1. Page 13-16; 16.6b-16c: Strategies Porter’s 5 Force Model Task 1 Task 2 IT for a Competitive Adv 1

2. Porter’s Strategies: Overall cost leadership Differentiation Focus Information Systems assist by Reducing costs of products and services If correctly designed, assists with differentiation and focus strategies 2

3. Role of IT: Bottom-line, by improving efficiency by reducing overall costs Top-line, by generating new revenue by offering new products and services to customers or increasing revenue by selling existing products and services new customers E-commerce: adapt business models to reduce distribution costs dramatically. Ex? 3

4. Overall Costs: To reduce costs: ES: SCM, CRM, ERP, and collaboration SW SCM CRM Collaboration SW: Goal: To use IT to create the most Efficient, effective link between suppliers and consumers 4

5. Differentiation: Make the products and services different from competitors Apple: computers look different, and ease of use Amazon.com: Web uses personalization technologies. One-click for fast checkout CEO? 5

6. Focus: To concentrate on a specific market segment to achieve cost or differentiation advantage Apple: iPhone focus on customers not business Macintosh: for creative professionals Abercrombie & Fitch: high-end clothing to low- income customers Nordstrom: high-end clothing to high-income customers 6

7. Conclusion: Focus and differentiation work to a certain point, and then customers cannot afford it anymore. Cost still plays a role. 7

8. Porter’s 5 Force Model: Buyer power: is high when customers have many choices Organizations offer services that makes it difficult for customers to switch (differentiation) increase buyer’s bargaining power and decreases supplier power 8

9. Cont.: Dell: computer customization Sam’s Club: club cards that encourage customers to shop for big discounts (cost leadership) Airlines and hotels: free mileage and points Customer loyalty: combating the threat of new entrants or substitute products Internet: give customers access to all sorts of data, increase buyer’s bargaining power and decreases supplier power 9

10. Supplier Power: Is high when customers have fewer options. Make products and services cheaper or to offer more services in order to distinguish themselves from competitors Netflix: watched unlimited movies and TV episodes…. Drug co’s: patents to reduce competition 10

11. Substitute products: When many alternatives to organization’s products and services are available. Companies try to be distinctive Use fees to discourage customers from switching. Cell phone companies 11

12. Threat of new Entrants: Low when duplicating a company’s products or services is difficult Focus: Google.. Banks Yahoo Google 12

13. Rivalry: Many competitors occupy the same marketplace position On-line Brokerage firms: use IT to make their services unique. 13

14. Task 1 Airline Industry: SA How many airline companies do we have? Who are they? Which one the tax payer is paying for? 14

15. Task 2: The role of Information Systems in Porter’s Forces: Supplier bargaining Power: Competitive rivalry: Buyers bargaining Power: Thread of substitutes: Threat of new entrants: 15

16. References: 1. Baltzan, P. Business Driven Technology. New York: McGraw-Hill Irwin, 2013. 2. Johnson, G., Whittington, R., Scholes, K. Exploring Strategy. Essex: Pearson, 2011. 3. Oz, E,. Jones, A. Managemnt Information Systems. Andover: Course Technology, 2008. 4. Stair, R., Reynolds, G., Chesney, T. Fundamentals of Business Information. 16