strategic and competitive opportunities

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Chapter 2Chapter 2

STRATEGIC AND COMPETITIVE STRATEGIC AND COMPETITIVE OPPORTUNITIESOPPORTUNITIES

Using IT for Competitive AdvantageUsing IT for Competitive Advantage

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Presentation OverviewPresentation Overview

Competitive Advantage ExamplesCompetitive Advantage Examples Developing A Strategy For The Internet Developing A Strategy For The Internet

Age Age Key E-Commerce StrategiesKey E-Commerce Strategies The U.S. Airline IndustryThe U.S. Airline Industry Summing It UpSumming It Up

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Opening Case StudyOpening Case StudyZara – Fashion Fast ForwardZara – Fashion Fast Forward

Zara sets itself apart with its computerized Zara sets itself apart with its computerized network that ties stores to design shops network that ties stores to design shops and company-owned factories in real time.and company-owned factories in real time.

How can technology be used to respond How can technology be used to respond quickly to shifts in consumer tastes?quickly to shifts in consumer tastes?

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Competitive advantageCompetitive advantage – a company provides – a company provides a product or service in a way that customers a product or service in a way that customers value more than what the competition is able to value more than what the competition is able to do.do.

Application architect - Application architect - information technology information technology professional who can design creative professional who can design creative technology-based business solutions.technology-based business solutions.

IntroductionIntroduction

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Competitive Advantage Competitive Advantage ExamplesExamples

Federal ExpressFederal Express

FedEx – lets you access information about your FedEx – lets you access information about your packages through your Internet connection and packages through your Internet connection and Web browser. Web browser.

Temporary advantage - Temporary advantage - whatever you do, whatever you do, sooner or later the competition duplicates what sooner or later the competition duplicates what you’ve done. you’ve done.

First mover - First mover - the company who is first to market the company who is first to market with a new IT-based product or servicewith a new IT-based product or service ..

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Federal ExpressFederal Express

Enter your tracking Enter your tracking number here.number here.

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Charles SchwabCharles Schwab

Schwab was a first mover in offering stock Schwab was a first mover in offering stock trades over the Internet, along with other trades over the Internet, along with other online brokers such as E*Trade.online brokers such as E*Trade.

Schwab’s willingness to embrace the Schwab’s willingness to embrace the Internet early has made Schwab the Internet early has made Schwab the largest online broker.largest online broker.

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Competitive Advantage Competitive Advantage ExamplesExamplesDell ComputerDell Computer

Dell computer has a direct sell model that gives the Dell computer has a direct sell model that gives the company a huge advantage over any competitor.company a huge advantage over any competitor.

Distribution chain - Distribution chain - the path followed from the the path followed from the originator of a product or service to the end consumer. originator of a product or service to the end consumer.

Alliance partner - Alliance partner - a company you do business with on a a company you do business with on a regular basis in a cooperative fashion, usually facilitated regular basis in a cooperative fashion, usually facilitated by IT systems. by IT systems.

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Competitive Advantage Competitive Advantage ExamplesExamplesDell ComputerDell Computer

Information Information partnership - partnership - lets two lets two or more companies or more companies cooperate by cooperate by integrating their IT integrating their IT systems. systems.

On Your Own

Looking for Opportunities Close to Home

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Competitive Advantage Competitive Advantage Examples - Examples - DDell Computerell Computer

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Cisco SystemsCisco Systems Cisco Systems - a leader in utilizing the direct Cisco Systems - a leader in utilizing the direct

sell model over the Internet. sell model over the Internet.

Business to Business (B2B) - Business to Business (B2B) - companies companies whose customers are primarily other whose customers are primarily other businesses.businesses.

Business to Consumer (B2C) -Business to Consumer (B2C) -companies companies whose customers are primarily individuals. whose customers are primarily individuals.

