MOS 1033B - Week 2: IT & Competitive Advantage

• MOS 1033B-552/553, Winter 2025, Week 2, Deck 1

Examples to build on

• FreshDirect and its competitors in the grocery industry

Issues

• Pervasive nature of information technology
• Technology provides affordances to operations
• Technology changes activities and organizations, sometimes radically
• Technology changes rapidly

Learning Objectives

• There are a lot of them, more than can be addressed in class
• You should approach them independently and ask for clarification if needed

Section 3.1: Learning Objectives

• Define operational effectiveness and understand the limitations of technology-based competition
• Define strategic positioning and the importance of grounding competitive advantage in this concept
• Understand the resource-based view of competitive advantage
• List the four characteristics of a resource that might yield sustainable competitive advantage

Section 3.2: Learning Objectives

• Understand that technology is critical to enabling competitive advantage
• Provide examples of firms that have used technology to organize for sustained competitive advantage
• Understand the value chain concept
• Be able to examine and compare how various firms organize to bring products and services to market
• Recognize the role technology plays in crafting an imitation-resistant value chain
• Recognize when technology choice may render potentially strategic assets less effective
• Define brand, scale, data and switching cost assets, differentiation, network effects, and distribution channels
• Understand and provide examples of how technology can be used to create or strengthen the resources mentioned above

Section 3.3: Learning Objectives

• Understand the relationship between timing, technology, and the creation of resources for competitive advantage
• Argue effectively when faced with broad generalizations about the importance of technology and timing to competitive advantage
• Recognize the difference between low barriers to entry and the prospects for the sustainability of new entrant's efforts

Section 3.4: Learning Objectives

• Diagram the five forces of competitive advantage
• Apply the framework to an industry
• Assess the competitive landscape and the role of technology in influencing the relative power of buyers, suppliers, competitors, and alternatives

Section 7.1: Learning Objectives

• Identify the two characteristics of disruptive innovations
• Understand why dominant firms often fail to capitalize on disruptive innovations
• Recognize examples of past disruptive technologies
• Learn from the disruption faced by once-dominant firms, including Kodak and Intel

Section 7.2: Learning Objectives

• Suggest techniques to identify potentially disruptive technologies
• Understand how incumbent firms might nurture experimentation and development of disruptive technologies more effectively
• Contrast the approaches used by Yahoo! and Intuit when encountering disruptive technologies
• Understand how firms might learn from these examples
• Examine several potentially disruptive technologies
• Brainstorm what it might take for their potential to be realized
• Consider the potential positive and negative impacts of these innovations across industries, workers, consumers, and governments

Section 7.3: Learning Objectives

• Understand why early predictions of consumer 3D printing haven't panned out
• Recognize how modern additive manufacturing works
• Understand how 3D-printed homes offer benefits over conventional manufacturing
• Present a potential disruption to several industries while creating opportunities
• Learn the circumstances and conditions where industrial additive manufacturing can make sense and where it might not be a good choice
• Understand how additive manufacturers like VulcanForms use additive manufacturing
• VulcanForms produces parts for a variety of firms from aerospace to life sciences
• Recognize why companies choose Vulcan's products over conventional manufacturing approaches

Section 7.4: Learning Objectives

• Understand what Bitcoin is
• Understand who Bitcoin appeals to
• Understand strengths and limitations of Bitcoin
• Understand blockchain technologies and their potential benefit
• Recognize blockchain's current weaknesses
• Identify promising and impactful areas of blockchain use
• Learn about the DeFi movement and its relationship to cryptocurrency and blockchain technologies
• Gain additional insights into evaluating the trajectory of technology and its disruptive capacity
• Understand the failure of FTX and Alameda Research
• Understand how the "crypto winter" impacted the adoption and use of crypto and blockchain technologies
• Understand CBDC efforts and how these relate to stablecoins
• Learn China's e-CNY has struggled domestically, but presents an alternative to the U.S. dollar for the global financial system

Porter's Five Forces

• Michael Porter's concepts are useful for organizations attempting to achieve comparative advantages
• Value chain is the path of activities that the organization carries out to produce value
• Five forces are the elements of the industry environment
• Harvard Business Review has a YouTube video titled “The Explainer: The 5 Forces That Make Companies Successful"
• Harvard Business Review also has a YouTube video titled "The Five Competitive Forces That Shape Strategy"

Frameworks for situational analysis

• Frameworks can be used on their own or in conjunction with other frameworks
• Examples include SWOT, PEST/PESTLE, and Five Forces
• SWOT concentrates on the Strengths, Weaknesses, Opportunities, and Threats of organizations; it's well-known and generic but specific when best

PEST/PESTLE

• PESTLE concentrates on Political, Economic, Social, Technological, Legal, and Environmental factors in the macroenvironment
• This is more effective when the wider environment plays a significant role

Five Forces (Michael Porter)

• Focuses on the microenvironment, including existing and potential competitors, the power of suppliers and consumers, and the threat of substitute products
• Better for entire industries or organizations within single industries

Porter on Organizations

• Defines themselves according to operational effectiveness
• Suffer aggressive, margin-eroding competition

Dangers for Organizations

• Similarity turns offerings into commodities
• A failure to innovate lets competitors catch up, leading to increased similarity

