Business Driven Technology - Chapter 2 (Identifying Competitive Advantages)

Competitive Advantage

A feature of a product or service on which customers place a greater value than they do on similar offerings from competitors. - Typically temporary, since competitors quickly seek to duplicate them.

Entry Barrier

A feature of a product or service that customers have come to expect, so entering competitors must offer the same for survival.

Business Strategy

A leadership plan that achieves a specific set of goals or objectives such as increasing sales, decreasing costs, entering new markets, or developing new products or services. - 4 common tools to develop business strategies: 1.) SWOT Analysis; 2.) Five Forces Model; 3.) Three generic strategies; and 4.) Value Chain Analysis.

Stakeholder

A person or group that has an interest or concern in an organization. - Drive business strategies. - IMAGE: Different stakeholders and their common interests.

Business Process

A standardized set of activities that accomplish a specific task, such as processing a customer's order.

SWOT Analysis

An analysis that evaluates an organization's strengths, weaknesses, opportunities, and threats to identify significant influences that work for or against Business Strategies. - Stands for: Strengths; Weaknesses; Opportunities; Threats.

Porter's Five Forces Model

Analyzes the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. - Identifies opportunities, competitive advantages, and competitive intelligence. - 5 Forces are: 1.) Buyer Power; 2.) Threat of new entrants; 3.) Supplier power; 4.) Threat of substitute products or services; 5.) Rivalry among existing competitors.

Supply Chain

Consists of all parties involved, directly or indirectly, in obtaining raw materials or a product.

Switching Costs

Costs that make customers reluctant to switch to another product or service. - Can be financial and/or intangible - Reduces Buyer Power

Porter's Three Generic Strategies

Generic business strategies that can be applied to any business, product, or service. - 1.) Broad cost leadership - 2.) Broad differentiation - 3.) Focused strategy

First-Mover Advantage

Occurs when a company can significantly increase its market share by being first with a new Competitive Advantage.

Product Differentiation

Occurs when a company develops unique differences in its products or services with the intent to influence demand.

Loyalty Programs

Reward customers based on their spending. - Ex: "Frequent flyer" programs in the airline industry.

Buyer Power

The ability of buyers to affect the price they must pay for an item. - Factors that impact ___ ___: 1.) # of customers; 2.) Customer sensitivity to price; 3.) Size of orders; 4.) Differences between competitors; and 5.) Availability of substitute products. - Reduced by increasing Switching Costs, and Loyalty Programs.

Competitive Intelligence

The process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed.

Supplier Power

The supplier's ability to influence the prices they charge for supplies (including materials, labor, and services). - Factors that increase ___ ___: 1.) # of suppliers; 2.) Size of suppliers; 3.) Uniqueness of services; and 4.) Availability of substitute suppliers. - If ___ ___ is HIGH, then suppliers can: Charge more; Limit quantity; and shift costs to industry participants.

Primary Value Activities

These activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services. - Include: Inbound logistics; operations; outbound logistics; marketing and sales; service (customer support).

Support Value Activities

These activities support the Primary Value Activities. - Include: Firm infrastructure; human resource management; technology development; procurement.

Threat of New Entrants

This is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market.

Threat of Substitute Products or Services

This is high when there are many alternatives to a product or service, and low when there are few.

Value Chain Analysis

Views a firm as a series of Business Processes that each add value to the product or service. - 2 categories of value activities: 1.) Primary; and 2.) Support