MIS Key Concept Questions Exam 1
Danger of relying on technology
"sameness" is the danger facing firms that compete only on operational effectiveness. technology can be easily acquired. the fast follower problem occurs when rivals enter a market quickly with a comparable product at a lower cost
API's
(distribution channel slide) 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. for example, amazon provides APIs to let developers write their own applications and websites that can send the firm orders
Affiliates
(distribution channel slide) third parties that promote a product or service, typically in exchange for a cut of any sales
Main benefits and risks associated with contract manufacturing in the fashion industry?
- Risks: Firms have created race-to-the-bottom cost-cutting measures that form contracts of which skimp on safety, and ignore environmental concerns. The fashion/ apparel industry has been plagued by accusation of sweatshop labor and unsafe working conditions. Ethical practices need to be a primary focus for firms. - Benefits: Not having to worry about directly employing workers to produce goods or a factory in which to do so.
Drawing from class discussion and the "A List of Goals Is Not a Strategy" article: 1) By identifying key stakeholders and recognizing what they want from a product/service, managers will find it easier to define "strategic factors" and thus develop a winning, sustainable strategy.
1) because most management teams don't identify key stakeholders, they don't even get to this point. and those that do often launch right into what they need to do for customers, for employees, and so on, without thinking first about what they want from them. why is sorting out from so important? what an organization wants from each group of key stakeholders translates neatly into its objectives. for instance, sales and revenue growth will come from customers, productivity and innovation from employees, and quality goods and services at the right price from suppliers. what's more, company law requires that boards, CEOs, and senior executives act in the best interests of the company. all decision making should stem from that mandate. of course, this doesn't preclude looking after customers' and other stakeholders' interests en route. Recognize what your stakeholders want from you. When management teams delve too quickly into problem-solving, they make assumptions. They think they already know what's good for their stakeholders. As a result, their companies end up with products and services that don't sell.
Describe primary characteristics of "waves" of computing in previous decades.
1. 1960s: computing was limited to large, room-sized mainframe computers that only governments and big corporations could afford. 2. 1970s: Moore's Law kicked in; minicomputers were a hit. 3. 1980s: personal computers (PCs) arrived; by the end of the decade nearly every office worker in America had a computer on their desk. 4. 1990s: Internet computing—cheap servers/networks can now send data around the world at the same time that fast, cheap PCs became mouse-click easy and PCs became a household item in the industrialized world. 5. 2000s: mobile phones put a computer in our pockets. 6. 2010s: Many consider this wave to be one of pervasive computing, where things have their own computers. Technology is becoming ubiquitously woven into products, infrastructure, and our mundane surroundings.
What are the five forces in Porter's Five Forces framework?
1. Threat of New ENTRANTS/potential new entrants 2. power of buyers/bargaining power of BUYERS 3. threat of SUBSTITUTES/products or services 4. bargaining power of SUPPLIERS 5. intensity of RIVALRY among existing competitors
What were the three critical (and mutually reinforcing) resources that rivals to the Netflix DVD-by-mail business failed to match?
1.Brand strength from customer experience 2.Scale: distribution centers / selection / customer base 3.Data assets
Drawing from class discussion and the "A List of Goals Is Not a Strategy" article: 2) Recognize "strategic factors" for an industry (e.g. port example in article) as distinct from generic objectives
2) STRATEGIC FACTORS from a company that manages a port and aims to attract as many ship operators as possible: - port capability (suitability for a ship's size and freight - freight availability (to pick up on the return leg) - congestion (speed of unloading and turnaround time in the port) - location (which affects "steaming time" or time between destinations - price (port charges for docking and remaining moored)
Why is the U.S. patent system often considered to be unfairly stacked against start-up companies?
A patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. Intellectual property protection can be granted in the form of a patent for innovations deemed useful. because of high costs associated with litigation. US litigation costs in a single patent case average is about $5 million and this can sink an early-stage firm.
Internet of Things
A vision where low-cost sensors, processors, and communication are embedded into a wide array of products and our environment, allowing a vast network to collect data, analyze input, and automatically coordinate collective action
Who are the main competitive rivals to Netflix today? Recognize examples of strategic advantages and disadvantages for Netflix relative to its main rivals.