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The Competitive Advantage Model

productcost/

performance

marketsharegrowth

YouOthers

D

D

D

DD

D

InitialInnovation

Second StageInnovation

D D

Third StageSpinoff

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Developing A Strategy For Developing A Strategy For The Internet AgeThe Internet Age

Porter’s three frameworks are:Porter’s three frameworks are:1.1. The Five Forces modelThe Five Forces model

2.2. The Three Generic StrategiesThe Three Generic Strategies

3.3. The Value ChainThe Value Chain

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Developing A Strategy For Developing A Strategy For The Internet AgeThe Internet AgeThe Five Forces ModelThe Five Forces Model

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Five forces modelFive forces model - determines the relative - determines the relative attractiveness of an industry. attractiveness of an industry.

Buyer power - Buyer power - high when buyers have many choices of high when buyers have many choices of whom to buy from, and low when the choices are few. whom to buy from, and low when the choices are few.

Supplier power Supplier power - high when buyers have few choices of - high when buyers have few choices of whom to buy from, and low when there are many whom to buy from, and low when there are many choices. choices.

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Threat of substitute products or services -Threat of substitute products or services - low if there low if there are very few alternatives to using the product or service.are very few alternatives to using the product or service. Switching costs -Switching costs - costs that costs that can make customers reluctant to can make customers reluctant to

switch to another product or service. switch to another product or service.

Threat of new entrants - Threat of new entrants - high when it is easy for high when it is easy for competitors to enter the market. competitors to enter the market.

Rivalry among existing competitors –Rivalry among existing competitors – high when the high when the industry is less attractiveindustry is less attractive..

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The Three Generic StrategiesThe Three Generic Strategies

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The Three Generic StrategiesThe Three Generic Strategies

Three generic strategiesThree generic strategies1.1. Cost leadershipCost leadership

2.2. DifferentiationDifferentiation

3.3. Focused strategyFocused strategy

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Using the Five Forces ModelUsing the Five Forces Model

Buyer powerBuyer power Loyalty programs.Loyalty programs.

Supplier powerSupplier power B2B marketplace - B2B marketplace - an Internet-based service which an Internet-based service which

brings together many buyers and sellers. brings together many buyers and sellers.

Threat of substitute products or servicesThreat of substitute products or services IT-based alternatives.IT-based alternatives.

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Using the Five Forces ModelUsing the Five Forces Model

Threat of new entrantsThreat of new entrants Entry barrierEntry barrier - a product or service feature - a product or service feature

that customers have come to expect from that customers have come to expect from companies in a particular industry. companies in a particular industry.

Rivalry among existing competitorsRivalry among existing competitors Using IT systems to be more efficient.Using IT systems to be more efficient.

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Bridging the Gap Between Business Bridging the Gap Between Business People and Technical PeoplePeople and Technical People

Project team -Project team - a team designed to a team designed to accomplish accomplish specific one-time goals, which is disbanded once specific one-time goals, which is disbanded once the project is complete. the project is complete.

Form a team that draws the best knowledge of Form a team that draws the best knowledge of the business problem from the business people the business problem from the business people and the best technical solution from the and the best technical solution from the technology people.technology people.

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APPROACHES TO STRATEGIC PLANNING

1Business-

Led

2Method-Driven

3Admin

4Organizational

5Technology

UnderpinningAssumption

Business Plansand NeedsShould DriveIS Plans

FormalizedPlanningMethodology

Use Firm’sMethodology

ContinuousShared PlanningActivities

Quality Business/InformationModeling

Emphasis ofApproach

Use BusinessPlans to LeadDevelopment ofIS Plans

Selection ofBest Method/Best Consultant

Project ROI User/ISCooperation andLearning

Creation ofBusiness Process/InformationModels

Slogan BusinessDrives IS

PlanningNeeds aMethod

Follow theRules

Themes withTeams

Model theBusiness

Key toSuccess

OperationalizedBusiness Plan

IntegratedStrategic,Tactical, andImplementationMethodology

EffectiveSteeringCommittee

ExperiencedUsers and ISPersonnel

Quality BusinessProcessReengineeringPrograms

Problem Business PlanQuality

Availability ofMethodologies

Tactical Tactical Difficult

ContinuousShared PlanningActivities

User/ISCooperation andLearning

Themes with

ExperiencedUsers and ISPersonnel

Tactical

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Viewing the Business Problem from Viewing the Business Problem from Another PerspectiveAnother Perspective

Take the perspective of a customer of the Take the perspective of a customer of the company.company.

