OIM exam 1

sustainable competitive advantage

financial performance that consistently outperforms industry averages

operational effectiveness

performing the same tasks better than rivals perform them

commodity

A basic good that can be interchanged with nearly identical offerings by others- milk, coal, orange juice, Windows PCs, Android phones. The more commoditized an offering, the greater the likelihood that competition will be based on PRICE

fast follower problem

exists when savvy rivals watch a pioneer’s efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate

strategic positioning

performing different tasks than rivals, or the same tasks in a different way

Tragedy of TiVo

shows why technology alone doesn’t guarentee a sustainable competitive advantage

resource based view of competitive advantage

the strategic thinking approach suggesting if a firm maintains sustainable comptitive advantage, it must control an exploitable resource, or set of resources, that have 4 critical characteristics. these resources must be (1) valuable, (2) rare, (3) imperfectly imitable, and (4) nonsubtitutable

imitation resistant value chain

a way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role

value chain

the set of activities through which a product or service is created and delivered to customers

straddling

trying to copy a competitor’s cool new strategy without giving up your old one - a company tries to get the best of both worlds -

brand

synbolic embodiment of all the information connected with a product or service

viral marketing

leveraging consumers to promote a product or service

scale advantages

advantages related to size

economies of scale

when costs can be spread across increasing units of production or in serving multiple customers. businesses that have favorable economies of scale (like many internet firms) are sometimes referred to as being highly scalable

• BUYING OR MAKING THINGS IN BULK TO SAVE MONEY- the more you make of something, the cheaper it is to make each individual piece

switching costs and data

the hastle, time, money it takes to break up with one company and move to a competitor

differentiation

making a product or service different form other similar products in order to break away from intense price competition

network effects

Also known as Metcalfe’s Law, or network externalities. when the value of a product or service increases as its number of users expands

distribution channels

the path through which products or services get to customers

API (application programming interface)

programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or recieve data. for example, amazon provides APIs to let developers write their own applications and websites that can send the firm orders

affiliates

third parties that promote a product or service, typically in exchange for a cut of any sales

what is the general trend for barriers to entry in tech-centric businesses?

they are low- technology lowers barriers to entry because it can be duplicated easily

give an ex of a business environment where entry barriers are exceptionally low due to technology

rivals can launch a competing website seeminly overnight

when are low barriers to entry not a major threat to a company?

when the company has built a sustainable competitive advantage based on critical resources

what are the 4 criteria a firm’s critical resources must meet to protect against low entry barriers?

rare, valuable, tough to immitae, lack substitutes

when does a first mover advantage adtually pay off for an early entrant?

when a company uses its time-lead to create critical resources that are rare, valuable, tough to imitate, and lack substitutes

true or false: timing or tech alone can produce a sustainable competitive advantage

false- timing and technology alone will not produce a sustainable competitive advantage; however, both act as significant enablers for it

under what exact condition does tech provide a strategic advantage to a firm?

when it is aligned with business objectives

porter’s 5 forces

AKA industry and competitive analysis. a framework considering the interplay between (1) the intensity of rivalry amoung exting competitors, (2) a threat of new entrants, (3) the threat of substitute goods or service, (4) the bargaining power of buyers, and (5) the bargaining power of suppliers

price transparency

a market condition where buyers know what products are offerened and at what prices across the entire market

information asymmetry

a decision situation where one party has more or better information than its counterparty

price discrimination

when identical goods or services are transacted at different prices from the same providor

how does the internet impact price transparency and price discrimination

the internet FOSTERS price transparency and REDUCES price discrimination by making information easily available to counteract information asymmetry

in general cases, how does the internet shift power between buyers and sellers?

it ENHANCES power of buyers and REDUCES power of sellers

under what 2 conditions can the internet actually STRENGTHEN supplier bargaining power?

1. when network effects are strong

2. when a seller’s goods are highly differentiated

why does the internet strengthen a supplier’s power if their goods are rare or highy differentiated?

it creates a market with only a few suppliers but many buyers through widespread internet exposure (ex: an antique dealer bidding up prices on ebay)

what do switching costs have on buyer bargaining power?

switching costs weaken buyer bargaining power (giving more leverage to the supplier)

contract manufacturing

outsourcing production to third party firms. firms that use contract manufacturers don’t own the plants or directly employ the workers who produce the requested goods

zara’s strategy

don’t guess, gather data, and make small batches of what customers want and ship it fast

PDA

personal digital assistant

what is a PDA (personal digital assistant)

an early name for handheld mobile computing devices

POS (point of scale) system

a transaction processing system that captures customer purchases. cash registers and store checkout systems are examples of point of scale systems. these systems are critical for capturing sales data and are usually linked to inventory systems to subtract out any sold items

vertical integration

when a single firm owns several layers in its value chain

value chain

set of activities through which a product or service is created and delivered to customers

RFID

radio frequency identification

what is RFID (radio frequency identification)

small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to. think of RFID systems as the next generation bar code

logistics

coordinating and enabling the flow of goods, people, information, and other resources amoung locations

how does Zara use RFID ?

tags wirelessly emit a unique identifying code for the individual item that they are attached to. as an item moves around the zara distribution center, or into zara stores, wall mounted or hand held scanners can listen in, track product, and take inventory. RFID lets zara know where products are, so if a customer asks for an item in a store, staff using custom apps can find the product for the customer

omnichannel

an approach to retail that offers consumers an integrated and complementary set of shop, sales and return experiences (ex: retail store, online, and sometimes even phone and catalog)

in what 3 major ways is zara’s business model counterintuitive to traditional retail?

• does NOT advertise aggressively

• RARLEY runs sales/promotions

• uses VERTICAL INTEGRATION instead of contracting to low cost countries

what is the primary focus of zara’s profit margin strategy?

tedchnology- abbetted vertical integration to lower manufacturing/distribution costs, and utiliizing “hungry” out of school designers to cut design costs

what two systems do zara stores use to capture data?

PDAs (digital personal assistants) and POS (point of scale) transaction systems

what is the specific role of PDAS in a zara store?

staff use them to record customer preference data (soft data) by directly asking customers what they like or want

what is the specific role of Zara’s POS systems?

to record hard customer purchase information during checkout

list 4 ways zara specifically deploys technology in its operations

• gathering soft/hard data to design styles based on information

• coordinating suppliers, Just in time (JIT) manufacturing, and logistics

• running inventory optimization models for twice weekly shipping cycles

• controlling robots to dye and cut fabric in its 23 automated factories

how does Zara’s IT expenditure compare to the fashion industry average?

it is less than ¼ of the industry average

how does zara’s inditez advertising spending compare to its rivals ?

it is only 0.3 percent, compared to the fashion retail average of 3.5 percent

compare zara’s failed product introduction rate to the industry baseline

zara’s failure rate is just 1 percent, whereas the industry average is 10 percent

compare zara’s markdown performance to traditional retail competitors

the industry average markdown ratio is roughly 50 percent, while zara successfully sells about 85% of its products at full price