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191021 Discussion 07-service.pptx
Define and compare Manufacturing Industry vs Service Industry
Definition:
- Service: an industry that provides a service for people but does not result in the production of goods(source: Cambridge dictionary).
- Manufacturing: producing goods in large numbers, usually in a factory using machines(source: Cambridge dictionary).
- Comparison:
The most important difference between them is the presence of physical goods produced which can be sell to gain profit.
- For example, a barbershop case, a barber can not sell the person had a hair cut, because the person is not physical goods. The baber processed the person’s hair to look good, where additional value added and not physical goods produced. Therefore, a barbershop provides service.
Types of Service Industry with examples
- e-business: Amazon, Cuppang, Android and i-OS App providers, Hotels.com, Airbnb, Skyscanner, google,
- Design: ARM(semiconductor chip design company),
- Travel: Hana tour, Modu tour,
- Retail: CU, 7 eleven, e-mart, Walmart, Amazon go,
- Healthcare: hospitals, pharmacies
- Transportation: Korail, Kobus, Korean Airlines, Jin air, Asiana airline
- Communications: SK telecoms, LG telecom, KT, NTT, AT&T
Select one example of service operation for the following
3.1. Define FIVE forces with explanations
ARM holdings: British multinational semiconductor and software design company. its primary business is in the design of ARM processors (CPUs).
- The power of suppliers
. Extremely Low: There is No suppliers, since ARM only creates and licenses its technology as IP rather than manufacturing and selling its own physical CPUs, GPUs, SoCs or microcontrollers.
- The bargaining power of customers
. Low: A characteristic feature of ARM processors is their low electric power consumption, which makes them particularly suitable for use in portable devices. Almost all modern mobile phones and personal digital assistants contain ARM CPUs, making them the most widely used 32-bit microprocessor family in the world. As of 2005, ARM processors accounted for over 75% of all 32-bit embedded CPUs. Customers choice is limited by their high technology and market share which reduces marketing and reliability test costs.
- The threat of new entrants:
. Low: New entrants of ARM’s IP takes a lot of money and time to verify performance, and confidence etc. To do that every IP have to be manufactured and tested for all combinations of CPU circuits. Even Samsung or TSMC accomplished that job, consumer companies such as Apple will not use them to minimize the power of suppliers. For these reasons, the treat of new entrants is very low.
- The treat of substitutes
. Low: Substitution of CPUs, GPUS, and other microcontrollers will takes long time until the quantum computer is available I think, because changing existing architectures of mobile phone needs a lot of money, man power, and time to design, manufacture, and test.
Select one example of service operation for the following
3.2 Define VC with explanations
Select one example of service operation for the following
- Primary activities: add value to the final product directly
. Operations: Designing and customizing chips with ARM’s IPs, cooperation to test performance of chips. For example, Apple usually use ARM based processing cores(CPUs), and GPUs with ARM engineers. ARM provides services.
. Service: Testing support is service after selling IPs when customer’s chip manufactured.
. Marketing and sales: Mostly B2B, not so big.
. No logistics: both Inbound logistics, and outbound logistics, because activities of designing and testing, and IPs are intangible.
3.2 Define VC with explanations
- Support activities: activities that add value indirectly.
. Technological development: Developing new IPs are very important for ARM in that technical superiority over competitor is the source of ARM’s competiveness. This activity costs a lot. Since designing a chip with new IPs requires high cost EDA tools and systems to design with short period, high productivity, and high reusability etc.
. Procurement: In addition to those tools and systems, in order to develop a new IP, chip manufacturing, testing and verification are required. These need procurement activity.
. Human resource management: high quality IPs are essential for ARM to gain higher profits and their resources are human brain. Therefore, human resource management is important and costs a lot. The activity involves in recruiting, hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel.
. Firm infrastructure: normal activity similar to other companies.
Discussion Issues (DI) 7-1
How can you define SM in terms of P5CFM? P5CFM: Porter’s 5 Competing Force Model
- Strategic Management in terms of P5CFM is whichever strategies overcoming or changing the rule of the threats of bargaining power of suppliers or(and) customers or(and) substitues or(and) new entrants. For example, monopolization.
How can you define SIS in terms of P5CFM ?
- Strategic Information System in terms of P5CFM is whatever information systems overcomming or changing the threats of bargaining power of suppliers or customers and overcomming threat of new enterants. For example, Amazon prime service and Cuppang Rocket Wow service overcomming the bargaining power of customers.
How can you define SIS in terms of VC ?
Strategic Information System(SIS) in terms of value chain is that a SIS increases the margin in the VC model.
For example a SIS linking horizontally or(and) vertically in the VC model. Ex. AHS, Walmart.
- Strategic Information Systems(SIS) in terms of procurment of value chain, are inventory, and MRO(maintenance, repair and overhaul) mangements.
Discussion Issues (DI) 7-2
When you evaluate an IS…(Evaluate the examples illustrated here)-American Hospital Service(AHS)
Type of IS in the AHS case ?
- TPS
- It provides hospitals with direct data-entry capability, which processes data about transaction improving efficiency.
Process automation or innovation ?
- Process automation with SIS.
If automation , then, work or manufacturing? (If innovation, which Hammer’s principle is applied ?) Will be discussed later
Work automation.
Is it an SIS or not ?
It’s a SIS though the type of a IS is a TPS.
Since the TPS of AHS provides strategic values such as raising barrier to entry, locking in customer, it is an SIS.
If SIS, which competing forces in P5FCM to be affected ?
Raising barrier to entry, locking in customer
If SIS, which activities in VC to be reinforced ?
Procurement, logistics, service and marketing/sales by providing direct data-entry capabilities.
Presentation discussions
1. Can you think of any other forces that may act as the drivers to determine a firm’s profitability?
- Externality(Environment): for example mineral water, masks.
2. How can technology be helpful in making these forces favorable for an industry?
- Information systems can reduce costs and provide many advantages at company level by the power of information from processed data.
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