chp 2
Threat of Entry of New Competitors (Porter's 1)
The threat that new competitors will enter your market is high when entry is easy and low when there are significant barriers to entry.
Business Pressures
Types: technology pressures, Societal/Political/Legal Pressures, market Pressures
Competitive Advantage
any assets that provide an organization with an edge against its competitors in some measure such as cost, quality, or speed. It also helps an organization to control a market and to accrue larger-than-average profits
Technology Pressures
business pressures caused by technological innovation/obsolescence and information overload. Technological Innovation and Obsolescence: Few and improved technologies rapidly create or support substitutes for products, alternative service options, and superb quality. As a result, today's state-of-the-art products may be obsolete tomorrow. Information Overload: Internet and other telecommunications networks are bringing a flood of information to managers. To make decisions effectively and efficiently, managers must be able to access, navigate, and utilize these vast stores of data, information, and knowledge.
Market Pressures
business pressures generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers Types: Globalization, Changing nature of workforce, powerful customers
Societal/Political/Legal Pressures
business pressures related to social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics.
Powerful Customers
consumer sophistication and expectations increase as customers become more knowledgeable about the products and services they acquire. Customers can use the Internet to find detailed information about products and services, to compare prices, and to purchase items at electronic auctions
Electronic commerce
describes the process of buying, selling, transferring, or exchanging products, services, or information via computer networks, including the Internet.
Compliance with Government Regulations (type 2: Societal/Political/Legal Pressures)
government regulations regarding health, safety, environmental protection, and equal opportunity. Businesses tend to view government regulations as expensive constraints on their activities. In general, government deregulation intensifies competition. In the wake of 9/11 and numerous corporate scandals, the U.S. government passed many new laws, including the Sarbanes-Oxley Act, the USA PATRIOT Act, the Gramm-Leach-Bliley Act, and the Health Insurance Portability and Accountability Act (HIPAA).
Ten Flatteners (Thomas Freidman)
1. Fall of the Berlin Wall on November 9, 1989: Shifted the world toward free-market economies and away from centrally planned economies.Led to the emergence of the European Union and early thinking about the world as a single, global market. 2. Netscape goes public on August 9, 1995: Popularized the Internet and the World Wide Web. 3. Development of workflow software: Enabled computer applications to work with one another without human intervention. Enabled faster, closer collaboration and coordination among employees, regardless of their location. 4. Uploading: Empowered all Internet users to create content and put it on the Web. Led the transition from a passive approach to content to an active, participatory, collaborative approach. 5. Outsourcing: Contracting with an outside company to perform a specifi c function that your company was doing itself and then integrating their work back into your operation; for example, moving customer call centers to India. 6. Offshoring: Relocating an entire operation, or certain tasks, to another country; for example, moving an entire manufacturing operation to China. 7. Supply chaining: Technological revolution led to the creation of networks composed of companies, their suppliers, and their customers, all of which could collaborate and share information for increased efficiency. 8. Insourcing: Delegating operations or jobs within a business to another company that specializes in those operations; for example, Dell hires FedEx to "take over" Dell's logistics process. 9. Informing: The ability to search for information, best illustrated by search engines. 10. The Steroids (computing, instant messaging and file sharing, wireless technologies, Voice over Internet Protocol, videoconferencing, and computer graphics): Technologies that amplify the other flatteners. Enable all forms of computing and collaboration to be digital, mobile, and personal.
Porter's Five Forces Model
1. The threat of new competitors 2. The bargaining power of suppliers 3. The bargaining power of customers (buyers) 4. The threat of substitute products or services 5. The rivalry among existing firms in the industry
Bargaining Power of Customers (Buyers) (Porter's 3)
Buyer power is high when buyers have many choices from whom to buy and low when buyers have few choices
IT is instrumental in organizational efforts to "go green" in three areas:
Facilities design and management, Carbon management, International and U.S. environmental laws
Customer Focus
Organizational attempts to provide superb customer service can make the difference between attracting and retaining customers versus losing them to competitors. Numerous IT tools and business processes have been designed to keep customers happy.
E-Business and E-Commerce
Conducting business electronically is an essential strategy for companies that are competing in today's business environment
Ethical Issues (type 4: Societal/Political/Legal Pressures)
Ethics relates to general standards of right and wrong. Information ethics relates specifically to standards of right and wrong in information processing practices. Ethical issues are very important because, if handled poorly, they can damage an organization's image and destroy its employees' morale.
