chapter 2: strategy and technology: concepts and frameworks for achieving success
AmazonFresh
FreshDirect's current most dangerous competitor
true
T/F: Dell started out as the largest PC firm on the planet, utilizing vertically integrated manufacturing and direct to consumer sales to earn the firm significantly more profit than rival firms
true
T/F: as google's innovations in technology, interface, and advertising remained unmatched over time, this allowed the firm to build its brand, scale, and advertising network (distribution channel) that grew from network effects because content providers and advertisers attract one another
true
T/F: being dependent on distribution channels provided by other firms can present challenges if distribution partners suddenly decide to cut you off
true
T/F: consumers buying commodities are highly price focused since they have so many similar choices
true
T/F: contract manufacturers serving Dell's rivals observed Dell and improved manufacturing efficiency, causing the price of computing to fall and the price advantage Dell enjoyed to shrink this meant that savings from buying a Dell weren't as big as they once were
true
T/F: even if an innovation is patentable, that doesn't mean that a firm has bulletproof protection
true
T/F: firms that seem dominant but don't have high switching costs can be rapidly trumped by strong rivals
false
T/F: goods and information have to flow in a line from one function to another in a value chain in order to be successful
true
T/F: if a firm adopts software that changes a unique process into a generic one, it may have coopted a key source of competitive advantage, particularly if other firms can buy the same stuff third party SCM, CRM, and ERP software typically requires adopting a very specific way of doing things, using software and methods that can be purchased and adopted by others
true
T/F: in order for a challenger to win customers away from a rival, a new entrant must not only demonstrate to consumers that an offering provides more value than the incumbent, but they have to ensure that their value added exceeds the incumbent's value plus any perceived customer switching costs if it's going to cost you and be inconvenient, there's no way you're going to leave unless the benefits are overwhelming
true
T/F: in the US, technology and business methods can be patented
true
T/F: late moving pure play rivals will struggle, as FreshDirect's lead time allows the firm to develop brand, scale, data, and other advanages that newcomers lack
true
T/F: market entry is not the same as building a sustainable business, and just showing up doesn't guarantee survival
true
T/F: operational effectiveness is critical, as firms must invest in techniques to improve quality, lower cost, and design efficient customer experiences
true
T/F: operational effectiveness is not sufficient to yield sustainable dominance over the competition
true
T/F: over time, FreshDirect has built up a set of strategic assets that not only address specific needs of a market but are now extremely difficult for any upstart to compete against entry costs for competitors would be high as well
true
T/F: resource based thinking can help firms avoid the trap of carelessly entering markets simply because growth is spotted telecommunications industry learned this lesson in a hard way after the explosion of the internet
differences
T/F: technology can play a critical role in creating and strengthening strategic ____________ or advantages that rivals will struggle to match
true
T/F: technology is very easy to replicate, and those assuming advantage lies in technology alone may find themselves in a profit eroding arms race with rivals able to match their moves step by step
true
T/F: technology opens up opportunities to leverage products provided by others to create new distribution channels to reach customers
true
T/F: the ability to distribute products by bundling them with existing offerings can be a key advantage
true
T/F: the patent system is often considered to be unfairly stacked against startups
true
T/F: today's internet giants are winners because in most cases, they were the first to move with a profitable model and they were able to quickly establish resources for competitive advantage
true
T/F: with growing internet demands, many telecom firms began digging up the ground and laying down cables to meet demand, but all rivals were doing the same thing, resulting in new assets that weren't rare and less valuable
valuable, rare, imperfectly imitable, non substitutable
4 characteristics of a resource that a firm should control to maintain sustainable competitive advantage
tech
______ firms 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, making them reluctant to switch to a rival's efforts
commodity
a basic good that can be interchanged with nearly identical offerings by others (think milk, coal, orange juice, or to a lesser extent, Windows PCs and Android phones)
information asymmetry
a decision situation where one party has more or better information than its counterpart
Porter's Five Forces (Industry and Competitive Analysis)
a framework considering the interplay between (1) the interplay between the intensity of rivalry among existing competitors, (2) the threat of new entrants, (3) the threat of substitute goods or services, (4) the bargaining power of buyers, and (5) the bargaining power of suppliers analyzing them will illuminate an industry's fundamental attractiveness, expose the underlying drivers of average industry profitability, and provide insight into how profitability will evolve in the future
