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1. Describe the relationship between core competencies and competitive advantage.
Core competencies are the potentialities that are vital to a business in attaining a competitive advantage (Korper and Ellis 1-22). Once a firm maintains good profit margins that surpass the standard for that industry, it is said to have attained competitive advantage over its competitors. Achieving a sustainable competitive advantage is one type of business strategies which is central to all operations. Core competencies therefore, determine the position of a company in as far as competition is concerned. It helps in identifying factors that need to be considered to improve the operations of a company. The development of the core competencies puts an organization in a position to apply the emerging trends in innovations in the global markets. It therefore helps in forming a new competitive space to its capabilities and ahead of its competition (Efraim et al 46).
According to Reynolds (22-32), there is a significant statistical relationship between core competencies and competitive advantage. Research has shown that core competencies are a major source of competitive advantage. These competencies include some set of skills and resources as well as the mode in which the resources are utilized to generate desired outcomes for a company. Through this, a company contends with its competitors for the market share. In case a company has innovative ideas in its operations and products then it will attain competitive advantage over others who may not embrace better innovations and practices. Core competencies are therefore the aspects that a company does better than its competitors in the key areas of production process where value is added to products. Essentially, this is what establishes a competitive advantage of a company over others.
Competitive advantage comes about when a firm is able to realize the same profits as its competitors but at a minimal cost, or gain profits that surpass those of its competitors. Competitive advantages therefore facilitate the creation of better value for clients and at the same time maximize profits as well as lowering production costs. The capability of a company to utilize its resources effectively can be exemplified by its ability to introduce a product into the market ahead of its competitors and supply it faster. The metrics for these customs are not readily documented. They keep changing because of the changing competitive approaches that are being embraced by businesses.
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2. What is the relationship between profitability, fixed costs, variable costs, and market share for knowledge-based products? What are the significances of these relationships for strategy formulation?
Knowledge-based organizations have found a culture of operating effectively in today's economy. Knowledge-based products are those which require expertise in the designing and production stages of a commodity or services. Examples of knowledge-based organizations are consulting firms and research institutes. Their products or services are entirely found on proficiency unlike some companies which manufacture physical products. The mode in which the products or services are produced determines how popular a firm or company becomes among its clients. The profit margins realized from these products are dependent on the quality of the products or services (Bajaj and Nag 23-24). Organizations which produce quality products are likely to gain popularity among individuals and corporate clients.
Fixed costs and variable costs also affect profitability attained from these products. Fixed costs ensure that regardless of the action, the profit margins remain standard. This implies that the company will incur the same benefits even when it is not producing. This concept is useful in planning since it assures that the operations of the organization will continue to run smoothly. Fixed costs also make the operations of the organization consistent since there is always a surety for continuation. Knowledge-based products call for application of new and better methods in operations.
Variable costs have a close relationship with knowledge-based products. The costs vary depending on the level of knowledge that has been applied in producing a final product. These costs are carefully calculated to ensure that they correspond with the product. The type of service offered determines the charges that are going to be imposed on the customer. This variability is carefully considered for it balances the profits that the organization plans to make. The charges per product give an idea on knowledge that has been involved to produce final product (Laudon and Traver 670-672).
There is a relationship between knowledge-based products and profitability, fixed costs, variable costs, and market share. The manner in which the operations of such companies are conducted determines the degree of each of these elements. Through the use of existing knowledge, the creation of new knowledge characterizes organizations that produce knowledge-based products. This plays an important role in establishing the benefits that such an organization gain.
The relationship of the above three elements on knowledge-based products is direct since they are real indicators of the quality of products on offer. The elements differ from one organization to another since different organizations have diverse ways of conducting business, operational costs, and the knowledge involved. The bottlenecks through which organizations pass through in an attempt to come up with a product are also common determinants which dictate the charges per product. As Rosen (60-70) notes, knowledge-based products are very engaging since knowledge is dynamic, new ideas emerge each new passing day hence requiring individuals to be up to date with most recent developments. Failure to do a follow up may make an organization to lose its customers since customer needs also change with advancement in technology.
3. Name three firms that are key players in e-business. What is the competitive advantage of each? Are these competitive advantages sustainable? If so, consider possible events or circumstances which could reduce their sustainability.
Electronic Business, commonly referred to as e-business, is used to refer to the use of technologies in information and communication to enhance business activities and operations. It uses information and communication technology to allow for external business transactions between the company and individual clients, other businesses and groups. This is generally seen as the carrying out of business over the internet. American On-Line (AOL) is the oldest of all e-businesses. Google and Electronic Productivity Solutions (EPS) are other examples of e-businesses. These companies use the internet to carry out business by providing online services to clients alone or in collaboration with other business partners.
