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. What is a group of firms within the industry following the same or similar strategy?A x group is a group of firms in an industry following the same or a similar strategy in a given target market. General Electric and Whirlpool belong to the same strategic group because: each produces a full line of medium-price appliances supported by good service.
What is strategic group in strategic management?A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies.
Why are strategic groups important?Examination of the strategic groups in an industry provides a firm's executives with a better understanding of their closest rivals, reveals alternative paths to success, and highlights untapped opportunities.
What is a strategic group Give me an example of one?Companies whose products and services are recognized by people based on their brand's name and not based on the quality of the products or services are part of one strategic group. For example, cosmetic brand companies like Lakme, Bobby Brown, and Loreal companies are part of one strategic group.
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