Porter’s Competitive Forces Porter’s Competitive Forces d V l Ch i M d ld V l Ch i M d land Value Chain Modelsand Value Chain Models

Prof. Dr. Hans AkkermansProf. Dr. Hans AkkermansFree University Amsterdam VUAFree University Amsterdam VUA

ICT and Information Systems (IS): ICT and Information Systems (IS): Analysis of context comes first!Analysis of context comes first!Analysis of context comes first!Analysis of context comes first!

NonNon--technical issues are essential for successful technical issues are essential for successful f ICTf ICTuseuse of ICT of ICT

Strategy, market, competitive advantage, organization, Strategy, market, competitive advantage, organization, feasibility, change, impact analysisfeasibility, change, impact analysisfeasibility, change, impact analysis feasibility, change, impact analysis

Need to identify and quantify benefits and costs of Need to identify and quantify benefits and costs of innovative ICT (can be difficult; strategy) innovative ICT (can be difficult; strategy) Acceptability to users is very important Acceptability to users is very important

ICT applications are useful ICT applications are useful ifif they complement human they complement human kill d i t t (b t ft i t h)kill d i t t (b t ft i t h)skills and interests (but often mismatch)skills and interests (but often mismatch)

Fielding into ongoing business process not trivialFielding into ongoing business process not trivialConclusion: ensure match between informationConclusion: ensure match between informationConclusion: ensure match between information Conclusion: ensure match between information systems and organizational goalssystems and organizational goals

Create common understanding Create common understanding ith ll t k h ldith ll t k h ldwith all stakeholderswith all stakeholders

“It’s all about “It’s all about communication”communication”

Source: Financial Times, e-procurement, Oct. 2000

Analysis of competitive forces: Analysis of competitive forces: P t d l ( f i t)P t d l ( f i t)Porter model (of environment)Porter model (of environment)

NEW MARKET

ENTRANTS

SUBSTITUTE PRODUCTS & SERVICES

THE TRADITIONAL

5.5. 2.2.THEFIRM

TRADITIONAL COMPETITION

1.1. 3.3.4.4.

SUPPLIERS CUSTOMERS

Exercise and classroom discussion: Competitive Forces

Carry out a strategic analysis of CocaCoca--ColaColaAccording to the 5 Forces modelAccording to the 5-Forces model

Value Chain Model (1/3)Value Chain Model (1/3)

Chain of core components of total businessChain of core components of total business process, such that every step adds valueDistinction between primary and secondaryDistinction between primary and secondary processG i d i l h i l iGeneric components used in value chain analysis:

Primary: inbound logistics, (internal) operations, b d l i i k i d l ( f l )outbound logistics, marketing and sales, (after sales)

serviceS t t HRM tSupport: management, HRM, procurement, technology

Value Chain Model (2/3)Value Chain Model (2/3)

Value Chain Model (3/3)Value Chain Model (3/3)Note 1: underlying worldview of Porter is the well-known industrial production lineNote 2: E-business: not linear chain, but (dynamic) network – connected and enabled by ICT and ISNote 3: ICT as strategic factor, not just cost cutting

Role of IS in Value Chain

Source: Laudon & Laudon, MIS textbook

Exercise and classroom discussion: The Value Chain

What is the value chain of a universityuniversity ??According to the Value Chain model

What types of ICT/IS play an important role? And at what points in the value chain?And at what points in the value chain?

Three “Logics of Value”All logics must fit to succeed with new business applications and services

Market LogicProduct/Service Content E-business mechanisms:•Customer profiling, personalization •Product/Service customizing, (un)bundling •Digital product versioning, syndication•Product content management standards•XML document standards, e-catalogues•Customer perceived value and interaction

Production/Delivery ChainE-business mechanisms:•Value chain de/reconstructionValue chain de/reconstruction •Novel e-business models, value networks•Virtual, extended enterprise•Partnering, out/insourcing •Transacting: e-marketplaces and auctionsTechnology development

Business Logic

Transacting: e marketplaces and auctionsgy p•Technological trajectories•Technology strategy and portfolio•Innovation adoption and diffusion •Customer acceptability

Techno-Logicp y

Source: IEEE Intell. Systems, Aug. 2001 (www.computer.org/intelligent)

Networked Business Models: The Logics of Value Creation

Value chains become networked E f t k dt k dEmergence of networked networked business modelsbusiness models: Value Value webswebs or constellationsAnalyze crosscross--companycompanyofferings, business models workflowsmodels, workflows Role of customercustomerincreases in service-based Information Society

Key points:Key points:K d b th !K d b th !Know and remember these!Know and remember these!

The importance of the environment (context)The importance of the environment (context)The importance of the environment (context)The importance of the environment (context)Porter’s 5Porter’s 5--Forces model as an analysis toolForces model as an analysis tool

l h i d l l i ll h i d l l i lValue chain model as an analysis toolValue chain model as an analysis toolValue chain change due to ICT and eValue chain change due to ICT and e--business:business:

Connectivity of chainsConnectivity of chainsFrom chain to networkFrom chain to networkInteracting drivers: business, market, technologyInteracting drivers: business, market, technologyRole of Information Systems (IS) to enable Role of Information Systems (IS) to enable

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y ( )y ( )Cases and examplesCases and examples

Exercise and classroom discussion 1: Competitive ForcesCompetitive Forces

Carry out a strategic analysis of CocaCoca--ColaColaAccording to the 5-Forces model

Exercise and classroom discussion 2: The Value ChainThe Value Chain

What is the value chain of a universityuniversity ??According to the Value Chain model

What types of ICT/IS play an important role? And at what points in the value chain?

Coca ColaCoca Cola

Suppliers:Traditional competition:Prices of Pepsi local brands Price and availability of

ingredients on world market Quality speed safety

Prices of Pepsi, local brandsMarket sharePromotional actions of Quality, speed, safety,

traceability, flexibility of supply chain

competitionLight, diet coke, cherry coke a.o. variations

Buyers/consumers:Consumer taste, fashion,

lit f ti i

a.o. variationsNew entrants:

New “look-a-like” quality of perception, image: Is it “cool”? or: Is it “hot”?Combined purchase power of

manufacturers (foreign; global competition)

Substitute products: p pshops, bars, supermarkets

Substitute products:Fashionable new drinks, Red Bull, coffee, Belgian beer, ...