Information Systems: A manager's guide to harnessing technology: Chapter 2

this is a set of interrelated activities that bring products or services to market; a series of activities undertaken by the company to produce a product or service to be delivered to customers

value chain

Name an example of a company using technology and strategic positioning in a way that isn't easily replicated:

FreshDirect

True/False - Many Internet and tech-leveraging businesses are highly scalable since, as firms grow to serve more customers with their existing infrastructure investment, profit margins improve dramatically.

True

True/False - Nothing lasts forever, and shifting technologies and market conditions can render once strong assets as obsolete.

True

this is the path through which products or services get to customers and can be critical to a firm's success

distribution channels

this exists when savvy rivals watch a pioneer's efforts, learn from their successes and missteps, and then enter the market quickly with a comparable or superior product at a lower cost

fast follower problem

this switching cost can include investments in new equipment, the cost to acquire any new software, consulting, or expertise, and the devaluation of any investment in prior technologies no longer used.

financial commitment

sometimes called network externalities or Metcalfe's Law, these exist when a product or service becomes more valuable as more people use it

network effects

as firms grow in size, they gain advantages and advantages related to a firm's sizer are referred to as _________________________________.

scale advantages

this switching cost is where finding and evaluating a new alternative costs time and money

search costs

this is new product and process design

technology/R&D

In order to think about how to achieve sustainable competitive advantage, it is useful to start with what two concepts developed by Michael Porter?

the value chain the five forces model

What is the fundamental strategic question in the Internet era?

"How can I possibly compete when everyone can copy my technology and the competition is just a click away?"

Tech can play a critical role in rapidly and cost-effectively strengthening a brand and if a firm performs well, consumers can often be enlisted to promote a product or service which is known as ___________________________________.

viral marketing

How can recognize whether your firm's differences are special enough to yield sustainable competitive advantage?

with resource based view of competitive advantage

Name the Five Forces:

1. intensity of rivalry among existing competitors 2. the threat of new entrants or barriers to entry 3. the threat of substitute goods or services 4. bargaining power of suppliers 5. bargaining power of customers

Name 6 switching costs:

1. learning costs 2. information and data 3. financial commitment 4. contractual commitments 5. search costs 6. loyalty programs

What are the 4 critical characteristics of resource based view of competitive advantage and the key to its success?

1. valuable 2. rare 3. imperfectly imitable (tough to imitate) 4. nonsubstitutable

Name the 4 secondary components or activities of the value chain:

1. firm infrastructure 2. human resource management 3. technology/R&D 4. procurement

Name the 5 primary components or activities of the value chain:

1. inbound logistics 2. operations 3. outbound logistics 4. sales/marketing 5. services or support

Ranked ____________________, patents were only important after secrecy, lead time, sales skills, and manufacturing .

5th

One of the most popular frameworks for examining a firm's competitive environment is _________________________ also know as the ________________________________________________.

Porter's Five Forces Industry and Competitive Analysis

_______________________ often benefit from strong switching costs that cement customers to their firms. Users invest their time learning a product, entering data into a system, creating files, and buying supporting programs or manuals. These investments may make them reluctant to switch to a rival's effort.

Tech firms

_____________________ is a key enabler to nearly every modern business strategy, but also a function often thought of as easily "outsourced". Furthermore, _______________________ can easily be copied and alone rarely offers sustainable advantage.

Technology

___________________ and ______________________ alone will not yield sustainable competitive advantage. Yet both of these can be _________________ for competitive advantage. Put simply, it's not the time lead or the technology; it's what a firm _______ with its time lead and technology.

Timing and technology enablers does

True/False - . In the United States, technology and (more controversially) even business models can be patented, typically for periods of twenty years from the date of patent application. Firms that receive patents have some degree of protection from copycats that try to identically mimic their products and methods.

True

True/False - According to Porter, the reason so many firms suffer aggressive, margin-eroding competition is because they've defined themselves according to operational effectiveness rather than strategic positioning.

True

True/False - As a manager, the ability to size up a firm's strategic position and understand its likelihood of sustainability is one of the most valuable and yet most difficult skills to master.

True

True/False - Being aware of major sources of competitive advantage can help managers recognize an organization's opportunities and vulnerabilities, and can help them brainstorm winning strategies. And these assets rarely exist in isolation.

True

True/False - Beware of those who say, "IT doesn't matter" or refer to the "myth" of the first mover. This thinking is overly simplistic. It's not a time or technology lead that provides sustainable competitive advantage; it's what a firm does with its time and technology lead. If a firm can use a time and technology lead to create valuable assets that others cannot match, it may be able to sustain its advantage. But if the work done in this time and technology lead can be easily matched, then no advantage can be achieved, and a firm may be threatened by new entrants.

True

True/False - Branding is difficult, but if done well, even complex tech products can establish themselves as killer brands.

True

True/False - Build resources like brand, scale, network effects, switching costs, or other key assets and your firm may have a shot. But guess wrong about the market or screw up execution and failure or direct competition awaits.

