Post on 04-Apr-2018
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Porters Competitive Forces
ModelThe best-known framework for analyzing
competitiveness is Michael Porters
competitive forces model (Porter, 1985).
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Porters Competitive Forces
Model TheThreat of entry of new competitors is
high when it is easy to enter a market and
low when significant barriers to entry exist
A barrier to entry is a product or service
feature that customers expect from
organizations in a certain industry For most organizations, the Internet
increases the threat that new competitors
will enter a market
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Porters Competitive Forces
Model
The bargaining power of suppliers is high
when buyers have few choices and low when
buyers have many choices
Internet impact is mixed. Buyers can find
alternative suppliers and compare prices
more easily, reducing power of suppliers
On the other hand, as companies use the
Internet to integrate their supply chains,
suppliers can lock in customers
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Porters Competitive Forces
Model The bargaining power of buyers is high
when buyers have many choices and low
when buyers have few choices
Internet increases buyers access to
information, increasing buyer power
Internet reduces switching costs, which arethe costs, in money and time, to buy
elsewhere. This also increases buyer power
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Porters Competitive Forces
Model The threat of substitute products or
services is high when there are many
substitutes for an organizations products orservices and low where there are few
substitutes
Information-based industries are in thegreatest danger from this threat (e.g., music,
books, software). The Internet can convey
digital information quickly and efficiently
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Porters Competitive Forces
Model Therivalry among firms in an industry is
high when there is fierce competition and
low when there is not
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Value Chain in E-commerce
Value Chain: a way of organizing the activities of abusiness so that each activity adds value (value-
added activity) or productivity to the total operation
of the business.
Michael Porter
Competitive Advantage: Creating and Sustaining Superior
Performance
A strategic tool for identifying how the critical
components of a business tie together to deliver
value for the business across the value-chain
process.
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Value Chain in E-commerce - contd
Organizations are open systemsThey do not consist of isolated sets of functions
They are a chain of value-creating activities that
assure competitive advantages by delivering
value to the customer
Depicts the series of interdependent
activities of a business
A business evaluates its value to find
opportunities for improving the value
activities
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Competitive Advantage
Competitive advantage is achieved when an
organization links the activities in its value
chain more cheaply and effectively than itscompetitors.
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Value Chain Primary Activities
1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. Service
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Value Chain Support Activities
1. Corporate infrastructure
2. Human resources
3. Technology development
4. Procurement
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Porters Value Chain
Inbound activities to receive, store and distribute inputsto the product, such as material handling, inventory control, warehousingand contact with suppliers.
Production activities to create the product such as machining,packaging, printing and testing.
Outbound activities to store and distribute the productto customers, including warehousing, order processing and vehiclescheduling.
Activities associated with providing a means by whichbuyers can purchase the product and be included to do so (advertising,selling, pricing, merchandising and promotion).
Activities for providing service or maintaining product value,including installation and training.
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Porters Value Chain
Purchasing input.
Not just machines and processes butalso expertise, procedures and systems.
Activities involved in recruiting,training and staff development.
General management, finance, planning and qualityassurance. Infrastructure supports the whole value chain.
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Analyzing Value Chain Activities
What type of activity is being performed? Does it addvalue? Does it ensure the quality of other activities?
How does the activity add value to the customer?
Could the same activity be reconfigured or performed in a
different way?
What inputs are used? Is the expected output beingproduced?
Is the activity vital? Could it be outsourced, deletedcompletely, or combined with another activity?
How does information flow into and out of the activity?
Is the activity a source of competitive advantage?
Does the activity fit the overall goals of the organization?
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E-commerce Value Chain The E-commerce Value Chain means identifying:
The competitive forces within the companys e-
commerce environment
The business model it will use Identifying the value activities that help the e-commerce
value chain do its homework
E-commerce views information technology as partof a companys value chain
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Value Chain for American Airlines