BUSINESS DRIVEN TECHNOLOGY

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BUSINESS DRIVEN TECHNOLOGY Chapter Two
Identifying Competitive Advantages
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LEARNING OUTCOMES

• 2.1 Explain why competitive advantages are
  typically temporary
• 2.2 List and describe each of the forces in
  Porters Five Forces Model
• 2.3 Compare Porters three generic strategies
• 2.4 Describe the relationship between business
  processes and value chains

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CHAPTER TWO OVERVIEW

• To survive and thrive an organization must create
  a competitive advantage
• Competitive advantage a product or service that
  an organizations customers value more highly
  than similar offerings from a competitor
• First-mover advantage occurs when an
  organization can significantly impact its market
  share by being first to market with a competitive
  advantage

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CHAPTER TWO OVERVIEW

• Organizations watch their competition through
  environmental scanning
• Environmental scanning the acquisition and
  analysis of events and trends in the environment
  external to an organization
• Three common tools used in industry to analyze
  and develop competitive advantages include
• Porters Five Forces Model
• Porters three generic strategies
• Value chains

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THE FIVE FORCES MODEL EVALUATING BUSINESS
SEGMENTS

• Organizations use Porters Five Forces Model to
  determine the relative attractiveness of an
  industry

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Buyer Power

• Buyer power high when buyers have many choices
  of whom to buy from and low when their choices
  are few
• Loyalty programs reward customers based on the
  amount of business they do with a particular
  organization

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Supplier Power

• Supplier power high when buyers have few
  choices of whom to buy from and low when their
  choices are many
• Supply chain consists of all parties involved,
  directly or indirectly, in the procurement of a
  product or raw material

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Supplier Power

• Organizations that are buying goods and services
  in the supply chain can create a competitive
  advantage by locating alternative supply sources
  (decreasing supplier power) through B2B
  marketplaces
• Business-to-Business (B2B) marketplace an
  Internet-based service which brings together many
  buyers and sellers

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Supplier Power

• Two types of Business-to-Business (B2B)
  marketplaces
• Private exchange a single buyer posts its needs
  and then opens the bidding to any supplier who
  would care to bid
• Reverse auction An auction format in which
  increasingly lower bids are solicited from
  organizations willing to supply the desired
  product or service at an increasingly lower price

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Threat of Substitute Products or Services

• Threat of substitute products or services high
  when there are many alternatives to a product or
  service and low when there are few alternatives
  from which to choose
• Switching costs costs that can make customers
  reluctant to switch to another product or service

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Threat of New Entrants

• Threat of new entrants high when it is easy for
  new competitors to enter a market and low when
  there are significant entry barriers to entering
  a market
• Entry barrier a product or service feature that
  customers have come to expect from organizations
  in a particular industry and must be offered by
  an entering organization to compete and survive

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Rivalry among Existing Competitors

• Rivalry among existing competitors high when
  competition is fierce in a market and low when
  competition is more complacent
• Although competition is always more intense in
  some industries than in others, the overall trend
  is toward increased competition in just about
  every industry

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THE THREE GENERIC STRATEGIES CREATING A
BUSINESS FOCUS

• Organizations typically follow one of Porters
  three generic strategies when entering a new
  market
• Broad cost leadership
• Broad differentiation
• Focused strategy

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THE THREE GENERIC STRATEGIES CREATING A
BUSINESS FOCUS
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VALUE CHAINS TARGETING BUSINESS PROCESSES

• Once an organization chooses its strategy, it can
  use tools such as the value chain to determine
  the success or failure of its chosen strategy
• Business process a standardized set of
  activities that accomplish a specific task, such
  as processing a customers order
• Value chain views an organization as a chain,
  or series, or processes, each of which adds value
  to the product or service for each customer

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VALUE CHAINS TARGETING BUSINESS PROCESSES

• Graphical Depiction of a Value Chain

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VALUE CHAINS TARGETING BUSINESS PROCESSES
Start
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VALUE CHAINS TARGETING BUSINESS PROCESSES

• Organizations find tremendous value in analyzing
  their value chains along with Porters Five
  Forces

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OPENING CASE STUDY QUESTIONSHow Levis Got Its
Jeans into Wal-Mart

• How can Levis use environmental scanning to gain
  business intelligence?
• Using Porters Five Forces Model, analyze Levis
  buyer power and supplier power
• Which of the three generic strategies is Levis
  following?

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CHAPTER TWO CASESay Charge It with Your Cell
Phone

• By associating a credit card with a cell phone,
  banks and credit card companies hope to convince
  consumers to buy products, such as soda, with
  their cell phones instead of pocket change
• A transaction fee will be charged for each
  transaction
• The ability to charge items to a cell phone has
  significant business potential

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CHAPTER TWO CASE QUESTIONS

• Do you view this technology as a potential threat
  to traditional telephone companies? If so, what
  counterstrategies could traditional telephone
  companies adopt to prepare for this technology?
• Using Porters Five Forces describe the barriers
  to entry for this new technology
• Which of Porters three generic strategies is
  this new technology following?