Business Strategy & IT. Minder Chen, Ph.D. Minder.Chen@CSUCI.EDU. Strategy and IS. Industry Structure (5 Competing Forces). Competitive Strategy . Business Process Design / Reengineering. Value Chain Analysis . Information Systems. Business Strategies.
Minder Chen, Ph.D.
(5 Competing Forces)
Design / Reengineering
The job of the strategist is to understand and cope with competition.
Competition for profits goes beyond established industry rivals to include four other competitive forces: customers, suppliers, potential entrants, and substitute products.
The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.
Forces are intense: airlines, textiles, and hotels, almost no company earns attractive returns on investment.
Forces are benign: software, soft drinks, and toiletries, many companies are profitable
Industry structure, manifested in the competitive forces, sets industry profitability & competitiveness in the medium and long run.
Industry structure and a firm strategic positioning
Identify the strongest competitive force or forces for strategy formulation.
INSIDE MICROSOFT (Part 1)INSIDE MICROSOFT (Part 2)
YouTube Video: The Five Competitive Forces That Shape Strategy
Loyalty programs: Switching can cause customers to lose out on program benefits. Think frequent purchaser programs that offer “miles” or “points” (all enabled and driven by software).
Learning costs: Switching technologies may require an investment in learning a new interface and commands.
Information and data: Users may have to reenter data, convert files or databases, or may even lose earlier contributions on incompatible systems.
Financial commitment: Can include investments in new equipment, the cost to acquire any new software, consulting, or expertise, and the devaluation of any investment in prior technologies no longer used.
Contractual commitments: Breaking contracts can lead to compensatory damages and harm an organization’s reputation as a reliable partner.
Search costs: Finding and evaluating a new alternative costs time and money.
Apple Computer Inc. Apple Inc.
Apple to Mac
iPod + iTune + music
Apple Stores (see teaching note)
iPhone + iTune + Apps
iPad + iTune + Apps + iBook
From a system to an eco-system
From hardware to software to contents and services
Intensive control of how employees interact with customers, scripted training for on-site tech support and consideration of every store detail down to the pre-loaded photos and music on demo devices.
Photo by Bobby Bank/Getty Images
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Cost Leadership: High volume and low profit margin
Differentiation strategy: High margin/price, low volume
IBM Leads the Way in the Post-PC EraWhy IBM exited the PC market?
Source: Process in Perspective (or “Tell me again, why are we doing this ‘process’ stuff?”), Geary Rummler
The order management process consists of several business processes and crosses the boundaries of traditional business functions.
Enterprise Resource Planning
Customer Relationship Management
Source: How information gives you competitive advantage.
What are your goals?
What are your strategies?
What are your methods for implementing your strategies?
How do you know you are making progress towards your goals?