IST 349
Chapter 3 Concepts
- Describe Porter’s Competitive Forces Model (Figure 3.1)
The most widely used model for understanding competitive forces. In this model, five competitive forces shape the fate of the firm:
Traditional competitors – these are the competitors you share the market space with. They are continuously striving for new products and more efficiency, and are attempting to attract t new customers to switch to their brand.
New market entrants – new companies have several possible advantages. They are not locked into old plants and equipment. They can hire younger workers who may be less expensive and more innovative.
Substitute products and services – there are substitutes that your customers might use if your prices get too high. The more substitute products in your industry, the lower your profit margin will be.
Customers – a company must be able to attract and retain customers. The power of the customer grows if they can easily switch to a competitor or if they know the price of all competitor’s product instantly.
Suppliers – the more suppliers a firm has, the greater control it can exercise over price, quality, and delivery schedules.
- Describe each of the four followinggeneric strategies for dealing with competitive forces:
Low-cost leadership – obtain the lowest operational costs and the lowest prices. WalMart
Product differentiation –customize and personalize products and services to fit individual customers. Nike
Focus on market niche –Serve a narrow target market better than competitors. Hilton Hotel
Strengthen customer and supplier intimacy – Tighten contacts with suppliers and develop intimacy with customers. Amazon
- Describe the impact the Internet has had on competitive advantages for a company.
Competition has become much more intense
It makes it easy for new competitors to enter the market
Shifts bargaining power to customers
Widens the geographic market
- What is the Business Value Chain Model? (Figure 3.2)
Porter model is very helpful in identifying competitive forces and suggesting generic strategies, but it is not very specific about what to do next.
The value chain model highlights specific activities within the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. This model identifies specific points where information technology can best be used to enhance its competitive position.
The firm is considered to be a series or chain of activities that add value to the firm’s product. These activities are categorized as either Primary or Support activities.
You can ask at each stage: “How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?”
By making improvements in your business value chain, you might achieve a competitive advantage by attaining operational excellence, lowering costs, improving profit margins, and forging a closer relationship with customers and suppliers.
- What is a disruptive technology and give an example of this technology.
These are substitute products that perform as well or better than anything currently produced and radically change the business environment. Example: microprocessor chip.
- Case Study:Nike Becomes a Technology Company
- Case Study:Datacard Group Redesigns the Way It Works
- Case Study:Will Technology Save Sears?