HINF 410 - Chapter 8

Describe Disruptive Innovation

"Use existing technology in new ways to disrupt the market" -an open door to competitors -Provide a whole new population of consumers at the bottom of a market -Simpler, cheaper, more accessible

In regards to Competitive Dynamics, Describe what Hardball strategies are and state the 5 strategies.

"Winners in business play rough and don't apologize for it" 1. Devastate rivals profit sanctuaries 2. Plagiarize with pride 3. Deceive the competition 4. Unleash massive and overwhelming force 5. Raise competitors costs * Business success contains the seed of it's own destruction

Describe Sustaining Innovation

"leverage technology advances to sustain existing markets" -fast-paced innovation -pursued at higher tiers of market -Charging higher prices for them -Targeting more demanding and sophisticated customers

In regards to Competitive Dynamics - types of competitive action, What are frontal assaults?

-Actions directed at taking business from another company -Capitalizing on industry weakness -Effective when a firm uses a low cost strategy

Decribe how HIT affects - Threats to New Entrants

-HIT lowers barrier to entry -Scale economies may be less important in a HIT context -New entrants can go to market with lower capital costs -Health care organizations who use HIT may have lower expenses such as office/hospital space, printing and postage

Describe how HIT affects - Threat of Substitutes

-Threat of substitutes is increased because the internet creates new ways to accomplish the same task -Another way to access HIT based literature -Another way to maintain one's certifications in HIT -Storing health information on the web

Regarding the Industry Life Cycle - the maturity phase How does a firm rescue itself?

-introduce new products with new features -Reposition the product (i.e. swatch from jewelry to a fun-watch)

What are the evolutionary stages in the industry lifecycle?

1. Introduction 2. Growth 3. Maturity 4. Decline

Describe the 4 ways that the internet adds value....

1. Search - gathering information/identifying purchase options (ex. faster speed, breadth of info, cost of search) 2. Evaluation - Comparing alternatives (ex. comparitive shopping, product reviews) 3. Problem Solving - generating problems and creating action plans (ex. more immediate answers) 4. Transactions - process of completing the sale (ex. lower costs, rapid sales)

In regards to disruptive innovation, What 2 functions does every product/service have?

1. Utility Function (i.e. being a book in any form) 2. Identity Function -Value of firms stakeholders (paper copy of a book = at home library) -Ethics -Relationships

What are the 3 (2+1) Forces for Industry Change?

2 most potent forces: 1. Innovation - serve to improve existing products and cement the incumbents position (sustaining and disrupting innovations) 2. Technology (disruptive) - Arise from a new technologies of new firms that upset incumbent firms competitive advantages. 3rd Force: Regulation and Deregulation (i.e. changes in patent laws in the pharmaceutical industry)

In regards to disruptive innovation, Describe the Utility-Identity curve

A continuum for all products and services for each person or group Innovations that challenge identity have a much different set of dynamics than innovations challenging purely utility

Regarding the Industry Life Cycle, Describe the "maturity" phase (Market/Industry, Competition, Rivalry, what becomes important?, customers)

Aggregate industry demand slows down Market becomes saturated / few opportunities Competition: -Growing around - no longer possible -Direct competition - becomes predominant Rivalry: -Marginal competitors begin to exit -Rivalry against existing competitors begins to intensify (a game of inches) Efficient manufacturing and engineering becomes important Customers: -More price-sensitive -More understanding of products/services -Differentiation becomes more difficult Example: Beer, automobile, furniture

Describe how HIT affects - bargaining power of Suppliers

B2B: HC organizations providing products or services to other healthcare orgnaizations Advantages: -Access to business customers at a lower cost -More downstream outlets -Creating of web-based purchasing arrangments Disadvantages: -Buyers can shop competitively and negotiate prices -Inhibits the ability of HC organizations to offer differentiated products or unique services

Describe Turnaround Strategies (in the industry lifecycle)

Can happen at any stage (most likely in the maturity and decline stage) Starts with careful analysis of: -external environment (i.e. new customers) -internal environment (opportunities to lower costs and increase efficiency) (typically a mix of both) Strategies: 1. Asset and cost surgery 2. Selective product and market pruning 3. Piecemeal productivity improvements

Regarding the Industry Life Cycle, Describe the "growth" stage (Characterized by, Primary key to success, simulating...)

Characterized by increase in sales and revenues -New customers to try the products -A growing proportion of satisfied customers make repeat purchases Primary key to success: build consumer preference for brands (requires strong brand identification and differentated products) Financial resources to support value chain activities Simulating "selective demand": demand for a firms product vs. it's rivals

Describe how internet content is a source of competitve advantage

Customer Feedback -buyers trust what other buyers say Expertise -Internet as a library Access to Services -accessing different types of EHRs via the cloud

Regarding the Industry Life Cycle, Describe the "decline" stage

Decisions become very critical To exit or stay and consolidate Industry sales and profits begin to fall Roots in changes in the industry: -customer taste -technological innovation Spending a lot of management time and financial resources Competitors start drastic price cuts, liquidation Example: video cassette recorders

Regarding the Industry Life Cycle - the decline stage How are strategies dependent on rivals actions?

Depend on the actions of rivals Lots of rivals leave = sales increase All competitors remain = prospects are limited Competitors merge = more difficult for other remaining players

Describe how HIT affects - bargaining power of buyers

End-Users -Final customers or buyers in a distribution channel (patients, health care professionals) -Health care organization to customer activity via internet and HIT -Internet and HIT increase power of these buyers --more information --lower switching costs -Such buyers are likely to have more bargaining power Buyer Channel Intermediaries -Wholesalers, distributors, and retailers of HIT may be removed from the channel -Internet and HIT makes it easier for HC organizations to reach health care consumers directly -HIT may decrease the bargaining power of channel intermediaries

What is the difference between Evolutionary and Revolutionary?