data
a particularly strong switching cost for firms leveraging technology (like Netflix recommendations/feeds)
collaborative filtering
a process that automatically groups people with similar buying intentions, preferences, and behaviors and predicts future purchases
dense wave division multiplexing (DWDM)
a technology that increases the transmission capacity (and hence speed) of fiber-optic cable transmissions using fiber are accomplished by transmitting light inside "glass" cables in ___________, the light inside fiber is split into different wavelengths in a way similar to how a prism splits light into different colors
augmented reality
a technology that superimposes content, such as images and animation, on top of real world images
imitation resistant value chain
a way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role having one is a critical competitive asset
outbound logistics
delivering products or services to consumers, distribution centers, retailers, or other partners
fast follower problem
exists when savvy rivals watch a pioneer's efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate Groupon, Instagram vs Snapchat, Flip video camera
sustainable competitive advantage
financial performance that consistently outperforms industry averages
scalable
firms that benefit from scale economies as they grow are _________ many internet and tech leveraging businesses are highly _______ since, as firms grow to serve more customers with their existing infrastructure investment, profit margins improve dramatically
firm infrastructure
functions that support the whole firm, including general management, planning, IS, and finance
inbound logistics
getting needed materials and other inputs into the firm from suppliers
tradeoffs
if a firm's value chain can't be copied by competitors without engaging in painful _________, 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
differentiate
in order to break the commodity trap, many firms leverage technology to _________ their goods and services
straddled
incumbents trying to copy FreshDirect's value chain will be _______ across two business models, unable to reap full advantages of either
new entrants
investments online are expensive and uncertain, prompting some firms to partner with ________ like Amazon
increases, decreases
it is often suggested that the internet _______ (increases/decreases) the bargaining power of buyers and _______ (increases/decreases) the bargaining power of suppliers
viral marketing
leveraging consumers to promote a product or service
supply chain management (SCM)
linking inbound and outbound logistics with operations
long-haul fiber-optic cables
most of what travels over the internet is transferred over __________
technology/research and development
new product and process design
inventory turns (inventory turnover, stock turns, stock turnover)
number of times inventory is sold or used during a given period (a higher figure means that a firm is selling products quickly)
FreshDirect
online grocery firm addressing the quality gap between store bought produce and restaurant grade goods broader selection and cheaper prices compared to in person stores, supply chain savings that traditional grocery stores and delivery firms can't match, appealing user interface and mobile app encourages people to buy more and more often, next day delivery appeals to time strapped New Yorkers
strategic positioning
performing different tasks than rivals, or the same tasks in a different way
operational effectiveness
performing the same tasks better than rivals perform them
switching costs
play a role in determining the strength of network effects, as users spend time learning a product, buy add ons, create files, and enter preferences
data
plays a critical role in differentiation each time a user returns to Amazon, the firm uses browsing records, purchase patterns, and product ratings to present a custom home page that the firm hopes the user would like Apple operating systems only running on Apple hardware
substitute good
products or services that can be used in place of each other, like online digital tracks and their CD counterparts
application programming interfaces (APIs)
programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data ex: Amazon provides ____ to let developers write their own applications and websites that can send the firm orders
human resource management (HRM)
recruiting, hiring, training, and development
switching costs
the cost a consumer incurs when moving from one product to another can involve actual money spent (buying a new product) as well as investments in time, any data loss, and so forth
sameness
the danger in operational effectivness
price transparency
the degree to which complete information is available
commoditized
the direct to consumer model suffered when sales of notebook PCs outpaced the more _________ desktop market
the dominant social network worldwide
commoditized
the more _____________ an offering, the greater the likelihood that competition will be based on price, pulling down profits for al players that consumers see as basically equivalent in features
customer experience
the most important aspect to building a strong brand (not advertising and promotion, but proxying quality and inspiring trust)
distribution channels
the path through which products or services get to customers Apple Store versus selling Apple gear at Best Buy gives Apple an advantage and reduces the likelihood that consumers price check products with other brands