Similarity

• Being visually similar to others makes it more difficult for a consumer to use a substitute product
• The goal is to protect the organization from economic forces
• There is always a challenge given, in that other organizations can do the same thing eventually
• There is a fast-follower problem where someone catches on fast

Examples of Similarity

• TiVo relied on technology easily adopted by others, creating a high threat of potential competitors
• FreshDirect used technology that could be adopted but provided information that kept them ahead
• FreshDirect is desirable for acquisition because of their expertise and data assets

The Value Chain

• Includes infrastructure, HRM, Technology, Procurement, Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service
• Improvements in a part of the value chain may result in the chain working well at what it is supposed to do (operational effectiveness)
• A core competency is what the organization does well and how well at carrying out a value chain
• A core competency is not necessarily a sustainable advantage

Sustainable Advantage

• Requirements: unique/rare to the organization, have operational effectiveness, and leads to a better existence
• Unique: the value chain must be distinct and not easily implemented or imitated
• Favourable: can it grow and lead to the creation of new value chains?
• Nourishing: success meshes with success as a going concern- does it lead to getting the resources it needs to survive and thrive?
• Develop a brand
• Develop value-added services, especially in commodity sales
• Secure IP Rights
• Buy tools to help effectiveness
• Develop Scalable processes
• Utilize distribution channels to best effect

Resource Based View

• Identifies the factors that contribute to a sustainable advantage. The resources must be valuable, rare, imperfectly imitable, and nonsubstitutable
• Valuable: Improve the relative effectiveness
• Rare: is only there exclusive to the owner
• Imperfectly imitable: can the competitors copy it
• Nonsubstitutable: the degree that competitors can find an alternative resource

Outsourcing

• Analysis of a firm’s value chain can reveal operational weaknesses. Technology may reveal operations and effectiveness
• This may improve operations there
• Supply chain management (SCM)
• Customer relationship management CRM
• Enterprise resource planning (ERP)
• By adopting software that changes a unique process into a generic one.

Brand

• The symbolic product or service
• A conceptual anchor
• Strong brand means it’s powerful enough to compete with others
• Consumers use brands to decide which company’s products are better there for forming a long term brand loyalty
• Advantages related to size
• Businesses benefit from economies of scale. When costs can be spread across producing units that benefit customers
• Organizations can scale if they benefit from economics

What Makes a Commodity

• These are products or services that are offered from multiple vendors
• How does a firm that offers commodities distinguish itself?
• Consumers buying commodities focus highly on prices since they so many choices
• A firm also can be distinguishable on customer service.

Network Effects

• When the value of a product or service increases with expanses with new users
• Also known as network eternaries
• The following firms are dominant due to this concert, Facebook is dominant social network in the world
• Microsoft windows has 90% of the market share there are options that help as well.

Distribution Channels - what is that?

• This is critical and the key to your business as the path throughout services and custom products.
• Apple stores show the firm crafted as effective
• Apple also leveraged it’s itune platform to have a distribution channel to lunch the apple subscription service Apple has a distribution advantage that spotifu doesnt bundle as single package
• understanding this is to the success o
• There can be so much frshdirect they did all this there selves more then apple apple
• Not all channels are good for all products.
• Ice cream is rarely In Costo.
• Understanding on how to get it through in a key
• 0ften Firms that distribution the offerings can be for additional services and code Distribution Chennel is the right path for you to suceed in the long fun

Intellectual property restirctions

• Governments allow people in orgnaisation to collect higher prices
• You do not get price based on printing instead you get because you have monopoly of book

Tends to consolidate into larger firms

• the large market leads to paying
• E.g.: potential and important trolls and extract money From it
• They need to have cost control to be an effective brand

Disruptive Technology

• We will learn from technology from kodack and Intel

Digital camera

• Developed by Eastman Kodak Engineer Steven Sasson In 19975

• Traditional camera/ Way better product.

• Kodak is important: kodackdrome

Boston Consulting Group

• The group helps drive business

• Transforming comes with the matrix

• This is from the company that looks at customers

• B: PERFORMANCE TREND relative to business of the market share

• Failiure to see disruption in novations as threat

• They have not dirceting

• The forms dont need to start there base
• They do not care
• They see high quality and great value in their own product
• Overtime technology
• Existing comments on their plan in the same
• Power supply
• Change standards on other means is for new tech
• There is little or no substitute products this day and age

McNamar fallicy

• Based on make decision and make sure you have metric
• That is for the decision

metric

• A measure with all the systems
• It might be the best and not the best solution
• We use the terms indicator performance not every thing can be measured

Switch - What Nvidia Learnt

• This process helps protect against new forms and has has additional And what now it does it is hard to access all those services
• It is important to keep an eye out for potential tech but need weigh the cost to do it ,
• Cost= Is If you have something then its a risk of investment.
• Alternatives- Buy or op in.

3 printing

• No destruction as of YET The base Is not what makes it more easy
• Low cost priters and plastic parts
• Cost effectiveness when looking over a new view of type of creativity
• More concrete is used . There is more concrete with different building elements

crypto

• this is about the truth with how crypto changes things

• Is like peer to peer connection without central authority

Defi

• is because it does without any banking structure like a smart contract
• People use the crpto exchanger more
• The bitcoin and stablecoins are something you need to keep a watch for as well