Assignment 1: Models for Competitive Dynamics
CIS 336 Enterprise Architecture
Competition occur naturally between at least two entities or more. Does not matter if its people, businesses, or even countries. There will be a winner and a loser. As such, competitive dynamics is often analyzed by understanding one’s competition. Competitive dynamics is actions and reactions of business taking part in a competitive business environment (Marketing and Strategy 2016). Destroy Your Business strategy (DYB) and Grow Your Business strategy (GYB) are competitive dynamic models that seek to give businesses the ability to be both competitive and profitable against competitors. DYB and GYB also seek to give business long term competitive advantages to maximize the sustainability of the business. However, the DYB and GYB approach these key factors in different ways. We will explore and discuss some of the key similarities and differences between DYB and GYB. Also, examine the correlation between Information Systems (IS), strategic advantage, and the social business strategy. All of these models present ways that can increase the competitive advantage over the competition. While continually to evolve with the ecommerce revolution, these dynamic models will help business redefine themselves in an ever changing world (Pearlson, Saunders, & Galletta, 2016).
During the dot.com boom, late 1990’s and early 2000’s, the DYB approach to strategic planning was implemented by Jack Welch. The destroy-your-business approach forced every business unit to benchmark contenders. While at General Electric, GE, Jack Welch developed a web-based business plan that wears down its own customer base, and afterwards changes its own business plan operations to respond to the threat. DYB approach transformed GE and placed the employees in the same shoes as their competitors. The ultimate goal of the DYB planning approach was the disruption of current practices and traditions. The company could then take actions to protect the business before competitors focused in on it weaknesses (Ashkenas 2012).
The GYB approach strategy reintroduced ways to reach new customers and improved ways to serve and keep existing ones. All while collaborating with others; the GYB strategy will give you the opportunity to implement user centered solutions, enhance your communications skills, and become more efficient at solving problems. The following is list of ways to Grow Your Business: 1. Get referrals 2.Innovate your product or service 3.Penetrate your existing market 4. Regulate your costs 5. Attend and Participate in trade shows 6. Extend your market reach 7. Conquer a suitable market for your product 8. Diversify your services 9. Franchise your business 10. Expand to international market (Spaeder, 2004).
GYB is much different than the DYB strategy, however both are intended to sustain a long term competitive advantage over the market. DYB focuses on weaknesses and evolving business models. While GYB focuses on strengths; growing customer base and capitalizing on existing customer. When used together, GYB and DYB are very powerful strategies’. For example, they were both used by GE to increase and maintain profitability. By using both of these strategies, GE’s has continued to strive and dominate its marketplace (Ashkenas 2012).
Cannibalization is an occurrence that results when a business develops an idea for a new product or service that steals business from one or more of its current products and services. Consequently, that product may take sales from another offering in a product line. Although the idea of cannibalization can be seen as negative, there are some positive effects. As E-Commerce expands, some companies are intentionally choosing to cannibalize their own retail sales through bargain-priced online deals. (Chandy & Gerard 1998). Cannibalization is not usually an attractive situation for a firm. For example, Clorox saw sales of their bleach products suffer when they introduced laundry detergents with bleach. A Subway franchise can cannibalize sales from another franchise just a couple miles down the street.
Dealing with cannibalization, businesses will need to reduce the benefit considered for a new product by the amount of the existing product benefit lost. However, these businesses have to realize that cannibalization is not totally preventable. In spite of everything, even if the new product had not been introduced, rival business may have introduce a similar product in the market and taken these sales anyway. Cannibalization can occur before a new product is comes available. Chandy & Gerard (1998) stated that a pre-announcement for a new product can cannibalize the sales of an old product in a prior period.
The relationship between the will to cannibalize and radical product innovation can be seen as intuitive. Radical product innovation is a behavioral model is and cannibalize is an attitude model. Radical product innovation does not result in cannibalization or make products obsolete. For example, microwaves do not declare conventional ovens useless. Most businesses and even households use both. The Internet and Social Media is making cannibalization a trending item. Pet Smart, Barnes and Noble, and Toys ‘R’ Us launched an online venture as a separate company. With this launch, they cannibalized sales at their onsite stores. Thus their online prices are lower than actual store prices (Reference for Business 2016).