Evolutionary: Industry life cycle Revolutionary: -Rapid and discontinuous change -Leads to quick and unpredictable industry change -Introduced by: --Innovation --Major shifts in external environment --Internal industry change

Regarding the Industry Life Cycle - the introduction stage Describe First movers and late movers

First movers are pioneers of something Late movers wait to learn from other's mistakes

In regards to Competitive Dynamics - types of competitive action, What are Guerilla offensives and selective attacks?

For firms with fewers sources (ex. open source software vs. microsoft)

Describe the options of choosing not to react to an attack....

Forbearance: -Refraining from reacting at all -Holding back from initiating an attack Co-opetition: -A combination of competition and co-operation -Competition in the eyes of the consumer -Co-operation behind the scences to achieve industry-wide efficiencies -Not to be led to collusion

In regards to Competitive Dynamics, What are threats to sustainability?

Imitation Substitution Slack: Worry of compliance Hold-up: fear of bargaining power

Describe potential internet related pitfalls

Implications for low cost leaders -ease of imitation by competitors -ease of comparison shopping by consumers -Temptation to place too much emphasis on one business activity and ignore others Implications for differentiation -overprices products or services Implications for Focus -misreading scope and interest of target market -efforts to read a broader audience can cause it to lose cost advantage

In regards to Competitive Dynamics, What are reasons why a company might create a new competitive action?

Improve market position Capitalize of growing demand Expand production capacity Provide an innovative solution Obtain first-mover advantages Build reputation for innovativeness or effeciency

Describe Competitive Dynamics

Intense rivalry among competitors, which has the potential to alter a company's strategy

Describe the Internet and Differentiation Strategy

Internet can create new ways of differentiating by enabling mass customization and increasing customer control over the process -shortening response time and organizational learning -Personalizing online access so customers can access -Enhancing healthcare efforts -Access to research -Access to status reports

Describe the Internet and Overall Cost Leadership Strategy

Internet can decrease a costs throughout a firms value chain in both primary and support activities -Minimize rework -Reducing costs for procurement and paper

Describe Internet and Focus Strategy

Internet permits focusers to access markets less expensively (low cost) and provides more services and features (differentiation) -Focusing efforts on specific customers -Creating community for customer with similar interests -Providing access to viewers with specialized interests -Minimize firms infrastructure requirements

Regarding the Industry Life Cycle - the decline stage What are the 4 basic strategies?

Maintaining -keep the product going -no significant reduction in market support, technological development, other investments) -Hope rivals will exit / fall Harvesting -Taking as much profit possible from the business -minimal investment -maximize sales volume -reduce costs quickly Exiting -Dropping the product from portfolio (dogs) -Be careful with residual consumers, market relationships Consolidation -Firm acquires a number of competitors -Surviving firm enhances its market power and assets

In regards to Competitive Dynamics - Threat Analysis What are the factors assessing competitiveness?

Market Commonality -competing for the same customers -How many markets they share in common (works both ways) Resource Similarity -Degree of competing for the same types of resources

In regards to Competitive Dynamics, What are factors affecting a competitors response

Market Dependency -High concentration on a particular industry = more risk because of dependency on that industry Competitors Resources -Small firms go for tactic actions -Large firms with "deep pockets" go for costly strategic actions Actors Reputation -Competitors respond more to market leaders' attacks then smaller firm attacks -How successful have prior attacks been?

In regards to Competitive Dynamics, What are motives and capabilities to respond to threats?

Motives to Respond -blunt the attack -enhance own competitive position -minimize the damage Capability to respond -enough resources to fend off an attack -array of internal strengths to draw on *Age and size effect response

In regards to Competitive Dynamics, What is a "new competitive action"?

New Entry Existing competitors -Price cutting -Imitating -Expanding production

Describe how HIT affects - Intensity of Rivalry

Rivalry is likely to be more intense -More tools and means for competing via the internet -New HIT can be easily and quickly imitated -Competitors in cyberspace are more equally balanced and competitive -Increased importance of pricing

Regarding Turnaround strategies Describe Asset and Cost Surgery

Sales of accumulated, non-producible assets (real estate, building) Postponing new investments Cut of admin expenses and inventories Speed up collection of receivables Outsourcing production to various inputs

Regarding Turnaround strategies Describe Piecemeal Productivity Improvements

Small but accumulative gains Improving business processes by re-engineering them Benchmarking specific activities against industry leaders Encourage employee input to identify excess costs Reducing R&D and marketing expenses Increasing capacity utilization Improving employee productivity

Regarding the Industry Life Cycle, Describe the "Introduction" stage (Starts At, Typically Involves, Success requires emphasis on, challengs:)

Starts at: -Unfamiliar products -ill defined market segments -non-specified product segments -Few players & limited competition Typically Involves: -Low sales growth -Rapid technological change -Operating loses -Need for strong cash sources Success requires emphasis on... -R&D - research and development -Marketing Challenges: -Developing a product and getting users to use it -Generating enough exposure to be evaluated by the standards Example: Electronic vehicles

In regards to Competitive Dynamics, What are the 2 broad types of competitive action?

Strategic Action -Major commitments of distinctive and specific resources -Needs significant planning and resources -When initiated, difficult to reverse (ex. building a new facility) Tactical Action -Refinements or extensions of a strategy (ex. cutting prices)

Regarding Turnaround strategies Describe Selective Product and Market Pruning

discontinue unsuccessful/marginal product lines Cut off unprofitable/difficult clients

What does the Four Trajectories of Industry Change (diagram) illustrate?

the core activities and/or assets that may face threat of obsolescence.