Q1-5 What Is Competitive Strategy? Flashcards
How does MIS relate to organizational strategy?
MIS helps organizations achieve their strategies by aligning information systems with the organization’s competitive strategy.
The structure, features, and functions of information systems are influenced by business processes and competitive strategy, as seen in Figure 1-6.
What is Porter’s Five Forces Model?
Porter’s Five Forces Model determines industry profitability based on five forces:
Threat of substitutes
Threat of new entrants
Existing rivals
Bargaining power of suppliers
Bargaining power of customers
How do the Five Forces determine industry profitability?
The intensity of the five forces shapes the profitability and sustainability of an industry.
A high level of rivalry, strong threats of substitutes and new entrants, and high bargaining power of suppliers or customers can decrease profitability.
What are examples of strong and weak forces in the Five Forces Model?
**Threat of Substitutes: **
Strong: Toyota’s purchase of auto paint,
Weak: Your power over university procedures.
**Threat of New Entrants: **
Strong: Frequent traveler’s choice of auto rental,
Weak: Patients using the only drug for cancer.
**Existing Rivals: **
Strong: Students buying gasoline, Weak: Grain farmers in a surplus year.
Bargaining Power of Suppliers:
Strong: Corner latte stand,
Weak: Professional football team.
Bargaining Power of Customers:
Strong: Used car dealers,
Weak: Internal Revenue Service.
How does Walmart exemplify the Five Forces Model?
Threat of Substitutes: High due to e-commerce.
Threat of New Entrants: High due to regional chains that grow.
Existing Rivals: Medium (e.g., Target, Kmart, Sears).
Bargaining Power of Suppliers: Weak (Procter & Gamble, Microsoft).
Bargaining Power of Customers: Weak (You and I).
What is competitive strategy?
Competitive strategy is how an organization responds to the structure of its industry, as explained by Porter’s Four Competitive Strategies model:
Cost leadership (lowest cost across the industry)
Differentiation (better product/service across the industry)
Cost focus (lowest cost within a segment)
Differentiation focus (better product/service within a segment)
Why is it crucial for companies to commit to one competitive strategy?
Companies must commit to one strategy to avoid conflicting goals that can dilute focus and effectiveness.
Attempting to pursue both cost leadership and differentiation often results in failure to achieve either.
How does Walmart’s competitive strategy apply to Porter’s model?
Walmart has chosen a low-cost strategy industry-wide, aiming to combat threats from e-commerce, regional chains, and rivals by maintaining the lowest cost structure in the industry.
