WEEK 2 IT & Strategy: Competitive Market Analysis

Vocabulary flashcards covering IT & Strategy, firm theory, Porter's Five Forces, generic competitive strategies, and the Resource-Based View (RBV).

Markets

Locations where transactions take place to achieve gains from trade.

Hierarchies

Organizations (firms) where transactions are vertically integrated to reduce transaction costs and increase operational efficiency.

Firm

A capital pooling device consisting of a bundle of capabilities and resources that attempts to trade in the marketplace to capture long-term value.

Purpose of the Firm

To maximize shareholder value and profits over the long term.

Business Strategy

A plan for the firm to achieve specific goals, such as entering new markets or increasing customer loyalty, by counterpositioning and differentiating from competitors.

Competitive Advantage

Occurs when a firm performs its value-added activities either at a lower cost than competitors or in a way that leads to differentiation, represented by profit formula $\pi = (R - C)$.

Sustainable Competitive Advantage

A long-term advantage that positively affects firm value, cannot be easily copied by competitors, and is maintained through continuous investment.

Resource-Based View (RBV)

A theoretical perspective asserting that sustainable competitive advantage originates from identifying and deploying a firm's unique internal bundle of assets and capabilities.

Assets

What an organization possesses, such as physical assets and intellectual property.

Capabilities

What an organization can do with its assets, including skills, technologies, techniques, know-how, processes, and culture.

VRIN Framework

A set of criteria establishing that resources must be Valuable, Rare, Imperfectly imitable, and Non-substitutable to form the foundation of a sustainable competitive strategy.

Tradeoffs

Sacrifices that competitors must make in order to copy or compete with a firm's strategy, preventing them from easily imitating the firm's position.

The Five Forces Model

A competitive analysis framework centered on switching costs that evaluates market attractiveness through buyer power, supplier power, threat of substitutes, threat of new entrants, and existing rivalry.

Buyer Power

A force that is high when buyers have many choices and low when choices are few; driven by volume, concentration, fungibility, price sensitivity, brand loyalty, and asset specificity.

Supplier Power

A force that is high when suppliers can sell to many buyers and low when choices are few; influenced by input substitutes, volume concentration, and input impact on cost or differentiation.

Threat of Substitutes

A force that is high when there are many alternatives to a product or service; determined by relative price performance, switching costs, and buyer propensity to substitute.

Threat of New Entrants

A force that is high when market entry is easy and low when entry barriers—such as economies of scale, patents, distribution access, regulation, and expected retaliation—exist.

Rivalry Among Existing Competitors

A force measuring competition intensity, which is higher in commoditized global markets and lower in heavily regulated markets.

Cost Leadership

A generic strategy offering products or services to consumers at a lower price while selling higher overall volume.

Differentiation Strategy

A generic strategy offering products or services with higher quality or better features to charge a premium price.

Focused Strategy

A generic strategy targeting a narrow or niche market segment composed of a specific customer group.

Porter's Generic Strategies Matrix

A strategic framework categorizing positions along competitive scope (broad market vs. narrow market) and cost strategy (low cost vs. high cost).

IT Strategy

The application of digital resources toward a specific organizational purpose to enable and execute business strategy.

Information Asymmetry

An imbalance of information between buyers and sellers, which online user reviews and ratings resolve in competitive markets.