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Business Driven Technology 7th Edition Baltzan Solutions Manual
Business Driven Technology 7th Edition Baltzan Solutions Manual
CHAPTER TWO
Identifying Competitive Advantages
This section discusses how an organization can identify competitive advantages using tools such
as Porter’s Five Forces, three generic strategies, and value chains. Gaining competitive
advantages are critical for organizations. Organizations also must understand that competitive
advantages are typically temporary since competitors are quick to copy competitive advantages.
For example:
• United was the first airline to offer a competitive advantage with its frequent flyer mileage (this
first-mover advantage was temporary)
• Sony had a competitive advantage with its portable stereo systems (this first-mover advantage
was temporary)
• Microsoft had a competitive advantage with its unique Windows operating system
• Ask your students if Microsoft still has a competitive advantage with its Windows operating
system
Ans: Perhaps – primarily due to its first-mover advantage since it is difficult to switch
operating systems and users face interoperability issues if they are using different
operating systems at the same organization.
How many students in your class are currently using Windows?
What are the competitors to Windows? Ans: Linux and Macintosh
Why are there only three primary competitors (Microsoft, Macintosh, and Linux) in this
large operating system market?
LEARNING OUTCOMES
Learning Outcome 2.1: Explain why competitive advantages are temporary along with the
four key areas of a SWOT analysis.
A competitive advantage is a feature of a product or service on which customers place a greater
value than they do on similar offerings from competitors. Competitive advantages provide the same
product or service either at a lower price or with additional value that can fetch premium prices.
Unfortunately, competitive advantages are typically temporary because competitors often quickly
seek ways to duplicate them. In turn, organizations must develop a strategy based on a new
competitive advantage. Ways that companies duplicate competitive advantages include acquiring
the new technology, copying business processes, and hiring away employees.
Learning Outcome 2.2: Describe Porter’s Five Forces Model and explain each of the five
forces.
Porter’s Five Forces Model analyzes the competitive forces within the environment in which a
company operates, to assess the potential for profitability in an industry.
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• Buyer power is the ability of buyers to affect the price they must pay for an item.
• Supplier power is the suppliers’ ability to influence the prices they charge for supplies
(including materials, labor, and services).
• Threat of substitute products or services is high when there are many alternatives to a product
or service and low when there are few alternatives from which to choose
• Threat of new entrants is high when it is easy for new competitors to enter a market and low
when there are significant entry barriers to entering a market
• Rivalry among existing competitors is high when competition is fierce in a market and low
when competition is more complacent
Learning Outcome 2.4: Demonstrate how a company can add value by using Porter’s value
chain analysis.
To identify competitive advantages, Michael Porter created value chain analysis, which views a
firm as a series of business processes that each add value to the product or service. The goal of
value chain analysis is to identify processes in which the firm can add value for the customer and
create a competitive advantage for itself, with a cost advantage or product differentiation. The
value chain groups a firm’s activities into two categories—primary value activities and support
value activities. Primary value activities acquire raw materials and manufacture, deliver, market,
sell, and provide after-sales services. Support value activities, along the top of the value chain in
the figure, include firm infrastructure, human resource management, technology development, and
procurement. Not surprisingly, these support the primary value activities.
CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Cyrus McCormick’s Reaper
On a hot summer day in 1831, several dozen farmers and hired laborers gathered in a wheat field
in Virginia to watch a horse-drawn wood-and-iron device mow down rows and rows of golden
wheat. On this day, twenty-two-year-old Cyrus McCormick demonstrated the reaper that his father
invented and changed history as the mechanization of farming began. Soon the process of
industrialization began, which turned the nation’s economy into the world’s most productive
workforce. As the historian, William Hutchinson noted, “Of all the inventions during the first half of
the nineteenth century which revolutionized agricultures, the reaper was probably the most
important.”
Interestingly, the McCormicks were not the only individuals to build and develop a reaper. In fact,
many other companies and individuals developed similar technology; however, Cyrus McCormick
invented the business of making reapers and selling them to the farmers of America and foreign
countries. His real genius was in the area of gaining and protecting patents for his technology.
McCormick turned the reaper into a commercially viable product and introduced many new
business practices including free trials, money-back guarantees, and installment payment plans.
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CLASSROOM EXERCISE
Comparing Porter’s Five Forces
Porter’s Five Forces is an easy framework to understand and offers students a quick way to
analyze a business. Porter’s Five Forces is also reinforced throughout the text and it is important
that your students have a solid understanding of each force. For this exercise, break your students
into groups and ask them to choose two products to perform a Porter’s Five Forces analysis. The
two products must compete in the same market.
