CRM : Chapter 11

CUSTOMER RELATIONSHIP MANAGEMENT

CRM enables an organization to: 

• Provide better customer service
• Make call centers more efficient
• Cross sell products more effectively
• Help sales staff close deals faster
• Simplify marketing and sales processes
• Discover new customers
• Increase customer revenues

Recency, Frequency, and Monetary Value

• Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value
• How recently a customer purchased items (Recency)
• How frequently a customer purchased items (Frequency)
• How much a customer spends on each purchase (Monetary Value)

The Evolution of CRM

CRM reporting technology – help organizations identify their customers across other applications

CRM analysis technologies – help organization segment their customers into categories such as best and worst customers

CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

Using Analytical CRM to Enhance Decisions

Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers

Customer Relationship Management Success Factors

CRM success factors include:

1. Clearly communicate the CRM strategy 
2. Define information needs and flows
3. Build an integrated view of the customer
4. Implement in iterations
5. Scalability for organizational growth

Supply Chain Management Chapter 10

Extending the Organization: Supply Chain Management

Supply Chain Management
The average company spends nearly half of every dollar that it earns on production

In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

Basics of Supply Chain
The supply chain has three main links:

• Materials flow from suppliers and their “upstream” suppliers at all levels
• Transformation of materials into semifinished and finished products through the organization’s own production process
• Distribution of products to customers and their “downstream” customers at all levels
• 
  

Basics of Supply Chain Management

Plan

A company must have a plan for managing all the resources that go toward meeting customer demand for products or services.

Source

Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. 

Make

This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. 

Deliver (Logistic)

Companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.

Return

This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

Visibility

Visibility – more visible models of different ways to do things in the supply chain have emerged.  High visibility in the supply chain is changing industries, as Wal-Mart demonstrated

Supply chain visibility – the ability to view all areas up and down the supply chain

Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

Supply chain visibility allows organizations to eliminate the bullwhip effect

To explain the bullwhip effect to your students discuss a product that demand does not change, such as diapers.  

The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long.  

The number of newborn babies determines diaper demand, and that number is constant.

Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe

Distributors order diapers from manufacturers when their inventory level falls below a certain levelthey might order a few extra just to be safe

Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe

Eventually the one or two extra boxes ordered from a few retailers becomes several thousand boxes for the manufacturer. 

 This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip.

Consumer Behavior

Companies can respond faster and more effectively to consumer demands through supply chain enhances 

Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organizations performance

Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

Competiton

Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain

Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

SCP and SCE both increase a company’s ability to compete

SCP depends entirely on information for its accuracy

SCE can be as simple as electronically routing orders from a manufacturer to a supplier

SCM industry best practices include:

1. Make the sale to suppliers
2. Wean employees off traditional business practices
3. Ensure the SCM system supports the organizational goals
4. Deploy in incremental phases and measure and communicate success
5. Be future oriented

Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains

DSSs allow managers to examine performance and relationships over the supply chain and among:

1. Suppliers
2. Manufacturers
3. Distributors
4. Other factors that optimize supply chain performance

The End :)

Chapter 9 ; Streaming Business Operations

Chapter Nine – Enabling the Organization – Decision Making

Chapter Ten – Extending the Organization – Supply Chain Management

Chapter Eleven – Building a Customer-centric Organization – Customer Relationship Management

Chapter Twelve – Integrating the Organization from End to End – Enterprise Resource Planning

Decision Making

Reasons for the growth of decision-making information systems

People need to analyze large amounts of information

People must make decisions quickly

People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions

People must protect the corporate asset of organizational information

Transaction Processing Systems

Transaction processing system - the basic business system that serves the operational level (analysts) in an organization 

Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

Decision Support Systems

Models information to support managers and business professionals during the decision-making process

Three quantitative models used by DSSs include:

Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model. 

Eg: What will happen to the supply chain if a hurricane in South Carolina reduces holding inventory from 30% to 10%?

What-if analysis – checks the impact of a change in an assumption on the proposed solution. 

Eg: Repeatedly changing revenue in small increments to determine it effects on other variables.

Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output. Eg: Determine how many customers must purchase a new product to increase gross profits to $5 million.

Executive Information System

A specialized DSS that supports senior level executives within the organization

Most EISs offering the following capabilities:

Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information.

 Eg: Data for different sales representatives can be rolled up to an office level. Then state level, then a regional sales level.

Drill-down – enables users to get details, and details of details, of information.

