Strategic And Competitive Opportunities

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Strategic And Competitive Opportunities

  1. 1. <ul><li>Chapter 2 </li></ul><ul><li>STRATEGIC AND COMPETITIVE OPPORTUNITIES </li></ul><ul><li>Using IT for Competitive Advantage </li></ul>
  2. 2. Presentation Overview <ul><li>Competitive Advantage Examples </li></ul><ul><li>Developing A Strategy For The Internet Age </li></ul><ul><li>Key E-Commerce Strategies </li></ul><ul><li>The U.S. Airline Industry </li></ul><ul><li>Summing It Up </li></ul>
  3. 3. Opening Case Study Zara – Fashion Fast Forward <ul><li>Zara sets itself apart with its computerized network that ties stores to design shops and company-owned factories in real time. </li></ul><ul><li>How can technology be used to respond quickly to shifts in consumer tastes? </li></ul>
  4. 4. <ul><li>Competitive advantage – a company provides a product or service in a way that customers value more than what the competition is able to do. </li></ul><ul><li>Application architect - information technology professional who can design creative technology-based business solutions. </li></ul>Introduction
  5. 5. Competitive Advantage Examples Federal Express <ul><li>FedEx – lets you access information about your packages through your Internet connection and Web browser. </li></ul><ul><li>Temporary advantage - whatever you do, sooner or later the competition duplicates what you’ve done. </li></ul><ul><li>First mover - the company who is first to market with a new IT-based product or service . </li></ul>
  6. 6. Competitive Advantage Examples Federal Express Enter your tracking number here.
  7. 7. Competitive Advantage Examples Charles Schwab <ul><li>Schwab was a first mover in offering stock trades over the Internet, along with other online brokers such as E*Trade. </li></ul><ul><li>Schwab’s willingness to embrace the Internet early has made Schwab the largest online broker. </li></ul>
  8. 8. Competitive Advantage Examples Dell Computer <ul><li>Dell computer has a direct sell model that gives the company a huge advantage over any competitor. </li></ul><ul><li>Distribution chain - the path followed from the originator of a product or service to the end consumer. </li></ul><ul><li>Alliance partner - a company you do business with on a regular basis in a cooperative fashion, usually facilitated by IT systems. </li></ul>
  9. 9. Competitive Advantage Examples Dell Computer <ul><li>Information partnership - lets two or more companies cooperate by integrating their IT systems. </li></ul>On Your Own Looking for Opportunities Close to Home
  10. 10. Competitive Advantage Examples - D ell Computer
  11. 11. Competitive Advantage Examples Cisco Systems <ul><li>Cisco Systems - a leader in utilizing the direct sell model over the Internet. </li></ul><ul><li>Business to Business (B2B) - companies whose customers are primarily other businesses. </li></ul><ul><li>Business to Consumer (B2C) - companies whose customers are primarily individuals. </li></ul>
  12. 13. Developing A Strategy For The Internet Age <ul><li>Porter’s three frameworks are: </li></ul><ul><ul><li>The Five Forces model </li></ul></ul><ul><ul><li>The Three Generic Strategies </li></ul></ul><ul><ul><li>The Value Chain </li></ul></ul>
  13. 14. Developing A Strategy For The Internet Age The Five Forces Model
  14. 15. Developing A Strategy For The Internet Age The Five Forces Model <ul><li>Five forces model - determines the relative attractiveness of an industry. </li></ul><ul><li>Buyer power - high when buyers have many choices of whom to buy from, and low when the choices are few. </li></ul><ul><li>Supplier power - high when buyers have few choices of whom to buy from, and low when there are many choices. </li></ul>
  15. 16. Developing A Strategy For The Internet Age The Five Forces Model <ul><li>Threat of substitute products or services - low if there are very few alternatives to using the product or service. </li></ul><ul><ul><li>Switching costs - costs that can make customers reluctant to switch to another product or service. </li></ul></ul><ul><li>Threat of new entrants - high when it is easy for competitors to enter the market. </li></ul><ul><li>Rivalry among existing competitors – high when the industry is less attractive . </li></ul>
  16. 17. Developing A Strategy For The Internet Age The Three Generic Strategies
  17. 18. Developing A Strategy For The Internet Age The Three Generic Strategies <ul><li>Three generic strategies </li></ul><ul><ul><li>Cost leadership </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><ul><li>Focused strategy </li></ul></ul>
  18. 19. Developing A Strategy For The Internet Age Using the Five Forces Model <ul><li>Buyer power </li></ul><ul><ul><li>Loyalty programs. </li></ul></ul><ul><li>Supplier power </li></ul><ul><ul><li>B2B marketplace - an Internet-based service which brings together many buyers and sellers. </li></ul></ul><ul><li>Threat of substitute products or services </li></ul><ul><ul><li>IT-based alternatives. </li></ul></ul>
  19. 20. Developing A Strategy For The Internet Age Using the Five Forces Model <ul><li>Threat of new entrants </li></ul><ul><ul><li>Entry barrier - a product or service feature that customers have come to expect from companies in a particular industry. </li></ul></ul><ul><li>Rivalry among existing competitors </li></ul><ul><ul><li>Using IT systems to be more efficient. </li></ul></ul>
  20. 21. Developing A Strategy For The Internet Age Bridging the Gap Between Business People and Technical People <ul><li>Project team - a team designed to accomplish specific one-time goals, which is disbanded once the project is complete. </li></ul><ul><li>Form a team that draws the best knowledge of the business problem from the business people and the best technical solution from the technology people. </li></ul>