Potential Products
• Laptop Computer and Desktop Computer
• PDA and Laptop Computer
• iPod and Walkman
• DVD Player and VCR Player
• Digital camera and Polaroid Camera
• Cell Phone and Blackberry PDA
• Coca-Cola Plastic Bottle and Coca-Cola Glass Bottle
• GPS Device and a Road Atlas
• Roller skates and Rollerblades
• Digital Books to Printed Books
• Digital Paper to Paper
CLASSROOM EXERCISE
Analyzing Porter’s Five Forces
Porter's Five Forces is an easy framework to understand and offers a quick way to analyze a
market. Porter’s Five Forces was introduced in the text and you can review the below examples to
ensure you have a solid understanding of each force. For this assignment, choose a product from
the following list and perform a Porter’s Five Forces analysis. Feel free to use the below Porter’s
Five Forces template for your assignment.
• Desktop Computer
• Address Book
• Walkman
• VHS Player
• Polaroid Camera
• Telephone
• Textbook
Be sure to add in examples of loyalty programs or switching costs you could implement to help
retain your market share.
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CLASSROOM VIDEOS
Porter Videos
• Michael Porter – The Five Forces that Shape Strategy (10 Mins)
http://www.youtube.com/watch?v=mYF2_FBCvXw
CORE MATERIAL
The core chapter material is covered in detail in the PowerPoint slides. Each slide contains detailed
teaching notes including exercises, class activities, questions, and examples. Please review the
PowerPoint slides for detailed notes on how to teach and enhance the core chapter material.
3. Only members of Costco can purchase products at Costco. Which of Porter’s Five
Forces did Costco address through the introduction of its members-only program?
Costco is working the loyalty program as you must be a Costco customer to even shop at
Costco.
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and regions have tremendous specialization. Anything that can be easily accessed from a
distance no longer is a competitive advantage. But the more there are no barriers, the more
things are mobile, the more decisive location becomes. This point has tripped up a lot of really
smart people. As a result, the bottom half of U.S. locations are facing more stress. Many cities
used to have a natural advantage just become they were in the U.S. But that is not such an
advantage any more. We are finding a tendency for the rich regions to get richer.
2. Do you agree or disagree that business can solve social problems? Justify your
answer.
There is no right or wrong to this question – makes for an interesting debate as your students
combine the concepts of MIS in Chapter One with a real business.
REVIEW QUESTIONS
1. What is the relationship between a business strategy and stakeholders?
Stakeholders must believe in and support the business strategy to ensure its success. If a
company creates a business strategy that employees or shareholders do not value it is
doomed to failure. Having support of all stakeholders when setting goals and strategies for the
business is crucial for survival.
3. When would you use a SWOT analysis to help you make business decisions?
The question should be when would you not use a SWOT since this tool is amazingly simple to
use for analyzing every aspect of business. I can’t think of time you would not want to gain the
insight of a SWOT analysis in business.
4. What is the role Porter’s Five Forces Model plays in decision making?
Formally defined, Porter’s Five Forces Model analyzes the competitive forces within the
environment in which a company operates to assess the potential for profitability in an industry.
Its purpose is to combat these competitive forces by identifying opportunities, competitive
advantages, and competitive intelligence. If the forces are strong, they increase competition; if
the forces are weak, they decrease competition.
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Business Driven Technology - Instructor’s Manual
covered by loyalty programs is not practical without large-scale business systems, however.
Loyalty programs are thus a good example of using MIS to reduce buyer power.
6. How could a company use switching costs to lock in customers and suppliers?
One way to reduce buyer power is by manipulating switching costs, costs that make customers
reluctant to switch to another product or service. Switching costs include financial as well as
intangible values. The cost of switching doctors, for instance, includes the powerful intangible
components of having to build relationships with the new doctor and nurses, as well as
transferring all your medical history. With MIS, however, patients can store their medical
records on DVDs or thumb drives, allowing easy transferability. The Internet also lets patients
review websites for physician referrals, which takes some of the fear out of trying someone
new
7. What are Porter’s three generic strategies and why would a company want to follow only
one?
Porter has identified three generic business strategies for entering a new market: (1) broad
cost leadership, (2) broad differentiation, and (3) focused strategy. Broad strategies reach a
large market segment, while focused strategies target a niche or unique market with either cost
leadership or differentiation. Trying to be all things to all people is a recipe for disaster, since
doing so makes it difficult to project a consistent image to the entire marketplace. For this
reason, Porter suggests adopting only one of the three generic strategies.