 Eg: From regional sales data then drill down to each sales representatives at each office.

Slice-and-dice – looks at information from different perspectives. 

Eg: One slice of information could display all product sales during a given promotion, another slice could display a single product’s sales for all promotions.

Artificial Intelligence (AI)

Intelligent system – various commercial applications of artificial intelligence

Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

Advantages: can check info on competitor

The ultimate goal of AI is the ability to build a system that can mimic human intelligence

Four most common categories of AI include:

*    Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems. Eg: Playing Chess.

* Neural Network – attempts to emulate the way the human brain works. 

Eg: Finance industry uses neural network to review loan applications and create patterns or profiles of applications that fall into two categories – approved or denied.

Fuzzy logic – a mathematical method of handling imprecise or subjective information. Eg: Washing machines that determine by themselves how much water to use or how long to wash.

Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem. 

Eg: Business executives use genetic algorithm to help them decide which combination of projects a firm should invest.

* Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

Multi-agent systems

Agent-based modeling

Eg:  Shopping bot: Software that will search several retailer’s websites and provide a comparison of each retailers’s offering including prive and availability.

Data Mining

Common forms of data-mining analysis capabilities include:

Cluster analysis

Association detection

Statistical analysis

Association detection – reveals the degree to which variables are related and the nature and frequency of these relationships in the information

Market basket analysis – analyzes such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services

Eg: Maytag uses association detection to ensure that each generation of appliances is better than the previous generation.

Statistical analysis – performs such functions as information correlations, distributions, calculations, and variance analysis

Forecast – predictions made on the basis of time-series information

Time-series information – time-stamped information collected at a particular frequency

Eg: Kraft uses statistical analysis to assure consistent flavor, color, aroma, texture, and appearance for all of its lines of foods

Accessing Organizational Information-Data Warehouse Chapter 8

History of Data Warehousing

Data warehouses extend the transformation of data into information

In the 1990’s executives became less concerned with the day-to-day business operations and more concerned with overall business functions


The data warehouse provided the ability to support decision making without disrupting the day-to-day operations

Data Warehouse Fundamentals

Data warehouse – a logical collection of information – gathered from many different operational databases – that supports business analysis activities and decision-making tasks

The primary purpose of a data warehouse is to aggregate information throughout an organization into a single repository for decision-making purposes

Extraction, transformation, and loading (ETL) – a process that extracts information from internal and external databases, transforms the information using a common set of enterprise definitions, and loads the information into a data warehouse

Data mart – contains a subset of data warehouse information

Multidimensional Analysis and Data Mining 

Databases contain information in a series of two-dimensional tables

In a data warehouse and data mart, information is multidimensional, it contains layers of columns and rows

Dimension – a particular attribute of information

Data mining – the process of analyzing data to extract information not offered by the raw data alone

To perform data mining users need data-mining tools

Data-mining tool – uses a variety of techniques to find patterns and relationships in large volumes of information and infers rules that predict future behavior and guide decision making

Information Cleansing or Scrubbing 

An organization must maintain high-quality data in the data warehouse

Information cleansing or scrubbing – a process that weeds out and fixes or discards inconsistent, incorrect, or incomplete information

Business Intelligence

Business intelligence – information that people use to support their decision-making efforts

Principle BI enablers include:

Technology

People

Culture

Technology

Even the smallest company with BI software can do sophisticated analyses today that were unavailable to the largest organizations a generation ago.

 

The largest companies today can create enterprisewide BI systems that compute and monitor metrics on virtually every variable important for managing the company. 

How is this possible? The answer is technology—the most significant enabler of business intelligence. 

Culture

A key responsibility of executives is to shape and manage corporate culture. 

The extent to which the BI attitude flourishes in an organization depends in large part on the organization’s culture. 

Perhaps the most important step an organization can take to encourage BI is to measure the performance of the organization against a set of key indicators. 

Lets Collaborateee with Information !

Chapter 7 - Information

What is Information?

