Week 2

Question 1

Describe the value chain and the categories of the value chain

Answer 1

The value chain is the set of activities through which a product or service is CREATED and DELIVERED to customers

Support activities + Primary Activities = Add value

Support Activities:
- Human Resources
- Accounting
- Information Technology
- Research and Development
- Procurements

Primary Activities:
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and Sales
- After sales service and support

Question 2

What are resources

Answer 2

Resources are INPUTS required to perform activities

Resources can be:
1) tangible - ex. physical, human, financial
2) intangible - ex. data, information, patents, reputation, userbase

Question 3

How are resources and activities linked?

Answer 3

Resources are INPUTS required to perform activities

Activities create resources so that they can be OUTPUTS

Resources and activities combine to deliver a CAPABILITY. Capacity for a set of resources to perform an activity in a integrative manner

Question 4

Resources provide an advantage when …

Answer 4

Resources provide an advantage when they are:
- Valuable
- Rare
- Tough to Imitate
- Non-substitutable

Question 5

Distribution channels

Answer 5

Distribution channels are how products get to customers. They can be …
- Direct/Indirect (ex. B2B, B2C)
- Physical/Online (ex. in-store, online)

Technology opens opportunities for new channels (ex. Uber on United Airlines app)

Question 6

What types of software can a business implement to integrate across value chain activities through information technology

Answer 6

A business can implement software to integrate across value chain activities through information technology:
- supply chain management (SCM)
- customer relationship management (CRM)
- enterprise resource planning software (ERP)

If the business adopts standard software, there is a danger it could change a unique process to a generic one

Question 7

Technology can ____ and ____ powerful resources

Answer 7

Technology can create and reinforce powerful resources

Question 8

Brand

Answer 8

Brand is a symbolic embodiment of all information connected to a product or service
- customers use brands to decide which company’s products are better –> thus forming brand loyalty
- brand = powerful resource
- technology can rapidly & cost-effectively strengthen a brand
ex. viral marketing consumes to promote a product/service

Question 9

Non-practicing entities

Answer 9

Non-practicing entities - commonly known as patent trolls, firms make money by acquiring and asserting patents over bringing products/services to market

Question 10

Application Programming Interfaces (APIs)

Answer 10

Application Programming Interfaces are programming hooks that allow other firms to tap into their services

Question 11

Affiliates

Answer 11

Affiliates are a 3rd party that promote a product/service in exchange for a percentage of sales

Question 12

Opportunity

Answer 12

Opportunity can be partnership agreements among tech companies

Question 13

Business Model

Answer 13

Business Model answers the question “how does the business, create, deliver, and capture value?”

Question 14

Business Strategy

Answer 14

Business Strategy answers the question “how does the business do BETTER by being DIFFERENT (from rivals)?”

Business Strategy = Be Different So Businesses Do Better

Strategy deals w/ competition and trends in the external environment

Question 15

Name the two different types of business strategies

Answer 15

1) Strategic positioning view - advantage if firm performs different ACTIVITES than rivals, or the same activities in a different way

2) Resource based view - advantage if RESOURCES are valuable, rare, tough to imitate, and non-substitutable

Question 16

Switching costs

Answer 16

Switching costs - costs incurred by consumers when switching from one product to another
- data can be a strong switching cost for firms leveraging technology
- firms with more customers gather more data to improve their value chain with more accurate (1) demand and (2) product reccomendations [more customers = more data = increased value]

Question 17

Sources of Switching Costs

Answer 17

Sources of Switching Costs:
- learning costs
- information and data
- financial commitment
- contractual commitments
- search costs
- loyalty programs

Question 18

Network Effects

Answer 18

Network effects (also can be referred to as Network Externalities or Metcalfe’s Law) - when the value of a product/service increase as its number of users expands

Powerful resource for firms that can control and leverage dominance

Switching costs can help determine the strength of network effects

Question 19

Scale Economies

Answer 19

Scale Economies - businesses benefit from advantages related to size

Scalable = benefits from scale economies as it develops/grows

Fixed costs can be spread across increasing units of production and in serving a growing customer base

Businesses can gain an advantage from bargaining power w/ suppliers and buyers

Question 20

Imitation resistant value chain

Answer 20

Imitation resistant value chain - a way of doing business that companies struggle to replicate and involves technology as an enabling role
- incumbents straddle 2 business model’s cant take advantage of either
- newer entrants struggle when we lead time to create powerful resources (ex. data, brand, scale)

Question 21

Point of Sale System (POS)

Answer 21

Point of Sale System - transaction processing system that captures customer purchase information

Question 22

Contract manufacturers

Answer 22

Contract manufacturers - outsource production to 3rd party firms
- advantages –> lower product costs may increase profit’s
- disadvantages –> poor working conditions, sweatshop labour, environmental concerns

Question 23

Logistics

Answer 23

Logistics - coordinating and enabling the flow of goods, people, information, and other resources among locations