8. How can a company use Porter’s value chain analysis to measure customer
satisfaction?
To identify these competitive advantages, Michael Porter created value chain analysis, which
views a firm as a series of business processes that each add value to the product or service.
Value chain analysis is a useful tool for determining how to create the greatest possible value
for customers. The goal of value chain analysis is to identify processes in which the firm can
add value for the customer and create a competitive advantage for itself, with a cost advantage
or product differentiation. The value chain groups a firm’s activities into two categories, primary
value activities, and support value activities. When performing a value chain analysis, a firm
could survey customers about the extent to which they believe each activity adds value to the
product or service. This step generates responses the firm can measure to describe how each
activity adds (or reduces) value. Then the competitive advantage decision for the firm is
whether to (1) target high value-adding activities to further enhance their value, (2) target low
value-adding activities to increase their value, or (3) perform some combination of the two.
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All of these businesses were started by BUSINESS people who understood the value of
technology so well that they fundamentally changed the primary business processes of buying
books, renting videos, and trading goods. Every BUSINESS person should understand
technology, without it they won't be able to spot the competitive advantages that are just
waiting for the next brilliant entrepreneur to discover.
There are huge strides in third world countries. We now have Internet carts that can drive
around and provide remote villages in Neap and India and Africa with computers and access.
Some argue that the world between the haves and the have-nots is widening because of
technology - I personally believe it is closing. With a computer, I can literally get a PHD from
an online school no matter where I am located - a remote village in Antarctica.
Here is a question for your students. Is the world flat for everyone? When I view Friedman,
and try to think of a job that isn't flat I actually tend to come up with blue collar jobs. White
collar jobs are easily outsourced - CPAs are doing our taxes in China, Legal work is done is
Africa, Architecture work is done in India, Programming code is done is Ukraine, Doctors are
reading our x-rays in India, etc. But can a nurse, garbage man, house painter, contractor,
waitress, librarian, (service industry) jobs be outsourced? Don't get me wrong - I completely
agree that the best thing you can invest in is your education - but in a flat world I no longer
agree that it means your skill set won't be outsourced.
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The CSI/FBI Computer Crime and Security Survey reported that 38 percent of respondents
indicated security incidents originated within the enterprise. Insiders are legitimate users who
purposely or accidentally misuse their access to the environment and cause some kind of
business-affecting incident. Most information security breaches result from people misusing an
organization’s information either advertently or inadvertently. For example, many individuals
freely give up their passwords or write them on sticky notes next to their computers, leaving the
door wide open to intruders.
3. PURSUING PORTER
The types of professionals your students might list include:
• Bill Gates
• Steve Jobs
• Seth Godin
• Malcolm Gladwell
• John Kotter
• Jim Collins
• Peter Drucker
• Clayton Christensen
• Jack Welch
• Stephen Covey
• Dale Carnegie
4. CHOOSING A CAREER
Student answers to this project will vary depending on their area of expertise. This project is aimed
at getting your students excited about information technology, even though they are not IT majors.
By researching the IT implications for their majors, they will begin to realize how important IT will
be in their future. The most important part of your students’ answers will be the justification for their
analysis.
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If your students are still determining their potential majors and areas of expertise you can break
your students into groups and assign each group a different major or industry to research. Have
your students present their findings to the entire class. This helps provide an overview of all areas
and related IT influences.
Potential majors:
• Accounting – Oracle financials, payroll systems, QuickBooks
• Finance - Oracle financials, payroll systems, QuickBooks
• Management – HR systems that can pinpoint potential employee issues and risks
• Marketing – Blogs, eMarketing, RSS, podcasts, sales force automation
• IT/MIS – Design tools such as Irwin or Rational Rose or Rational RUP
• Statistics - SAS
• Operations – i2, supply chain systems, logistic systems
Potential industries:
• Telecommunications
• Health care
• Finance
• Education
• Strategy services
• Products
• Energy
• Fashion
5. DEATH OF A PRODUCT
Answer to this questions will vary – below is a template for your students to use as they
analyze their products.
Threat of Substitute
Products or Services
Buyer
Supplier Rivalry Power
Power
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Threat of Substitute
Products or Services
Buyer
Supplier Rivalry Power
Power
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Business Driven Technology - Instructor’s Manual
BUSINESS PLUG-IN B2
Business Process
LEARNING OUTCOMES
1. Describe business processes and their importance to an organization.
A business process is a standardized set of activities that accomplish a specific task, such as
processing a customer’s order. Business processes transform a set of inputs into a set of
outputs (goods or services) for another person or process by using people and tools. Without
processes organizations would not be able to complete activities.