AMAZON PRIME HULU HBO GO YOUTUBE APPLE MICROSOFT GOOGLE
How does massively parallel processing provide access to supercomputing capabilities for diverse businesses? (not just the few large corporations and wealthy institutions that can afford an actual supercomputer, e.g. Stampede 2 at UT Austin
Access to the powerful supercomputers via the cloud. It allows many microprocessors to work together simultaneously to solve problem. "The fastest of these supercomputers are built using hundreds or even thousands of microprocessors, all programmed to work in unison as one big brain. While supercomputers use special electronics and software to handle the massive load, the processors themselves are often of the off-the-shelf variety that you'd find in a computer at Best Buy"
What social media gaffe accompanied the ill-fated strategy to split Netflix into two firms? (see Qwikster Debacle)
Adding to the pain was the embarrassment of a botched rebranding of the DVD-by-mail service under the new name Qwikster. At the time of the rebranding announcement, Netflix had secured the domain Qwikster.com, but not the Twitter handle @Qwikster.
How does Zara benefit from Limited Production Runs?
Allows Zara to cultivate exclusivity of its offerings. Encourages customers to buy right away and at full price. Encourages customers to visit often Reduces the rate of failed product introductions.
Why is inventory management so important for retailers?
Because the retailers need to maintain the right amount of stock in warehouses, so there is a balance between not having too much or too little inventory. Too much inventory or too little can trigger profit losses.
NOT a strategy:
Best practice improvement, execution, aspirations, a vision, learning, agility, flexibility, innovation, the internet or any technology, downsizing, restructuring, mergers/consolidation, alliances/partnering, outsourcing, internationalizing
What does it mean to "go private" or to "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, or leveraged buyout firms (LBO)) that take another company private hope to improve results so that the company can be sold to another firm or they can reissue shares on public markets.
Identify key stakeholders in the publishing industry. Recognize how they have generally been impacted by Amazon's increasing dominance of the e-book (and book? and audiobook?) markets
Channel conflict arises, and companies who see Amazon as a threat pull away from activities benefitting Amazon's business Walmart and Target discontinued the sale of Kindles in stores, and Barnes & Noble stopped carrying Amazon publishing titles in stores
What is Moore's Law? To what industry does it apply?
Chip performance per dollar doubles every 18 months An observation and projection of a historical trend - not a physical or natural law. Has been used in the semiconductor industry to guide long-term planning and to set targets for research and development
3) Leveraging the Data Asset: Collaborative Filtering and Beyond
Cinematch is a software technology known as collaborative filtering. these systems monitor trends among customers and use this data to personalize an individual customer's experience. Recommendations accounted for more than 60% of customer DVD request queues. Netflix leveraged its dataassets for: Brand strength Operational advantages Switching costs for subscribers churn rate: the rate at which customers leave a product
Are there any potential concerns with respect to pervasive computing?
Computers are "listening" like Siri responding to phrases besides "Hey Siri" Having a mic enabled Google Chrome Auto-filling password, credit card information, sensitive information Location services/tracking
Can technology serve as a distribution channel? Recognize examples of tech-enabled distribution channels.
Distribution Channels: the path through which products or services get to customers. The Apple Store: shopping experience and distribution channel that offers an opportunity for differentiation The App Store: low barriers to entry for programmers Partnerships and affiliates, but dependence on distribution channels provided by other firms can present challenges if distribution partners decide to cut you off (e.g., Google Maps on iOs) Distribute products by bundling them with existing offerings Application Programming Interface (APIs): turn your product into a platform. Technologies such as the Internet and mobile phones act as channels to sell products.
Threat of potential new ENTRANTS
Economies of scale - Product differentiation - Start-up capital requirements - Switching costs to buyers; brand loyalty - Access to distribution channels - Government policy and regulation - Incumbents' defense of market share - Industry growth rate Presence of Strong Force: - Corner latte stand - Mobile app development Presence of Weak Force: - Professional football team - Telecommunications industry
What are a few challenges facing Netflix with respect to international expansion?
