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

1. Develop a summary of the important elements of
   the case.
2. How can Levis use environmental scanning to gain
   business intelligence?
3. Using Porters Five Forces Model, analyze Levis
   buyer power and supplier power
4. 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

1. 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?
2. Using Porters Five Forces describe the barriers
   to entry for this new technology
3. Which of Porters three generic strategies is
   this new technology following?

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Format Report

• The following HEADINGS must be in the report
• Summary 30
• Environmental Scanning 20
• Porters Five Forces 20
• Levis Strategy 20
• Language/Format 10