1. IT IMPACT ON BUSINESS MODEL Session 02
Lecturer : JONATHAN SOFIAN LUSA
Reading materials : Applegate chapter 2
MASTER IN MANAGEMENT PROGRAM
PPM - School of Management
DEC Week I
0CT

2. Chapter Outline 1 2 3 Analyzing IT Impact The Search for Opportunity
GPA Case Study 2

3. ANALYZING IT IMPACT CASE STUDY : BORDERLESS MANUFACTURING AT LI & FUNG
Assembly
CHINA
Lining
TAIWAN
Shell
KOREA by 
Made in Hong Kong
Label, elastic,
studs, toggle
and string
HONG KONG
Filler
CHINA
Zipper
JAPAN

4. LI & FUNG’S BUSINESS PARADIGM
Raw Material
Sourcing
Product
Developm’t
Product
Design
Consumer
Needs
Supply Chain Management
Local
Forwarding
Consolidation
Factory
Sourcing
Mfg
Control
Export Docu-
mentation
Forwarder
Consolidation
Customs
Clearance
Supply Chain Financing
Financing
Financing
Financing
Financing
Supply Chain
Raw Material
Mill
Factories
Shipping
Airlines
Wholesale
Importer
Retailer
Consumer 4

5. THE CHANGING ROLE OF THE TRADING COMPANY
Supply Chain
Management
Level of Value Added
Virtual
Manufacturing
Borderless
Manufacturing
Sourcing
Buying
Agency

6. ANALYZING IT IMPACT IT impact on strategy IT impact on capabilities.
Determining product, market, business network, and boundary positioning
IT impact on capabilities.
Building processes, infrastructure, people, partner, organization & culture, leadership, governance

7. ANALYZING IT IMPACT IBM Path to Business transformation

8. ANALYZING IT IMPACT IBM Path to Business transformation
Goal: Use IT to improve end to end operating processes
Business Sponsor: Business Unit & Shared service Leaders ( suppliers, customer, partner)
Business Value: Reduce cost, decrease cycle time, improve org or extended enterprise operating performance, improve total cost of IT Ownership.
Risk & Uncertainty: moderate to high, business & tech complexity and volatility, org change, required integration.
Investment: Corporate Budgeting, steering committee.
Goal: Transform organization n industry, differentiate strategy, develop proprietary asset.
Business Sponsor: BOD, strong project leadership.
Business Value: Enable sustained capital efficient profitable growth, improve market share, deliver sustainable competitive advantage.
Risk & Uncertainty: High, new business model needed, new tech needed, organizational change, integration of new business.
Investment: Integrated with corporate strategy, Review by committee, change control process n system
Goal: Pursue opportunities that enable launch of new products / business, entry into new market
Business Sponsor: Executive Committee, business unit leadership.
Business Value: Grow Revenue, launch new product, enter high growth industries and market
Risk & Uncertainty: High, new business model needed
Investment: Staged commitments and investments base on milestones, base on business plan, new venture risk management
Goal: Use IT to improve local operating performance
Business Sponsor: Local Manager, team, individuals.
Business Value: Reduce cost & Improve local operating performance.
Risk & Uncertainty: Low to moderate
Investment: Local Budgeting

9. BASIC QUESTIONS
Five key questions can be used to guide executives as they search for value creating opportunities to use IT to support and drive the business strategy
Can IT change the basis of competition?
Can IT change the nature of relationship and the balance of power among buyers and suppliers
Can IT build or reduce barriers to entry?
Can IT increase or decrease switching costs?
Can IT add value to existing products and services or create new ones?

10. Impact of IT: questions 1 of 5.
Can IT change the basis of competition?
Uses IT not just to automate but also to transform and to inform
Benefits of conducting business online
AHSC American Hospital Supply Corporation
American Airlines
Internet to reengineer value chain and the basis of competition

11. Impact of IT: questions 2 of 5.
Can IT change the nature of relationships and the balance of power among buyers and suppliers?
AHSC
Customers recognized the value of a multivendor marketplace but were unwilling to put up with the problems of using multiple different supplier systems
AHSC became channel manager
Electronic market places: Oracle, CommerceOne, Ariba, …

12. Impact of IT: questions 3 of 5.
Can IT build or reduce barriers to entry?
Consultancy companies: knowledge technology
Technology based advantage: AHSC, AA, …
The internet can decrease the impact: low cost, ease of penetration
Knowledge and community barriers are more sustainable
Proprietary infrastructure and channels to market are at a particular disadvantage relative to new entrants when they attempt to create second-order barriers to entry (Amazon.com as new entrant with transaction, information and community infrastructures)

13. Impact of IT: questions 4 of 5.
Can IT increase or decrease switching costs?
Switching to another system might become difficult and costly in proprietary systems
With the internet switching costs are substantially reduced  difficult to achieve customer loyalty
Intuit increased the switching cost
Provided easy to use inexpensive financial service software
Won users via ease-of-use
Hooked via simple ways of storing the information that should be reentered if the customer switches to a different product

14. Impact of IT: questions 5 of 5.
Can IT add value to existing products and services or create new ones?
Grocery stores are also in the business of selling information (client profiles)
Information content of existing products (cars)
Digital distribution of books, music, and video will dramatically alter existing publishing and entertainment industries.
Manure and fertilizer company provides information.

15. GROUP PURCHASING ALLIANCE
New concept for health care industry
CASE STUDY

16. FACT

17. FACT

18. % COST DIFFERENCES GLOVE FILM I.V.SOLNS DISP SYRINGES 350%
18 X %
24 X %
30 X %
35 X %
D5W 138%
D10W 164%
SALINE 140%
RINGERS 164%
1ml 347%
2ml 337%
5ml 334%
10ml 247%
GLOVE
FILM
I.V.SOLNS
DISP SYRINGES
% COST DIFFERENCES

19. SOLUTIONS ?

20. CONSEPT Infomediaries

21. GPA Components Hospitals: Power Force of GPA Bank: Financial support
GML: Representer of Hospital
Distributor/Manufacturer: Product supplier

22. GPA Components

23. Transaction Scheme
GML
GML

24. BENEFIT
HOSPITAL
BANK
DISTRIBUTOR
GML

25. OUR LEARNING POINTS FOR TODAY …
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26. THANK YOU