Entering new markets involves heavy upfront expenses, including ramping up marketing campaigns to create awareness and securing licenses for both american and local content. Legal issues in certain countries can be challenging. Movies in France must wait at least 3 years after it is released in theaters before it can be streamed online. It is expensive and doesn't have the same amount of name recognition.
Smartphones are the key driver of 21st century business growth. Mobile and digital technologies have built billion-dollar industries that wouldn't exist without handheld computing power and internet connectivity
Faster/cheaper technology means that computing and telecommunications are accessible to billions of people in ways that are both opening entire new market opportunities and poisoning our planet. Today's smartphones are used by 2 billion people worldwide, by the end of this decade it will be 4 billion. Sub-Saharan Africa is becoming economic lubricant, 70% of the region have access to mobile phone coverage. A percentage greater than those that have access to reliable water or electricity. Kenya's M-PESA and Zaad use text messages to replace cash, bringing the safety and speed of electronic payment and funds transfer to the unbanked region, cutting corruption. Drones are delivering medical supplies in Rwanda and other underserved communities. They also monitor the health of agricultural crops. Tech giants like Apple, Facebook, Google, IBM, Netflix, and Oracle would not have come to fruition without technology. open source software powers sites
Goals ≠ Strategy ≠ Tactics recognize clear examples of each
Goal: broad primary outcome Strategy: the approach you take to achieve a goal Objective: a measurable step you take to achieve a strategy Tactic: a tool you use in pursuing an objective associated with a strategy the terms tactic and strategy are often confused: tactics are the actual means used to gain an objective, while strategy is the overall campaign plan, which may involve complex operational patterns, activity, and decision making that lead to tactical execution
Goal/Strategy/Tactics
Goal: we will increase the number of library card holders by 6% by Oct. 1, 2014 Strategy: develop an inbound marketing plan to achieve this goal Tactic 1: write a series of blog posts using the blogging editorial calendar Tactic 2: push this content onto multiple platforms Tactic 3: schedule tweets throughout each week
Distinguish products/industries based on "atoms" from those enabled by "bits"
Going to a record store is a product based on atoms (physical). Atoms are physical entities that contain media. Whereas Apple music is a bit- based product (digital). It streams music (which is the bits) and recognizes that the need for physical entities that contain bits like record players and CDs are unnecessary
What are the five components of an Information System?
Hardware, Software, Data, Procedures, and the People who interact with and are impacted by the system.
What is the main reason that we are observing diminishing returns with respect to an increasingly asymptotic Moore's Law? Is it primarily an issue of performance? Or price?
If Moore's Law has started to flag, it is mainly because of economics. As originally stated by Mr. Moore, the law was not just about reductions in the size of transistors, but also cuts in their price. New semiconductor fabrication plants("fabs") now cost more that $6 billion. Transistors can be shrunk further, but they're now getting more expensive.
Understand main points supporting the argument that the marginal cost of digital goods is effectively zero
It's often argued that the marginal cost of digital goods is effectively zero. That's because computers can make limitless duplicates of digital content—no material required—and the Internet can be used to almost instantly distribute content to customers. In practice there are some costs associated with digital distribution. About ¼ of Amazon revenues come from the sale of media businesses that are rapidly shifting from atoms to bits Moore's law has allowed Amazon to rapidly drop the price of Kindle offerings while increasing device functionality Amazon does not make money by selling Kindle hardware; instead, it seeks to fuel media and e-commerce sales as well as side businesses such as on-Kindle and in-app advertising
What are some primary managerial considerations with respect to e-Waste?
Managers must audit disposal and recycling partners with the same vigor as their suppliers and other corporate partners. If not, an organization's equipment may end up in environmentally harmful disposal operations.
