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ASSIGNMENT 03

Prepared by

Shahida Akhter Khanam ID# 1130152660

1(a). How can a firm achieve competitive advantage via IT? The information revolution is sweeping through our economy. No company can escape its effects. Dramatic reductions in the cost of obtaining, processing, and transmitting information are changing the way we do business. Most general managers know that the revolution is under way, and few dispute its importance. As more and more of their time and investment capital is absorbed in information technology and its effects, executives have a growing awareness that the technology can no longer be the exclusive IS departments. As they see their rivals ecutives recognize the need to become directly involved in the management of the new technology. Information technology is changing the way companies operate. It is affecting the entire process by which companies create their products. Furthermore, it is reshaping the product itself: the entire package of physical goods, services, and information companies provide to create value for their buyers. A business is profitable if the value it creates exceeds the cost of performing the value activities. To gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differenciation & premium price. Achieving Competitive Advantage via IT: Cats Eye Cats Eye does many things to have a competitive advantage over companies similar to it. Some of these things are use of networking, point of sale computers, demand forecasting and an overall competitive strategy. All of these things utilize IT in different ways. How well Cats Eye implements its information systems is directly correlated to how well the following aspects of its supply chain, internal network and Point of Sale systems work. A good information system infrastructure will help Cats Eye not only gain a competitive advantage over its competitors but be able to sustain in the long term by increasing customer retention rates and increasing market share. Use of Networking Each Cats Eye store doesnt just have their own stock on file; they have every Cats Eyes stock in the nation. This is possible by the use of LANs and the Internet. Each computer in every individual store is connected to a server in that store. This server is connected to the other stores servers allowing them to see stock of other stores inventory instantly. The first part of Cats Eyes network consists of in-house clients and servers. Each Cats Eye has multiple Point of Sale systems some of which are at the registers and the others are handheld and carried by the department managers. These Point of Sale systems are considered the clients in the network scheme. The clients connect to a local server that manages the entire inventory and records the items that are sold. The clients all have local IP addresses that are assigned by the network administrator for that store. The server on the other hand has an external IP address that is provided by an Internet Service Provider. The next part of Cats Eyes network consists of cloud computing. Every stores server connects to a cloud server through a private connection known as a Virtual Private Network, or VPN. A VPN enables data to be sent over the Internet securely by encrypting the data.

Because each store is connected to Cats Eyes cloud server, they are able to access the inventory of surrounding stores. Because the local server has an external IP address, the cloud server can access it. And since each store server is connected to all of the clients locally, they are able to see what is on the cloud server. Below is a diagram showing the topology of Cats Eyes network infrastructure. Point of Sale Systems The way each store knows when to order more stock is by ways of the point of sale system. Every time something is sold, the point of sale system updates the server and the inventory amount changes. Point of Sale system is the location where a transaction or checkout occurs. Point of Sale systems have to be able to track the internal stock as well as schedule the replenishment stock from external sources. This management of inventory is an important part of Information Systems for Cats Eye. Customer Relationship Management Customer Relationship Management is a widely used strategy for managing a companys interactions with clients and the sales. The CRM involves using information system technology to gather data from sales activities and organize, automate and synchronize business processes. The CRM is also a vital tool for helping customers and helping them with their needs by making customer and technical support easier. The Cats Eye CRM system helps to reduce cost of sales, get new clients and customers and reduce costs for marketing and client service. Demand Forecasting The following four models show the different factors taken into account for the different models which provide more and more accurate data for Cats Eye. The four point moving average model is commonly used with time series data to smooth out short term fluctuations and show long term. Simple exponential model uses the general trend based on constant growth based on past data. Trend corrected model takes into account past trends around certain times and then provides a much more accurate demand forecasting than the moving average or simple exponential models. Trend and Seasonality corrected model takes it further, and takes into account not only the trends of a certain time period, but also the seasonality during the year. Such that it takes into account holiday season or summer time to provide a much more accurate forecast.

This shows how more data, which is captured by better information systems helps a company like Cats Eye gain a competitive advantage over competitors who may have less accurate data.

