MIS: Exam 1: Learning Objectives

What are the advantages and disadvantages of vertical integration? What are the advantages and disadvantages of contract manufacturing?

- Contract manufacturing can offer firms several advantages, including lower costs and increased profits. But firms have also struggled with the downside of cost-centric contract manufacturing when partners have engaged in sweatshop labor, poor working conditions, and environmental abuse.

What are the five forces that affect competitive advantage? Be able to apply the five forces framework to an industry, assessing the competitive landscape and the role of technology in influencing the relative power of buyers, suppliers, competitors and alternatives. FINISH

- Porters 5 Forcers model: focused externally, describing how a firm is positioned within its industry. - (Industry and Competitive Analysis) used to examine a firm's competitive environment; considers interplay between 5 things: 1. rivalry among existing competitors 2. threat of new entrants 3. threat of substitute goods or services 4. bargaining power of buyers 5. bargaining power of suppliers FINISN:SKDGLNGJKJSNSL: NS:OLFD

supply chain profitability

- Supply chain profitability - difference between sum of revenue and sum of costs in supply chain (P=R-C) - Maximum profit to supply chain will not usually occur if each organization maximizes profits in isolation - Profitability of supply chain increases if one or more organizations operates at less than maximum profitability

Why is technology critical to enabling competitive advantage? What are some examples of firms that have used technology to organize for sustained competitive advantage?

- 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. - In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency. - Fresh Direct uses technology to increase worker efficiency, lower labor costs, and lessen waste.

Value Chain

- 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, a superior value chain may yield sustainable competitive advantage. - 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. - Many of the examples used in this book, including FreshDirect, Amazon, and Zara, illustrate this point.

What is the relationship between timing, technology and the creation of resources for CA?

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

Why is inventory management so important? What happens when a retailer has too much inventory? What happens when a retailer has too little inventory?

- inventory=death: (leftover inventory) - Low inventory = low costs - Excess inventory in the retail apparel industry is the kiss of death. Long manufacturing lead times require executives to guess far in advance what customers will want. Guessing wrong can be disastrous, lowering margins through markdowns and write-offs.

How is operational effectiveness different than strategic positioning? To what degree can technology-based competition created operational effectiveness? What is the importance of grounding competitive advantage (CA) in strategic positioning?

- operational effectiveness: performing tasks better than rivals(HEB). But for the most part, these efforts can be matched. isn't always enough to yield sustainable dominance over competition.. see strategic positioning --- Technology can be easy to copy, and technology alone rarely offers sustainable advantage. - strategic positioning: performing different tasks than rivals, or the same tasks in a different way(Fresh Direct) --- 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.

What are some examples of barriers to entry? Be able to recognize the difference between low barriers to entry and the prospects for sustainability of new entrant's efforts? (Just because it might be easy to START a business doesn't mean it is easy to STAY in business.) Relate this to Fresh Direct and straddling.

- something making it difficult for other firms to enter an industry and compete --when barriers to entry stop your competitors, then sustainable profits are more likely - ex. brand, differentiation, patents, distribution channels, capital intensity, switching costs, network effects, regulation - 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. - 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 previously discussed if they wish to create truly sustainable advantage. - FreshDirect's value chain to traditional rivals, there are differences across every element. But most importantly, the elements in FreshDirect's value chain work together to create and reinforce competitive advantages that others cannot easily copy. Incumbents trying to copy the firm would be straddled across two business models, unable to reap the full advantages of either. And late-moving pure-play rivals will struggle, as FreshDirect's lead time allows the firm to develop brand, scale, data, and other advantages that newcomers lack (see below for more on these resources). FINISH FINIHS+SLKDFJL:F:KLS

To what degree has technology permeated every management discipline? Be able to give a few examples of how technology has changed areas such as finance, marketing, operations, accounting, etc.

-As technology becomes cheaper and more powerful, it pervades more industries and is becoming increasingly baked into what were once nontech functional areas. -Technology is impacting every major business discipline, including finance, accounting, marketing, operations, human resources, and the law. -- Finance: You must also consider tech's role as part of any investment portfolio. -- Accounting: All accounting records are recorded, stored, and reported by information systems. -- Supply Chain: Tech is central to producing goods and services. -- Management: Managing a global firm means leveraging global technology. -- Marketing: Rise of social media is blowing apart the marketing landscape.

Information Technology(IT)

-IT= strategic business value -its not about the technology, its about the information -IT adds efficiency and competitive advantage, the life blood of success, to every business area

In the past decade, how has technology helped bring about radical changes across industries and throughout societies? What is the impact of a disruptive technology? What is its trajectory? Why do we care?