2) Scale from the Distribution Network
Netflix built a nationwide network of 58 automated distribution centers that collectively could deliver DVDs overnight to 97% of the US population. No competitors had a comparable network at launch, so the lack of scale among rivals harmed their customer experience, weakening their brand.
bargaining power of BUYERS
Number of buyers relative to sellers - Product differentiation - Switching costs - Buyers' threat of vertical integration - Importance of product to buyer - Price sensitivity of buyers - Buyers' volume/size of orders Presence of Strong Force: - Suppliers of auto paint to Toyota - Department of Defense purchases from contractors Presence of Weak Force: - Buying gas during a shortage - Most consumer products, e.g. paper towels
intensity of RIVALRY among existing competitors
Number of competitors (market concentration) - Relative size of competitors (balance) - Diversity of competitors - Industry growth rate - Cost structures: fixed vs. variable - Extent of product differentiation - Impact of economies of scale - Buyers' switching costs - Exit barriers Presence of Strong Force: - Airlines - Fast food restaurants Presence of Weak Force: - Internal Revenue Service - Google online search (debatable)
bargaining power of SUPPLIERS
Number of sellers relative to buyers - Suppliers' product differentiation - Availability of substitute inputs - Switching costs to other inputs/products - Importance of products to buyers - Importance of industry to suppliers - Buyers' potential for vertical integration Presence of Strong Force: - Oil and gas companies - Pharmacies buying patented drugs from pharmaceutical company Presence of Weak Force: - Selling grain after a surplus harvest - Travel agents (many supplier options)
Recognize the distinction between Operational Effectiveness and Strategic Positioning. Why do companies need both to sustain competitive advantage
Operational Effectiveness: preforming the same tasks better than rivals preform them. Strategic Positioning: preforming different tasks than rivals, or the same tasks in a different way
In order to win customers from an established incumbent, a late-entering rival must offer a product or service that not only exceeds the value offered by the incumbent, but also any perceived customer switching costs
People who have started their service with an established incumbent would have stronger ties with the company, so late-entering rivals must offer a product or service that exceeds the value of the incumbent's service and the switching costs. switching costs and value of service=incumbent. value of service(differentiation)=late-entering rival
Internet retailers providing digital products and services are potentially even more scalable. Why?
Platform play - redefine industry value chain so customers and suppliers can interact more directly j New marginal supply - using digital tech to tap into previously inaccessible sources of supply at a marginal cost Digitally-enabled products and services - create new digital products/services to serve new demand Rebundling & customizing - rebundle products/services to better serve existing customers Digital distribution channels - make it easier for customers to access products/services Cost efficiency - using digital to improve their cost efficiency, typically through automation or cost scaling
Understand the essence of Business Strategy: differentiation, trade-offs, deliberately choosing to be different, unique mix of value, choosing what not to do, rooted in a system of difficult-to-match activities...
Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. strategy is about making choices, trade offs, its about deliberately choosing to be different. the essence of strategy is choosing what not to do. a strategy delineates a territory in which a company seeks to be unique. competitive strategy is about being different. it means deliberately choosing a different set of activities to deliver a unique mix of value
Recognize notable implications of Moore's Law for managers (not just managers at computer companies
Rapid obsolescence of computing equipment forces management to consider accounting and budgeting factors such as the useful life of the equipment, capital expenditures, total cost of ownership, and training budgets.
What downsides might a start-up company experience from "going public" early?
Reed Hastings once said his biggest strategic regret was taking his firm public too early. Once public, the firm was required to disclose its financial position each quarter, and the whole world soon (including Blockbuster & Walmart) learned that the Netflix business model was profitable and scalable. NFLX went public with shares near $1 in 2002, when net streaming technology was in its infancy. Few realized the long-term potential of its business model.
Threat of SUBSTITUTES/products or services
Relative price/ quality/ availability of substitutes - Perceived switching costs for buyers - Perceived level of product differentiation Presence of Strong Force: - Car rental companies - Soft drinks Presence of Weak Force: - Medical treatments - Salt, water
Tactic:
SE's board level risk and enterprise/security risk alignment. how you allocate resources
Identify key examples of how the digital economy impacted conventional media industry value chains
Streaming is not just a format change, but a business-model overhaul for the industry, forcing a revolution in the way music is produced, marketed, and sold. "The threat of piracy is real, but there's good news: it's clearly much cheaper now to produce and distribute movies, television, books, and so on. Creation and distribution have become trivially inexpensive. That's one important counterpoint, at least, to loss of revenue."
Recognize emerging trends and current computing paradigms (e.g. quantum computing) that could extend computing progress even if the specific exponential progress of Moore's Law tapers off
Supercomputers- Computers that are among the fastest of any in the world at the time of their introduction. Grid computing- A type of computing that uses special software to enable several computers to work together on a common problem, as if they were a massively parallel supercomputer. Cluster computing - Connecting server computers via software and networking so that their resources can be used to collectively solve computing tasks.
