Chapter+3+All+definitions

Michael Porter's Competitive Forces Mode Michael Porter's competitive forces model. This model provides a general view of the firm, its competitors, and the firm's environment. Recall in Chapter 2 we described the importance of a firm's environment and the dependence of firms on environments. Porter's model is all about the firm's general business environment.

Efficient Customer Response System efficient customer response system. An efficient customer response system directly links consumer behavior to distribution and production and supply chains.

Mass Customization This ability to offer individually tailored products or services using the same production resources as mass production is called mass customization.

INFORMATION SYSTEM STRATEGIES FOR DEALING WITH COMPETITIVE FORCES 1) Align the IT with the Business Objectives

2) Low-Cost Leadership

3) Product Differentiation

4) Focus on Market Niche

5) Strengthen Customer and Supplier Intimacy

Benchmarking Benchmarking involves comparing the efficiency and effectiveness of your business processes against strict standards and then measuring performance against those standards.

Best practices Industry best practices are usually identified by consulting companies, research organizations, government agencies, and industry associations as the most successful solutions or problem- solving methods for consistently and effectively achieving a business objective.

Value Web A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively. It is more customer driven and operates in a less linear fashion than the traditional value chain.

Synergies The idea of synergies is that when the output of some units can be used as inputs to other units, or two organizations can pool markets and expertise, these relationships lower costs and generate profits.

Core Competency A core competency is an activity for which a firm is a world- class leader. Core competencies may involve being the world's best miniature parts designer, the best package delivery service, or the best thin- film manufacturer. In general, a core competency relies on knowledge that is gained over many years of experience and a first- class research organization, or simply key people who follow the literature and stay abreast of new external knowledge.

Network Economics Business models based on a network may help firms strategically by taking advantage of network economics. In traditional economics— the economics of factories and agriculture— production experiences diminishing returns. The more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional outputs. This is the law of diminishing returns, and it is the foundation for most of modern economics.

Virtual Company A virtual company, also known as a virtual organization, uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another company without being physically tied to that company. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own.

Disruptive Technologies Sometimes a new technology comes along like a tsunami and destroys everything in its path. Some firms are able to create these tsunamis and ride the wave to profits; others learn quickly and are able to swim with the current; still others are obliterated because their products, services, and business models are obsolete. They may be very efficient at doing what no longer needs to be done! There are also cases where no firms benefit, and all the gains go to consumers ( firms fail to capture any profits). Business history is filled with examples of disruptive technologies.

Domestic Exporter Strategy domestic exporter strategy is characterized by heavy centralization of corporate activities in the home country of origin. Production, finance/ accounting, sales/ marketing, human resources, and strategic management are set up to optimize resources in the home country. International sales are sometimes dispersed using agency agreements or subsidiaries, but foreign marketing is still totally reliant on the domestic home base for marketing themes and strategies. Caterpillar Corporation and other heavy capital equipment manufacturers fall into this category of firm.

Multi-National Strategy A multinational strategy concentrates financial management and control out of a central home base while decentralizing production, sales, and marketing operations to units in other countries. The products and services on sale in different countries are adapted to suit local market conditions. The organization becomes a far- flung confedera-tion of production and marketing facilities in different countries. Many financial service firms, along with a host of manufacturers, such as Ford Motor Co. and Intel Corporation fit this pattern.

Franchisers Franchisers have the product created, designed, financed, and initially produced in the home country but rely heavily on foreign personnel for further production, marketing, and human resources. Food franchisers, such as McDonald's and Starbucks, fit this pattern. McDonald's created a new form of fast- food chain in the United States and continues to rely largely on the United States for inspiration of new products, strategic management, and financing. Nevertheless, local production of some items, local marketing, and local recruitment of personnel are required.

Transnational Strategy Transnational firms have no single national headquarters but instead have many regional headquarters and perhaps a world headquarters. In a transnational strategy, nearly all the value- adding activities are managed from a global perspective without reference to national borders, optimizing sources of supply and demand wherever they appear and taking advantage of any local competitive advantages. There is a strong central management core of decision making but considerable dispersal of power and financial muscle throughout the global divisions. Few companies have actually attained transnational status, but Citigroup, Sony, and Nestlé are attempting this transition.

Centralized Systems Centralized systems are those in which systems development and operation occur totally at the domestic home base.