-In the prior decade, tech firms have created profound shifts in the way firms advertise and individuals and organizations communicate. -New technologies have fueled globalization, redefined our concepts of software and computing, crushed costs, fueled data-driven decision making, and raised privacy and security concerns.

What kinds of jobs are available to someone with an IT background?

-Tech jobs rank among the best and highest-growth positions, and tech firms rank among the best and highest-paying firms to work for. -Information systems (IS) jobs are profoundly diverse, ranging from those that require heavy programming skills to those that are focused on design, process, project management, privacy, and strategy.

Be able to diagram and compare how various firms organize to bring products and services to market. Be able to recognize components that provide operational effectiveness or strategic positioning.

-check value chain

What are the four characteristics of a resource that might possibly yield sustainable CA?

-resource-based view of competitive advantage: llll.lstrategic thinking approach suggesting that if a firm is to maintain sustainable competitive advantage, it must control an exploitable set of resources that have 4 critical characteristics: 1. valuable 2. rare 3. imperfectly imitable 4. nonsubstitutable - having this helps create barriers to entry for future competitors - it also provides a sustainable competitive advantage

How does Zara's approach differ from the conventional wisdom in fashion retail? How does the firm's strategic use of information technology influence design and product offerings, manufacturing, inventory, logistics, marketing and, ultimately, profitability?

-zara's essential advantage --- Information systems allow Zara to design, produce, and distribute products to stores within weeks, not months. -----Stay at the leading edge of fashion trends. Low inventory costs and reduced risk of producing products that people don't want. Alters production to meet consumer needs. - zara wins with information --- profound vertical integration --- technology-orchestrated supplier coordinate --- just-in-time manufacturing --- finely tuned logistics --- results: 10x unique products, 12x turnaround speed - zara wins with its value chain --- zara maintains an efficient value chain - Zara managing design differently --- teams of 300 designers create 30,000+ items each year(competitors average 2,000-4,000 items per year) --- constant rotation of design teams: cross-pollinates design experience. encourages innovation. --- forecast fashion trends through data analysis rather than the hunch from a heroic executive --- data sources include: directly asking customers in stores, point-of-sale data, investigating unsold item pile. --- data goes directly to the cube - Zara Managing Inbound Logistics Differently --- Vertical Integration: 40% of fabric and most dyes made by Zara itself or its own subsidiary --- Responsive to fashion shift: half of the cloth arrives undyed --- Avoid contract manufacturing: 60% produced in house --- Contract manufacturing only used for items with longer shelf lives - e.g., T- shirts and jeans - zara managing manufacturing differently --- Fabric is cut and dyed by robots in twenty-three highly automated factories --- After cutting and dying, many items are stitched together through a network of local cooperatives - zara managing outbound logistics differently --- Five-million-square-foot distribution center --- Moves 2.5 million items every week, no item staying in-house for more than 72 hours --- Inventory optimization models determines how many of which items in which sizes should be delivered to each specific store --- Chartered cargo flights serving any destinations within 48 hours - zara managing marketing and sales differently --- Little advertising: only 0.3% of revenue spent on ad, with 3.5% as the industry average --- Z-day, twice-weekly inventory delivery --- Limited product runs to encourage customers buy right away, at full price, and visit often - zara optimizing --- Software used to schedule staff based on forecasted sales volume --- shave staff work hours by 2 percent --- Clothes ironed in advance and packed on hangers, with security and price tags saving in-store employees' time for customer services

How has Zara's parent company Inditex leveraged a technology-enabled strategy to become the world's largest fashion retailer?

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What are the five components that make up an information system? Which one is hardest to change?

IS: an integrated solution that combines 5 components: 1. hardware 2. software 3. data 4. processes 5. people (who interact with and are impacted by the system)

How does Zara's approach counteract specific factors that Gap has struggled with for over a decade?

Information systems allow Zara to manufacture differently Zara: -- In-house designers create knock-offs of latest designs -- Company controlled factories can change design, color quickly -- Distribution systems are tightly controlled -- Changes inventory constantly -- creates "fashion of the moment" -- store employees ask shoppers for their opinions -- buy it or it's gone Gap: -- NY designers create seasonal collections -- Manufacturing is outsourced to produce large quantities at low prices -- Unsold products placed on seasonal clearance -- stable inventory -- designs created for each season -- fashion driven by high profile in-house designers -- if they're out of stock, just come back next week

Ch.1: Tech and Modern Enterprise

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Ch.2: Strategy and Technology

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Ch.3: Zara: Fast Fashion from Savvy Systems

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