COM 331 - Chapter 8

COM 331 - Chapter 8 - COM331Chapter8Notes TraditionalModels

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COM 331 – Chapter 8 Notes Traditional Models  of Value Creation  within IT  Three analytical tools introduced to the search for strategic IS  opportunities: 1. Industry analysis 2. Value Chain analysis 3. Customer service life cycle analysis p. 221 Industry Analysis Basic notion: different industries offer different potential for  profitability -suggests that industry differences can be analyzed a priori by  managers using an analytical framework known as  five forces  framework -helps executives to decide whether or not to enter an industry - helps offer guidance as to what to do to increase the industry  appeal p.222 Five Competitive  Forces Five determinants of the potential for profitability of the average  firm in a given industry 1. Threat of New Entrants:  represents the extent to which  the industry is open to entry by new competitors or whether  significant barriers to entry make it so that the existing  firms need not worry about competition from outside 2. Threat of Substitute Products or Services:  represents  the extent to which the products or services marketed by  the firm in the industry of interest are subject to potential  substitution by different products or services that fulfill the  same customer needs 3. Bargaining Power of Buyers:  represents the extent to  which customers of those organizations in the industry  have the ability to put downward pressure on prices -Highly concentrated buyers and low switching costs  typically conspire to increase the bargaining power of  buyers 4. Bargaining Power of Suppliers:  represents the extent to  which those individuals and firms who sell production  inputs to the organization in the industry the ability to  maintain high prices -firms in the industry have taken the role of the buyer  rather than the seller 5. Rivalry among Existing Competitors:  represents the  p. 222  – 224
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extent to which fierce battling for position and aggressive  competition occur in the industry. -competition of degree varies -hypercompetition:  refers to industries characterized by  fierce rivalry amongst existing firms and a very rapid rate of  innovation leading to fast obsolescence of any competitive  advantage and a consequent need for a fast cycle of  innovation example: search engine Can the use of IT  raise or increase  barriers to entry? Investments could reduce the threat of new entrants p. 225 Can the use of IT  decrease  suppliers’  bargaining power? The emergence of IT as viable business tolls shift power away 
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This note was uploaded on 07/25/2011 for the course BUS 371 taught by Professor Franz during the Fall '10 term at University of Victoria.

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COM 331 - Chapter 8 - COM331Chapter8Notes TraditionalModels

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