I believe that the cannibalization strategy is more effective than the DYB strategy for businesses that sale technical products. However, from my personal experience from working in the logistics industry, not all products share the same short shelf life as these products. For example, in the industrial field, products like carpentry and mechanical tools, bolts and nuts, and lumber can be relevant for years. Except for small variances in prices, there is no real competition. In this example to match their competition, businesses must use the DYB strategy. To gain a competitive edge, companies must analyze and attack their weaknesses. Therefore allowing your company to provide better service, more efficient service, and product availability. However, if a company were to release a new hammer or new screwdriver every six months, it is very unlikely that the new product will cause market cannibalization.
Information Systems or IS, are such a crucial part of every aspect of today’s businesses. As a way to improve or change the business model, businesses must consider the opportunities to improve or maintain an IS. IS increases productivity for both employers and employees. In the event of changes in business strategy, the reassessment of IS must be included. IS assessment can give a business a competitive advantage over the market place (Pearlson, Saunders, & Galletta, 2016). For example, as a small business owner, if you are assessing your business model, you may discover new opportunities in logistics and distribution. As a result, you would analyze the existing IS and weigh out the pros and cons to find possible alternatives. Implementing a new system will add new costs, but the pros of improving logistics and distribution by twenty percent will greatly outweigh those cons. It will also allow the business to produce products faster and efficient; thus creating higher customer satisfaction. Another example would be changing the process of the finance department. If you analyze the IS and find an alternative that would allow for a more efficient and timely process of payroll, you can reduce the overhead.
Another commonly preferred tool in today’s business strategy is Social IT. Firms have developed and perfected ways to use Social IT with positive feedback from customers as a competitive advantage in the market place. However, this can also have a negative impact on a business. Firms making themselves readily available to social IT can open up a realm for negative comments and reviews viewed by millions of users and followers. According to Forbes’ Chuck Cohn (2015), there are several steps to use for your Social IT business strategy; what to use, how to use it and who should use Social IT. Also, setting goals for your social media use will increasing traffic to your website, increase credibility, and demonstrate a culture where people will more likely to want to work as employees and shop as consumers. Next, research and choose the right type of Social IT strategy to use. You will want to take full advantage of the time and money invested in the chosen Social IT. Sites such as Facebook, Twitter, and Instagram can provide maximum exposure. Providing exposure to millions of consumers, the ability to strategize, data mining, and market planning can make Social IT the best way to grow and expand your firm or business to the next level. By having instant access to data; consumer’s internet site history, trends and desires, your firm will gain a tremendous advantage over the market competitors (Pearlson, Saunders, & Galletta, 2016).
In the movement toward intentional cannibalization, start-ups often overcome through innovation. Most small businesses are seen as quick and risky. These risks make it necessary to develop new products and service innovations. While becoming financially stable and developing greater research and development these smaller businesses may exceed larger corporations. Though cannibalization has become an actual concern, having the right attitude and strategic approach can eventually stop the pursuit of high-potential growth strategies. Companies can also use a combination of DYB and GYB to take advantage of weaknesses in their organization and grow the strengths. While analyzing business models and making changes in today’s competitive market, businesses must include IS. IS can allow businesses to maintain a long term advantage over the market and seize opportunities competitors would otherwise exploit away by changing the business model. Failure to manage IS can be harmful to businesses and allow competitors to run them out of the market.
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Chandy, R., Gerard, T. (1998). Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize. Journal of Marketing Research. Vol 35:4 p 474-487. Retrieved from https://www.london.edu/faculty-and-research/academic-research/organizing–for-radical-product-innovation-the-overlooked-role-of-willingness-to-cannibalize#.V4eYRdIrIcU
Cohn, C. (2015). Entrepreneurs. How to Properly Use Social Media to Fit Your Business Strategy. Available at http://www.forbes.com/sites/chuckcohn/2015/01/23/how-to-properly-use-social-media-to-fit-your-business-strategy/#17a52fe5474e
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Pearlson, K., Saunders, C., Galletta, D. (2016). Managing & Using Information Systems: A Strategic Approach. John Wiley & Sons, Inc.
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Spaeder, K. (2004). Growth Strategies. 10 Ways to Grow Your Business. Retrieved from https://www.entrepreneur.com/article/70660