MIS Module 2: Strategy

Porter’s Five Forces

new entrants, suppliers, buyers, substitutes, rivals

new entrants barriers

supply side economies of scale, demand side benefits of scale, switching costs, capital requirements, incumbency advantages, gov. policy, unequal access to distribution

supply side economies of scale

spread fixed costs over more units, employ more efficient tech or command better terms from suppliers

demand side benefits of scale

network effects arise in industries where a buyer’s willingness to pay for co’s product increases w/ # of other buyers who also patronize the co, buyers must trust larger co’s (more valuable cuz ppl want & use it)

switching costs

alter product specifications, retrain employees to use new product, modify processes or info systems

incumbency advantages

independent of size

gov policy

tariffs, patents, trade rules costs rime & money

unequal access to distribution

new soda co. trying to come into target but pepsi & coke already have shelf space

suppliers

concentrated supplier group, suppliers serve many other industries, switching costs for industry participants (surgery ex), differentiated supplier offering (prescription), no substitutes in supply (pilots), forward integration (firm going straight to customer)

buyers

few buyers/large volume buyers, standardized products, low buyer switching costs, backward integration (DIY customer), price sensitivity

substitutes

source (similar function, different means, outside options), drivers of threat (attractive price, performance tradeoff, low cost for buyer to solution to sub.)

rivals

intensify competition(equal in size), price (most intense rivalry), non-price

porters generic strategies (how to win)

cost leadership, cost focus, benefit leadership, benefit focus

cost leadership

Win by having the lowest costs/prices in the market.

cost focus

Offer low-cost products to a specific/niche market

benefit leadership

Win by offering better/differentiated benefits than competitors.

benefit focus

Offer unique/better benefits to a specific/niche market

what is competitive advantage

advantages over the competition —> cost leadership, differentiation, innovation, brand equity, operational excellence, tech, exclusive access to resources

what makes a competitive advantage sustainable?

valuable, rare, hard to imitate, nonsubstutable

what is operational effectiveness

performing same activities better or more efficiently than competitors

why isn’t tech along a sustainable advantage?

competitors can easily copy or adopt the same tech

strategic positioning

choosing to perform different activities from competitors to create a unique position

value chain analysis

examines a company’s activities to see where value is created and where improvements can be made

value chain upstream

activities involving suppliers and getting inputs into the business

value chain downstream

activities involving getting products/services to customers

primary activities (value chain)

inbound logistics (raw materials, handling & warehouse), operations (machining, assembling, testing), outbound logistics (warehousing & distribution of finished product), marketing & sales (advertising, promo, pricing, channel relations), service (installation, repair, parts)

supporting activities (value chain)

firm infrastructure (GM, accounting, finance, strategic planning), HR management (recruiting, training, development) tech development (R&D, product & process improvements), procurement (purchasing of raw materials, machines, supplies)

how to choose which changes to undertake?

economic analysis: return on investment (investment = cost to undertake change, return = result of change), strategic fit = cost/benefit analysis

what killed gap & what makes zara different?

gap predict what customers want months in advance —> customers didn’t like it —> markdowns —> lower profit —> store closures ; zara is tech driven & listens to customers wants

in what ways is zara model unconventional?

customer demands influence design, vertically integrated (higher manufacturing costs for speed & flexibility)

zara capture & use data

POS system tracks whats selling & talks to customers abt what they want

RFID tech play in zaras success?

track individual items —> COVID locate inventory to complete sale

zara vs prada

zara uses tech for speed, inventory, & customer data. prada focuses mroe on enhancing luxury shopping experience

hard to copy

fast supply chain, data driven culture, & integrated business model

zaras strategy

fast fashion - quickly responds to customer demand w/ frequent, affordable new products

sustainable competitive advantages

supply chain, data collection & ability to quickly respond to customers because these are difficult for competitors to replicate

just in time delivery

getting just enough inventory at the right time —> too many items: inventory costs + obsolescence, too few items —> assembly line shutdowns + retail stock outs