Competitive Strategy for Cats Eye: There are several things a company can do to know how to approach and dominate a market they are a part of. The Porter model is used to describe the power a specific entity has over Cats Eyes decision making. The entities include New Entrants, Suppliers, Buyers, Competitors and Substitutes. When Cats Eye has this model completed it will help them position themselves in the market for a competitive advantage. New Entrants Because Cats Eye and other similar corporations like it already exist; it would be very hard for a new company to enter their market space. Because of this, the threat of new entrants is very low, thus Cats Eye need not worry about new companies entering in the market. Suppliers Cats Eye has numerous suppliers for the endless products they sell. Suppliers for Cats Eye are important to the customers more than anything. Customers want brand name products. If there was a problem with one of Cats Eyes suppliers and they decided to stop supplying Cats Eye will be hurt in the sense that they will not be carrying a certain brand name anymore. Because of this, suppliers have quite a bit of power on what Cats Eye does. Buyers There are many companies that sell the same things that Cats Eye does. Because of this buyers have to be encouraged to shop at Cats Eye instead of the other similar stores. If consumers and businesses are not purchasing goods from Cats Eye, they will have a large problem. So buyers have a large amount of power on Cats Eyes decision-making process because the buyers have other places they could go to buy the products they want. Competitors Cats Eye has numerous competitors. Because there are other businesses similar to Cats Eye, the threat of competitors is high. If Cats Eye makes a mistake, consumers can easily switch to a competing company and potentially be just as happy. Thus, Cats Eyes competitors have a lot of influence on the decision making process. Substitutes There are many substitutes for Cats Eye, however, many of these dont offer the full range of products that are offered by Cats Eye. With that being said, substitutes dont have as much of a bearing on Cats Eyes competitive strategy as other entities like competitors.

The analysis of the porter model suggests that Cats Eye is in a very volatile market and they need to carefully plan every move they make. Cats Eyes position in their market is fairly simple. They are shooting to deliver the customer a quality product at a low price. They also are cornering the market by offering a large variety of goods that others do not. They are functioning as a one-stop shop for numerous products. Another thing that Cats Eye focuses on is good customer service and understanding the wants and needs of the customer. Another way Cats Eye stays ahead of the curve on the competitive strategy front is by having a solid supply chain management. Their supply chain network consists of suppliers, warehouses for storage, distribution center and finally the Cats Eye stores. All of these drivers are operated by information systems.

1(b). Describe Potrers competitive five forces model & four steps to deal with those forces Porters Competitive five forces model Porter identified five forces that determine the competitive natures of an industry are as follows: Traditional Competitors Rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industrys profit potential depends, first, on the intensity with which companies compete and, second, on the basis on which they compete. New Market Entrant New entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete. Particularly when new entrants are diversifying from other markets, they can leverage existing capabilities and cash flows to shake up competition. For Example, Pepsi did when it entered the bottled water industry, Microsoft did when it began to offer internet browsers, and Apple did when it entered the music distribution business. The threat of entry, therefore, puts a cap on the profit potential of an industry. When the threat is high, incumbents must hold down their prices or boost investment to deter new competitors. For example, in specialty coffee retailing, relatively low entry barriers mean that Starbucks must invest aggressively in modernizing stores and menus. Substitute Product & Services: A substitute performs the same or a similar function as an industrys product by a different means. Videoconferencing is a substitute for travel. Plastic is a substitute for aluminum. Email is a substitute for express mail. Sometimes, the threat of substitution is downstream or indirect, when a substitute replaces a buyer industrys product. For example, Electronic data bases, such as NEXIS, are substituting for library research and consulting firms. NEXIS subscribers can quickly search the full text of any article in 225 periodicals. Users agement services for corporate clients now need advanced software to give customers on-line account only for the information required.

Customer Powerful customers, the flip side of powerful suppliers, can capture more value by forcing down prices, demanding better quality or more service, thereby driving up costs, and generally playing industry participants off against one another, all at the expense of industry profitability. Customers are powerful if they have negotiating leverage relative to industry participants, especially if they are price sensitive, using their clout primarily to pressure price reductions. For example: Videotex home shopping services, such as Comp-U-Card, increases buyers information. Buyers use their personal computers to browse through electronic catalogs and compare prices and product specifications. Customers can make purchases at any hour at prices typically 25% to 30% below suggested retail levels. Suppliers Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services, or can squeeze profitability out of an industry that is unable to pass on cost increases in its own prices. Microsoft, for instance, has contributed to the erosion of profitability among personal computer makers by raising prices on operating systems. PC makers, competing fiercely for customers who can easily switch among them, have limited freedom to raise their prices accordingly.

Strategies to deal with Competitive Forces One of the most fundamental components of any business is a sound strategy, as it sets the stage for how the organization will execute over time. Strategies are designed to position companies to achieve, strengthen and protect their competitive advantage. Low-Cost leadership: Low-cost leaddership refers to use of information systems to achieve the lowest operational costs and the lowest prices. Firms such as Wal-Mart have utilized IT to develop an efficient customer response system that directly links customer behavior back to distribution, production, and supply chains. Canon, for example, built a low-cost copier assembly process around an automated partsselection and materials-handling system. Assembly workers have bins containing all the parts needed for the particular copier. Canons success with this system derives from the software that controls parts inventory and selection. In garment production, equipment such as automated pattern drawers, fabric cutters, and systems for delivering cloth to the final sewing station have reduced the labor time for manufacturing by up to 50%.