True

True/False - Even if an innovation is patentable, that doesn't mean that a firm has bulletproof protection. Some patents have been nullified by the courts upon later review (usually because of a successful challenge to the uniqueness of the innovation). Software patents are also widely granted, but notoriously difficult to defend.

True

True/False - Firms may consider adopting packaged software or outsourcing value chain tasks that are not critical to a firm's competitive advantage. A firm should be wary of adopting software packages or outsourcing portions of its value chain that are proprietary and a source of competitive advantage.

True

True/False - Firms that leverage technology for strategic positioning use technology to create competitive assets or ways of doing business that are difficult for others to copy.

True

True/False - Fueled by scale over time, firms that have more customers and have been in business longer can gather more data, and many can use this data to improve their value chain by offering more accurate demand forecasting or product recommendations.

True

True/False - If you have a model for thinking about competition, it's easier to understand what is happening and to think creatively about possible solutions

True

True/False - In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency.

True

True/False - It doesn't matter if it's easy for new firms to enter a market if these newcomers can't create and leverage the assets needed to challenge incumbents.

True

True/False - It is critical for challengers to realize that in order to win customers away from a rival, a new entrant or late-entering rivals must not only demonstrate to consumers that an offering provides more value than the incumbent, they have to ensure that their value added exceeds the incumbent's value plus any perceived customer switching costs.

True

True/False - Patents are not necessarily a sure-fire path to exploiting an innovation. Many technologies and business methods can be copied, so managers should think about creating assets like the ones defined above if they wish to create truly sustainable advantage.

True

True/False - Some have correctly argued that the barriers to entry for many tech-centric businesses are low. But it's absolutely critical to understand that market entry is not the same as building a sustainable business and just showing up doesn't guarantee survival.

True

True/False - Strategic frameworks help managers describe the competitive environment a firm is facing and frameworks can also be used as brainstorming tools to generate new ideas for responding to industry competition.

True

True/False - Strategy isn't just about recognizing opportunity and meeting demand. Resource-based thinking can help you avoid the trap of carelessly entering markets simply because growth is spotted.

True

True/False - Technology can play a key role in creating and reinforcing assets for sustainable advantage by enabling an imitation-resistant value chain; strengthening a firm's brand; collecting useful data and establishing switching costs; creating a network effect; creating or enhancing a firm's scale advantage; enabling product or service differentiation; and offering an opportunity to leverage unique distribution channels.

True

True/False - Technology is critical to the FreshDirect model, but it's the collective impact of the firm's differences when compared to rivals, this tech-enabled strategic positioning, that delivers success.

True

True/False - The ability to distribute products by bundling them with existing offerings is a key Microsoft advantage. But beware—sometimes these distribution channels can provide firms with such an edge that international regulators have stepped in to try to provide a more level playing field.

True

True/False - The value chain can be used to map a firm's efficiency and to benchmark it against rivals, revealing opportunities to use technology to improve processes and procedures. When a firm is resistant to imitation, its value chain may yield sustainable competitive advantage.

True

True/False - The virtuous cycle of network effects doesn't apply to all tech products, and it can be a particularly strong asset for firms that can control and leverage a leading standard (think Apple's iPhone and iPad with their closed systems versus Netscape, which was almost entirely based on open standards), but in some cases where network effects are significant, they can create winners so dominant that firms with these advantages enjoy a near-monopoly hold on a market.

True

True/False - The world is so dynamic, with new products and new competitors rising seemingly overnight, that truly sustainable advantage might seem like an impossibility. New competitors and copycat products create a race to cut costs, cut prices, and increase features that may benefit consumers but erode profits industry-wide.

True

True/False - True strategic positioning means that a firm has created differences that cannot be easily matched by rivals. Moving first pays off when the time lead is used to create critical resources that are valuable, rare, tough to imitate, and lack substitutes. Anything less risks the arms race of operational effectiveness.

True

True/False - True sustainable advantage comes from assets and business models that are simultaneously valuable, rare, difficult to imitate, and for which there are no substitutes.

True

True/False - When a firm has an imitation-resistant value chain—one that's tough for rivals to copy while gaining similar benefits—then a firm may have a critical competitive asset. From a strategic perspective, managers can use the value chain framework to consider a firm's differences and distinctiveness compared to rivals.

True

True/False - When technology can be matched so quickly, it is rarely a source of competitive advantage. And this phenomenon isn't limited to the Web.

True

True/False - While technology itself is often very easy to replicate, technology is essential to creating and enabling novel approaches to business that are defensibly different from those of rivals and can be quite difficult for others to copy.

True

True/False - While the value chain is typically depicted as it's displayed in the figure below, goods and information don't necessarily flow in a line from one function to another. For example, an order taken by the marketing function can trigger an inbound logistics function to get components from a supplier, operations functions (to build a product if it's not available), or outbound logistics functions (to ship a product when it's available). Similarly, information from service support can be fed back to advise research and development (R&D) in the design of future products

True

True/False - Google's ability to succeed after being late to the search party isn't a sign of the power of the late mover, it's a story about the failure of incumbents to monitor their competitive landscape, recognize new rivals, and react to challenging offerings.