AOL has shown its commitment by embracing diversity and inclusion to an extent that the two elements are applied at all levels of the company. To this company, diversity and inclusion surpasses race, sex, gender, age and skills. This covers a wide range of issues concerning the workforce, details such as their backgrounds and experiences. The company has a workforce that can drive innovation because the business world calls for innovativeness as a result of the stiff competition in the market. This means creating conducive a working environment where superior ideas can be invented. This only comes when employees from different background, races, ages and abilities are engaged. The company seeks to work with the most talented staff regardless of their geographical location or socio-economic origins. This is one of the most outstanding competitive advantages that the company has over other firms that go for academic performance rather than considering the potential employee's capability. The company has also introduced a variety of offers so maintain its customers as well as attracting others.
This strategy is sustainable since the issue of looking for talent rather than only considering aspects like age, sex, background is excellent. Talent can be found in different places all over the globe hence the issue of not restricting the selection process to one region is well informed. This aspect ensures that the company invents new ideas regularly especially in the face of competition from other firms. The sustainability can further be described in terms of the ways in which the operations are conducted. This sustainability can be challenged if other firms combine skilled personnel with more advanced technology. This would be a big blow to the company since new technologies are easily embraced by clients. This can further force the company to embrace new technologies for effective services. This means that the company's operational costs will go high.
Google is a preference for many internet users. One of its competitive advantage is the straightforward way of how to Google something from the internet. People tend to have a psychological hold on this search engine since it is common to find people saying that they know how to Google this and that. Schmidt and Dobler and Schenk (100-103) say that the option to choose Google can be regarded as natural. They further state that many people will just say that they prefer Google but fail to give a valid reason. This psychological hold persists despite the fact that there are no financial switching costs. Google also has the largest single server and a host system as compared to others. Another competitive advantage that this company has over others is that it is the first web-based company to try to challenge Microsoft. This is evidenced by the fact that they have created business web packages. These are only the key competitive advantages that Google has over its competitors.
The fact the Google remains a preference for may does not mean that it has absolute competitive advantage over its competitors. It is very risky to have people preferring a product or service for no particular reason. This is because the producers of such a product do not know when and where to make adjustments. Companies act when they sense competition. Although the company is very popular among its users, the company could also lose popularity with the blink of an eye. It is important that clients state what they like in the services or goods provided by the service provider. The fact that people have a natural psychological hold means that those people cannot give logical explanations as to why they have opted to be served by Google but not other online companies.
EPS has proved its commitment to advance with the ever-changing technology. This is reflected by the website that this company has built and maintained. This company has been acknowledged for its tendency to be up to date with every single recent development in the ever changing business world (Schmidt, Dobler and Schenk 198-201). The degree of knowledge and skills inherent in it brings out a clear cut difference between what one would call a great website and a professional one. High levels of professionalism upheld by this firm ensure that a project is completed in the desired way. This firm is for those clients who demand the very best in services and this serves as one competitive advantage of this company. The company provides its clients with quality services at subsidized prices. This is one quality that clients look out for in any firm; cheaper and quality services. This has put it in a good position to compete with other e-business firms.
The EPS's competitive advantage is sustainable since the company can continue enjoying benefits as long as it continues to meet the market needs. This can be enhanced if the company continues to embrace new developments in technology. This will ensure that the services provided by the company are relevant to the market needs. It is easy to maintain professionalism since the only requirement is for the firm's staff to keep abreast with the new developments in the industry. Once this is done, the company will have proved to its customers that it is consistent in providing quality services, this further enhances the growth of trust between the service provider and the clients.
4. What are some differences in traditional business models and Internet business models?
The internet has emerged as one of the most effective method of personalizing one's income and at the same time owning a business. There are many real life stories of well established businessmen and women who have left their jobs and careers to embark on internet businesses. The traditional business models takes up more time and all the profits from the investments. Comparing the two models, the results are amazing. The traditional business models takes up more capital and a lot of time before profits are realized. It calls for patience because anyone using this model cannot depend on the returns of the investment for survival. This is opposite case with internet investments, the capital required is less and the returns are plenty within a short period of time.
According to Rosen (20-23), traditional business models require so much time, cost and effort. An average business owner will need to set aside much time per week to attain the goals set. The goals are not always attained since this nature of business does not give assurance. The requirements of this kind of business are among the things that contribute to the high cost of starting the business. These requirements include hiring employees, constructing a building or renting one, purchasing inventory, paying taxes and insurance. This forces a prospective business enthusiast to have very high initial capital. The internet business does not call for most of these requirements. One needs a computer and internet access. These are two key requisites to the internet business. In addition, no rent or constructing a building cost are involved and in most cases since one can work from home. While traditional business may require funds of between $250, 000 to $2.5 million, the home internet home-based business will require a start up cost of $300 to $2,000 (Reynolds 286-300). The most advantageous thing is that most internet business owners will make a full return of the capital within two to three months or even less (Korper and Ellis 46).