Duplicated Systems Duplicated systems are those in which development occurs at the home base but operations are handed over to autonomous units in foreign locations.

Decentralized Systems Decentralized systems are those in which each foreign unit designs its own unique solutions and systems.

Networked Systems Networked systems are those in which systems development and operations occur in an integrated and coordinated fashion across all units.

Total Quality Management (TQM) total quality management ( TQM). Total quality management makes quality the responsibility of all people and functions within an organization. TQM holds that the achievement of quality control is an end in itself. Everyone is expected to contribute to the overall improvement of quality.

Six Sigma Six sigma is a specific measure of quality, representing 3.4 defects per million opportunities. Most companies cannot achieve this level of quality but use six sigma as a goal to implement a set of methodologies and techniques for improving quality and reducing costs. Studies have repeatedly shown that the earlier in the business cycle a problem is eliminated, the less it costs the company. Thus, quality improvements not only raise the level of product and service quality but they can also lower costs.

Cycle Time cycle time, which refers to the total elapsed time from the beginning of a process to its end. Shorter cycle times mean that problems are caught earlier in the process, often before the production of a defective product is completed, saving some of the hidden costs of producing it.

Computer-Aided Design A computer- aided design ( CAD) system automates the creation and revision of designs, using computers and sophisticated graphics software. The software enables users to create a digital model of a part, a product, or a structure, and make changes to the design on the computer without having to build physical prototypes.

Business Process Management (BPM) Business process management ( BPM) is an approach to business which aims to continuously improve business processes.

Business Process Re-Engineering (BPR) Many business process improvements are incremental and ongoing, but occasionally, more radical change is required. Our example of a physical bookstore redesigning the book purchasing process so that it can be carried out online is an example of this type of radical, far- reaching change. This radical rethinking and redesign of business processes is called business process reengineering ( BPR).

How does Porter's competitive forces model help companies develop competitive strategies using information systems? In Porter's competitive forces model, the strategic position of the firm, and its strategies, are determined by competition with its traditional direct competitors. They are also greatly affected by new market entrants, substitute products and services, suppliers, and customers. Information systems help companies compete by maintaining low costs, differentiating products or services, focusing on market niche, strengthening ties with customer and suppliers, and increasing barriers to market entry with high levels of operational excellence. Information systems are most successful when the technology is aligned with business objectives.

How do the value chain and value web models help businesses identify opportunities for strategic information system applications? The value chain model highlights specific activities in the business where competitive strategies and information systems will have the greatest impact. The model views the firm as a series of primary and support activities that add value to a firm's products or services. Primary activities are directly related to production and distribution, whereas support activities make the delivery of primary activities possible. A firm's value chain can be linked to the value chains of its suppliers, distributors, and customers. A value web consists of information systems that enhance competitiveness at the industry level by promoting the use of standards and industry- wide consortia, and by enabling businesses to work more efficiently with their value partners.

How do information systems help businesses use synergies, core competences, and network- based strategies to achieve competitive advantage? Because firms consist of multiple business units, information systems achieve additional efficiencies or enhanced services by tying together the operations of disparate business units. Information systems help businesses leverage their core competencies by promoting the sharing of knowledge across business units. Information systems facilitate business models based on large networks of users or subscribers that take advantage of network economics. A virtual company strategy uses networks to link to other firms so that a company can use the capabilities of other companies to build, market, and distribute products and services. Disruptive technologies provide strategic opportunities, although " first movers" do not necessarily obtain long- term benefit.

How do competing on a global scale and promoting quality enhance competitive advantage? Information systems and the Internet can help companies operate internationally by facilitating coordination of geographically dispersed units of the company and communication with faraway customers and suppliers. Information systems can enhance quality by simplifying a product or service, facilitating benchmarking, reducing product development cycle time, and improving quality and precision in design and production.

What is the role of business process management ( BPM) in enhancing competitiveness? Organizations often have to change their business processes in order to execute their business strategies successfully. If these business processes use technology, they can be redesigned to make the technology more effective. BPM combines and streamlines the steps in a business process to eliminate repetitive and redundant work and to achieve dramatic improvements in quality, service, and speed. BPM is most effective when it is used to strengthen a good business model and when it strengthens processes that have a major impact on firm performance.


 * By Moaead Yahya**