Discussion: Warn of Hypercompetition

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Discussion: Warn of Hypercompetition

Discussion: Warn of Hypercompetition

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In an application of the value chain model to the Zara example discussed earlier, Figure 2.7 describes the value added to Zara’s primary and support activities provided by information systems. The focus in Figure 2.7 is on value added to Zara’s processes, but suppliers and customers in its supply chain also realize the value added by information systems. Most notably, the customer is better served as a result of the systems. For example, the stores place orders twice a week over personal digital assistants (PDAs). Each night, managers use their PDAs to learn about newly available garments. The orders are received and promptly processed and delivered. In this way, Zara can be very timely in responding to customer preferences.

Unlike the five competitive forces model, which focuses on industry dynamics, the focus of the value chain is on the firm’s activities. Yet, using the value chain as a lens for understanding strategic use of information resources affects competitive forces because technology innovations add value to suppliers, customers, or even competitors and potential new entrants.

Supplier’s Value

Chains

Firm’s Value Chain

Channel’s Value

Chains

Buyer’s Value

Chains

FIGURE 2.6 The value system: Interconnecting relationships between organizations.

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43Sustaining Competitive Advantage

Sustaining Competitive Advantage It might seem obvious that a firm would try to sustain its competitive advantage. After all, the firm might have worked very hard to create advantages, such as those previously discussed. However, there is some controversy about trying to sustain a competitive advantage.

On one side are those who warn of hypercompetition as discussed in Chapter 1.7 In an industry facing hyper- competition, recall that trying to sustain an advantage can be a deadly distraction. Consider the banking industry as a good example that has undergone much change over the past five decades. In the 1960s, people needed to visit a physical bank for all transactions, including withdrawing from or depositing to their accounts and transferring among accounts. In the 1970s, some banks took a chance and invested in automated teller machines (ATMs) and were among the innovators in the industry. In the 1980s, some banks pioneered “bank‐by‐phone” services that enabled customers to pay bills by phone, attempting to establish competitive advantage with technology. In the late 1990s, Web sites served to augment banking services, and “bank‐by‐web” was the new, exciting way to compete. Most recently, many banks are providing mobile banking, enabling customers to make deposits by using their smartphone camera to take photos of checks that previously needed to be turned in physically. Then the checks can be destroyed.

The obvious picture to paint here is that competitors caught up with the leaders very quickly, and competitive advantage was brief. When ATMs were introduced, it did not take long for others to adopt the same technology. Even small banks found that they could band together with competitors and invest in the same technologies. The same imitation game took place with “bank by phone,” “bank by Web,” and mobile banking.

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