Information is everywhere in an organization

Information is stored in databases

Database – maintains information about various types of objects (inventory), events (transactions), people (employees), and places (warehouses)

Relational Database Fundamentals

Database models include:

Hierarchical database model – information is organized into a tree-like structure (using parent/child relationships) in such a way that it cannot have too many relationships

Network database model – a flexible way of representing objects and their relationships

Relational database model – stores information in the form of logically related two-dimensional tables

Entities and Attributes

Entity – a person, place, thing, transaction, or event about which information is stored

The rows in each table contain the entities

In Figure 7.1 CUSTOMER includes Dave’s Sub Shop and Pizza Palace entities

Attributes (fields, columns) – characteristics or properties of an entity class

The columns in each table contain the attributes

In Figure 7.1 attributes for CUSTOMER include Customer ID, Customer Name, Contact Name

Keys and Relationships

Primary keys and foreign keys identify the various entity classes (tables) in the database

Primary key – a field (or group of fields) that uniquely identifies a given entity in a table

Foreign key – a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables

Relational Database Advantages

Database advantages from a business perspective include :

Increased flexibility

Increased scalability and performance

Reduced information redundancy

Increased information integrity (quality)

Increased information security

Increased Flexibility

A well-designed database should:

Handle changes quickly and easily

Provide users with different views

Have only one physical view

Physical view – deals with the physical storage of information on a storage device

Have multiple logical views

Logical view – focuses on how users logically access information 

Increased Scalability and Performances

A database must scale to meet increased demand,  while maintaining acceptable performance levels

Scalability – refers to how well a system can adapt to increased demands

Performance – measures how quickly a system performs a certain process or transaction

Reduced Information Redundancy 

Databases reduce information redundancy

Redundancy – the duplication of information or storing the same information in multiple places 

Inconsistency is one of the primary problems with redundant information

Increase Information Integrity

Information integrity – measures the quality of information

Integrity constraint – rules that help ensure the quality of information

Relational integrity constraint

Business-critical integrity constraint 

Increased Information Security

Information is an organizational asset and must be protected

Databases offer several security features including:

Password – provides authentication of the user

Access level – determines who has access to the different types of information 

Access control – determines types of user access, such as read-only access

Database Management System

Database management systems (DBMS) – software through which users and application programs interact with a database

Data Driven Websites

Data-driven Web sites – an interactive Web site kept constantly updated and relevant to the needs of its customers through the use of a database

Data Driven Website Business Advantages

Development

Content Management

Future Expandability

Minimizing Human Error

Cutting Production and Update Costs

More Efficient

Improved Stability

Integrating Information among Multiple Databases

Integration – allows separate systems to communicate directly with each other

Forward integration – takes information entered into a given system and sends it automatically to all downstream systems and processes

Backward integration – takes information entered into a given system and sends it automatically to all upstream systems and processes

THE END !

Welcome for the chapter 5 : Organizational Structures that Support Strategic Initiatives

What is the meaning of Organizational Structures?

Organizational employees must work closely together to develop strategic initiatives that create competitive advantages

Ethics and security are two fundamental building blocks that organizations must base their businesses upon

IT Roles and Responsibilities are :-

Information technology is a relatively new functional area, having only been around formally for around 40 years

 

Recent IT-related strategic positions:

• Chief Information Officer (CIO)
• Chief Technology Officer (CTO)
• Chief Security Officer (CSO)
• Chief Privacy Officer (CPO)
• Chief Knowledge Office (CKO)

Chief Information Officer (CIO) – oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives

Broad CIO functions include:

Manager – ensuring the delivery of all IT projects, on time and within budget

Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization

Communicator – building and maintaining strong executive relationships

Chief Technology Officer (CTO) – responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT

Chief Security Officer (CSO) – responsible for ensuring the security of IT systems

Chief Privacy Officer (CPO) – responsible for ensuring the ethical and legal use of information 

Chief Knowledge Office (CKO) - responsible for collecting, maintaining, and distributing the organization’s knowledge

The Gap Between Business Personnel and IT Personnel :-

Business personnel possess expertise in functional areas such as marketing, accounting, and sales  

IT personnel have the technological expertise  

This typically causes a communications gap between the business personnel and IT personnel

Improving Communications :-

Business personnel must seek to increase their understanding of IT

IT personnel must seek to increase their understanding of the business

It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel

Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful 

In recent years, such events as the Enron and Martha Stewart, along with 9/11 have shed new light on the meaning of ethics and security

Ethics – the principles and standards that guide our behavior toward other people

Privacy is a major ethical issue

Privacy – the right to be left alone when you want to be, to have control over your own personal possessions, and not to be observed without your consent

Issues affected by technology advances:-

Intellectual property

Copyright

Fair use doctrine

Pirated software

Counterfeit software

Intellectual property - Intangible creative work that is embodied in physical form

Copyright - The legal protection afforded an expression of an idea, such as a song, video game, and some types of proprietary documents

Fair use doctrine - In certain situations, it is legal to use copyrighted material

Pirated software - The unauthorized use, duplication, distribution, or sale of copyrighted software

Counterfeit software - Software that is manufactured to look like the real thing and sold as such

Organizational information is intellectual capital - it must be protected 

Information security – the protection of information from accidental or intentional misuse by persons inside or outside an organization

E-business automatically creates tremendous information security risks for organizations

THANK YOU ! 