bargaining power
the pressure that a supplier or buyer can exert on a company Apple's dominance of smartphone and tablet markets has allowed the firm to lock up a significant portion of the world's supply of advanced touch screen displays and to do so with better pricing than would be available to smaller rivals
operational effectiveness, strategic positioning
the reason so many firms suffer aggressive, margin eroding competition is because they've defined themselves according to _______________ rather than ____________
barrier to entry
the scale of technology investment required to run a business can act as a __________, discouraging new, smaller competitors
value chain
the set of activities through which a product or service is created and delivered to customers
reduced based view of competitive advantage
the strategic thinking approach suggesting that if a firm is to maintain sustainable competitive advantage, it must control an exploitable resource, or set of resources, that have four critical characteristics (valuable, rare, imperfectly imitable, non substitutable)
brand
the symbolic embodiment of all the information connected with a product or service
intensity of rivalry
the threat that customers will switch their business to competitors within the industry the rise of the internet led to an increase of _______ for music retailers
non practicing entities (NPEs, patent trolls)
these firms make money by acquiring and asserting patents, rather than bringing products and services to market ex: BlackBerry was forced to pay a settlement to a little known holding company called NTP
affiliates
third parties that promote a product or service, typically in exchange for a cut of any sales
enablers
timing and technology are _______ for competitive advantage, but they alone will not yield sustainable competitive advantage (it is what a firm does with its time lead and technology)
operations
turning inputs into products or services
inbound logistics, operations, outbound logistics, marketing and sales, service
value chain primary components (value chain does not necessarily flow in a line from one function to another)
firm infrastructure, human resource management, technology/research and development, procurement
value chain secondary components
economies of scale
when costs can be spread across increasing units of production or in service multiple customers businesses that have favorable __________ (like many internet firms) are sometimes referred to as being highly scalable
network effects (Metcalfe's Law, network externalities)
when the value of a product or service increases as its number of users expands (like Instagram)
scale advantages
advantages related to size (Google, Netflix, Amazon)
OpenTable
an example of network effects, delivers high value to the restaurant industry by exposing inventory and lowering search costs (thereby reducing frustration)
straddling
attempts to occupy more than one position, while failing to match the benefits of a more efficient, singularly focused rival
private (as in "to go private" or "take a firm private")
buying up a publicly traded firm's shares usually done when a firm has suffered financially and when a turnaround strategy will first yield losses that would further erode share price firms (often called private equity, buyout, LBO/leveraged buyout firms) that take another company _______ hope to improve results so that the company can be sold to another firm or they can reissue shares on public markets
lower
consumers use brands to _______ (raise/lower) search costs, so having a strong brand is particularly vital for firms hoping to the first online stop for consumers
marketing and sales
customer engagement, pricing, promotion, and transaction
procurement
sourcing and purchasing function
accounting processes
standardized and not a source of competitive advantage, so firms buy rather than build their own
customer relationship management (CRM)
supporting sales, marketing, and in some cases, research and development
strategic position
Dell's struggles as computers, customers, and product mix changes all underscore the importance of continually assessing a firm's __________ among changing market conditions
defensible strategic assets
Google and Apple arrived late in their respective tech games, but nothing before them had created _______, which left an opening
two sided market
OpenTable participates in a _______, where customers are attracted to the service with the most restaurants, and restaurants are attracted to the service with the most customers
distribution channel
OpenTable's captive audience of restaurants and diners effectively creates a new __________ for introducing all sorts of additional value added services, including loyalty programs
support
service, maintenance, and customer support
enterprise resource planning software (ERP)
software implemented in modules to automate the entire value chain
learning costs, information and data, financial commitment, contractual commitments, search costs, loyalty programs
sources of switching costs 1. switching tech might require an investment in learning a new interface and commands 2. users may have to reenter data, convert files or databases, or even lose earlier contributions on incompatible systems 3. 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 4. breaking contracts can lead to compensatory damages and harm an organization's reputation as a reliable partner 5. finding and evaluating a new alternative costs time and money 6. 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)