  21. 23. Developing A Strategy For The Internet Age Viewing the Business Problem from Another Perspective <ul><li>Take the perspective of a customer of the company. </li></ul><ul><li>Design the information system so it enhances the customer’s experience. </li></ul>
  22. 24. Developing A Strategy For The Internet Age Using the Three Generic Strategies <ul><li>Use the three generic strategies to change the basis of competition. </li></ul><ul><li>Amazon.com makes the buying experience a pleasure by using sophisticated software to personalize the site for each individual. </li></ul>
  23. 25. Developing A Strategy For The Internet Age Developing a Creative Design <ul><li>Creative design - solves the business problem in a new and highly effective way rather than the same way others have done it. </li></ul>Team Work Finding the Best IT Strategy For Your Industry
  24. 26. Developing A Strategy For The Internet Age The Value Chain <ul><li>Business process - a standardized set of activities that accomplishes a specific task, such as processing a customer’s order. </li></ul><ul><li>Value chain - views the organization as a chain – or series – of processes, each of which adds value to the product or service for the customer. </li></ul>
  25. 27. Developing A Strategy For The Internet Age The Value Chain
  26. 28. Developing A Strategy For The Internet Age The Value Chain <ul><li>Talbott used the value chain to: </li></ul><ul><ul><li>Plan for a better way of meeting customer demands. </li></ul></ul><ul><ul><li>Identifying processes that add value. </li></ul></ul><ul><ul><li>Identifying processes that reduce value. </li></ul></ul>
  27. 29. Developing A Strategy For The Internet Age The Value Chain
  28. 30. Developing A Strategy For The Internet Age The Value Chain
  29. 31. Developing A Strategy For The Internet Age Looking Beyond The Four Walls Of The Company <ul><li>Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it. </li></ul><ul><li>Supply chain - consists of the paths reaching out to all of a company’s suppliers of parts and services. </li></ul><ul><li>Collaborative planning, forecasting, and replenishment (CPFR) - a concept that encourages and facilitates collaborative processes between members of a supply chain. </li></ul>
  30. 32. Key E-Commerce Strategies <ul><li>Three capabilities made possible by the Internet are: </li></ul><ul><ul><li>Mass customization and personalization </li></ul></ul><ul><ul><li>Disintermediation </li></ul></ul><ul><ul><li>Global reach </li></ul></ul>
  31. 33. Key E-Commerce Strategies Mass Customization and Personalization <ul><li>Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications. </li></ul><ul><li>Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you. </li></ul><ul><li>Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics. </li></ul>
  32. 34. Key E-Commerce Strategies Disintermediation <ul><li>Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can be bypassed. </li></ul>
  33. 35. Key E-Commerce Strategies Global Reach <ul><li>Global reach - the ability to extend reach to customers anywhere there is an Internet connection, and at a much lower cost. </li></ul>
  34. 36. The U.S. Airline Industry Airline Reservation Systems <ul><li>The airlines really began using IT in a significant way when American Airlines and United Airlines introduced the first airline reservations systems. </li></ul><ul><ul><li>SABRE </li></ul></ul><ul><ul><li>APPOLO </li></ul></ul>
  35. 37. The U.S. Airline Industry Frequent Flyer Programs <ul><li>Frequent flyer programs are a great example of using IT to alter Porter’s five forces. </li></ul><ul><ul><li>They reduced buyer power by making it less likely a traveler would choose another airline. </li></ul></ul><ul><ul><li>They reduced the threat of substitute products or services by increasing switching costs. </li></ul></ul><ul><ul><li>They erected entry barriers by making a frequent flyer program a practical necessity for any airline to compete effectively. </li></ul></ul>
  36. 38. The U.S. Airline Industry Yield Management Systems <ul><li>Yield management systems are designed to maximize the amount of revenue that an airline generates on each flight. </li></ul><ul><li>Yield management systems are the reason that an airfare you’re quoted over the phone can be $100 higher when you call back an hour later. </li></ul>
  37. 39. The U.S. Airline Industry Yield Management Systems
  38. 40. The U.S. Airline Industry Disintermediating the Travel Agent <ul><li>Expert surveys have estimated that the number of travel agents in the U.S. will be sharply reduced as a result of disintermediation. </li></ul>Team Work Helping the Little Guy Compete
  39. 41. The U.S. Airline Industry Utilizing Emerging Technologies <ul><li>Permission marketing - when you have given a merchant your permission to send you special offers. </li></ul>
  40. 42. Summing It Up <ul><li>Important considerations you should keep in mind as you work to bring an IT competitive advantage to your organization include: </li></ul><ul><ul><li>Be efficient and effective. </li></ul></ul><ul><ul><li>Competition is all around you. </li></ul></ul><ul><ul><li>Push the state-of-the-art. </li></ul></ul><ul><ul><li>IT competitive advantages are only temporary. </li></ul></ul>
  41. 43. Case Study GM Tries to Lure Customers with OnStar <ul><li>GM added an in-car cellular service, OnStar, to update its image and increase sales. </li></ul><ul><li>Did the OnStar system give GM a competitive advantage? </li></ul>
  42. 44. Case Study Speedpass: Throw Away Your Plastic? <ul><li>Speedpass offers a short plastic cylinder, called a Key Tag, that transfers customer billing information automatically. </li></ul><ul><li>Speedpass is an alternative to a credit card. </li></ul><ul><li>How is Speedpass an example of a first mover? </li></ul>

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