CHAPTER 3 - STRATEGIC INITIATIVE FOR IMPLEMENTING COMPETITIVE ADVANTAGES

CHAPTER 2 - IDENTIFYING COMPETITIVE ADVANTAGES

Michael Porter's Five Forces Model is useful tool to aid organization in challenging decision whether to join i anew industry or industry segment.

Threat of new entrants

Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents (which in business refers to the largest company in a certain industry, for instance, in telecommunications, the traditional phone company, typically called the "incumbent operator"), the abnormal profit rate will trend towards zero (perfect competition).

The following factors can have an effect on how much of a threat new entrants may pose:

• The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.
• Government policy
• Capital requirements
• Absolute cost
• Cost disadvantages independent of size
• Economies of scale
• Economies of product differences
• Product differentiation
• Brand equity
• Switching costs or sunk costs
• Expected retaliation
• Access to distribution
• Customer loyalty to established brands
• Industry profitability (the more profitable the industry the more attractive it will be to new competitors)

Threat of substitute products or services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. For example, tap water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar product. Increased marketing for drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase consumption of all soft drinks), albeit while giving Pepsi a larger slice at Coke's expense. Another example is the substitute of traditional phone with a smart phone.

Potential factors:

• Buyer propensity to substitute
• Relative price performance of substitute
• Buyer switching costs
• Perceived level of product differentiation
• Number of substitute products available in the market
• Ease of substitution
• Substandard product
• Quality depreciation

Bargaining power of customers (buyers)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. The buyer power is high if the buyer has many alternatives. The buyer power is low if they act independently e.g. If a large number of customers will act with each other and ask to make prices low the company will have no other choice because of large number of customers pressure.

Potential factors:

• Buyer concentration to firm concentration ratio
• Degree of dependency upon existing channels of distribution
• Bargaining leverage, particularly in industries with high fixed costs
• Buyer switching costs relative to firm switching costs
• Buyer information availability
• Force down prices
• Availability of existing substitute products
• Buyer price sensitivity
• Differential advantage (uniqueness) of industry products
• RFM (customer value) Analysis
• The total amount of trading

Bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

Potential factors are:

• Supplier switching costs relative to firm switching costs
• Degree of differentiation of inputs
• Impact of inputs on cost or differentiation
• Presence of substitute inputs
• Strength of distribution channel
• Supplier concentration to firm concentration ratio
• Employee solidarity (e.g. labor unions)
• Supplier competition: the ability to forward vertically integrate and cut out the buyer.

Intensity of competitive rivalry

For most industries the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Potential factors:

• Sustainable competitive advantage through innovation
• Competition between online and offline companies
• Level of advertising expense
• Powerful competitive strategy
• Firm concentration ratio
• Degree of transparency

CHAPTER 1 - INFORMATION TECHNOLOGY FOR BUSINESS

Learning outcomes

- compare management information system (MIS) and information technologies (IT)

- describe the relationship among people, information technology, and information

- identify four different department in a typical business and explain how technology helps them to work     together.

- compare the four the different types of organizational information cultures and decide which cultures applies to your school.

INFORMATION TECHNOLOGY’S ROLE IN BUSINESS

 -Information technology is everywhere in business.

INFORMATION TECHNOLOGY’S IMPACT ON BUSINESS OPERATION

Customer sevices-60%

Finance-90%

Sales and Marketing-44%

IT operations-56%

Operations management-25%

HR-12%

Security-17%

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 system (MIS)-a general name for the business function and academic discipline covering the application of people, technologies, and procedures to solves business problems.

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

 - When beginning to learn about information technology is important to understand

     *Data, information, and business intelligence IT resources.

      *IT cultures.

INFORMATIONS

*Data-raw facts that describe the characteristic of an event.

Exp - number of student of UiTM MALACCA

*Information-data converted into a meaningful and useful context.

*Business intelligence-applications and technologies that are used to support decision making effort.

DATA, INFORMATION, AND BUSINESS INTELLIGENCE

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 of power over others. For example, a manager in sales refuses to shares information with marketing to need the sales manager’s input each time a new sales strategy is developed.

*Informational-Sharing Cultures-

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

*Information - Enquiring Cultures

Employees across department search for information to better understand the futures and align themselves with current trends and new directions.

*Information - Discovery Culture

Employees across department are open to new insight about crisis and radical changes and seek ways to create competitive advantages.