1. Chapter 2. Strategic Use of Information Resources
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force. Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats. Five forces are: the rivalry among existing competitors, the threat of new entrants, the threat of substitute products, the bargaining power of buyers, and the bargaining power of suppliers.
The value chain model highlights specific activities in the business where competitive strategies can be best applied (Porter, 1985) and where information systems are most likely to have a strategic impact. Therefore, the value chain model can be employed to identify specific, critical leverage points where a firm can use IT most effectively to enhance its competitive position.

2. What is the “Competitive Advantage”?
A competitive advantage is a benefit derived from something a company does or has that its customers want and its competitors cannot (or choose not to) match.
A CA is a benefit derived from something a company does or has that its customers want and its competitors cannot (or choose not to) match.
Your company’s CA gives your customers a reason to buy from you rather than from a competitor.
Consequently, companies continually seek to create and protect their own and to neutralize their competitors’ CA by improving their business practices.
The innovative use of IT is a common source of such improvements. Successful e-business do not adopt IT for its own sake. They do so because they see an opportunity to gain a CA.

3. Sustainable Competitive Advantages
However, firms may create/improve their competitive advantages only if they:
have capacity to learn.
employ revenue management approach.
With the service economy accounting for over 70 percent of GDP in OECD (Organization for Economic Co-operation and Development) countries, service firms are becoming increasingly competitive with revenue management (RM) and pricing becoming central in their focus for sustaining long term profitability (and competitive advantage).

4. Copyright 2010 John Wiley & Sons, Inc.
Learning Objectives
List the identifying factors of the eras of information usage.
Know what makes an information resource valuable.
Explain how information resources are used strategically in context of the 5-forces model.
Understand how information resources can be used to alter the value chain.
Explain the importance of strategic alliances.
Know the risks of information resources. 4
Copyright 2010 John Wiley & Sons, Inc. 4

5. Real World Examples
The Spanish manufacturer Zara has a simple business model that provides a significant strategic advantage.
Their system links demand to manufacturing and manufacturing to distribution.
Customers visit up to 17 times per year to check on new items that may have arrived.
Since products are limited customers will immediately purchase products they like.
Loyal and satisfied customer base. 5 5

6. Real World Examples (cont.)
Zara aligns its information system strategy with its business strategy.
The POS system sends daily updates to Zara’s headquarters.
Managers report to designers what sold and what customers wanted but couldn’t find.
The information is used to determine what to keep and what to discontinue or change.
New designs can be ordered twice a week.
The entire process is automated so that new designs and products can be created quickly. 6

7. What is Business Model?
A business model is a set of planned activities (sometimes referred to as business processes) designed to result in a profit in a marketplace.
The business model is at the center of the business plan.
An e-commerce business model aims to use and leverage the unique qualities of the Internet and the www.
One of the major characteristics of EC is that it enables the creation of new business models.
Business model
-- is a means (way)of creating business value. (a subset of business plan or a business case)
-- A business model is a set of planned activities (sometimes referred to as business processes) designed to result in a profit in a marketplace.
-- In order to be successful and prosperous for a company, it should have a suitable, profitable model within its industry and business.
The business model is at the center of the business plan.
A business plan is a document that describes a firm’s business model. N
Source: E-Commerce: business, technology, society, Laudon and Traver, A/W

8. Why New Models? We need some new models
for how we go about exploring IT for competitive advantage,
for IT infrastructure how we create it and manage it
for how we acquire, manage and deploy the skills that are needed to run that infrastructure
One of the major characteristics of EC is that it enables the creation of new business models.
(Business model is a ROADMAP for emerging technology)
Business model
-- is a means (way) of creating business value. (a subset of business plan or a business case)
-- A business model is a set of planned activities (sometimes referred to as business processes) designed to result in a profit in a marketplace.
-- In order to be successful and prosperous for a company, it should have a suitable, profitable model within its industry and business.
The business model is at the center of the business plan.
A business plan is a document that describes a firm’s business model.
Profitability (making money) N

