CHAPTER 3

STRATEGIC INITIATIVES for IMPLEMENTING COMPETITIVE ADVANTAGES

In this chapter, we learned about :

• List and describe the four basic components of supply chain management

• Explain customer relationship management systems and how they can help organizations understand their customers

• Summarize the importance of enterprise resource planning systems

• Identify how an organization can use business process reengineering to improve its business

STRATEGIC INITIATIVES

 
* Organizations can undertake high-profile strategic initiatives including : 

– Supply chain management (SCM) 

– Customer relationship management (CRM) 

– Business process reengineering (BPR) 

– Enterprise resource planning (ERP)

SUPPLY CHAIN MANAGEMENT

* It involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

* Four basic components of supply chain management include :

1. Supply chain strategy – strategy for managing all resources to meet customer demand

2. Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services

3. Supply chain operation – schedule for production activities

4. Supply chain logistics – product delivery process

* Effective and efficient SCM systems can enable an organization to : 

– Decrease the power of its buyers 

– Increase its own supplier power 

– Increase switching costs to reduce the threat of substitute products or services

– Create entry barriers thereby reducing the threat of new entrants

– Increase efficiencies while seeking a competitive advantage through cost leadership

* Effective and efficient SCM systems effect on Porter’s Five Forces 

CUSTOMER RELATIONSHIP MANAGEMENT 

* It involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

* Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

* CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

* CRM can enable an organization to :

– Identify types of customers 

– Design individual customer marketing campaigns 

– Treat each customer as an individual

– Understand customer buying behaviors

  
BUSINESS PROCESS REENGINEERING

   
* It is a standardized set of activities that accomplish a specific task, such as processing a customer’s order

* The analysis and redesign of workflow within and between enterprises

– The purpose of BPR is to make all business processes best-in-class

Reengineering the Corporation – book written by Michael Hammer and James Champy that recommends seven principles for BPR

* Finding opportunity using BPR
  
- A company can improve the way it travels the road by moving from foot to horse and then horse to car 
- BPR looks at taking a different path, such as an airplane which ignore the road completely
- Progressive Insurance Mobile Claims Process 
- Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

ENTERPRISE RESOURCE PLANNING

* It integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations

* Keyword in ERP is “enterprise"

PAST YEAR QUESTION CHAPTER 1 & 2

MARCH 2012

QUESTION 2

Five forces in Porter's Five Forces Model :

1. Buyer Power

 

• Assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item 

• High - when buyers have many choices of whom to buy
• Low - when their choices are few 
• Example : rewards on free airline tickets or hotel stays
• Ways to reduce buyer power include

- switching costs  : cost that can make customers reluctant to switch to another product or service- loyalty program : rewards customers  based on the amount of business they do with a particular organization

 2. Supplier Power

• Assessed by the suppliers' ability to directly impact the price they are charging for supplies (including materials, labor, and services) 
• High - when buyers have few choices of whom to buy from
• Low - when their choices are many
• Example : Business to Business (B2B) marketplace - private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids

3. Threat Of Substitute Products and Servies

• High - when there are many alternatives to a product or service
• Low - when there are few alternatives from which to choose
• Example : electronic product - same function different brands

4. Threat Of New Entrants

• High - when it is easy for new competitors to enter a market
• Low - when there are significant entry barriers to entering a market
• Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive

• Example : new bank (online paying bills, account monitoring)

5. Rivalry Among Existence Competitors

• High - when competition is fierce in a market
• Low - when competition is more complacent
• Example : the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt ( MAS & AIR ASIA)

OCTOBER 2012

QUESTION 1

(a) Four organizational information cultures :

1. Information-Functional Culture

• Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager's input each time a new sales strategy is developed

2. Information-Sharing Culture

• Employees across departments trust each other to use information (especially about problems and failures) to improve performance

3. Information-Inquiring Culture

• Employees across departments search for information to better understand the future and align themselves with current trends and new directions

4. Information-Discovery Culture

• Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages

 QUESTION 2

(a) Three Porter Generic Strategies :

1. Cost Leadership

  

• Becoming a low-cost producer in the industry allows the company to lower prices to customers
• Competitors with higher costs cannot afford to compete with the low-cot leader on price
• Example : TESCO (shelf book)

2. Differentiation

• Create competitive advantage by distinguish their products on one or more features important to their customers
• Unique features or benefits may justify price differences and/or stimulate demand
• Example : i-care by Proton

3. Focused Strategy

• Target  to a niche market
• Concentrates on  either cost leadership or differentiation
• Example : Payless Shoes-BATA (low cost, narrow market), Tiffany & Co. Jewellery (high cost, narrow market)

CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGE

 

In this chapter, we learned about :

 

•  Explain why competitive advantages are typically temporary

•  List and explain each of the five forces in Porter's Five Forces Model

•  Compare Porter's three generic strategies

•  Describe the relationship between business processes and value chain

  
  

  INTRODUCTION

   

  • Competitive advantage : - 

    - a product or service that an organization's customers place a greater value on than similar offerings from a competitor 

    
    

  •  First-mover advantage : - 

  - occurs when an organization can significantly impact its market share by being first to market with a competitive advantage 

  
  * Three common tools used in industry to analyze and develop competitive advantages include :
  
  
  • Porter's Five Forces Model
  • Porter's three generic strategies
  • Value chains
   
  THE FIVE FORCES MODEL - EVALUATING BUSINESS SEGMENTS
  
  

  •  Porter's Five Forces Model determines the relative attractiveness of an industry

    - buyer power  

    - supplier power 

    - threat of substitute products or services 

    - threats of new entrants 

    - rivalry among existing company

Buyer Power

• Assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item 

• High - when buyers have many choices of whom to buy
• Low - when their choices are few 
• Example : rewards on free airline tickets or hotel stays
• Ways to reduce buyer power include

- switching costs  : cost that can make customers reluctant to switch to another product or service- loyalty program : rewards customers  based on the amount of business they do with a particular organization

Supplier Power

• Assessed by the suppliers' ability to directly impact the price they are charging for supplies (including materials, labor, and services) 
• High - when buyers have few choices of whom to buy from
• Low - when their choices are many
• Example : Business to Business (B2B) marketplace - private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids

Threat Of Substitute Products & Services

• High - when there are many alternatives to a product or service
• Low - when there are few alternatives from which to choose
• Example : electronic product - same function different brands

   Threat Of New Entrants

• High - when it is easy for new competitors to enter a market
• Low - when there are significant entry barriers to entering a market
• Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive
• Example : new bank (online paying bills, account monitoring)

Rivalry Among Existence Competitors

• High - when competition is fierce in a market
• Low - when competition is more complacent
• Example : the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt ( MAS & AIR ASIA)

THE THREE GENERICS STRATEGICS STRATEGIES - CREATING A BUSINESS FOCUS

Cost Leadership

• Becoming a low-cost producer in the industry allows the company to lower prices to customers
• Competitors with higher costs cannot afford to compete with the low-cot leader on price

Differentiation 

• Create competitive advantage by distinguish their products on one or more features important to their customers
• Unique features or benefits may justify price differences and/or stimulate demand
• Example : i-care by Proton

Focused Strategy

• Target  to a niche market
• Concentrates on  either cost leadership or differentiation

 

THE VALUE CHAINS - TARGETING BUSINESS PROCESSES

• Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy

- Business process : a standardized set of activities that accomplish a specific task, such as processing a customer's order

- Value chain : views an organization as a service or processes, each of which adds value to the product or service for each customer

 

 

CHAPTER 1

BUSINESS DRIVEN TECHNOLOGY

 

In this chapter, we learned about :

• Compare management information systems (IMS) and information technology

• Describe the relationships among people, information technology, and information

• Identify 4 different departments in a typical business and explain how technology helps them to work together

• Compare the 4 different types of organizational information cultures and decide which culture applies to your school

INFORMATION TECHNOLOGY'S IMPACT on BUSINESS OPERATIONS

• Organizations typically operate by functional areas or functional silos

• Functional areas are interdependent

 

 INFORMATION TECHNOLOGY BASICS

• Information Technology (IT) : -

A field concerned with the use of technology in managing and processing information

•  Information technology is an important enabler of business success and innovation

• Management Information Systems (MIS) : -

A general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems

• MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

• When beginning to learn about information technology it is important to understand

- Data, information, and business intelligence IT resources

- IT cultures

INFORMATION

• Data : -

Raw facts that describe the characteristic of an event

• Information : -

Data converted into a meaningful and useful context

• Business intelligence : -

Applications and technologies that are used to support decision-making efforts

IT RESOURCES

• People use

• Information technology to work with

• Information

IT CULTURES

•  Organizational information cultures include :

- Information-Functional Culture : -

Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager's input each time a new sales strategy is developed

- Information-Sharing Culture : -

Employees across departments trust each other to use information (especially about problems and failures) to improve performance

-  Information-Inquiring Culture : -

Employees across departments search for information to better understand the future and align themselves with current trends and new directions

- Information-Discovery Culture : -

Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages