Week 2: Organisational Strategy

Last week was a bit full-on, so this week Patrick only has one big idea for you: Making the Most of the Medium. He gets out a picture of an early-days television studio with the caption “early TV dramas were filmed live using very basic sets”. Then he compares it to the kind of television we get today. The argument is that we’re better at using the television medium; it is no longer just a translation of stage plays.

(Picture: Ching Chong! Asians in the Library Song)

This week is part one of a two-week series about business models. I suppose the relevance of ‘making the most of the medium’ is that we should be innovative and creative about how we use technology. Anyway, we’ve got a chocolate bar of theories to memorise:

  1. The Value Chain model. This sees your organisation as a “series of activities” that adds value to your product. The 5 primary activities – inbound logistics, (production) operations, sales/marketing, servicing, outbound logistics – are supported by 4 support activities (administration, HRM, technology, and procurement). Every single one of these activities can be made better using IS.
  2. Porter’s Five Forces model. We, the firm, are like a gazelle in the Serengeti in that we’re fighting for our life. Not only do we have (1) rivalry among existing competitors, but we also face the bargaining power of (2) suppliers and (3) customers as well as threats of (4) new entrants and (5) substitute products. Yikes!
  3. Patrick’s many strategic initiatives: (1) reduce costs e.g. IKEA, (2) raise barriers to new entrants e.g. ATMs, (3) establish high switching costs e.g. iTunes, (4) create new products, either as the ‘first mover’ or the ‘critical mass’ e.g. Skype, (5) product differentiation e.g. Google, (6) enhance products e.g. Dell, (7) establish alliances to combine services or affiliate programs for mutual promotion, (8) lock in suppliers/buyers e.g. Microsoft.

The case study for this week is to analyse Apple – yeah, that one, the one that makes all the trendy electronics – with respect to those business models. Pretty straightforward.

The textbook reading for this week doesn’t add much to the lecture but I am very impressed with their treatment of ‘freeconomics’ (i.e. how we afford to give away free stuff like Facebook and Dropbox), particularly the six approaches: advertising, freemium, cross subsidies (e.g. printer and ink), zero marginal cost, labour exchange (e.g. Yahoo Answers), gift economy (e.g. Wikipedia). I should add that between now and when this semester week actually happened, the advertising/freemium/zero-marginal-cost music streaming service Spotify became available in Australia.

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