Chapter 2 : IDENTIFYING COMPETITIVE ADVANTAGE

Learning Outcomes:

2.1 Explain why competitive advantages are typically temporary.
2.2 List and describe each of the live forces in Porter's Five Forces Model.
2.3 Compare Porter's three generic strategies.
2.4 Describe the relationship between business processes and value chains.

Identifying Competitive Advantage

- To survive and thrive, an organization must create a competitive advantage.

- Competitive advantage is a product or service that an organization's customers place a greater value on than similar offerings from a competitors.

- When an organization is the first to market with a competitive advantage, it gains a first-mover advantage.The first-mover advantage occurs when an organization can significantly impact its market share by being first to market with a competitive advantage.

- As organizations develop their competition advantages, they must pay close attention to their competition through environmental scanning.Environmental scanning is the acquisition and analysis of events and trend in the environment external to an organization. Information Technology has the opportunity to play an important role in environmental scanning.

- Organizations use three common tools to analyze and develop competitive advantages:

1) the Five Forces Model

2) the three generic strategies

3) value chains.

• The Five Forces Model

- For a business to prosper it must be able to quick respond to all form of competition from its rivals.

- The Five Force Model by Michael Porter helps determining the relative attractivenes of an industry and includes the following five forces:

1. Buyer power is assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item.
2. Supplier power is assessed by the suppliers' ability to directly impact the price they are charging for supplies (including materials, labor, and services).
3. Threat of substitute products or services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose.
4. Threat of new entrants is high when it is easy for new competitors to enter a market and low when there are are significant entry barriers to entering a market.
5. Rivalry among existing competitors is high when competition is fierce in a market and low when competition is more complacent.

• Using The Five Forces Model to Analyze the Airline Industry

- Buyer power: Buyer power is high as customers have many airlines to choose from typically make purchases bases on price, not carrier.

- Supplier power: Supplier power is high as there are limited plane and engine manufacturers to choose from and unionized workforces squeeze the airlines profitability.

- Threat of substitute products or services: Threat of substitute products is high as there are numerous transportation alternatives including automobiles, trains, and boats. There are seven substitutes to travel such as video conferencing and virtual meetings.

- Threat of new entrants: Threat of new entrants is high as new airlines are continuously entering the market including the new sky taxies which offer low-cost on demand air taxi service.

- Rivalry among existing competitors: Rivalry in the airline industry is high just search Travelocity.com and see how many choices are offered. For this reason airlines are forced to compete on price.

• The Three Generis Strategies-Creating a Business Focus

- Porters three generic strategies when entering a new market:

1) Broad Cost Leadership

2) Broad Differentiation

Chapter 1 : BUSINESS DRIVEN TECHNOLOGY OVERVIEW

Learning Outcomes:

1.1. Compare management information systems (MIS) and information technology (IT)
1.2. Describe the relationships among people, information technology, and information.  
1.3. Identify four different departments in a typical business and explain how technology helps them to work together.   
1.4. Compare the four different types of organizational information cultures and decide which culture applies to your school.

• Information Technology's Impact on Business Operations

- Information Technology is everywhere in business.

- Information technology plays a critical role in deploying such initiatives by facilitating communication and increasing business intelligence.

 Typical business operate by fuctional area.

1. Each functional area undertakes a specific core business function.
2. Functional areas are anything but independent in a business.
3. In face, functional areas are interdependent;however, they need from each other to work.
4. Information Technology can enable departments to more efficiently and effectively perform their business operations.

• Information Technology Basics

- Information Technology: It is a field concerned with the use of technology in managing and processing information.Today, the term information technology has ballooned to encompass many aspects of computing and technology.

- Information technology in and of itself is not useful unless the right people know how to use and manage
it.Information technology can be an important enabler of business success and innovation.

- Management Information Systems (MIS): 
It is a general name for the business function and academic discipline covering the application of people, technologies,and procedures--collectively called information systems--to solve business problems.

- Some examples of management information sistem are marketing, finance, operations, and human resources

• Common departments in an organization

1. Accounting provides quantitative information about the finances of the business including recording, measruing, and describing financial information.
2. Finance deals with the strategic financial issures associated with increasing the value of the business, while observing applicable laws and social responsibilities.
3. Human resources (HR) includes the policies, plans, and procedures for the effective management of employees (human resources).
4. Sales is the function of selling a good or service and focuses on increasing customer sales, which increases company revenues.
5. Marketing is the process associated with promoting the sale of goods of services. The marketing department supports the sales department by creating prmotions that help sell the company's products.
6. Operations management (also called production management) is the management of systems of processes that convert or transform resources (including human resources) into goods and services.
7. Management informationg systems (MIS) is the academic discipline covering the application of people, technologies, and procedures--collectively called information systems--to solve business problems.

When beginging to learn about management information system it is important to understand the following:

1. Data, information and business intelligence
2. IT resources
3. IT cultures

• Data, Information, and Business Intelligence

1. Data are raw facts that describe the characteristics of an event.
2. Information is data converted into a meaningful and useful context.
3. Business intelligence refers to applications and technologies that are used to gather, provide access to , and analyze data and information to support decision--making efforts.

• IT Resources

- The plan and goal of the IT department must align with the plan and goals of the organization.

- Managers who understand what IT is, and what IT can and cannot do, are in the best position for success.

Putting It All Together

In essence,

- people use

- information technology to work with

- information

Those theree key resources--people, information, and information technology (in that order of priority)--- are inextricably linked. If one fails, they all fail. Most important, if one fails, then chances are the business will fail.

• IT Cultures

- An organization culture plays a large role in determining how successfully it will share information.

- Culture will influence the way people use information.

- An organization's IT culture can directly affect its ability to compete in global market.

Organizational Information Cultures

1. Information-Functional Culture : Employees use information as a means of exercising influence or power over others.
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 crises and radical changes and seek ways to create competitive advantages.