Organizational
Strategy and
Competitive
Advantage
BSAD 141
Dave Novak
BDIS: 1.2 (13-26)
Lecture Outline
Business Strategy
 Competitive Advantage
 Goals versus Objectives
 Porter’s 5 Forces Model
 Value Chains
 How do information systems fit in?

Business Strategy

What is a “business strategy”?
Business Strategy

Is it important for employees to know
the organizational “business
strategy”?
Business Strategy

Difference between goals and
objectives
Examples of Goals
Developing new products or services
 Entering new markets
 Increasing customer loyalty
 Attracting new customers
 Increasing sales

Examples of Objectives

First, identify a particular goal


For example, increasing customer loyalty
Second, identify measurable, focused
indicators of customer loyalty that can be
used to determine whether you are
actually meeting your goal

Examples?
Competitive Advantage

A feature of a product or service that
customers value very highly or more highly
than they do for similar features provided
by their competitors
Could be a unique product or service but
doesn’t have to be unique
 How do you determine “better”?

Identifying Competitive
Advantages


Competitive intelligence –The process of
gathering information about the competitive
environment to improve the company’s ability to
succeed
First-mover advantage – Occurs when an
organization can significantly impact its market
share by being first to market with a competitive
advantage
Competitive Strategy
Competitive Strategy
Source: Kroenke, Experiencing MIS, 2008
Porter’s 5 Forces Model

A framework for analyzing the competitive
forces in the environment in which an
organization operates
Evaluate the attractiveness in terms of
entering into a particular industry
 Assess potential for profit

Porter’s 5 Forces Model
1) Buyer/Customer Power

The ability of buyers to influence
the price of an item

High when customers have
ability/power to (lower) prices

Switching cost – Manipulating costs
that make customers reluctant to
switch to another product

Loyalty program – Rewards
customers based on the amount of
business they do with a particular
organization
2) Supplier Power

The suppliers’ ability to influence the prices
they charge for their product/service

High when supplier can set their own price with
little risk of losing customers

For example, a monopolistic firm has high
supplier power
3) Threat of Substitute
Products or Services

How difficult it is for a customer to switch from
your product / service to one of your
competitor’s (or an alternative)

Threat is high when it is easy for customers to
switch (there are many alternatives and
switching costs are low) between different
products and services and low when there are
few alternatives
4) Threat of New Entrants

How difficult it is for an organization to enter
into the same industry as you

High when it is easy for new competitors to
enter a market and low when there are
significant barriers to entry

Entry barrier – A feature of a product or service
that customers have come to expect and
entering competitors must offer the same for
survival
5) Rivalry Among Existing
Competitors

To what extent is your market
position challenged?

High when competition is fierce in a
market and low when competitors
are more complacent

Product differentiation – Occurs when
a company develops unique differences
in its products or services with the
intent to influence demand
Value Chain Analysis:
Executing Business Strategies

What is a business process?
Value Chain Analysis:
Executing Business Strategies

Value chain analysis – Viewing an
organization as a series of connected
business processes that each add
value to the product or service
Value Chain Analysis:
Executing Business Strategies
Porter’s Value Chain
Value Chain Analysis:
Executing Business Strategies

Primary value activities

Inbound logistics - Acquires raw materials and
resources, and distributes

Operations - Transforms raw materials or inputs into
goods and services

Outbound logistics - Distributes goods and services to
customers

Marketing and sales - Promotes, prices, and sells
products to customers

Service - Provides customer support
Value Chain Analysis:
Executing Business Strategies

Support value activities

Firm infrastructure – Includes the company format or
departmental structures, environment, and systems

Human resource management – Provides employee
training, hiring, and compensation

Technology development – Applies MIS to processes
to add value

Procurement – Purchases inputs such as raw materials,
resources, equipment, and supplies
Value Chain Analysis:
Executing Business Strategies
Value Chain and Porter’s Five Forces Model
The organization’s goals and
value-chain structure directly
impact rivalry
Value Chain Analysis:
Executing Business Strategies

The necessity of linking ALL activities is what
allows the organization to realize a profit

These linkages are essential for success

The various profits, functions, and functional areas
of the organization cannot operate in isolation

Concept of “whole” is greater than the sum of the
individual parts
Value Chain Analysis:
Executing Business Strategies

The profit margin is determined by the
organization’s ability to successfully manage
linkages between different processes and
functions in the organization

Links are flows of information, goods, and
services including the systems and processes
needed to perform these activities and assist in
flow
Value Chain Analysis:
Executing Business Strategies



Only if the Marketing & Sales function delivers sales
forecasts for the next period to all other departments in time
and in reliable accuracy, procurement will be able to order
the necessary material for the correct date
And only if procurement does a good job and forwards
order information to inbound logistics, operations will be
able to schedule production in a way that guarantees the
delivery of products in a timely and effective manner – as
pre-determined by marketing
In the result, the linkages are about seamless cooperation
and information flow between the value chain activities
Source: Recklies, (2001) http://www.fao.org/fileadmin/user_upload/fisheries/docs/ValueChain.pdf
Value Chain and
Information Systems

How might the introduction of new
technologies impact different parts of the
value chain and integration of components?

How might technology impact buyers?

How might the introduction of new
technologies impact costs?

Value chain components might change
based on new technologies and IS
Value Chain and
Information Systems

Supply chain – Consists of all parties
involved in the procurement, creation,
and delivery of a product or raw material

Value chain –versus- supply chain?
Summary of lecture
Discussion of business strategy and why is it
important
 Defining competitive advantage


Cost-based matrix
Differentiating between goals & objectives
 Discuss Porter’s 5 Forces Model



Value Chains


Name 5 forces
Name 5 primary and 4 support activities
The role of IS