3. Describe the importance of business process modeling (or mapping) and business
process models.
Business process modeling (or mapping) is the activity of creating a detailed flow chart or
process map of a work process showing its inputs, tasks, and activities, in a structured
sequence. A business process model is a graphic description of a process, showing the
sequence of process tasks, which is developed for a specific purpose and from a selected
viewpoint. A set of one or more process models details the many functions of a system or
subject area with graphics and text and its purpose is to:
• Expose process detail gradually and in a controlled manner
• Encourage conciseness and accuracy in describing the process model
• Focus attention on the process model interfaces
• Provide a powerful process analysis and consistent design vocabulary
4. Explain business process management along with the reason for its importance to an
organization.
The latest area to discover the power of technology in automating and reengineering business
process is business process management. Business process management (BPM) integrates
all of an organization’s business process to make individual processes more efficient. BPM can
be used to solve a single glitch or to create one unifying system to consolidate a myriad of
processes. Many organizations are unhappy with their current mix of software applications and
dealing with business processes that are subject to constant change. These organizations are
turning to BPM systems that can flexibly automate their processes and glue their enterprise
applications together.
CLASSROOM OPENER
Cable Not Ready
A current cable subscriber calls up to change the date for activating the service at a new address
from Feb. 22 to March 1. The subscriber is successful and hangs up the phone happy. However,
on February 22nd the cable at the current home is disconnected and the customer is no longer
happy. The customer service representative forgot to change the date of the disconnection and
only changed the date of the activation.
Practically speaking, these two events will almost always be linked - and the system
probably should have prompted the customer service representative to ask if they were. The point:
In focusing on business process, it is important to facilitate real-world tasks that are, by nature,
"integrated."
• Ask your students to discuss times that a business process problem caused them
problems. What did they do to solve the problem?
• What could the company do to solve the problem?
• What can a company do to anticipate operational process problems before they occur?
• What can a company do to keep their customers after a process malfunction?
CLASSROOM OPENER
Examining and Reengineering Business Processes
Ask your students to discuss issues they have encountered around the college due to an inefficient
or ineffective process. Choose one of the processes, break your students into groups, and ask
them to reengineer the process. How would they change it to make it more effective or more
efficient? Would they add a new technology device to help with the process such as RFID or 3D
printing? Be sure to have them diagram the As-Is process and the To-Be process. Have them
present their reengineered processes to the class.
CORE MATERIAL
The core chapter material is covered in detail in the PowerPoint slides. Each slide contains detailed
teaching notes including exercises, class activities, questions, and examples. Please review the
PowerPoint slides for detailed notes on how to teach and enhance the core chapter material.
4. REVAMPING ACCOUNTS
Project Purpose: To revamp an accounting department using BPM.
Potential Solution: A key advantage of technology is its ability to improve business
processes. Working faster and smarter has become a necessity for companies. Initial
emphasis was given to areas such as production, accounting, procurement, and logistics. The
next big areas to discover technology’s value in business process were sales and marketing
automation, customer relationship management, and supplier relationship management. Some
of these processes involve several departments of the company and some are the result of
real-time interaction of the company with its suppliers, customers, and other business partners.
The latest area to discover the power of technology in automating and reengineering business
process is business process management. Business process management (BPM) integrates
all of an organization’s business process to make individual processes more efficient. BPM can
be used to solve a single glitch or to create one unifying system to consolidate a myriad of
processes.
