After doing relative research about Cisco, its business model can be described as shown in Figure1. All the entities are connected via web portals, internet, xml, EDI etc. Cisco’s virtual close system is connected to these entities too and generates “real-time” financial statement for decision makers.
Porter’s Five Forces
A MODEL FOR INDUSTRY ANALYSIS
The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure.
Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.
Diagram of Porter’s 5 Forces
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SUPPLIER POWER |
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BARRIERS |
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THREAT OF |
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BUYER POWER |
DEGREE OF RIVALRY |
I. Rivalry
In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences.
The Value Chain
To better understand the activities through which a firm develops a competitive advantage and creates shareholder value, it is useful to separate the business system into a series of value-generating activities referred to as the value chain. In his 1985 book Competitive Advantage, Michael Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Porter identified primary and support activities as shown in the following diagram:
The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.
For my business, as all other businesses, it has its suppliers, customers, Employees and investors, so from the software categories, both inward organised and outward organised are applicable to it. However, according to the key business processes, software categories are narrowed down; softwares were selected; vendors are chosen and delivery choice is decided as shown in figure1. Whether the software could facilitate the key business processes is the main criteria to judge which one(s) to choose for the steps.
The business I am thinking is to install monitors on trams, buses and trains, and broadcast news, weather forecast, entertaining programs and meanwhile advertisement. This service can provide useful information for tram and train passengers and generate revenue from advertisement. The strategy I am thinking is low cost and specific location focused. To implement the low cost strategy, firstly, the company could get news and weather forecast from some existing TV channels so that the company does not have to have their own studio to make videos and at the same time TV channels get themselves be advertised by providing programs with their own logos as return. Secondly, the company may make a special deal with the hardware provider, monitor manufacturer for example, because it is a good thing that the manufacturer has its product on all the trams. For the specific location focused strategy, our customers, the companies who want to advertise on trams, could target their specific segmentation more easily, especially when they segment their customer by location. For example, a particular restaurant can advertise itself only on the trams pass by other than advertising to the people hundreds miles away. This is also our competitive advantage.
