Firms with a competitive advantage over others typically have access to special resources that others do not or are able to use resources more efficiently, resulting in higher revenue growth, profitability, or productivity growth (efficiency), all of which ultimately in the long run translate into higher stock market valuations than their competitors. Show
Michael Porter's competitive forces model describes five competitive forces that shape the fate of the firm.
Figure 3-10
There are four generic strategies used to manage competitive forces, each of which often is enabled by using information technology and systems:
You can use the business value chain model to identify areas where information systems will improve business processes. You can also benchmark your business processes against your competitors or others in related industries, and identify and implement industry best practices.
A firm's value chain is linked to the value chains of its suppliers, distributors, and customers. Information systems can be used to achieve strategic advantage at the industry level by working with other firms to develop industry-wide standards for exchanging information or business transactions electronically, which force all market participants to subscribe to similar standards. Such efforts increase efficiency, making product substitution less likely and perhaps raising entry costs., Internet technology has made it possible to create highly synchronized industry value chains called value webs. A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively. It is more customer-driven and operates in a less linear fashion than the traditional value chain. Figure 3-12
A large corporation is typically a collection of businesses. Information systems can improve the overall performance of these business units by promoting synergies and core competencies.
Business models based on a network may help firms strategically by taking advantage of network economics. In network economics, the marginal costs of adding another participant or creating another product are negligible, whereas the marginal gain is much larger. For example, the more people offering products on eBay, the more valuable the eBay site is to everyone because more products are listed, and more competition among suppliers lowers prices. Another network-based strategy is the virtual company, or virtual organization, which uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another company without being physically tied to that company. The traditional Porter model of competitive forces assumes a relatively static industry environment; relatively clear-cut industry boundaries; and a relatively stable set of suppliers, substitutes, and customers. With the emergence of the digital firm and the Internet, some modifications to the original competitive forces model are needed. Some of today's firms are much more aware that they participate in business ecosystems, loosely coupled but interdependent networks of suppliers, distributors, outsourcing firms, transportation service firms, and technology manufacturers. In a business ecosystem, cooperation takes place across many industries rather than many firms. Figure 3-13
Business ecosystems can be characterized as having one or a few keystone firms that dominate the ecosystem and create the platforms used by other niche firms. Keystone firms in the Microsoft ecosystem include Microsoft and technology producers such as Intel and IBM. Niche firms include thousands of software application firms, software developers, service firms, networking firms, and consulting firms that both support and rely on the Microsoft products. Which of the following is the correct term to describe the capacity of a firm to perform some internal activity proficiently?A capability is the capacity of a firm to perform some activity proficiently.
Which of the following terms is used to describe cooperation by competitors?Coopetition is the act of cooperation between competing companies by forming a strategic alliance designed to help both companies. Coopetition includes a mixture of cooperation with suppliers, customers, and firms producing complementary or related products.
What are the four quadrants of the core competence?The Four Quadrants Model of High Growth. Quadrant 1: Increase Customer Base.. Quadrant 2: Increase Usage.. Quadrant 3: Introduce New Products.. Quadrant 4: Enter New Markets.. Which of the following is the term for the costs associated with an economic exchange?In basic terms, transaction costs are those costs associated with an economic exchange that vary independent of the competitive market price of the goods or services exchanged. 1 They include all search and information costs, as well as the costs of monitoring and enforcing contractual performance.
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