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MP3 / MD740 Strategy & Information Systems Nov. 3, 2004 Technology & Industry Competition

MP3 / MD740 Strategy & Information Systems Nov. 3, 2004 Technology & Industry Competition. Topics Covered. Strategy & the Internet – a critical look Tech’s impact on the five forces of industry competitiveness Recognizing competitor threats

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MP3 / MD740 Strategy & Information Systems Nov. 3, 2004 Technology & Industry Competition

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  1. MP3 / MD740Strategy & Information SystemsNov. 3, 2004Technology & Industry Competition

  2. Topics Covered • Strategy & the Internet – a critical look • Tech’s impact on the five forces of industry competitiveness • Recognizing competitor threats • Information Systems and dealing with competitor threats • Readings discussions on mass-customization, brand, and scope, among others • Buyer / Supplier power

  3. ICA: Industry & Competitive Analysis(Porter’s Five Forces) Potential New Entrants Power of Suppliers Industry Competitors Power of Buyers Substitute products or services

  4. Value Chain Infrastructure: general mgmt, planning, finance, IS HRM: recruiting, hiring, training, and development Tech. Development: R&D Procurement Inbound Operations Outbound Marketing Service logistics logistics & Sales

  5. Competitor related threats • Growth industry w/above average profits • Fragmented industry - no clear leader / national brand • Low startup costs • Lack of scale economies • Low differentiation • Weak brands / low customer loyalty • Low customer switching costs • Available distribution networks • Technology & Regulatory shifts • Similar products/services/industries exist

  6. Addressing Competitive Threats • Economies of Scale • Differentiation • Scope / Multiple Business Lines / Slack Resources • Develop / Strengthen Brand • Proprietary technology, learning curve/know-how, geography • Contrived Deterrence • over-capacity, pre-announcements • Government Regulation • Switching Costs and Network Effects • Create / secure distribution channels • Alliances (with complementary firms & competitors) The Role of Timing

  7. Scale, World-leading mfg. & sales Competitive Advantage Integrated IS across plants / offices IS as an Enabler • IS resource yields competitive advantage • (ex. Alcoa)

  8. Creating / Enhancing Resources • Created when resources combine for additional benefit. • e.g. embedded technology Service Network Superior Service/ Switching Cost/ Inventory Efficiencies Competitive Advantage Monitoring IS Superior Products R & D

  9. Google Revenue Streams AdSense AdWords Google Search Appliance

  10. Comparing Google Source: Fortune, Nov 15, 2004

  11. Supplier related threats • Small number of suppliers • Suppliers sell highly differentiated products • Suppliers not threatened by substitutes • Cost to switch suppliers is high • Firm is not an important customer for suppliers • Suppliers threaten forward integration • Information asymmetries

  12. Addressing the supply-side • Foster relationships with more suppliers • Acquire & leverage information • Lower switching costs • Lower product complexity - turn supplier products into commodities • be less dependent on a given supplier • Integrate backwards • Tightly integrate suppliers into your operations • make suppliers more dependent on your firm

  13. Information Systems Reduce Switching Costs & Enhance Choice Firms have a greater choice of suppliers Firms are limited to a few suppliers LOW HIGH SWITCHING COSTS • Examples • EDI, WebServices • Computer Aided Design (CAD), Computer Aided Engineering (CAE), Computer Aided Manufacturing (CAM) • Integrated Robotics

  14. Buyer related threats • Small number of highly influential buyers • Buyers purchase commodity products • Products sold to buyers consume a high portion of the product’s final cost • Buyers are not earning significant economic profits • Buyers threaten backward integration • Information asymmetries

  15. Addressing the buy side • Seek or create new buyers / new markets • Acquire & leverage information • Reduce buyer costs / assist buyer in expanding markets • Differentiate products • Tightly integrate with buyers • Integrate forwards

  16. Information Systems Differentiating Products Commodities Differentiated Goods LOW HIGH LEVEL OF CUSTOMIZATION • Examples • Customer-driven Ordering Systems • Mass-customization Systems • Just In Time (JIT) Manufacturing Systems

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