BMGT 301 FINAL STUDY GUIDE: Chapters 2, 4, 8, 9, 10, 13, 14, 15, and 17

1. Differentiate between operational effectiveness and strategic positioning Operational effectiveness – Performing the same tasks better than rivals perform them. “Sameness”. Strategic positioning – Performing different tasks than rivals, or the same tasks in a different way. 2. Differentiate between competitive advantage and sustainable competitive advantage Competitive Advantage – the ability of a firm to outperform its competitors in financial measures. Sustainable competitive advantage – Financial performance that consistently outperforms industry averages. Achieved when resources are VRIS. 3. Understand the resource view of the firm concept Resource-based view of competitive advantage – Strategic Thinking approach suggesting that if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have 4 critical characteristics. Resources must be VRIS: A. Valuable B. Rare C. Imperfectly imitable (tough to imitate) D. Not Substitutable 4. Imitation-resistant value chain Imitation-resistant value chain – a way of doing business that competitors struggle to replicate, and that frequently involves technology in a key enabling role. Value chain – a set of interrelated activities that bring products or services to market 5. Resources for competitive advantage A. Imitation-resistant Value Chains – (see above) B. Brand – The symbolic embodiment of all the information connected with a product or service C. Scale – Advantages related to size. Businesses benefit from economies of scale when the cost of an investment can be spread across increasing units of production or in serving a growing customer base. D. Switching Costs and Data – (see below). Data can be a particularly strong switching cost for firms leveraging technology. E. Differentiation – (see below) F. Network Effects – (see below) G. Distribution Channels – path through which product and services get to customers. H. Patents 6. Concept of switching costs Switching costs – when consumers incur an expense to move from one product or service to another. Sources of Switching Costs: bmgt A. Learning Costs – switching technology may require an investment in learning a new interface and commands. B. Information and Data – users may have to reenter data, convert files, etc. C. Financial Commitment – new equipment, new software, consulting, etc. D. Contractual Commitment – breaking contracts harm reputation as being “reliable”. E. Search Cost – finding and evaluating new alternatives = time and money F. Loyalty Programs – can lose out on program benefits such as miles and points. 7. Differentiation Commodities – products or services that are nearly identically offered from multiple vendors. o Consumers buying commodities are highly price-focused since they have so many similar choices. o In order to break the commodity trap, many firms leverage technology to differentiate their goods and services. o Data plays a critical role in differentiation. 2 Types of Differentiation: A. Vertical – Build a better product; products differ in quality B. Horizontal – Position yourself in “product space” away from competitors; used to appeal to distinct group of customers. 8. Networks effects Network effects – exist when the value of a product or service increases as the number of users expand. Network externalities or Metcalfe’s Law. 9. Activities involved in Value Chain Analysis model The 5 primary components are: A. Inbound logistics— getting needed materials and other inputs into the firm from suppliers B. Operations— turning inputs into products or services C. Outbound logistics— delivering products or services to consumers, distribution centers, retailers, or other partners D. Marketing and sales— customer engagement, pricing, promotion, and transaction E. Support— service, maintenance, and customer support The 4 secondary components are: A. Firm infrastructure—functions that support the whole firm, including general management, planning, IS, and finance B. Human resource management—recruiting, hiring, training, and development C. Technology / research and development—new product and process design D. Procurement—sourcing and purchasing functions 10. Competitive Forces model Porter’s 5 Forces – A framework considering the interplay between: A. Intensity of rivalry among existing competitors B. Threat of new entrants (barriers to entry) C. Threat of substitute goods or services D. Bargaining power of buyers E. Bargaining power of suppliers Chapter 4 – Netflix and its use of technology o Long tail –an extremely large selection of content or products. The long tail is a phenomenon whereby firms can make money by offering a near-limitless selection. o Collaborative filtering – a classification of software that monitors trends among customers and uses this data to personalize an individual customer’s experience. o Churn rate – the rate at which customers leave a product or service. o Coopetition or Frenemies – a situation where firms may both cooperate and compete with one another. o A/B test – A randomized group of experiments used to collect data and compare performance among two options studied (A and B). A/B testing is often used in refining the design of technology products, and A/B tests are particularly easy to run over the Internet on a firm’s Web site. Amazon, Google, and Facebook are among the firms that aggressively leverage hundreds of A/B tests a year in order to improve their product offerings. o Integration – when an organization owns more than one layer of its value chain. o Disintermediation – Removing an organization from a firm’s distribution channel. Disintermediation collapses the path between supplier and customer. o binge-watching – Viewing several episodes of a program in a single sitting. o bandwidth caps – A limit, imposed by the ISP on the total amount of traffic that a given subscriber can consume. Netflix Key Points o The strategically aligned use of technology by this early mover has allowed Netflix to gain competitive advantage through the powerful resources of brand, data and switching costs, and scale. o Collaborative filtering technology has been continually refined, but even if this technology is copied, the true exploitable resource created and leveraged through this technology is the data asset. My Highlights o Netflix was able to create critical and mutually reinforcing resources—brand, scale, and a data asset—that rivals simply could not match o threefold scale advantages – distribution centers, selection, and customers o Netflix recommendation system called Cinematch