Strategic Frameworks & Wrap Up Lecture 9

Question 1

Frameworks are used to __________ your thoughts and analysis.

Answer 1

structure, summarize, synthesize

Question 2

explain how Frameworks are used to structure your thoughts and analysis.

Answer 2

Here is our analysis in different slots / categories

Question 3

explain how Frameworks are used to summarize your thoughts and analysis.

Answer 3

Here is a summary of our analysis in one picture

Question 4

explain how Frameworks are used to synthesize your thoughts and analysis.

Answer 4

Here is our summary and we want you to focus on…

Question 5

Four Questions to be Asked:

Answer 5

How do we organize our analysis?
How should the company compete?
How can the company create value in the eye of customers?
What industry should the company be in?

Question 6

what can explain How do we organize our analysis?

Answer 6

SWOT & PESTEL

Question 7

what can explain How should the company compete?

Answer 7

 Generic Competitive Strategies

Question 8

what can explain How can the company create value in the eye of customers?

Answer 8

 => Value Chain

Question 9

what can explain What industry should the company be in?

Answer 9

=> Industry Analysis => Five Forces Model

Question 10

what is the SWOT Analysis

Answer 10

Strengths (internal, positive)
Weaknesses (internal, negative)
Opportunities (external, positive)
Threats (external, negative)

Question 11

what is the PESTEL Analysis

Answer 11

Political
economic
technological
environmental
legal
social
economic

Question 12

How can a firm develop & sustain competitive advantage?

Answer 12

– being better than competitors
– avoiding competition
– gaining competitive advantage
– having a better value proposition – others…?

Question 13

Cost Leadership: Using IT to lower price

how to

Answer 13

Substitute information for physical goods
Substitute IT for labor
Increase the output from the same “payroll”

Question 14

explain Substitute information for physical goods

Answer 14

– Info vs. parts inventory (Dell)

– Info vs. finished goods inventory (Dell, WalMart)

Question 15

explain Substitute IT for labor

Answer 15

– IT + customer vs. employees (FedEx, Amazon)

Question 16

explain Increase the output from the same “payroll”

Answer 16

– Enable employees to work faster
– Expand skills of employees
– Use employees in lower-cost areas/offices (e.g.,
“offshoring”)

Question 17

what are the different Competitive Strategies

Answer 17

cost leadership, cost focus, differentiation, differentiation focus

Question 18

explain Differentiation:

Using IT to create value

Answer 18

Increase product quality
– Create better products, enabled by IT (FedEx)
– Overlay better IT-enabled service on existing products (Amazon)

Increase product “fit”
– Use local information about demand patterns
(Zara)
– Find out what customers want and build it (Dell)

Increase product variety
– Convert uniform products into differentiated ones (Dell, Nike)

Question 19

How to be fundamentally different?

Answer 19

If a firm is to maintain sustainable competitive advantage, it must control an exploitable resource, or set of resources, that have four critical characteristics
– Valuable
– Rare
– Imperfectly Imitable
– Non-Substitutable

Question 20

explain – Valuable

Answer 20

 Does the asset yield value to the

firm/customers?

Question 21

explain – Rare

Answer 21

 Is the asset in limited supply or difficult to acquire?

Question 22

explain – Imperfectly Imitable

Answer 22

 Is the asset impossible to imitate?

Question 23

explain – Non-Substitutable

Answer 23

 Is the asset without comparable substitutes?

Question 24

what are the Key Resources for Competitive Advantage

Answer 24

 Imitation-resistant Value Chain
 Brand
– (lowers search cost, inspire trust, viral mktg)
 Scale
 Switching Costs and Data
 Differentiation
 Network Effects
 Distribution Channels
 Patents (Intellectual Property)

Question 25

explain the value chain

Answer 25

inbound logistics, operations, outbound logistics, marketing and sales, service

Question 26

define Value chain:

Answer 26

Set of interrelated activities that bring products or services to market

Question 27

define Imitation-resistant value chains:

Answer 27

A way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role

Question 28

what is the point of Porter’s Five Forces

Answer 28

 “An industry’s profit potential is largely determined by the intensity of competitive rivalry within that industry.”
 Mainly used for Industry Analysis
 Some will argue that there is a 6th Force: – The Government !

Question 29

what are porters 5 forces

Answer 29

threat of new entrants, bargaining power of suppliers, threat of substitutes, bargaining power of buys, rivalry among existing competitors

Question 30

explain rivalry among existing competitors

Answer 30

The extent of rivalry between the existing firms in the focal industry

Question 31

explain bargaining power of suppliers

Answer 31

The bargaining power of the firms that sell inputs to the firms in
the focal industry

Question 32

explain threat of substitutes

Answer 32

the threat of products/services that could substitute (be used instead of) the finished products made by the firms in the focal industry

Question 33

explain bargaining power of buyers

Answer 33

The bargaining power of the customers that buy

the finished products of the firms in the focal industry

Question 34

explain threat of new entrants

Answer 34

The threat of entry by potential entrants (new firms) into the focal industry

Question 35

further summarize Threat of new entrants

Answer 35

The threat of entry lowers the prices firms can charge
 Some factors that lower the threat of new entrants:
– Economies of scale, high fixed costs, access to capital – Learning/experiencecurves
– Limited access to distribution channels
 Examples of how IT affects the threat of entry:  ATM networks increase costs of setting up retail
banking
 Internet-based channels permit direct customer access (e.g., Tangerine)

Question 36

further summarize Bargaining power of suppliers

Answer 36

When your suppliers have power, your costs are higher
 Some factors that increase suppliers’ bargaining power:
– If there are a few large suppliers
– If your industry is a small part of these suppliers’ demand
– If firms find it difficult to switch from their existing suppliers
 Examples of how IT affects supplier power
 Internet-based B2B markets make switching suppliers
easier
 IT-based integration of supply chains increases supplier dependence

Question 37

further summarize Bargaining power of buyers

Answer 37

When your buyers have power, your can’t raise prices
 Some factors that increase buyers’ power: – If buyers purchase in large volumes
– If buyers can easily switch to a competing firm
– If buyers know a lot about your cost structure
 Examples of how IT affects buyer power
 IT-administered loyalty programs foster “stickiness”
 The Internet provides buyers with detailed information

Question 38

further summarize Intra-industry rivalry

Answer 38

Intra-industry rivalry decreases prices
 Some factors that increase intra industry rivalry:
– Lots of firms in the industry (especially of similar size) – Competing firms offer similar products
– Slow industry growth
 Examples of how IT affects rivalry between firms
 The Internet globalizes commerce, increasing # of firms
 Web-based personalization can reduce product similarity

Question 39

further summarize Threat of Substitutes

Answer 39

Lowers a firm’s ability to raise prices and may reduce demand
 Some factors that increase threat of substitutes:
– Convergence (of products/features) – PDA or cameras vs. smartphones
– Changing tastes/preferences – high quality (CD) vs. high variety (iPod)
– Radical Innovations – landline vs. cell phones, books vs. e-books