Lecture 7: Services and Competitive Advantage Flashcards
How can an enterprise understand the competitive structure of an industry and identify sources of competitive advantage?
d
How can an enterprise understand its value chain and identify sources of competitive advantage?
d
Michael Porter
He is a leading authority on competitive strategy and the competitiveness and economic development of nations, states, and regions.
How can an enterprise understand the competitive structure of its industry and stake out a position that is more profitable and less vulnerable to attack?
Strategist Michael E. Porter suggests to extend the classic view of competition: rivalry among direct competitors
• His idea: include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products
What are Porter’s five forces?
middle - industry competitors
around: potential entrants, buyers, substitute products, and suppliers
Key message behind Porter’s five forces?
Awareness of the five forces
can help a company to …
• understand the structure of its industry,
• determine its current market position,
• stake out a position that is more profitable and less vulnerable to attack,
• and define how IT/IS can be used to influence these forces.
The idea behind the model
Besides the direct competitors that are the main rivals, …
… savvy customers can force down prices by playing you and your rivals against one
another.
… powerful suppliers may constrain your profits if they charge higher prices.
… aspiring entrants, armed with new capacity and hungry for market share, can ratchet up the investment required for you to stay in the game.
… substitute offerings can lure customers away.
Solution: Analyze all five competitive forces in order to …
… gain a complete picture of what’s influencing profitability in your industry.
… identify game-changing trends early, so you can swiftly exploit them.
… spot ways to work around constraints on profitability – or even reshape the forces in your favor.
Give an example of Porter’s five forces
Apple as a digital provider
Value chain
A value chain is a chain of activities for a firm operating in a specific industry
• The value chain disaggregates a firm into its strategically relevant activities
• A firm gains competitive advantage by performing these strategically important activities cheaper or better than its competitors (in the eyes of a customer)
What roles does IS play in the value chain?
Value chain interrelationships: The firm’s value chain is linked to value chains of suppliers, distributors, customers, etc.
• IT/IS plays an instrumental role in the realization of these interrelationships
value
the amount buyers are willing to pay for what a firms provides them and is measured by the total revenue
Value chain analysis
can support strategic decision making by providing a deeper understand of the sources of competitive advantage
Explain UPS and value chain
new business opportunities through the use of IT -
IT supports business strategy
steps in conducting a value chain analysis
- realise primary and secondary sources
- Define the business value chain
- linkages within the chain - optimisation and coordination
