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Broadband Internet access has grown from 6% to 31% in three years. Jobless claims fell last week to the lowest level since Nov. 30
Chapter 2 Summary
Business Competitive Environment
Review of Objectives
To clearly understand competition: Definition of Competitiveness Competitive Advantage Global Competition Role of the nation: Role of government within a nation.
Definition of Competitiveness
How can a business assure value to customers? A good competitor knows: Which products and services it offers. Who its customers are. Who its competitors are.
Competitive Advantage
To assure positioning for profit, a company must maintain competitive advantage. Methods that are achievable and sustainable. Work smarter. Assess whether Information Systems are appropriate to gaining a competitive advantage? Focus on three primary inputs: HR , Capital, Technology.
Global Competition
The Global Market will come to you if you dont go to it. By staying in your home country, you assume a defensive position. There are advantages and disadvantages to going global. These need to be considered carefully.
Capital
Technology
New Competition
What are some ways that governments serve as a catalyst and challenger to the competitiveness of its companies? Why has competitiveness become the important topic that it is?
2.
Chapter 3 Introduction
The Porter Competitive Model for Industry Structure Analysis
Intra-Industry Rivalry
Strategic Business Unit
Figure 3-1
Value Chain
Developed by Michael Porter but different from competitive model because it focuses within the company.
Analyzes the cross-functional flow of products or services within an organization that add value to customers.
INBOUND LOGISTICS
SERVICE
PRIMARY ACTIVITIES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright 1985 by Michael E. Porter.
Figure 3-6
Chapter 3
Porter Competitive Model for Industry Structure Analysis
ATP Research
1. Value Line 2. Company web page and annual report. 3. Internet search engines:
Google
Ask Jeeves 4. Library reference documents 5. Jack Callon and his documents
Awareness of competitive forces can help a company stake out a position in its industry that is less vulnerable to attack.
Michael E. Porter
Competitive Strategy
A few characteristics are often key to the strength of each competitive force.
Intra-Industry Rivalry
Strategic Business Unit
Figure 3-1
Rivalry Likelihood
Profit margins.
its customers business. 6. A long time working relationship provides unique capabilities.
Definitions
New Entrant:
An existing company or a startup that has not previously competed with the SBU in its geographic market. It can also be an existing company that through a shift in business strategy begins to compete with the SBU.
Substitute Product or Service:
An alternative to doing business with the SBU. This depends on the willingness of the buyers to substitute, the relative price/performance of the substitute and/or the level of the switching cost.
Substitute Threats
Buyer propensity to substitute.
Relative price/performance of substitutes. Switching costs.
Competitive Strategies
What is driving competition in my current or future industry? What are my current or future competitors likely to do and how will we respond? How can we best posture ourselves to achieve and sustain a competitive advantage?
Strategy Options
According to Michael Porter
Primary Strategies 1. Differentiation 2. Least Cost Supporting Strategies 1. Innovation 2. Growth 3. Alliance
Parts Manufacturers Electronic Components Specialty Metal Suppliers Machine Tool Vendors Labor Unions IT Vendors
Porter Competitive Model Heavyweight Motorcycle Manufacturing Industry North American Market
Foreign Manufacturer
Intra-Industry Rivalry
SBU: Harley-Davidson
Rivals: Honda, BMW, Suzuki, Yamaha
Entry Level
Law Enforcement
Premium
North American
Vertically Integrated
Information Systems
Engineering Product Design Manufacturing Sales/Distribution Business
Customer Strategy
Young Adults Parents Teenagers with Social with Focus Kids Time Conscious Adults
Leisure Adults
Senior Citizens
Ethnic Focus
Drive Through
Vendor Strategy
Competitive Bids
Alliances
Vertically Integrated
Market Strategy
Local Regional National International
Suppliers
Intra-Industry Rivalry
SBU: SF Giants
Buyers
Porter Competitive Model Analysis for the San Francisco 49ers Bay Area Market New Entrants
Canadian Football Professional Hockey Professional Soccer Sumo Tournaments
Suppliers
Players Union City of SF Transportation Services Food Service Sovereigns Police and Sanitation Service Utilities Stadium Employees
Buyers
Die Hard 49er Fans Die Hard Football Fans Intra-Industry Rivalry Fair Weather Football Fans SBU: SF 49ers Non-football Fans Rivals: Oakland Raiders Out of Town Visitors Arena Football Opposing Team Fans S.F. 49ers Age Group Segments Golden State Warriors Groups Versus Individuals College Athletic Events Corporate Sponsors High School Athletic Events Sports Writers and Media Movies, Stage Plays, etc. Outlets General Travel and Travel Packages
rivals.