Chapter 4: Measuring Information Technology Success

Measuring Information Technology Success

Key performance indicator – measures that are tied to business drivers

Metrics are detailed measures that feed KPIs

Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals




Efficiency and Effectiveness

Efficiency IT metric – measures the performance of the IT system itself including throughput, speed, and availability


Effectiveness IT metric – measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases

Benchmarking - Base Lining Metrics

Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain

Benchmarking – a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance

Efficiency IT metrics focus on technology and include:

Throughput

Transaction speed

System availability

Information accuracy

Web traffic

Response time

  

Throughput : The amount of information that can travel through a system at any point

Transaction Speed : The amount of time a system takes to perform a transaction

System Availability : The number of hours a system is available for users

Information Accuracy : The extent to which a system generates the correct results when executing the same transaction numerous times

Web Traffic : Includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a Web page

Response Time : The time it takes to respond to user interactions such as a mouse click

Effectiveness IT Metrics : 

1) Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:

Usability

Customer satisfaction

Conversion rates

Financial

Usability : The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.

Customer Satisfaction : Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.

Conversion Rates : The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.

Financial : Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

Metrics for Strategic Initiatives : 

1) Metrics for measuring and managing strategic initiatives include:

Web site metrics

Supply chain management (SCM) metrics

Customer relationship management (CRM) metrics

Business process reengineering (BPR) metrics

Enterprise resource planning (ERP) metrics   

Web sites Metrics include : 

Abandoned registrations

Abandoned shopping cards

Click-through

Conversion rate

Cost-per-thousand

Page exposures

Total hits

Unique visitors

Click Through : 

Count of the number of people who visit a site, click on an ad, and are taken to the site of the advertiser.

Conversion Rate : Percentage of potential customers who visit a site and actually buy something.

Cost per thousand : Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.

Customer Relationship Management :

1)  Customer relationship management metrics measure user satisfaction and interaction and include

Sales metrics

Service metrics

Marketing metrics

CHAPTER 3 Strategic Initiatives for Implementing Competitives Advantages

 Strategic Initiatives

Organizations can undertake high-profile strategic initiatives including:

Supply chain management (SCM)

Customer relationship management (CRM)

Business process reengineering (BPR)

Enterprise resource planning (ERP)

Supply Chain Management (SCM)

involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

Four basic components of supply chain management :

Supply chain strategy – strategy for managing all resources to meet customer demand

Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

Supply chain operation – schedule for production activities

Supply chain logistics – product delivery process

Effective and Efficient Systems can enable an organization to :

Effective and efficient SCM systems can enable an organization to:

Decrease the power of its buyers

Increase its own supplier power

Increase switching costs to reduce the threat of substitute products or services

Create entry barriers thereby reducing the threat of new entrants

Increase efficiencies while seeking a competitive advantage through cost leadership

Customer Relationship Management :

involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

CRM can enable an organization to:

1)Identify types of customers

                                    2)Design individual customer marketing campaigns 

              3)Treat each customer as an individual

                4) Understand customer buying behaviors

Business Process Reengineering:

Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises

The purpose of BPR is to make all business processes best-in-class

Finding Opportunity using BPR :

A company can improve the way it travels the road by moving from foot to horse and then horse to car

BPR looks at taking a different path, such as an airplane which ignore the road completely

Enterprise Resource Planning :

integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations

Keyword in ERP is “enterprise”

ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

Evaluate how Apple can gain business intelligence through the implementation of a customer relationship management system

Create an argument against the following statement:  “Apple should not invest any resources to build a supply chain management system

Why would a company like Apple invest in BPR?