Many organizations are unhappy with their current mix of software applications and dealing
with business processes that are subject to constant change. These organizations are turning
to BPM systems that can flexibly automate their processes and glue their enterprise
applications together. BPM technologies effectively track and orchestrate the business
process. BPM can automate tasks involving information from multiple systems, with rules to
define the sequence in which the tasks are performed as well as responsibilities, conditions,
and other aspects of the process. BPM not only allows a business process to be executed
more efficiently, but it also provides the tools to measure performance and identify
opportunities for improvement - as well as to easily make changes in processes to act upon
those opportunities such as:
• Bringing processes, people, and information together
• Identifying the business processes is relatively easy. Breaking down the barriers between
business areas and finding owners for the processes are difficult
• Managing business processes within the enterprise and outside the enterprise with suppliers,
business partners, and customers
• Looking at automation horizontally instead of vertically
IDENTIFYING
COMPETITIVE
ADVANTAGES
LEARNING OUTCOMES
1. Explain why competitive advantages are
temporary along with y the four key areas of a
SWOT analysis
2. Describe Porter’s Five Forces Model and explain
each of the five forces
3. Compare Porter’s three generic strategies
4. Demonstrate how a company can add value by
using Porter’s value chain analysis
IDENTIFYING COMPETITIVE
ADVANTAGES
Business strategy – A leadership plan that achieves a
specific set of goals or objectives such as
Developing new products or services
Entering new markets
Increasing customer loyalty
Attracting new customers
Increasing sales
IDENTIFYING COMPETITIVE
ADVANTAGES
IDENTIFYING COMPETITIVE
ADVANTAGES
Competitive advantage – A product or service that an
organization’s customers place a greater value on than
similar offerings from a competitor
First-mover advantage – Occurs when an organization
can significantly impact its market share by being first to
market with a competitive advantage
IDENTIFYING COMPETITIVE
ADVANTAGES
SWOT ANALYSIS
A SWOT analysis evaluates an organization’s strengths,
weaknesses, opportunities, and threats to identify significant
influences that work for or against business strategies
THE FIVE FORCES MODEL –
EVALUATING INDUSTRY ATTRACTIVENESS
Porter’s Five
Forces Model
BUYER POWER
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INTRODUCTION
4
EXAMINING BUSINESS
PROCESSES
Business process characteristics:
• The processes have internal and external users
• A process is cross-departmental
• The processes occur across organizations
• The processes are based on how work is done
in the organization
• Every process should be documented and fully
understood by everyone participating in the
process
• Processes should be modeled to promote
complete understanding
5
BUSINESS PROCESS
IMPROVEMENT
•Companies are forced to improve their business processes because
customers are demanding better products and services
6
BUSINESS PROCESS REENGINEERING
7
BUSINESS PROCESS REENGINEERING
•Managerial approach to reengineering projects
1.Define the scope
2.Analyze
3.Evaluate
4.Plan
5.Approve
6.Execute
8
BUSINESS PROCESS DESIGN
•Business process modeling (or mapping) - the
activity of creating a detailed flow chart or process
map of a work process showing its inputs, tasks,
and activities, in a structured sequence
•Business process model - a graphic description of
a process, showing the sequence of process tasks,
which is developed for a specific
• As-Is process model
• To-Be process model
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BUSINESS PROCESS DESIGN
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BUSINESS PROCESS DESIGN
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BUSINESS PROCESS DESIGN
Issues in the As-Is Order Process Model
• Credit checking holds up the process because it is done before (rather than concurrently
with) order picking.
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BUSINESS PROCESS DESIGN
13
SELECTING A PROCESS TO
REENGINEER
Criteria to determine the importance of the process:
• Is the process broken?
• Is it feasible that reengineering of this process will succeed?
• Does it have a high impact on the agency’s strategic direction?
• Does it significantly impact customer satisfaction?
• Is it antiquated?
• Does it fall far below best-in-class?
• Is it crucial for productivity improvement?
• Will savings from automation be clearly visible?
• Is the return on investment from implementation high and
preferably immediate?
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BUSINESS PROCESS MANAGEMENT
15
BUSINESS PROCESS MANAGEMENT
•BPM allows business process to be executed more efficiently and
measures performance and identifies opportunities for
improvement, BPM benefits include:
• Update processes in real-time
• Reduce overhead expenses
• Automate key decisions
• Reduce process maintenance cost
• Reduce operating cost
• Improve productivity
• Improve process cycle time
• Improve forecasting
• Improve customer service
16
BPM TOOLS
Business process management tool - an application that
designs business process models and simulates,
optimizes, monitors, and maintains various processes
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CRITICAL SUCCESS FACTORS
1. Understand reengineering
2. Build a business and political case
3. Adopt a process management approach
4. Measure and track performance
continuously
5. Practice change management and
provide central support
6. Manage reengineering projects for
results
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BUSINESS PROCESS MODELING
EXAMPLES
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BUSINESS PROCESS MODELING
EXAMPLES
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BUSINESS PROCESS MODELING
EXAMPLES
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BUSINESS PROCESS MODELING
EXAMPLES
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BUSINESS PROCESS MODELING
EXAMPLES
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BUSINESS PROCESS MODELING
EXAMPLES
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Business Driven Technology 7th Edition Baltzan Solutions Manual
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