Week 2 Flashcards
Describe the value chain and the categories of the value chain
The value chain is the set of activities through which a product or service is CREATED and DELIVERED to customers
Support activities + Primary Activities = Add value
Support Activities:
- Human Resources
- Accounting
- Information Technology
- Research and Development
- Procurements
Primary Activities:
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and Sales
- After sales service and support
What are resources
Resources are INPUTS required to perform activities
Resources can be:
1) tangible - ex. physical, human, financial
2) intangible - ex. data, information, patents, reputation, userbase
How are resources and activities linked?
Resources are INPUTS required to perform activities
Activities create resources so that they can be OUTPUTS
Resources and activities combine to deliver a CAPABILITY. Capacity for a set of resources to perform an activity in a integrative manner
Resources provide an advantage when …
Resources provide an advantage when they are:
- Valuable
- Rare
- Tough to Imitate
- Non-substitutable
Distribution channels
Distribution channels are how products get to customers. They can be …
- Direct/Indirect (ex. B2B, B2C)
- Physical/Online (ex. in-store, online)
Technology opens opportunities for new channels (ex. Uber on United Airlines app)
What types of software can a business implement to integrate across value chain activities through information technology
A business can implement software to integrate across value chain activities through information technology:
- supply chain management (SCM)
- customer relationship management (CRM)
- enterprise resource planning software (ERP)
If the business adopts standard software, there is a danger it could change a unique process to a generic one
Technology can ____ and ____ powerful resources
Technology can create and reinforce powerful resources
Brand
Brand is a symbolic embodiment of all information connected to a product or service
- customers use brands to decide which company’s products are better –> thus forming brand loyalty
- brand = powerful resource
- technology can rapidly & cost-effectively strengthen a brand
ex. viral marketing consumes to promote a product/service
Non-practicing entities
Non-practicing entities - commonly known as patent trolls, firms make money by acquiring and asserting patents over bringing products/services to market
Application Programming Interfaces (APIs)
Application Programming Interfaces are programming hooks that allow other firms to tap into their services
Affiliates
Affiliates are a 3rd party that promote a product/service in exchange for a percentage of sales
Opportunity
Opportunity can be partnership agreements among tech companies
Business Model
Business Model answers the question “how does the business, create, deliver, and capture value?”
Business Strategy
Business Strategy answers the question “how does the business do BETTER by being DIFFERENT (from rivals)?”
Business Strategy = Be Different So Businesses Do Better
Strategy deals w/ competition and trends in the external environment
Name the two different types of business strategies
1) Strategic positioning view - advantage if firm performs different ACTIVITES than rivals, or the same activities in a different way
2) Resource based view - advantage if RESOURCES are valuable, rare, tough to imitate, and non-substitutable
Switching costs
Switching costs - costs incurred by consumers when switching from one product to another
- data can be a strong switching cost for firms leveraging technology
- firms with more customers gather more data to improve their value chain with more accurate (1) demand and (2) product reccomendations [more customers = more data = increased value]
Sources of Switching Costs
Sources of Switching Costs:
- learning costs
- information and data
- financial commitment
- contractual commitments
- search costs
- loyalty programs
Network Effects
Network effects (also can be referred to as Network Externalities or Metcalfe’s Law) - when the value of a product/service increase as its number of users expands
Powerful resource for firms that can control and leverage dominance
Switching costs can help determine the strength of network effects
Scale Economies
Scale Economies - businesses benefit from advantages related to size
Scalable = benefits from scale economies as it develops/grows
Fixed costs can be spread across increasing units of production and in serving a growing customer base
Businesses can gain an advantage from bargaining power w/ suppliers and buyers
Imitation resistant value chain
Imitation resistant value chain - a way of doing business that companies struggle to replicate and involves technology as an enabling role
- incumbents straddle 2 business model’s cant take advantage of either
- newer entrants struggle when we lead time to create powerful resources (ex. data, brand, scale)
Point of Sale System (POS)
Point of Sale System - transaction processing system that captures customer purchase information
Contract manufacturers
Contract manufacturers - outsource production to 3rd party firms
- advantages –> lower product costs may increase profit’s
- disadvantages –> poor working conditions, sweatshop labour, environmental concerns
Logistics
Logistics - coordinating and enabling the flow of goods, people, information, and other resources among locations