Computer Industry
Why is this industry more of a challenge to evaluate using the Porter Competitive Model?
Layer 4 Applications
Spreadsheets Word Processors Database
Lotus 1-2-3
Microsoft Excel
Quattro Pro
MS DOS
Novell Netware
Windows
Banyan
OS/2
Unix
IBM
Apple
Others
IBM
Compaq
Apple Macs
Other
Layer 1 Microprocessor
Intel X86
Motorola
RISC
Power PC
Figure 3-4
Internet Direct
Desktop Suites Enterprise Resource Planning Supply Chain Management Other Word Processors Spread Sheets Publishing Groupware Data Warehouse Other
LAN, WAN and Internet Software Interfaces, Browsers and Search Engines Hierarchical Database Relationship Database
Windows
Unix
Linux
Apple
Handheld Device
Layer 1 Microprocessor
Intel X86
Motorola
RISC
Power PC
Computer Industry
Hardware Processors Input/Output Devices Storage Devices Multiple processor segments in the computer industry. Processor companies versus specialized hardware companies.
Networking Equipment?
Software
Systems Software
Operating Systems Database Systems
Network Systems
Utility Software Performance and Security Software Development Software Programming Languages CASE Software Applications Software
Applications Software
Specific application software to do numerous things. Running on a range of processors. Applications suites (integrated applications) Some call these integrated enterprise applications Is game software from Sony a part of the computer industry? Is software to run numerical control machine tools part of the computer industry? Is software to analyze automobile smog tests part of the computer industry?
1999
1998
Supercomputer
1997
1996
1995
Source: Dataquest
1994
1993
Billions of $s
Source: Dataquest
What is a PC?
1. A desktop toolword processor, spreadsheet, publishing tool, data store.
2. An entertainment device.
3. Communication deviceemail.
4. Information sourceInternet sources. 5. A collaboration tool.
PC Industry Segment
1. Passed $100 billion in sales in the first ten years.
2. Growth and competition was based on industry standards like never before.
5. Communication Device--Groupware
PC Industry Change
Atari Cromemco Fortune Systems Wicat Systems Kaypro Morrow Designs Osborne Computer Victor Technologies Dell Gateway IBM HP (Compaq) NEC
Service
INBOUND LOGISTICS
SERVICE
PRIMARY ACTIVITIES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright 1985 by Michael E. Porter.
Figure 3-6
-Financial Policy
-Regulatory Compliance
Actuary Training Actuarial Methods Investment Practices I/T Communications
- Legal
- Accounting
Claims Training Claims Procedures
Agent Training
Product Development Market Research
PROCUREMENT
Policy Rating
Underwriting Investment
INBOUND LOGISTICS
OPERATIONS
OUTBOUND LOGISTICS
SERVICE
Included with permission of Michael E. Porter based on ideas in Competitive Advantage: Creating and Sustaining Superior Performance, copyright 1985 by Michael E. Porter.
Figure 3-7
PROCUREMENT Transportation Technology Material Handling Technology Storage and Preservation Technology Communication System Technology Testing Technology Information Technology
Basic Process Technology Materials Technology Machine Tools Technology Materials Handling Technology Packaging Technology Testing Technology I/nformation Tech.
Transportation Technology Material Handling Technology Packaging Technology Communications Technology Information Technology
INBOUND LOGISTICS
OPERATIONS
OUTBOUND LOGISTICS
SERVICE
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright 1985 by Michael E. Porter., p. 167.
Figure 3-8
1. Enron collapse
2. HP-Compaq merger 3. United Airlines bankruptcy 4. Survival of Amazon.com and continued success of eBay. 1. Amazon.com is definitely the standard by which eCommerce companies are compared. eBay is uniquely profitable as an Internet company. 2. NASDAQ lists more than technology companies.
3. The News, Life, Sports and Weather is a description of USA Today and not the Wall Street Journal.
4. Japan, not Germany, is the worlds second largest economy.
7. A balance sheet indicates assets and liabilities. The profit and loss statement indicates profit.
8. A general sentiment is that established companies with a solid brick and mortar foundation can move to the Internet with a winning approach. 9. The big three of the airline industry are American, United and Deltanot Northwest.
1. To start a new business requires: E. all of the above. 2. Of the factors in question 1, not having sufficient operating capital is the cause of most business failures.
3. Never listed as first on the Fortune Most Admired List are Cisco Systems, Intel and Wal-Mart Stores.
4. Industries that have dominated the least admired list are the Savings and Loan Industry and the Airline Industry. 5. A money source for a startup that is not realistic in most cases is commercial banks. 6. IPO stands for initial public offering. 7. Marketing is determining what to sell and sales is selling what you have.