Internet business models save a lot of money and at the same time taking one near to be successful or not. This is due to the fact that no inventory, payroll and insurance are needed. Today's world calls for money making ventures that have quick returns. That is why the internet business is a choice for many. Another important aspect of this business is that it allows flexibility. It gives one the freedom to work from where he or she wants. Many business owners will only have to work about eight hour per day (Campbell and Woodley 68-72). These are some of the factors that make the internet business a preference for many. There are outstanding differences between the two models of business where while one is quick and effective in all its operations, the other one is quite slow and demanding.
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Experience level is central in any business (Bajaj and Nag 400-455). The traditional models of business call for high level of skills since there are a lot of things to be taken into consideration. In internet business, tools to be used in business transactions are already in place and do not require high level of operational skills. According to Reynolds (56), even an entrepreneur with little experience can generate a lot of income from this kind of business. This clearly shows that the business opportunity in using the traditional model is limited to those who possess the required skills since there are a lot of factors to be taken into consideration when conducting the business. This is a clear indication that the internet business models are easy to operate as compared to the traditional models. Work that requires less experience is necessary provided one can effectively carry out tasks that have been assigned in a desirable manner.
5. What areas of government regulation do you think would have the most influence on the Internet: taxation of e-commerce; intellectual property laws; or privacy laws? Explain your choice in some specificity and support your choice with examples.
According to Rosen (44), intellectual property refers to non physical or material goods that can be protected by the federal law. This property may include copyrighted materials, ideas, and discoveries. The internet possesses a vast amount of intellectual property that can be accessed online or those available to the public. The law has a moral responsibility of protecting this work through the statutes that govern internet. Protected files can be easily copied and downloaded from the internet. The ease at which the work can be reproduced raises concerns to both the producers and users of this information. It is common to find warnings posted to caution those who may violate copyright laws. The law has not does not fully protect original work since no major steps have been taken to penalize those that have been caught violating these laws.
The intellectual property laws have led to the emergence of two controversial views. Some believe that this kind of property should not be protected and restricted, while others believe that laws should protect intellectual laws. The laws basically cover producer rights and user rights. This forages into the private and public interests. If properly implemented, these laws can effectively protect the rights of owners of original work. Absence of effective protection raises concern since the original producer is not guaranteed returns from his or her work. These laws have the most effect on the internet since they are what determine the extent to which the original work will be presented. If well implemented, these laws can serve as effective tools of protecting original ideas of other people. Through this, we will be acknowledging inventive ideas of others while giving credit to their work.
6. Read case 15.3 The Success Story of E-Choupal. In addition to the two questions, answer the following, as well.
The metrics that can be used to gauge the success of E-Choupal system are the number of farmers that use the system, the number of E-Choupal transactions, the improvements that have been made in farming and the amount of money and efforts that the farmers have been saved as a result of using this system. These metrics can help in establishing the impact of the E-choupal system. This can further show the advantages of the E-Choupal system in terms of the benefits that it has had on the farmers.
E-Choupal differs from other regular electronic meeting places since it acts as a community meeting places as well as an e-commerce center. This way, people do not have to meet physically to share ideas and at the same time get to share more over the E-Choupal system. Regular non electronic meeting places are not possible over the internet since people do not get to meet face to face (Schmidt, Dobler and Schenk 76). This implies that sharing of information and asking questions are only done online and there is no operator in this case. This is a distinctive feature that identifies this system from other regular electronic meeting places.
Shanchalak is an operator in the e-market. The reference to this operator has been made in the second and third paragraph since it has been stated that most farmers are illiterate. The operator is therefore in charge of guiding the illiterate farmers through the process of using the system. This operator has been referred to show how the effectiveness of the system is attained. The system uses the internet and farmers who lack the basic skills of using the internet to access information are assisted. The Shanchalak serves and enhances the process by ensuring that the farmers get the correct information. It is from these transactions that the he is paid. He is the key figure in the system since he is in charge of farmers' transactions.
Today, E-Choupal is an effective supply chain that aims at delivering value to its international customers. It is one of the leading privatively owned companies with high annual revenues (Laudon and Traver 87). The model has been designed in such a way that it can overcome challenges that may come about as a result of different culture of people affected by farming related issues, such as fragmentation of land, poor infrastructure and the use of intermediaries for marketing produces. This system has also reinforced the prospective of Indian farmers who had not explored their potential. Since 2004, the system has undergone several changes aimed to improving effectiveness. The company has worn several awards directly attributable to E-Choupal system. This has acted as a force that has brought about sustainable developments and at the same time promotes continued social responsibilities of the company.