Technology
Technology can be most broadly defined as the entities, both material and immaterial, created by the application of mental and physical effort in order to achieve some value. In this usage, technology refers to tools and machines that may be used to solve real-world problems. W. Brian Arthur defines technology in a similarly broad way as "a means to fulfill a human purpose." 1. the branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society, and the environment, drawing upon such subjects as industrial arts, engineering, applied science, and pure science 2. the application of this knowledge for practical ends 3. a scientific or industrial process, invention, method, or the like 4. the sum of the ways in which social groups provide themselves with the material object of their civilization
Recognize broadly how technology has catalyzed major changes for business and society
Technology has catalyzed profound changes to the ways in which we live and work
Drawing from class discussion and the "How to tame the tech titans" article:
The "FAANG" firms are increasingly accused as being too big, anti-competitive, and destructive. Some of this "techlash" is unfounded, but most agree that changes are overdue with respect to how tech companies are regulated. Among recommended strategies for regulating without stifling innovation are: (1) better use of existing antitrust laws and (2) regulators' recognition of how tech-enabled markets work differently than conventional markets. large companies create/control market- they create barriers for entry- comp hinders stunt up growth, new ideas and profits. ALL ABOUT SIZE
2) Scale from Selection: The Long Tail
The Internet allows for large-selection inventory efficiencies with which traditional (offline) retailers cannot compete. Roughly 75% of Netflix DVDs shipped were from back-catalog titles, versus 70% of Blockbuster rentals from new releases. Long Tail: in this context, refers to an extremely large selection of content or products. the long tail is a phenomenon whereby firms can make money by offering a near-limitless selection
How has Netflix used crowdsourcing?
The Netflix Prize is an example of crowdsourcing, a technique in which a firm states a problem it would like solved, the reward it will provide, and then makes this available to a broader community in the form of an open call. The firm previously ran a competition, known as the Netflix Prize, ponying up $1 million to the first team that could improve Cinematch scores by 10 percent. For contest purposes, Netflix released a subset of ratings data, stripped of customer identity, and over 30,000 teams from over 170 countries eventually entered the contest. The winning team consisted of engineers that entered the competition on separate teams.
Recognize main ways that Netflix uses data as a strategic resource
The data gathered via streaming can be more revealing than ratings received via DVD-by-mail. Even if someone doesn't rate a given title, if they binge-watch multiple episodes, Netflix has a pretty good indicator that the user likes the show. The reverse is usually true for the unrated property that a user streamed for the first fifteen minutes and never came back to. In the DVD-by-mail days if you didn't take the time to rate a show, the firm had no idea if you'd actually watched shows you'd received, watched them multiple times, finished watching titles you started, and so forth. Once captured, this data can be fed into the firm's "collaborative filtering" software to further group user tastes and help subscribers discover the content most likely to delight them
What are a few ways that Moore's Law has impacted developing economies?
The increase in consumption of electronics has two major adverse ecological effects. First, it significantly increases mining and procurement for the materials needed for the production of gadgets. And second, discarded devices produce large quantities of electronic waste. That waste could be reduced through repair, reuse, or resale. Whether it ever will be is an open question
What main strategy has Netflix deployed to to deliver streaming content to customers' screens?
To deliver streaming video, Netflix actually uses computers provided by the cloud computing services of Amazon (making Amazon and Netflix both partners and competitors, a phenomenon often referred to as coopetition.
Consider gains and risks for an industry "first mover." What can they do to make the most of an early start?
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. Moving first pays off when the time lead is used to create critical resources that are valuable, rare, tough to imitate, and lack substitutes (e.g., scale, brand, switching costs, network effects, distribution channels...)
