3 - Organizational Strategy, Information Systems, and Competitive Advantage

Question 1

Competitive Strategy

Answer 1

The strategy that an organization chooses as the way to succeed in its industry.
According to Porter, there are 4 fundamental competitive strategies:
(1) Cost leadership across an industry
(2) Cost leadership within an industry segent
(3) Product Differentiation across an industry
(4) Product Differentiation within an industry segment

Question 2

Five Forces Model

Answer 2

Proposed by Michael Porter that assesses industry characteristics and profitability across 5 competitive forces:

(1) Bargaining power of suppliers
(2) Threat of substitution
(3) Bargaining power of customers
(4) Rivalry among firms
(5) Threat of new entrants

Question 3

Linkages

Answer 3

In Porter’s model of business activities, this is interaction across value chain activities.

Question 4

Margin

Answer 4

The difference between the value an activity generates, and the cost of the activity

Question 5

Primary Activities

Answer 5

In Porter’s Value Chain Model - Activities that contribute directly to the production, sale, or service of a product. EG:

• ACQUIRE bicycle parts
• PRODUCE Bicycle
• SHIP Bicycle
• MARKET & SELL Bicycle
• SERVICE Customers

Question 6

Support Activities

Answer 6

In Porter’s Value Chain model, the activities that contribute indirectly to Value Creation:

• Procurement (manage supplier relationships)
• Technology (investigate new designs)
• Human Resources (support employees)
• Firm Infrastructure (manage company resources)

Question 7

Switching Costs

Answer 7

Business strategy of locking customers in by making it difficult or expensive to change to another product or supplier

Question 8

Value

Answer 8

As defined by Porter:

The amount of money that a customer is willing to pay for a resource, product, or service.

Question 9

Value Chain

Answer 9

Network of value-creating activities.