Ecommerce Lecture Notes5b

7/31/2019 Ecommerce Lecture Notes5b

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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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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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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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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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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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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.
http://www.isc.hbs.edu/firm-competitve.htmhttp://www.isc.hbs.edu/firm-competitve.htmhttp://www.isc.hbs.edu/firm-competitve.htmhttp://www.isc.hbs.edu/firm-competitve.htmhttp://www.isc.hbs.edu/firm-competitve.htmhttp://www.isc.hbs.edu/firm-competitve.htm


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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

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Ecommerce Lecture Notes5b