Chapter 3 Case : Consolidating Touchpoints for SAAB

Saab required a consolidated customer view among its three primary channels:

Dealer network

Customer assistance center

Lead management center

Chapter 3 Case Questions : 

1) Explain how implementing a CRM system enabled Saab to gain a competitive advantage

2) Estimate the potential impact to Saab’s business if it had not implemented a CRM system

   3) What additional benefits could Saab receive from implementing a supply chain management system

BUSINESS DRIVEN TECHNOLOGY CHAPTER 1

               Information technology is everywhere in business

Business Functions Receiving The Greatest Benefits From Information Technology

• Customer Service                           70%
• Finance                                           51%
• Sales and Marketing                       42%
• IT Operations                                 39%
• Operations Management                31%
• HR                                                  17%
• Security                                          17%

Information Technology's Impact On Business Operations

• Accounting Finance
• Human Resources
• Finance
• Marketing 
• Sales
• Production Management
• Operations Management
• Management Information System

   Information technology (IT) – a field concerned with the use of technology in managing and processing information

Information technology is an important enabler of business success and innovation

When beginning to learn about information technology it is important to understand

• Data, information, and business intelligence IT resources
• IT cultures 

Data - raw facts that describe the characteristic of an event

Information - data converted into a meaningful and useful context

Business intelligence – applications and technologies that are used to support decision-making efforts





IT RESOURCES

Organizational information cultures include:

Information-Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed.

Information-Sharing Culture  - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.

Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.

THE END FOR THE CHAPTER ONE !

HERE WE GO FOR THE SECOND ONE !

IDENTIFYING COMPETITIVE ADVANTAGE

¡What is competitive advantage?

§A product or service that an organization’s customers place a greater value on than similar offerings from a competitor.

§Unfortunately, CA is temporary because competitors keep duplicate the strategy.

§Then, the company should start the new competitive advantage.

Five Forces Model 

• Buyer power
• Supplier power
• Threat of substitute products or services.
• Threats of new entrants.
• Rivalry among existing companies.

Introduction

Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

Anddd.. THIS IS THE MAIN POINTS FOR THIS CHAPTER ..

1. Buyer Power               

High – when buyers have many choices of whom to buy.

Low – when their choices are few.

To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors.

Best practices of IT-based

Loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays ) 

The Competitive Environment

Bargaining Power of Customers./Buyer power 

Customers can grow large and powerful as a result of their market share.  

Many choices of whom to buy from 

Low when comes to limited items

E.g.: used loyalty programs (jusco card, tesco card, - being a members to get the discount) 

2. Supplier Power

                                                    

High – when buyers have few choices of whom to buy from. 

Low – when their choices are many.

Best practices of IT to create competitive advantage.

E.g. B2B marketplace – private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who  would care to bid. Reverse auction is an auction format in which increasingly lower bids. 

3. Threat of Substitute products & Services

High – when there are many alternatives to a product or service. 

Low – when there are few alternatives from which to choose.

Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.

Best practices of IT 

E.g. Electronic product -same function different brand

The Competitive Environment

Threat of Substitutes.

  

To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.

E.g: electronic product -same function different brands

Switching cost- costs can make customer reluctant to switch to another product or service

4. Threat of new entrants 

High – when it is easy for new competitors to enter a market.

Low – when there are significant entry barriers to entering a market. 

Entry barriers is a product or service feature that customers have come to expect from 

organizations and must be offered by entering organization to compete and survive.

Best practices of IT

E.g. new bank must offers online paying bills, acc monitoring to compete.

The Competitive Environment

Threat of New Entrants.  

Many threats come from companies that do not yet exist or have a presence in a given industry or market. 

The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.  

E.g. new bank (online paying bills, acc monitoring)

EHH? HABIS DAH? HEHE BELUM LAGI...

             The Three Generics Strategies

1) COST LEADERSHIP

1.       Be a low cost producer in the industry allows the company to lower prices to customers 
2. 
   
3.         Competitors with higher costs cannot afford to compete with the low-cost leader on prices.

2) DIFFERENTIATION

1.       Create competitive advantage by distinguishing their products on one or more features important to their customers.

3) FOCUS STRATEGY

1.        Target to niche market 
2.        Concentrate on either cost leadership or differentiation

               The Value Chains- Targeting Business Processes   

Supply Chain - a chain or series of processes that adds value to product & service for                                       customer.

Add value to its products and services that support a profit margin for the firm

THE END :)

Alhamdulillah

P/S : Another 2 weeks we gonna celebrates for Hari Raya Aidilfitri !!

           WUHUUUU ~

          Sooooo mintak ampun maaf zahir batin ye , especially to our beloving lecturer Madam INTAN LIANA BT SUHAIME  ;)

     

         DONT FORGET for our DUIT RAYA hehe :D

Dan hati-hati bila memandu . Pandu perlahan , jiwa selamat :)