INFS1000 Lec 3 Strategy and Competitive Advantage

Question 1

How does a company’s competitive strategy affect IS?

Answer 1

1. Companies examine INDUSTRY STRUCTURE to understand opportunities and risks.
2. Companies devise a COMPETITIVE STRATEGY to leverage opportunities and minimize risks.
3. Companies design business processes to implement the strategy.
4. Companies design / buy and implement IS to execute those processes.

Question 2

What is the 5 step process to determining the requirements of a new IS system?

Answer 2

1. Industry structure: analyse competition using Porters 5 forces.
2. Competitive strategy: formulate strategic position using Porter’s generic strategies.
3. Value chains: primary and secondary activities determining internal structure.
4. Business processes.
5. Information systems.

Question 3

What are the components of Porter’s 5 forces?

Answer 3

• Bargaining power of CUSTOMERS
• Bargaining power of SUPPLIERS
• Threat of NEW ENTRANTS
• Threat of SUBSTITUTES
• RIVALRY among existing firms

Question 4

What are some factors that help you determine whether bargaining power of buyers is low / med / high?

Answer 4

• Low switching costs.
• Buyer has all relevant info.
• Concentrated competition.

Question 5

What are some factors that help you determine whether bargaining power of suppliers is low / med / high?

Answer 5

• Dominated by a few suppliers.
• Supplier input to quality of products is critical.
• No substitutes for supplier’s materials.

Question 6

What are some factors that help you determine whether threat of new entrants is low / med / high?

Answer 6

BARRIER TO ENTRY:

• Initial capital investment.
• Economies of scale is crucial.
• Access to suppliers / distributors.
• Customer switching costs too high.
• Expert knowledge needed.
• Government regulations.

Question 7

What is a substitute? Give some examples.

Answer 7

Product that provides same / similar utility for customer, but with DIFFERENT TECHNOLOGY. It is not a competitor’s product.

e. g. Spotify for MP3 for CD’s.
e. g. Coke v pepsi not substitutes.

Question 8

What are some factors that help you determine whether rivalry among competitions is low / med / high?

Answer 8

• Level of differentiation.
• Number of rivals.
• Height of customer exit barriers.

Question 9

What are Porter’s generic strategies?

Answer 9

• Cost leader (most efficient).
• Differentiation (most effective).
• Broad / narrow focus.

Question 10

What are primary and support activities.

Answer 10

Primary activities: adds value directly to customers.

Support activities: indirectly adds value by assisting primary activities.

Question 11

What is Porter’s generic manufacturing value chain?

Answer 11

Primary:

1. Marketing and sales.
2. Inbound logistics.
3. Operations / manufacturing.
4. Outbound logistics.
5. Service and Support.

Support:

1. HR.
2. Accounting and infrastructure.
3. Procurement and Technology.

Question 12

How can competitive advantage be created via BP design?

(i.e. how to reduce competition with reference to Porter’s 5 forces).

Answer 12

1. Lock in customers: by creating high switching costs (e.g. FB - system that feeds back and locks in itself)
2. Lock in suppliers: by making it easy to connect with you (e.g. JIT delivery).
3. Create entry barriers for new entrants: economies of scale through process optimisation.
4. Establish alliances with competitors to reduce rivalry: standardise processes, share costs, develop joint processes. (e.g. star alliance).

Question 13

How do value chains relate to BP’s and IS’s?

Answer 13

• BP’s describe how to execute value creation (work) within or across parts of the value chain.
• Link together different parts of the value creation –> cross-functional processes.
• 2 diff strategies (cost / differentiation) will lead to diff BP’s.

An IS may then be designed to support the BP’s.