Threat of Substitute Products or Services (Porter's 4)
If there are many alternatives to an organization's products or services, then the threat of substitutes is high. If there are few alternatives, then the threat is low.
Five Sequenced Primary Activities of Typical Manufacturing Companies
Inbound logistics (inputs) Operations (manufacturing and testing) Outbound logistics (storage and distribution) Marketing and sales Services
Organizations Responses
Organizations respond to the various pressures by implementing Information Technology (IT) such as strategic systems, customer focus, make-to-order and mass customization, and e-business.
Two Categories of Organization Activities in the Value Chain
Primary Activities: relate to the production and distribution of the firm's products and services. These activities create value for which customers are willing to pay. Support activities: contribute to the firm's competitive advantage by supporting the primary activities, but do not add value directly to the firm's products or services.
Protection Against Terrorist Attacks (type 3: Societal/Political/Legal Pressures)
Since September 11, 2001, organizations have been under increased pressure to protect themselves against terrorist attacks. In addition, employees who are in the military reserves have been called up for active duty, creating personnel problems. Information technology can help protect businesses by providing security systems and possibly identifying patterns of behavior associated with terrorist activities, including cyberattacks.
Social Responsibility (type 1: Societal/Political/Legal Pressures)
Social issues that affect businesses and individuals range from the state of the physical environment, to company and individual philanthropy, to education. Some corporations and individuals are willing to spend time and/or money to address various social problems. These efforts are known as organizational social responsibility or individual social responsibility.
Organizational Responses
Strategic Systems, Customer Focus, Make-to-Order and Mass Customization, E-Business and E-Commerce
Bargaining Power of Suppliers( Porter's 2)
Supplier power is high when buyers have few choices from whom to buy and low when buyers have many choices
Value Chain Support Activities
The firm's infrastructure (accounting, finance, management) Human resources management Product and technology development (R&D) Procurement
Rivalry Among Existing Firms(Porter's 5)
The threat from rivalry is high when there is intense competition among many firms in an industry. The threat is low when the competition is among fewer firms and is not as intense.
Changing Nature of the Workforce
The workforce, particularly in developed countries, is becoming more diversified. Increasing numbers of women, single parents, minorities, and persons with disabilities are now employed in all types of positions
Porter's Value Chain Model
Value Chain: a sequence of activities through which the organization's inputs, whatever they are, are transformed into more valuable outputs, whatever they are. Value System: includes the suppliers that provide the inputs necessary to the firm along with their value chains. After the firm creates products, these products pass through the value chains of distributors (which also have their own value chains), all the way to the customers. All parts of these chains are included in the value system.
Thomas Friedman
Wrote the book "The world is flat" in 2006. describes three eras of globalization: Globalization 1.0: Timeframe: 1492 to 1800 Distinct Focus: Countries Driver: Brute Force, Braun Globalization 2.0: Timeframe: 1800 to 2000 Distinct Focus: International Companies Driver: -- first half of this period --> Falling Transportation Costs (Steam Engine/Railroads) -- second half of this period --> Falling Telecommunication Costs (Telegraph, Telephone, Computer, Satellite, Fiber Optics, Internet) Globalization 3.0: Timeframe: 2000 to Present Distinct Focus: Groups and Individuals Driver: Convergence of 10 forces (Flatteners)
Mass Customization
a company produces a large quantity of items, but it customizes them to match the needs and preferences of individual customers. Mass customization is essentially an attempt to perform make-to-order on a large scale
Barrier to Entry
a product or service feature that customers have learned to expect from organizations in a certain industry. A competing organization must offer this feature in order to survive in the marketplace (e.g., legal requirements such as admission to the bar to practice law).
E-business
a somewhat broader concept than EC that includes servicing customers, collaborating with business partners, and performing electronic transactions within an organization.
Make-to-Order
a strategy of producing customized (made to individual specifications) products and services.
Strategic Systems
provide organizations with advantages that enable them to increase their market share and/or profits, to better negotiate with suppliers, and to prevent competitors from entering their markets.
Digital Divide
refers to the wide gap between those individuals who have access to information and communications technology and those who do not.
Business Environment
the combination of social, legal, economic, physical, and political factors in which businesses conduct their operations. Significant changes in any of these factors are likely to create Business Pressures on organizations
Switching Costs
the costs, in money and time, imposed by a decision to buy elsewhere (e.g., contracts with smartphone providers).
Globalization
the integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology