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