MI021/CS021 Computers in Management Sept. 11, 2006 Technology & Competitive Advantage: Strategy, Industry Competitiveness, Resource Creation, and Timing

Issues Covered: Basics of strategy & competitive advantage –Operational Effectiveness –Strategic Positioning –Characteristics of assets that may yield competitive advantage Industry/Competitive Analysis (5 forces) Value Chain Key Resources for Competitive Advantage

HyperCompetition Profits from a new product or service launch exploitation counter-attack Profits from a new product or service Time

Sony’s Slide

Critical Concepts in Understanding Competitive Advantage Operational Effectiveness – performing the same tasks better than your rivals. Strategic Positioning – performing different tasks than your rivals, or performing the same tasks in a different way.

How Do We Know if Assets Yield Sustainable Advantage? Rareness –Is the asset in limited supply or difficult to acquire? Value –Does the asset yield value to the firm/customers? Imperfectly Imitable –Is the asset impossible to imitate? Non-Substitutable –Is the asset without comparable substitutes?

87% Decline in International DS-3 Pricing over the past two years Source: BandXChange

Key Resources for Competitive Advantage –Imitation-resistant Value Chain Organization –Brand –Scale Economies –Network Effects –Data and Switching Costs –Distribution Channels –Alliances (with complementary firms & competitors) –Differentiation – product or service –Patents?

Value of service Switching Costs Incumbent Late Entering Rival Value of service

Value Chain Inbound logistics Operations Outbound logistics Marketing & sales Service Infrastructure: general mgmt, planning, finance, IS HRM: recruiting, hiring, training, and development Tech. Development: R&D Procurement

ICA: Industry & Competitive Analysis (Porter’s Five Forces) Potential new entrants Threat of substitute products or services Rivalry among existing competitors Power of suppliers Power of buyers