Concepts and Frameworks for Achieving Success

Strategy and Technology: Concepts and Frameworks for Achieving Success. Enterprise resource planning(ERP)- ties different departments together. The Danger of Relying on Technology: •Firms strive for sustainable competitive advantage. •sustainable competitive advantage: Financial performance that consistently outperforms industry averages. • challenging to achieve due to the rapid emergence of new products and competitors. •Competitors cut costs, cut prices, and increase features to achieve a comparative advantage. Understanding Competitive Advantage: Operational Effectiveness vs. Strategic Positioning The Tragedy of TiVo - Rivals created reasonably good copies of TiVo. - TiVo lacked access to critical distribution channels (e.g., the cable guys), which their rivals leveraged. Technology Alone Won’t Give You a Competitive Advantage Companies can compete based on one of two approaches: 1. Operational Effectiveness or 2. Strategic Positioning 1. Operational effectiveness - performing the same tasks better than your rivals. •Design •Customer Service •Technology •Quality •All are critical, but not enough… Commodity - an essential good that can be interchanged with nearly identical offerings by others 2. Strategic positioning- performing different tasks than your rivals or performing the same tasks differently. Strategy: differentiation is vital to getting you over the average profit. net35 period- A period in which companies can pay back their suppliers after purchasing the goods, typically/usually "35" days. Lower prices from suppliers without scale? 1. BUY direct 2. Save by eliminating the middleman 3. Give suppliers what they want. - unlimited shelf space Pay them faster Co-branding Share the data (everyone wants data) Inventory turnover- the number of times inventory is sold or used during a given period ( such as a year or a quarter ) Higher inventory means you're selling more -- this means your profits will be higher due to sales -- leading to paying your suppliers faster. How do we know if assets yield sustainable advantage? Asset yield- The yield on earning assets is a popular financial solvency ratio that compares a financial institution's interest income to its earning assets. The yield on acquiring assets indicates how well investments perform by looking at how much revenue they bring in. • rareness -is the asset in limited supply or difficult to acquire? • value -does the asset yield value to the firms/ customers? • imperfectly imitable -is the asset impossible to imitate or copy? • non-sustainable - Is the asset without comparable substitutes? Critical Resources for Competitive Advantage –Imitation-resistant Value Chain Organisation –Brand –Scale –Data – Differentiation & Switching Costs –Network Effects –Distribution Channels –Alliances (with complementary firms & competitors) –Patents? •useful, novel, non-obvious Value Chain Straddling: When a firm adopts more than one method of doing business (occupies more than one position) yet fails to gain the full advantages of any of these efforts. Ex: weak copycat efforts (e.g., Gristedes v. FreshDirect) Brand Value (symbolic embodiment) Brand: The symbolic embodiment of all the information connected with a product or service. Viral Marketing: We are leveraging consumers to promote our product or service. Scale & Scalability 1. Scale advantages: advantages related to size. 2. Economies of Scale: when a firm can spread costs across increasing production units. Switching Costs •Learning costs: 3e.g., investment in learning a new interface and commands. •Information and data: 3e.g., reentering data, converting files or databases, or loss of contributions on incompatible systems. •Financial commitment: 3e.g., investments in new equipment, cost to acquire new software, consulting, or expertise, & devaluation of any investment in prior technologies no longer used. •Contractual commitments: 3compensatory damages and harm an organization’s reputation as a reliable partner. •Search costs: 3e.g., time & money spent evaluating alternatives. •Loyalty programs: 3e.g., loss of < miles= or < points= (all enabled and driven by software). Network Effects - When present, a product or service becomes more valuable as its installed base (of participants/users) expands. Distribution channels - The path through which products or services get to customers. APIs build platforms & distribution. API- programmatic hooks or other guidelines published by firms tell other programs how to get a service to perform a task, such as sending or receiving data. (Application programming interface ) Platform - allowing for the integration of third-party software products and other complementary goods. Patents can be worked around4for example- Apple vs. Samsung lawsuit for $1 billion. Samsung copied Apple's style. More beneficial for Samsung even though they paid and copied. The Role of Timing & Technology: Think Beyond Platitudes. ● It’s not the technology or the timing; it’s what you do with a technology & timing lead. ● Create assets that are valuable, rare, imperfectly imitable & non-substitutable, and you’ve got terrain that can be defended. Stay customer-focused, innovate, & don’t lose your edge, or you’re Yahoo! or worse, Friendster! Price Transparency: The degree to which complete information is available. Information Asymmetry: When one party has more or better information than their counterparty. Zara: Fast Fashions from Savvy Systems Zara: A Brief History •Zara is the biggest of 8 brands owned by international clothing retailer Inditex. •Founded in 1963 in Spain by Amancio Ortega •Briefly was the wealthiest person in the world in 2015 • the First store opened (in 1975). About •Zara expands globally (the 1980s–1990s) •Launched many of its brands targeting different markets •First online store (Zara Home) opened (2007) Zara: Today •Inditex ranked #398 on the 2020 Fortune Global 500 •Net sales of €20.4 billion ($24 billion) •32% online sales (up from 14% YOY) •COVIDproof (< A post-covid retailer=): •In spring 2020, 88% of stores closed (Inditex has over 7,000 worldwide) •Refocused on e-commerce strategy and recovered its losses •Inditex used its infrastructure to help transport medical supplies Why Zara? •Largest Pure-Play Fashion retailer on the Planet! •Massive profits! •They took over the market and won over the previously top fashion clothing retailer in the world: GAP. Why study Zara? •< The most innovative and devastating retailer in the world.= •Consistent financial growth for the past five years, despite not using advertising and rarely having sales •While the retail market went down, Zara stayed profitable •Surpassed its competitors and continues to grow (started from nothing and became the world leader in clothing) •Zara is great at leveraging technology