1 Competitive Advantage Providing a product or service in a way that customers value more than what the competition is able to do. Chapter 2 STRATEGIC.

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Competitive Advantage

Providing a product or service in a way that customers value more than what the

competition is able to do.

Chapter 2

STRATEGIC AND COMPETITIVE OPPORTUNITIES

Using IT for Competitive Advantage

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Its not the IT, it’s the People

It is not the information technology that gives a company the competitive advantage; it is

the way people use the technology that makes the difference.

In perspective (do not be fooled) …In perspective (do not be fooled) …

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Competitive Advantage Examples FedEx Schwabs Dell Cisco

Developing A Strategy For The Internet Age The five forces model The three generic strategies The value chain

Key E-Commerce Strategies Mass customization Disintermediation Global reach

The U.S. Airline Industry

… … Main Chapter Menu…Main Chapter Menu…

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Competitive Advantage Examples

Federal Express

FedEx Package Tracking Screenpage 45

23 159 867 632  www.canadapost.ca 

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Competitive Advantage Examples

Charles Schwab

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Competitive Advantage Examples

Dell Computer

Buy-hold-sell versus sell-source-shippage 48

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Competitive Advantage Examples

Dell Computer

Information partnership - lets two or more companies cooperate by integrating their IT systems.

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Competitive Advantage Examples

Cisco Systems

Cisco Systems - a leader in utilizing the direct sell model over the Internet.

Business to Business (B2B) - companies whose customers are primarily other businesses.

Business to Consumer (B2C) -companies whose customers are primarily individuals.

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Developing A Strategy For The Internet Age

Porter’s three frameworks are: The Five Forces model The Three Generic Strategies The Value Chain

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Developing A Strategy For The Internet AgeThe Five Forces Model

Video: porter

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Developing A Strategy For The Internet AgeUsing the Five Forces Model

Buyer power Giving choices to the buyer For example: hotel chains

Give points Other loyalty programs Cash the points for free hotel stays at one of their

resort hotels Such programs have the effect of increasing the

likelihood that a traveler will stay at a single chain.

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Developing A Strategy For The Internet AgeUsing the Five Forces Model

Supplier power The objective is to reduce supplier

power. How to reduce supplier power

B2B marketplace - an Internet-based service which brings together many buyers and sellers.

Find a way to put more information into the buyer’s hands

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Developing A Strategy For The Internet AgeUsing the Five Forces Model

Threat of substitute products or services Consider the introduction of alternative IT

products such as income tax preparation software.

Consumers now use it. Accountant has less clients. Accountant livelihood is threatened.

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Developing A Strategy For The Internet AgeUsing the Five Forces Model

Threat of new entrants It is not a good thing when it is very easy for others to enter into

your market. Companies can use IT to develop and create barriers for others. Entry barrier - a product or service feature that customers

have come to expect from companies in a particular industry. A good example is what banks did:

Introduce the bank card and as many ATMs around the world as possible.

Banking on the internet to pay bills, transfer funds and print reports.

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Developing A Strategy For The Internet AgeUsing the Five Forces Model

Rivalry among existing competitors Using IT systems to be more efficient and

compete more strongly with others. An example would be PRICE.

Computer systems can be bought from two different stores but one is cheaper than the other.

This is possible when one company uses IT in such a way to reduce its price.

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Developing A Strategy For The Internet AgeThe Three Generic Strategies

Figure 2.5

The Three Generic Strategiespage 52

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Developing A Strategy For The Internet AgeThe Value Chain

Once you understand how IT can help you develop business

strategy, you can ensure that IT supports all important business

processes.

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Developing A Strategy For The Internet AgeThe Value Chain

The Components of a Value Chain

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Developing A Strategy For The Internet AgeThe Value Chain

The Value-Added View of a Necktie Manufacturer

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Manufacturing Value Chain

Where has information system added value in the value chain?

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Key E-Commerce Strategies

Three capabilities made possible by the Internet should be kept in mind by companies searching for ways to use the new economy to gain competitive advantage: Mass customization and personalization Disintermediation Global reach

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Key E-Commerce StrategiesMass Customization and Personalization

Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications.

Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you.

Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics.

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Key E-Commerce StrategiesDisintermediation

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Key E-Commerce StrategiesDisintermediation

Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can

be bypassed.

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Key E-Commerce StrategiesGlobal Reach

Global reach - the ability to extend a company’s reach to customers anywhere there is an Internet connection, and at a much lower cost.

Permission marketing - when you have given a merchant your permission to send you special offers.

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The U.S. Airline IndustryAirline Reservation Systems

Reservations systems

Frequent flyer programs

Yield management systems

Disintermediating the Travel Agent

Show porter video

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Chips system from earlier

What kinds of information systems could be beneficial? Why?

What kinds of information products would be helpful? Why?

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Utz Chips case Answer the following

What is the major role of UTZ information systems?

What are the characteristics of the information UTZ receives that would make it valuable?

Analyze the industry that UTZ is in using the porter model, is it a good industry to be in?

What competitive advantage do you feel Utz has? How does information play into that competitive advantage