Design the information system so it Design the information system so it enhances the customer’s experience.enhances the customer’s experience.

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Using the Three Generic StrategiesUsing the Three Generic Strategies

Use the three generic strategies to change Use the three generic strategies to change the basis of competition.the basis of competition.

Amazon.com makes the buying Amazon.com makes the buying experience a pleasure by using experience a pleasure by using sophisticated software to personalize the sophisticated software to personalize the site for each individual.site for each individual.

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Developing a Creative DesignDeveloping a Creative Design

Creative design - Creative design - solves the business solves the business problem in a new and problem in a new and highly effective way highly effective way rather than the same rather than the same way others have done it.way others have done it.

Team Work

Finding the BestIT Strategy

For Your Industry

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The Value ChainThe Value Chain

Business process Business process - a standardized set of - a standardized set of activities that accomplishes a specific task, activities that accomplishes a specific task, such as processing a customer’s order.such as processing a customer’s order.

Value chainValue chain - views the organization as a - views the organization as a chain – or series – of processes, each of chain – or series – of processes, each of which adds value to the product or service which adds value to the product or service for the customer. for the customer.

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Talbott used the value chain to:Talbott used the value chain to: Plan for a better way of meeting customer Plan for a better way of meeting customer

demands.demands. Identifying processes that add value.Identifying processes that add value. Identifying processes that reduce value.Identifying processes that reduce value.

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Looking Beyond The Four Walls Of The Looking Beyond The Four Walls Of The CompanyCompany

Just-in-timeJust-in-time - - an approach that produces or delivers a an approach that produces or delivers a product or service just at the time the customer wants it. product or service just at the time the customer wants it.

Supply chain - Supply chain - consists of the paths reaching out to all of a consists of the paths reaching out to all of a company’s suppliers of parts and services. company’s suppliers of parts and services.

Collaborative planning, forecasting, and replenishment Collaborative planning, forecasting, and replenishment (CPFR) - (CPFR) - a concept that encourages and facilitates a concept that encourages and facilitates collaborative processes between members of a supply chain. collaborative processes between members of a supply chain.

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Key E-Commerce StrategiesKey E-Commerce Strategies

Three capabilities made possible by the Three capabilities made possible by the Internet are:Internet are:

1.1. Mass customization and personalizationMass customization and personalization

2.2. DisintermediationDisintermediation

3.3. Global reachGlobal reach

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Key E-Commerce StrategiesKey E-Commerce StrategiesMass Customization and PersonalizationMass Customization and Personalization

Mass customizationMass customization - a business gives its customers - a business gives its customers the opportunity to tailor its product or service to the the opportunity to tailor its product or service to the customer’s specifications. customer’s specifications.

PersonalizationPersonalization - a Web site can know enough about - a Web site can know enough about your likes and dislikes that it can fashion offers that are your likes and dislikes that it can fashion offers that are more likely to appeal to you. more likely to appeal to you.

Collaborative filtering - Collaborative filtering - a method of placing you in an a method of placing you in an affinity group of people with the same characteristics. affinity group of people with the same characteristics.

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Key E-Commerce StrategiesKey E-Commerce StrategiesDisintermediationDisintermediation

Disintermediation Disintermediation – – using the Internet using the Internet as a delivery as a delivery vehicle, vehicle, intermediate intermediate players in a players in a distribution distribution channel can be channel can be bypassed. bypassed.

