Porters Competitive Forces and V l Ch i M d l d Value Chain Models

Prof. Dr. Hans Akkermans Free University Amsterdam VUA

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

NonNon-technical issues are essential for successful use of ICT f
Strategy, market, competitive advantage, organization, feasibility, change, impact analysis

Need to identify and quantify benefits and costs of innovative ICT (can be difficult; strategy) Acceptability to users is very important
ICT applications are useful if they complement human skills and interests (but often mismatch) kill di t t (b t ft i t h)

Fielding into ongoing business process not trivial Conclusion: ensure match between information systems and organizational goals

Create common understanding with all stakeholders ith ll t k h ld

Its all about communication

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

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

NEW MARKET ENTRANTS SUBSTITUTE PRODUCTS & SERVICES

5.
THE FIRM TRADITIONAL COMPETITION

2.

4.
SUPPLIERS

1.

3.
CUSTOMERS

Exercise and classroom discussion: Competitive Forces

Carry out a strategic analysis of Coca-Cola CocaAccording to the 5-Forces model 5 Forces

Value Chain Model (1/3)

Chain of core components of total business process, such that every step adds value Distinction between primary and secondary process Generic components used i value chain analysis: G i d in l h i l i
Primary: inbound logistics, (internal) operations, outbound logistics, marketing and sales, (after sales) b dl i i k i d l ( f l ) service Support: management, HRM, procurement, S t t HRM t technology

Value Chain Model (2/3)

Value Chain Model (3/3)

Note 1: underlying worldview of Porter is the wellknown industrial production line Note 2: E-business: not linear chain, but (dynamic) network connected and enabled by ICT and IS Note 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 university ?
According to the Value Chain model

What types of ICT/IS play an important role?

And at what points in the value chain?

Three Logics of Value

All logics must fit to succeed with new business applications and services
Product/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

Market Logic

Technology development gy p Technological trajectories Technology strategy and portfolio Innovation adoption and diffusion p y Customer acceptability

Production/Delivery Chain E-business mechanisms: Value chain de/reconstruction Value Novel e-business models, value networks Virtual, extended enterprise Partnering, out/insourcing Transacting: e-marketplaces Transacting: e marketplaces and auctions

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

Techno-Logic

Networked Business Models: The Logics of Value Creation

Value chains become networked Emergence of networked E f t k d business models Value models: webs or constellations Analyze cross-company crossofferings, business models, models workflows Role of customer increases in servicebased Information Society

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

The importance of the environment (context) Porters 5-Forces model as an analysis tool 5Value chain model as an analysis tool l h i d l l i l Value chain change due to ICT and e-business: eConnectivity of chains From chain to network Interacting drivers: business, market, technology Role of Information Systems ( ) to enable y (IS) Cases and examples
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Exercise and classroom discussion 1: Competitive Forces

Carry out a strategic analysis of Coca-Cola CocaAccording to the 5-Forces model

Exercise and classroom discussion 2: The Value Chain

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

What types of ICT/IS play an important role?

And at what points in the value chain?

Coca Cola
Traditional competition:
Prices of Pepsi, local brands Pepsi Market share Promotional actions of competition Light, diet coke, cherry coke a.o. variations

Suppliers:
Price and availability of ingredients on world market Quality, speed safety Quality speed, safety, traceability, flexibility of supply chain

New entrants:
New look-a-like manufacturers (foreign; global competition)

Buyers/consumers:
Consumer taste, fashion, quality of perception, image: lit f ti i Is it cool? or: Is it hot? Combined purchase power of p p shops, bars, supermarkets

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