FIVE Force Model
FIVE Force Model
FIVE Force Model
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What is Business Model? Why New Models?
• A business model is a set of planned • We need some new models
activities (sometimes referred to as
– for how we go about exploring IT for
business processes) designed to result in a p
competitive advantage,
g ,
profit in a marketplace.
marketplace
– for IT infrastructure how we create it and
• The business model is at the center of the manage it
business plan. – for how we acquire, manage and deploy the
• An e-commerce business model aims to skills that are needed to run that infrastructure
use and leverage the unique qualities of the – Profitability (making money)
Internet and the www.
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Source: E-Commerce: business, technology, society, Laudon and Traver, A/W 7 8
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competition structure/
Essentials for a Successful Enterprise culture
Value propositions Business Model vs.
1. Business model Internal/
Business landscape External Revenue Model
fulfill
2. Core competencies • Business model is the architectural
Strategic intent
Analysis configuration of the components of
(Porter, SWOT)
ffuture positioning
p g transactions designed
g to exploit
p business
Finance
Process
P
M
Management
H
H/R
T
Technology
… Strategy
Positioning
opportunities.
Corporate strategy •Positioning on product/market • Revenue model refers to “the specific
3. Execution Business strategy •Differentiation/choice of ways in which a business model enables
competitive advantage
revenue generation.”
Functional strategy •Competitive posture
Industry characteristics,
IT Role? Market growth,
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Demand characteristics, N
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Barrier of entry,etc.
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Information Resources
• The term information resources is defined as the
available data, technology, people, and processes
available to perform business processes and tasks.
• Information resources can be either assets or
EVOLUTION OF INFORMATION capabilities.
RESOURCES – IT asset is anything,
anything tangible or intangible,
intangible that can be used
by a firm in its processes for creating, producing and/or
offering its products (IT infrastructure is an asset).
– IT capability is something that is learned or developed over
time in order for the firm to create, produce or offer it
products.
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• Over the past decades the use of information resources Justify IT ROI Increasing Competitive Competitive Adding
productivity and
has changed. expenditure decision making
position position Value
• Organizations have moved from an “efficiency model” Target of Organization Individual manager/
Group
Business
processes
Business processes
ecosystem
Customer,
supplier,
systems
of the 1960’s to a “value creation model” of the ecosystem
IInformation
f ti Application Data driven
Data-driven User driven
User-driven Business driven
Business-driven Knowledge-
Knowledge
2000’
2000’s. model specific driven
Network Externalities
• Definition - The phenomenon whereby a service becomes
more valuable as more people use it, thereby encouraging
ever-increasing numbers of adopters.
– Network effects
INFORMATION RESOURCES
• While the word-of-mouth
word of mouth method is often more influential AS STRATEGIC TOOLS
in the beginning, analysis may play a significant role later
in the cycle. In other words, you may adopt a service
initially because someone you know uses it; later, you may
adopt a service because "everyone" uses.
– IT Role?
– Network Externality offers a reason for value derived from
plentitude (Era IV & V)
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Advantages of Information Resources –
What General Managers want are …
• General managers should consider the following to
understand the type of advantage the information
resource might create: HOW CAN INFORMATION
– What makes the information resource valuable?
– Who appropriates
pp p the value created byy the information RESOURCES BE USED
resource?
– Is the information resource equally distributed across STRATEGICALLY?
firms?
– Is the information resource highly mobile?
– How quickly does the information resource become
obsolete?
– When, where and …
What tools are available to help shape their strategic use?
What are the risks of using information resource to gain strategic
advantage
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Figure 2.3 - Five (5) Competitive Forces with Potential
Strategic Use of Information Resources (Porter)
Group Work/
Discussion Questions
• Using the five competitive forces model as
described in this chapter to describe how
((and what)) IT might
g be used to provide
p a
winning position for:
• A global airline
– Use UA as an example (Group work together)
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Figure 2.6 Process View of the Firm: The Value Chain Using Information Resources to Alter the
Value Chain
• The Value Chain model suggest that competition
can come from two sources:
– Lowering the cost to perform an activity and
– Adding value to a product or service so buyers
will be willing to pay more.
(Value) • Lowering costs only achieves competitive
advantage if the firm possesses information on the
competitors’ cost structure
• Adding value is a strategic advantage if a firm
possesses accurate information regarding its
customer such as: which products are valued?
Two broad categories:
Primary activities – relate directly to the value created in a product or service. Where can improvements be made? When to …
Support activities – make it possible for the primary activities to exist and remain coordinated N N
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3. (cont.)
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Supply Chain Management BASICS OF SUPPLY CHAIN
• An approach that improves the way a company finds • Organizations must embrace technologies that can
raw components it needs to make a product or
effectively manage supply chains
service, manufactures that product or service, and
delivers it to customers.
• Technology permits supply chains of customer
customer’ss and
supplier’s to be linked.
• Requires collaboration and the IT to support the
seamless connection.