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Key E-Commerce StrategiesKey E-Commerce StrategiesGlobal ReachGlobal Reach

Global reach - Global reach - the ability to extend reach the ability to extend reach to customers anywhere there is an Internet to customers anywhere there is an Internet connection, and at a much lower cost. connection, and at a much lower cost.

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The U.S. Airline IndustryThe U.S. Airline IndustryAirline Reservation SystemsAirline Reservation Systems

The airlines really began using IT in a The airlines really began using IT in a significant way when American Airlines significant way when American Airlines and United Airlines introduced the first and United Airlines introduced the first airline reservations systems.airline reservations systems. SABRESABRE APPOLO APPOLO

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The U.S. Airline IndustryThe U.S. Airline IndustryFrequent Flyer ProgramsFrequent Flyer Programs

Frequent flyer programs are a great example of Frequent flyer programs are a great example of using IT to alter Porter’s five forces. using IT to alter Porter’s five forces. They reduced buyer power by making it less likely a They reduced buyer power by making it less likely a

traveler would choose another airline.traveler would choose another airline. They reduced the threat of substitute products or They reduced the threat of substitute products or

services by increasing switching costs.services by increasing switching costs. They erected entry barriers by making a frequent flyer They erected entry barriers by making a frequent flyer

program a practical necessity for any airline to program a practical necessity for any airline to compete effectively. compete effectively.

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The U.S. Airline IndustryThe U.S. Airline IndustryYield Management SystemsYield Management Systems

Yield management systems are designed Yield management systems are designed to maximize the amount of revenue that an to maximize the amount of revenue that an airline generates on each flight. airline generates on each flight.

Yield management systems are the Yield management systems are the reason that an airfare you’re quoted over reason that an airfare you’re quoted over the phone can be $100 higher when you the phone can be $100 higher when you call back an hour later. call back an hour later.

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The U.S. Airline IndustryThe U.S. Airline IndustryYield Management SystemsYield Management Systems

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The U.S. Airline IndustryThe U.S. Airline IndustryDisintermediating the Travel AgentDisintermediating the Travel Agent

Expert surveys have Expert surveys have estimated that the estimated that the number of travel agents number of travel agents in the U.S. will be in the U.S. will be sharply reduced as a sharply reduced as a result of result of disintermediation.disintermediation.

Team Work

Helping the Little Guy Compete

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The U.S. Airline IndustryThe U.S. Airline IndustryUtilizing Emerging TechnologiesUtilizing Emerging Technologies

Permission marketingPermission marketing - when you have - when you have given a merchant your permission to send given a merchant your permission to send you special offers. you special offers.

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Summing It UpSumming It Up

Important considerations you should Important considerations you should keep in mind as you work to bring an IT keep in mind as you work to bring an IT competitive advantage to your competitive advantage to your organization include:organization include:

1.1. Be efficient and effective.Be efficient and effective.2.2. Competition is all around you.Competition is all around you.3.3. Push the state-of-the-art.Push the state-of-the-art.4.4. IT competitive advantages are only IT competitive advantages are only

temporary.temporary.

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Case StudyCase StudyGM Tries to Lure Customers with OnStarGM Tries to Lure Customers with OnStar

GM added an in-car cellular service, GM added an in-car cellular service, OnStar, to update its image and increase OnStar, to update its image and increase sales.sales.

Did the OnStar system give GM a Did the OnStar system give GM a competitive advantage?competitive advantage?

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Case StudyCase StudySpeedpass: Throw Away Your Plastic?Speedpass: Throw Away Your Plastic?

Speedpass offers a short plastic cylinder, called Speedpass offers a short plastic cylinder, called a Key Tag, that transfers customer billing a Key Tag, that transfers customer billing information automatically.information automatically.

Speedpass is an alternative to a credit card.Speedpass is an alternative to a credit card.

How is Speedpass an example of a first mover?How is Speedpass an example of a first mover?