Product Differentiation Information systems and technologies are a major enabling tool for firms to create new products and services, as well as entirely new business models. A business model describes how a company produces, delivers, and sells a product or service to create wealth. For Example, American Express has developed differentiated travel services for corporate customers through the use of information technology. The services include arranging travel and close monitoring of individual expenses. Computers search for the lowest airplane fares, track travel expenses for each cardholder, and issue monthly statements. Today's music industry is vastly different from the industry in 2000. Apple Inc. transformed an old business model of music distribution based on vinyl records, tapes, and CDs into an online, legal distribution model based on its own iPod technology platform. Apple has prospered from a continuing stream of iPod innovations, including the iPod, the iTlines music service, and the iPhone. Focus on Market Niche When a company is able to identify a segment of the market (a niche) which is can serve in a superior fashion, it is engaging in focused differentiation. Smaller firms in particular compete by specializing a product or a service for a limited-size niche. Information systems may be used to contribute to this goal by helping identify the customers to be served and then customizing the product for their needs.The niche may be a customer segment, a narrowly defined product, or a geographical region. Niche is a popular and fashionable term in strategic parlance. Many corporate leaders prefer their firms to be niche players rather than mass players. There is, however, an inadequate appreciation of what constitutes niche, and where niche fits in a firms quest for scale and scope, as much as for revenue and profitability. This paper seeks to clear some popular misconceptions and establish some logical foundations for niche strategy. For Example, Apple iPod provided for the user, for the first time, a total digital audio-visual experience in the most miniaturized and most elegant form factor, with unprecedented memory levels ranging from 2 GB to 160 GB. Apple iPhone provided, for the first time, a total convergence experience for the smart phone user, once again with the most elegant and user friendly form factor, and vastly superior memory levels. The iPhone experience was heightened by a Net based application store hosting thousands of proprietary and third party applications. Apple iPod and iPhone thus represented a unique fusion of state-of-the-art design and manufacturing on one hand and cutting-edge hardware and software on the other. And both the streams of products kept getting continuous enhancements; iPod with touch technology and iPhone with 3G and 3GS, for example.

Customer and Supplier Intimacy When a business really knows its customers, and serves them well, the customers generally respond by returning and purchasing more. This raises revenues and profits. Likewise with suppliers: the more a business engages its suppliers, the better the suppliers can provide vital inputs. This lowers costs. How to really know your customers, or suppliers, is a central problem for businesses with millions of offline and online customers. For Example, The Mandarin Oriental in Manhattan and other high-end hotels exemplify the use of information systems and technologies to achieve customer intimacy. These hotels use computers to keep track of guests' preferences, such as their preferred room temperature, check-in time, frequently dialed telephone numbers, and television programs, and store these data in a giant data repository. Individual rooms in the hotels are networked to a central network server computer so that they can be remotely monitored or controlled. When a customer arrives at one of these hotels, the system automatically changes the room conditions, such as dimming the lights, setting the room temperature, or selecting appropriate music, based on the customer's digital profile. The hotels also analyze their customer data to identify their best customers and to develop individualized marketing campaigns based on customers' preferences. JC Penney exemplifies the benefits of information systems-enabled supplier intimacy. Every time a dress shirt is bought at a Penney store in the United States, the record of the sale appears immediately on computers in Hong Kong at the TAL Apparel Ltd. supplier, a giant contract manufacturer that produces one in eight dress shirts sold in the United States. TAL runs the numbers through a computer model it developed and then decides how many replacement shirts to make, and in what styles, colors, and sizes. TAL then sends the shirts to each Penney store, bypassing completely the retailer's warehouses. In other words, Penney's shirt inventory is near zero, as is the cost of storing it. However, using information systems to beat the competition and increase the value of a product is not easy. Because competitors can quickly copy strategic systems, competitive advantage is not always sustainable. Sustaining a competitive advantage constantly requires changing processes and methods of conducting business. Managers simply cannot rest on their laurels with todays fast paced, fast changing technological advances. Technology changes much faster than organizations can adapt. As soon as employees and managers become comfortable with a particular system, its almost time to make some more changes.