Society has become increasingly dependent on Internet technology for virtually all aspects of communication and handling information, opening new frontiers for collaboration and knowledge generation and also introducing frightening and new security/safety/privacy risks
When mobile phones are cameras just a short hop from YouTube, Facebook, Instagram, twitter, every ethical lapse can be captures, every customer service flaw remains on the permanent (digital) record that is the internet. The service and ethics bar for today's manager has never been higher. Social Media has also emerged as a catalyst for global change, yet technology, itself, has no morality. Moore's Law and other factors that make technology faster and cheaper have thrust computing and telecommunications into the hands of billions in ways that are both empowering the poor and poisoning the planet. China has more internet users than any other country, India has become a global IT powerhouse. aspects such as social media, mobile cameras, Moore's Law. Chine= most internet users. India= global powerhouse
To what extent has there been a shift in digital content/distribution supplier power associated with the Netflix streaming model (relative to DVD-by-mail)
When the "First-Sale Doctrine" doesn't apply, the bargaining power of suppliers increases. Power of suppliers has unequivocally strengthened now that we use digital media. The competitive rivalry, however, has slightly decreased the bargaining power of suppliers because of the bidding for rights etc...
1) Advertising can build awareness, but brands are built through customer experience.
While both Blockbuster and Walmart were prominent companies, neither name was synonymous with a DVD-by-mail subscription service. Reed Hastings's early market entry and effective execution made Netflix the first firm consumers thought of. Everyone else in the space had to spend big to try to create awareness alongside the leader.
Size, heat, and power: three forces interacting to challenge the continued advancement of Moore's Law
While shrinking silicon pathways creates better chips, packing transistors close together creates problems associated with three interrelated forces: size, heat, and power As chips get smaller and more powerful, they get hotter and present power-management challenges. At some point, Moore's law will stop because we will no longer be able to shrink the spaces between components on a chip.
Recognize scale advantages / economies of scale associated with digital streaming
While studios may charge more for deals involving more users, the firm with more users is likely to be able to pay far more than smaller rivals. A studio would rather accept a $200 million check from Netflix than three $50 million checks from smaller players. Start talking exclusives, and advantage once again goes to the biggest player. Size-based advantages come from both the scale of a firm's streaming library (a longer tail) and the scale of the customer base (the ability to pay for that tail). Once a firm gets big, there's a virtuous cycle where more titles attract more customers, and more customers increase a firm's ability to bid on attractive content. A larger, more profitable firm also gains pricing advantages. As of this writing, the Netflix basic offering is cheaper than HBO, Hulu, and Showtime (although deep-pocketed Amazon is cheaper). Netflix doesn't just see growth as a way to advance profitability; it sees it as a vital competitive asset to keep competitors at bay. Netflix can spend so much more than competitors because it has more subscribers than rivals. And while Amazon's content spend is about 2/3rd of Netflix's bill, Netflix is seeing roughly five times more usage—scale economies in action.
Recognize examples of: how Zara uses technology to cultivate an imitation-resistant value chain
Zara has used technology to dominate the retail fashion industry as measured by sales, profitability, and growth. 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. Zara excels by targeting high leverage tech investments at points in its 'vertically integrated' value chain where they will have the most impact. Zara- customer data as competitive advantage. Zara is able to collect and interpret data in real time and adapt its supply chain quickly to the constant change in customer preferences. After hours fashion forensics include garment ranking analysis of sales, but also items tried on by customers but NOT sold. Zara store managers use PDAs/iPods to gather input about tastes and preferences of the customers when they visit the stores. 70% of retail salaries at Zara can come from commissions.
Progression to a Digital Economy
agricultural economy--> industrial economy--> digital economy (information technology, knowledge economy, service and self service economy, sharing economy, experience economy)
Information System
an integrated solution that combines five components: hardware, software, data, procedures, and the people who interact with and are impacted by the system
Why is an innovation/business model based on technology alone often subject to intense competition?
barriers to entry are low for many tech enabled firms. Innovation based on technology alone is often subject to intense competition because technology, in many cases (and despite patent protection) can be easily duplicated or copied (e.g., Groupon). 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. Moving first pays off when the time lead is used to create critical resources that are valuable, rare, tough to imitate, and lack substitutes (e.g., scale, brand, switching costs, network effects, distribution channels...). Technology and the Internet (e.g., social media) can help a firm build a brand identity inexpensively (e.g., viral marketing). Timing and technology alone will not yield sustainable competitive advantage, but firms can use them strategically by creating differences that cannot be easily matched. Technology can be imitated and reverse engineered.
