MIS: Chapter 2: Quiz
Switching costs
Business strategy of locking in customers by making it difficult or expensive to change to another product or supplier.
How Does Competitive Strategy Determine Business Processes and the Structure of Information Systems?
Figure 2-10 shows a business process for renting bicycles. The value-generating activities are shown in the top of the table, and the implementation of those activities for two companies with different competitive strategies
Four Competitive Strategies
Firms engage in one of the competitive strategies cost, Industry-wide -lowest cost across the industry 1.Cost leader across a wide industry (Nissan, Dell) Cost, focus -Lowest cost within an industry segment 1.Cost leader in a focused industry segment (Ikea) Differentiation, Industry-wide -Better product/service across the country 1.Differentiate its products across a wide industry (Mercedes) Differentiation, Focus -Better product/service with an industry segment 1.Differentiate its product in a focused industry segment (Ferrari)
•Firms engage in one of four competitive strategies:
How does analysis of industry structure determine competitive strategy?
competitive strategy
How does organizational strategy determine information systems structure?Organization goals and objectives are determine
Threat of substitutions
How many substitutes are in the market. eBay offers local delivery service Medium. Offer differentiating services, like shipping, transportation, or entertainment
Linkages
In Porter's model of business activities, interactions across value chain activities.
Five forces model
Model, proposed by Michael Porter, that assesses industry characteristics and profitability by means of five competitive
Four Strategies
Porter followed his five forces model with the model of
Like eHermes, organizations examine these five forces and determine how they intend to respond to them.
That examination leads to competitive strategy.
First mover advantage
The benefit of gaining market share by being the first to develop a new technology in a market segment.
cost
The cost of a business process is equal to the cost of the inputs plus the cost of activities.
margin
The difference between the value that an activity generates and the cost of the activity is called
Competitive Strategy
The strategy an organization chooses as the way it will succeed in its industry. According to Porter, there are four fundamental competitive strategies: cost leadership across an industry or within a particular industry segment and product or service differentiation across an industry or within a particular industry segment
Support Activities in the Value Chain
The support activities in the generic value chain contribute indirectly to the production, sale, and service of the product. They include procurement, which consists of the processes of finding vendors, setting up contractual arrangements, and negotiating prices.
Threat of new entrants
a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry. Ubers starts offering mobile retail services Medium. Offer differentiating services and enter other markets
Bargaining power of suppliers
a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs. We're increasing the cost of the self-driving vehicle chassis Weak We'll buy from a different manufacturer
business process
a network of activities that generate value by transforming inputs into outputs
outbound logistics
collecting, storing, and physically distributing the products to buyers
Rivalry
competition for the same objective or for superiority in the same field. Amazon offers drone delivery Weak. Offer additional services or create additional corporate partnerships
Information systems create
competitive advantages either as part of a product or by providing support to a product.
The first three principles in Figure 2-12
concern products or services. Organizations gain a competitive advantage by creating new products or services, by enhancing existing products or services, and by differentiating their products and services from those of their competitors.
second mover advantage
gaining market share by following a pioneering company and imitating its product or service, thereby reducing costly R&D expenditures. Google, for example, wasn't the first search engine. Altavista, WebCrawler, Lycos, and Ask.com were available before Google registered its domain name in 1997.
Primary Activities of the Value Chain
inbound logistics, operations/manufacturing, outbound logistics, marketing and sales, customer service
Sales and Marketing
inducing buyers to purchase the products and providing a means for them to do so
Porter's model of business activities includes
linkages
inbound logistics
receiving, storing, and disseminating inputs to the products
Bargaining power of customers
the ability of customers to influence the price that they will pay for the firm's products or services. A large account wants a greater share of profits Strong. Lower prices or diversify into other markets
According to Porter, to be effective,
the organization's goals, objectives, culture, and activities must be consistent with the organization's strategy.
The margin of the business process is the value of
the outputs minus the cost.
According to Porter
to be effective, the organization's goals, objectives, culture, and activities must be consistent with the organization's strategy. To those in the MIS field, this means that all information systems in the organization must reflect and facilitate the organization's competitive strategy.
Operations/Manufacturing
transforming inputs into the final products
Value chain
A network of value-creating activities
Five Forces Model of Industry Structure
According to this model, five competitive forces determine industry profitability: bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants, and rivalry among existing firms.
Value
As defined by Porter, the amount of money that a customer is willing to pay for a resource, product, or service.
competitive strategy
As you will learn in your business strategy class, an organization's goals and objectives are determined by its
customer service
Assisting customer's use of the product and thus maintaining and enhancing the product's value
The Five Forces Model of Industry Structure are:
Bargaining power of customers Threat of substitutions Bargaining power of suppliers Threat of new entrants Rivalry
The four strategies are
Bargaining power of suppliers,Threat of new entrants,Rivalry,Bargaining power of customers,Threat of substitutes