True/False

A growing firm may also gain ________________________________________ such as Dell for example, who as they grew larger, the firm forced suppliers wanting in on Dell's growing business to make concessions such as locating close to Dell plants.

bargaining power with its suppliers or buyers

The scale of technology investment required to run a business can also act as a _____________________________________ that discourages new, smaller competitors.

barrier to entry

A firm's _________________is the symbolic embodiment of all the information connected with a product or service, and a strong one can also be an exceptionally powerful resource for competitive advantage.

brand

What technology enabled existing fiber optics to carry more transmissions than ever before resulting in causing new assets to become less rare and less valuable?

dense wave division multiplexing (DWDM)

these are products or services that are nearly identically offered from multiple vendors

commodities

Firms that quickly get to market with the "right" model can dominate, but it's equally critical for leading firms to pay close attention to ___________________ and ___________________ in ways that customers value.

competition and innovation

If a firm's value chain can't be copied by competitors without engaging in painful trade-offs, or if the firm's value chain helps to create and strengthen other strategic assets over time, it can be a key source for ______________________________________.

competitive advantage

this switching cost where breaking contracts can lead to compensatory damages and harm an organization's reputation as a reliable partner.

contractual commitments

_____________ can be a particularly strong switching cos for firms leveraging technology

data

______________________ not only is a switching cost, it also plays a critical role in differentiation

data

Businesses benefit from ___________________________when the cost of an investment can be spread across increasing units of production or in serving a growing customer base.

economies of scale

Why is operational effectiveness not sufficient enough to yield sustainable dominance over the competition?

firm efforts to invest in techniques to improve quality, lower cost, and generate design-efficient customer experiences can by matched very easily

this is functions that support the whole firm, including general management, planning, IS, and finance

firm infrastructure

this means the firm is selling product faster so it collects money quicker than its rivals do

higher inventory turns

this is recruiting, hiring, training, and development

human resource management

Firms that craft an ______________________________________have developed a way of doing business that others will struggle to replicate, and in nearly every successful effort of this kind, technology plays a key enabling role.

imitation-resistant value chain

this is getting needed materials and other inputs into the firm from suppliers

inbound logistics

this switching cost is where users may have to reenter data, convert files or databases, or may even lose earlier contributions on incompatible systems

information and data

Why can't traditional grocers fully copy FreshDirect's delivery business?

it would leave them straddling between two markets - low-margin storefront and high-margin delivery

this switching cost is switching technologies may require an investment in learning a new interface and commands.

learning costs

Consumers use brands to _______________________, so having a strong brand is particularly vital for firms hoping to be the first online stop for customers.

lower search costs

this switching cost is where switching can cause customers to lose out on program benefits. Think frequent purchaser programs that offer "miles" or "points" (all enabled and driven by software).

loyalty programs

Today's internet giants are winners because in most cases, they were the first to _____________ with a profitable model and they were able to ____________________ establish resources for competitive advantage.

move quickly

this refers to performing the same tasks better than rivals perform them; is critical but alone it isn't as effective

operational effectiveness

An analysis of a firm's value chain can also reveal ____________________________________.

operational weaknesses

this is turning inputs into products or services

operations

this is delivering products or services to consumers, distribution centers, retailers, or other partners

outbound logistics

Intellectual property protection can be granted in the form of a ____________________ for those innovations deemed to be useful, novel, and nonobvious.

patent

Consumers buying commodities are highly _____ since they have so many similar choices. In order to break the commodity trap, many firms leverage technology to _________________________ their goods and services.

priced-focused; differentiate

this is sourcing and purchasing functions

procurement

A strong brand _____________________________ and _____________________________, so if consumers can't rely on a firm to deliver as promised, they'll go elsewhere.

proxies quality inspires trust

this idea is that if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have 4 critical characteristics

resource based view of competitive advantage

this is customer engagement, pricing, promotion, and transaction

sales/marketing

What is the danger with operational effectiveness especially for firms that rely on technology for competitiveness?

sameness

this refers to firms that have benefited from scale economies as they have grown in size

scalable

this is service, maintenance, and customer support

service/support

these are payments by suppliers for prime shelf price

slotting fees

The patent system is often considered to be unfairly stacked against _________________ because of patent trolls who hold intellectual property not with the goal of bringing novel innovations to market but instead in hopes that they can sue or extort large settlements from others.

start-ups

this refers to performing different activities from those of rivals or the same activities in a different way

strategic positioning

Firms can often buy software to improve things, and tools such as ______________________________________(SCM; linking inbound and outbound logistics with operations), _________________________________________(CRM; supporting sales, marketing, and in some cases R&D), and ______________________________________(ERP; software implemented in modules to automate the entire value chain), can have a big impact on more efficiently integrating the activities within the firm, as well as with its suppliers and customers.

supply chain management customer relationship management enterprise resource planning

this is financial performance firms strive to achieve where they consistently outperform their industry peers

sustainable competitive advantage

What also play a role in determining the strength of network effects?

switching costs

this exist when consumers incur an expense to move from one product or service to another.

switching costs