How do consumers often make decisions when evaluating commoditized products?
based on price. The threat of substitutes is HIGH when: Product or service is commoditized consumer switching costs are low Substitutes are cheaper than industry products Substitute product quality/performance is equal or superior to industry product The threat of substitutes is LOW when: Consumer switching costs are high (or perceived to be high) Substitutes are more expensive than industry products Substitute quality/performance is inferior to industry product No substitute product is available
Strategy:
connect broad level risks to security mitigation activities. your plan for action for the journey. a unique value proposition, a different tailored value chain, clear tradeoffs, and choosing what not to do, activities that fit together and reinforce each other, strategic continuity with continual improvement in realizing the strategy. stratefy is about doing things differently, not simply doing them better than everyone else. and its the key to competitive advantage
Strategic Positioning
creating a unique value proposition, doing things differently to deliver value compared to rivals, making choices. performing different activities from those of rivals, or the same activities in a different way
Is streaming content differentiated or commoditized?
differentiated
Recognize defining characteristics of the "digital economy" (effectively synonymous with modern business)
economic activity from billions of online connections: people, organizations, data, devices, and processes Conducting business through markets based on the internet and other digital technologies 3 main components: e-business infrastructure (hardware, software, telecoms, networks, human capital, etc.) E-business (how business is conducted, any process that an organization conducts over computer-mediated networks) E-commerce (transfer of goods, for example when a book is sold online)
Digital
expressed as series of the digits 0 and 1, typically represented by values of a physical quantity such as voltage or magnetic polarization
Smart Digital Strategy
five core principles: 1. emphasize outcome based customer experience 2. integrate core processes and real time analytics to enable simpler, smarter, faster work 3. support an empowered, highly engaged workforce 4. collaborate with suppliers to accelerate growth 5. use the internet of things to connect and leverage assets, generating improved insights for faster, better decision making
Business Strategy
how a company pursues sustained competitive advantage across its chosen market scope
Name a few tech-enabled developments in the past decade that have helped to lower barriers to entry for tech entrepreneurs. (e.g., App stores: low/no-cost distribution channels allow programmers to access millions of potential users)
ideas can be vetted and prototyped and tested online. funding can be crowdsourced. "the cloud" is transforming barriers to entry for start ups. app stores: low/no cost distribution channels allow programmers to access millions of potential users. social media. open source. peer production. software as a service. outsourcing. new and emerging tech enabled markets. the primacy of data across virtually all industries
Objective:
increased involvement in assisting the organization with risk decisions.
IPO
initial public stock offering, the first time a firm makes shares available via public stock exchange, also known as "going public"
Recognize examples of: how Zara's operates differently compared to conventional fashion industry practices
instead of trying to create demand for new trends in the summer and winter seasons using the catwalks of fashion shows, Zara studies the demands of the customers in its stores and then tries to deliver an appropriate design at lightening speed. in the process, Zara has become the most profitable arm of Inditex, a holding company of 8 retail brands, and one of the biggest success stories in Spanish business. Zara is a also a fashion industry pioneer in going green with use of renewable energy systems at logistics centers and biodiesel for the firm's trucking fleet.
Identify tech-enabled products that demonstrate market impacts of Moore's Law (e.g., Amazon's Kindle).
ipod song capacity Back then 5 GB of storage for songs on an ipod was $399 but now it is free on icloud
Understand the nature of the "fast follower problem" and recognize an example
occurs when rivals enter a market quickly with a comparable product at a lower cost. learn from their successes and missteps then enter the marker with a better product at lower costs. ex: Rivals created good copies of first-mover TiVo's DVR technology, and TiVo lacked access to critical distribution channels dominated by cable companies. Like how FB and instagram started having stories when SC started that
Operational Effectiveness:
preforming the same tasks better than rivals preform them. assimilating, attaining, and extending best practices, doing things better and better, validating and executing. So... firms have to invest in their techniques to improve quality, lower costs, and design efficient customer experiences with operational effectiveness. BUT the efforts can be matched. So operational effectiveness is not sufficient to have sustainable dominance in competition.