• Electronic marketplaces can be used to limit
information sharing.
Involvement
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INFORMATION TECHNOLOGY’S
FIVE BASIC SUPPLY CHAIN ROLE IN THE SUPPLY CHAIN
MANAGEMENT COMPONENTS • IT’s primary role is to create integrations or tight process and
information linkages between functions within a firm
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4. Use the resource-based view as described in this chapter to
describe how information technology might be used to provide and • 1. Global airline
– they could utilize their global relationships to market strategically
sustain a winning position for each of these businesses: (p.72) to customers through a CRM system that would be difficult to
imitate because of their global reach. They could utilize IT talent
• Ans: The resource based view The Resource-Based View from all parts of the world to create systems that are innovative
(RBV) looks at gaining competitive advantage through the and strategic in nature (specialized billing system for example).
use of information resources. • 3. Appliance Service Firm
• The question asks the student to describe how each of these – similar to the local dry cleaner, an IS system could be used that
5 businesses might use information resources to add value to tracks repairs of appliances and determines which appliances
the activities of their company.
company seem to have problems with specific components.
components They could
• 1. A global airline then use customer service to get feedback on these appliances and
help customers to select appliances in the future that are more
• 3. An appliance service firm (provides services to fix and reliable, thus generating customer loyalty and service.
maintain appliance) • 5. Web-based wine retailer
• 5. A Web-based wine retailer – take advantage of its online presence to offer other services like
• 2. A local dry cleaner wine recommendations, possibly creative cooking recipes, and
• 4. A bank other services that would enhance its services.
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Strategic Alliances
• An interorganizational relationship that affords one or
more companies in the relationship a strategic
advantage.
• IT can help produce the product developed by alliance,
share information resources across the partners’
STRATEGIC ALLIANCES existing value systems,
systems or facilitate communication and
coordination among the partners.
• E.g., Delta recently formed an alliance with e-Travel
Inc to promote Delta’s inline reservation system.
• This helps reduce Delta’s agency fees while offering e-
Travel new corporate leads.
• Also, Supply Chain Management (SCM) is another
type of IT-facilitated strategic alliance.
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Types of Strategic Alliances
• Supply Chain Management: improves the way a
company finds raw components that it needs to
make a product or service.
– Technology, especially Web-based, allows the supply chain of a
company’s customers and suppliers to be linked through a single
network that optimizes costs and opportunities for all companies in
the supply chain
RISKS
– Wal-Mart and Proctor & Gamble.
• Virtual Corporations: is a temporary (virtual) network of
suppliers, customer and even rivals linked by IT to share
skills, cost and access to each others’ markets
• Co-opetition: a new strategy whereby companies
cooperate and compete at the same time with companies in
their value net
– Covisint and General Motors, Ford, and DaimlerChrysler.
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Potential Risks
There are many potential risks that a firm faces when attempting to
Summary of Key Strategy Frameworks
use IT to outpace their competition.
Usefulness in Information Systems
• Awakening a sleeping giant – a large competitor with deeper Framework Key Idea Discussions
pockets may be nudged into implementing IS with even better
Porter’s generic Firms achieve Understanding which strategy is chosen
features strategies competitive advantage by a firm is critical to choosing IS to
• Demonstrating bad timing – sometimes customers are not framework through cost leadership, complement that strategy.
ready to use the technology designed to gain strategic advantage differentiation, or
focus.
• Implementing IS poorly – information systems that fail because
they are poorly implemented D’Aveni’s Speed and aggressive The 7-S’s give the manager suggestions
hypercompetition moves and counter- on what moves and counter moves to
• Failing to deliver what users want – systems that don’t meet model moves by a firm make and IS are critical to achieve the
the firm’s target market likely to fail create speed needed for these moves.
competitive advantage.
• Web-based alternative removes advantages – consider risk of
losing any advantage obtained by an information resource that Brandenberg and Companies cooperate Being cooperative and competitive at the
Nalebuff’s and compete at the same time requires IS that can manage
later becomes available as a service on the web co-opetition model same time. these two roles.
• Running afoul of the law – Using IS strategically may promote
litigation
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250
First major move
200
150
Profits relative to c
Customer acceptance
100
50
Competitor catch-up moves First-mover expansion moves
0
-10 -5 0 5 10
Time of market introduction relative to competition (months)
Commoditization
Figure 7.10 (p.227)
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When to Perform Activities
• First Movers
FOOD FOR THOUGHT:
Advantages Disadvantages
CO-CREATING
CO CREATING IT AND
• Build brand recognition • Newer technology BUSINESS STRATEGY
• Control scarce resources • Higher development costs
• Establish networks • Reverse engineering by
competitors
• Early Economies-of-Scale
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Questions 1. Analyze the business model of Zipcar using Porter’s
five forces model.
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Hypercompetition model
• Is the ZIPCAR case related to
“Hypercompetition Model”?
• What are they (in terms of 7S)? Endd oof C
Chapter
pe 2
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