2. How does Internet impact on Competitive advantage in Cement or Pharmacy industry? Since the beginnings of the computing era it has been suggested that firm performance could be enhanced by the use of information technology which would help firms to score better on such indicators as productivity, profitability and market share. The pharmaceutical industry, an important sector of the health care industry has in recent years already begun to use direct to consumer advertising to enhance the pull strategy by encouraging patients to request specific pharmaceutical products from their physicians. Yet, as the direct to consumer strategy is becoming more popular and effective, more pharmaceutical companies are assessing the viability of other modes of communication and the Internet is the most logical. Unlike other mass media modes, the Internet creates one-toone relationships with customers. Pharma companies riding the Internet economy The Internet economy is rapidly changing the face of the pharmaceutical industry by delivering new web-enabled solutions to solve many business and primary care issues. Automating administrative processes such as billing, purchasing, etc lead to increased sales-marketing and R&D productivity, thereby reducing operating costs across the organization. Emerging sciences such as genomics and proteomics increase the number of drug targets from the hundreds to tens of thousands, Internet applications will help to optimize large volumes of complex data and help better identify drug candidates. The question is no longer when the Internet or technology will impact the business of pharmaceuticals, but how the industry will adopt the technology to get the most out of the new global business environment. Today's new pharma companies need scalable networking solutions that will grow with the company, provide productivity for a mobile workforce, and meet pertinent security regulations. An online Pharmacy: E-pharmacy.com ePharmacy focuses exclusively on the sale of (1) prescription pharmaceuticals, (2) over-thecounter (OTC) pharmaceuticals, (3) vitamins, minerals, supplements (VMS) and herbal products and (4) related healthcare products. The Company has invested over $10 million in state-of-the-art technology and facilities including fully automated pharmaceutical dispensing equipment that enables the company to fulfil customer orders rapidly upon receipt of the order via the Internet. The company's long-term goal involves development of a comprehensive pharmacy services vertical portal-delivering all aspects of pharmacy services to consumers as well as business constituencies within the healthcare industry. The online pharmacy allows customers, via the Internet, to receive comprehensive drug and healthcare information, and correspond privately with pharmacists. In order to fully receive service from ePharmacy, customers must provide information such as name, address, and billing information. Payment for all healthcare items usually involves credit cards, but the company also accepts check and money orders when applicable. In addition to traditional e-commerce payment, ePharmacy also accepts third party payers,

such insurance companies. Insurance companies normally cover the cost of the prescription. In that case, the customers must provide payment information for their co-pay, and also provide information concerning their insurance company, as well as their coverage plan. Naturally, the company confirms the insurance coverage and the authenticity of the prescription. ePharmacy checks the accuracy of the prescription against the patient's medical history, as well as unearthing and verifying any possible interactions with other drugs. ePharmacy's Web site offers a reference desk to potential and current customers, which is a database of information relating to drug interaction, vitamin information, and other pharmacyrelated information that the customers can access. Further, in-house publications are also available to consumers. The company offers this service to the consumers in order to allay any questions or concerns pertaining to the online, or traditional, pharmaceutical field. ePharmacy feels this combination of products and information affords them an edge in terms of competing for consumers. The site becomes a "one-stop-shop" Web site that offers a vast array of medical and pharmaceutical information. ePharmacy.com Strategy: Low-cost Leadership The business model for the online pharmacy is mainly a virtual merchant model, whereby revenues are derived directly from the sales of prescription drugs. Their hope was that due to their lower operating costs, they could offer prescription drugs at prices that were competitive with those of brick and mortar pharmacies. Hence their dominant competitive strategy was to seek a cost leadership position in the pharmacy retail sector. However, the online pharmacy clearly sought to differentiate itself from brick and mortarbased competitors in a number of ways. Convenience: Consumers no longer need to leave home to fill prescriptions, since they could be ordered online and delivered to them at home. This was particularly important for homebound consumers. Anonymity and private transactions: For many buyers of prescription drugs, the ability to ask sensitive questions in private, rather than in front of other customers or a pharmacist that they may know outside of the pharmacy, is an advantage. Rich information: The ability to complement the provision of drugs with additional content is a distinct advantage. The online pharmacy provided detailed information about the drugs, including potential interactions and side effects. After-sales service: The online pharmacy offered a number of after-sales services to prescription drug buyers that would be hard for traditional pharmacies to replicate. This included allowing customers to email any questions they had about taking prescription drugs, and sending automatic reminders when prescriptions should be refilled.

Like many other e-businesses, the online pharmacy took advantage of the ease with which complementary products could be sold on their site. These other products added to the potential sources of revenue. However, the online pharmacy faced many challenges. The cost of delivery had to be absorbed or added to every sale, and since quantities of prescription drugs are usually not

large, little efficiency was possible for home deliveries. In addition, many people obtain prescription drugs only when they become ill, and need medication right away. For these customers, even overnight delivery represents an intolerable delay.