According to the Resource-based View, what are four characteristics of a company resource/capability that has potential to yield sustainable competitive advantage? (i.e., VRIN)
resource-based thinking can help a firm avoid the trap of carelessly entering markets simply because growth is spotted. resource-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: VRIN= valuable, rare, inimitable, non-substitutable. Valuable: does the asset yield value to the firm/customers? Rare: is the asset in limited supply or difficult to acquire? Inimitable: is the asset impossible/hard to imitate? Non-Substitutable: is the asset without comparable substitutes?
Goal:
security is fully aligned with business goals. what you want to achieve. growth, superior operational outcomes through efficient work practices, becoming competitive in an existing market, increasing product sales to take market leadership, expanding into other regions, optimizing ROI, developing a service delivery model that incorporates tactical projects
Recognize how Netflix has used vertical integration to mitigate the increase in supplier power
started making Netflix originals
Information Technology
the application of computers and internet to store, retrieve, transmit, and manipulate data, or information, often in the context of a business or other enterprise. IT is considered a subset of information and communications technology. includes hardware, software, data (in the information system)
Digital Economy
the economic activity resulting from the billions of online connections among: people, businesses, data, devices, process
Distribution Channels
the path through which products or services get to customers
What are the five primary components of the Value Chain?
value chain= the set of activities through which a product or service is created and delivered to customers. 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. five primary components: Inbound Logistics: getting needed materials and other inputs into the firm from suppliers Operations: turning inputs into products or services Outbound Logistics: delivering products or services to consumers, distribution centers, retailers, or other partners Marketing and Sales: customer engagement, pricing, promotion, and transaction Support: service, maintenance, and customer support
Recognize examples of: key strategic and operational vulnerabilities (potential weak spots) for Zara
vertically integrated, just in time, Spain-centric business Zara's value chain is difficult to copy, but it is not invulnerable, nor is future dominance guaranteed. Zara management must be aware of the limitations in its business model, and must continually scan its environment and be prepared to react to new threats and opportunities. By moving all deliveries through just two warehouse locations, the firm is vulnerable to political/social disruptions in the region. Potential for a natural disaster to disproportionately impact Zara. Susceptible to currency fluctuations (Euro) since development and manufacturing occur in one country. Rising costs of fuel to accommodate frequent deliveries. Potential for competitors to copy Zara's approach? Changing landscape of apparel retail: •Amazon is set to overtake Macy's as the biggest seller of clothing to Americans. •Fast-growing new entrants to the market (unburdened by retail stores) are bringing production much closer to distribution and continuously refreshing merchandise. Some of Zara's latest strategic moves: •Develop an innovation unit to test things like using robots to improve stocking inventory processes and using computer chips to tell the volume of clothing in a box •Development partnerships with tech companies working on machine learning and big data analytics •Make best use of physical stores, e.g. "location intelligence" and virtual assistants
2) Scale the Big Customer Base- Delivering True Economies of Scale
when costs can be spread across increasing units of production or in serving multiple customers. businesses that have favorable economies of scale (like many internet firms) are sometimes referred to as being highly scalable
Are tech products typically price elastic?
yes
What main sources of switching costs are identified in Ch 2? You might think of others.
○ Learning Costs: Switching technologies may require an investment in learning a new interface and commands ○ Information and Data: Users may have to re-enter data, convert files or databases, or even lose earlier contributions on incompatible systems. ○ Financial Commitment: 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. ○ Contractual Commitments: Breaking contracts can lead to compensatory damages and harm an organization's reputation as a reliable partner. ○ Search Costs: Finding and Evaluation a new alternative costs time and money. ○ Loyalty Programs: Switching can cause customers to lose out of program benefits. Think frequent purchaser programs that offer "miles" or "points" (all enabled and driven by software).
Key Takeaways from book (ch. 1)
● In the previous 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. ● Recognize that anyone reading this book has the potential to build an impactful business. Entrepreneurship has no minimum age requirement ● The ranks of technology revolutionaries are filled with young people, with several leading firms and innovations launched by entrepreneurs who started while roughly the age of the average university student. ● Several forces are accelerating and lowering the cost of entrepreneurship, these include crowdfunding, cloud computing, app stores, 3D printing and social media, among others.