9. … IT Role? Value propositions fulfill Strategic intent Strategy
competition
structure/
culture
Essentials for a Successful Enterprise
Value propositions
1. Business model
Business landscape
Internal/
External
Consistent
fulfill
2. Core competencies
Strategic intent
future positioning
Finance
Management
Process
H/R
Technology …
Analysis
(Porter, SWOT)
Strategy
Positioning
Corporate strategy
Business strategy
Functional strategy
Positioning on product/market
Differentiation/choice of competitive advantage
Competitive posture
Industry characteristics，
Market growth，
Demand characteristics，
Barrier of entry，etc.
Business model is a means (way)of creating business value.
-- In order to be successful and prosperous for a company, it should have a suitable, profitable model within its industry and business.
Business landscape is the relationships (pos. and negative) among the members of value chain and/or value net.
Strategic intent is the “future positioning” of an enterprise
Differentiation (BPR, Benchmarking, Best Practices): KSF - K_Survival_F - Strategic convergence - KSF
-- competitive advantage, sustainability, imitability
Competitive posture: collaboration or competition based on 产业特性, 市场的增长率，需求特性，进入障碍，等
Examples: SONY (Entertainment); MicroSoft (Help Business to be more PRODUCTIVE)
3. Execution
IT Role? N

10. Business Model vs. Revenue Model
Business model is the architectural configuration of the components of transactions designed to exploit business opportunities.
Revenue model refers to “the specific ways in which a business model enables revenue generation.”
Business Model:
A method of doing business by which a company can generate revenue to sustain itself.
describes the way in which a company enables transactions that create value for all participants, including partners, suppliers and customers.
3. The model spells out how the company is positioned in the value chain.
Revenue Model: can be realized through a combination of
-- subscription fees, -- advertising fees,
-- transactional income (e.g., fixed transactional fees, referral fees, fixed/variable commissions, etc) N

11. Business vs. Revenue Model
Business Model
Revenue Model
Value
Value
creation
appropriation
It can be realized through a combination of
- subscription fees,
- advertising fees,
- transactional income (e.g., fixed transactional fees, referral fees, fixed/variable commissions, etc)
It describes the way in which a company enables transactions that create value for all participants, including partners, suppliers and customers.
Issues in B2B Advertisement and Marketing
1.Finding and retaining business customers
2. Making them buy
3. Reaching organizational buyers (functional, corporate)
4. Building relationship marketing in B2B
5. Advertisement, mailing lists, strategies
6. Mailing lists: house, response, compiled
7. The role of the CD-ROM
8. Marketing databases and lists

12. Four Important Entities for a Successful Enterprise
Capital （资本）
Technical （技术）
Human （人才）
Information （信息）

13. EVOLUTION OF INFORMATION RESOURCES

14. Information Resources
Over the past decades the use of information resources has changed.
Organizations have moved from an “efficiency model” of the 1960’s to a “value creation model” of the 2000’s.
Companies seek to utilize those technologies that give them competitive advantage.
Maximizing the effectiveness of the firm’s business strategy requires the general manager to identify and use information resources.
Figure 2.1 shows this change. 14

15. Figure 2.1 Eras of information usage in organizations (Eras Model)
2000+
Primary
Role of IT
Efficiency
Automate existing paper-based processes
Effectiveness
Solve problems and create opportunities
Strategic
Increase individual and group effectiveness
Transform industry/organization
Value creation
Create collaborative partnerships
Justify IT expenditure
ROI
Increasing productivity and decision making
Competitive
position
Adding
Value
Target of systems
Organization
Individual manager/
Group
Business
processes
Business processes ecosystem
Customer,
supplier,
ecosystem
Information model
Application
specific
Data-driven
User-driven
Business-driven
Knowledge-
driven
Dominant technology
Mainframe- based
Minicomputer-based
Microcomputer “decentralized intelligence”
Client-Server “distribution intelligence”
Internet “ubiquitous intelligence”
Basis of Value
Scarcity
Plentitude
Underlying economics
Economic of information bundled w/ economics of things
Economic of information separated f/ economics of things
w/ (with)
f/ (from)
Figure 2.1 Eras of information usage in organizations (Eras Model) 15

16. Network Externalities
Definition - The phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters.
Network effects
While the word-of-mouth method is often more influential in the beginning, analysis may play a significant role later in the cycle. In other words, you may adopt a service initially because someone you know uses it; later, you may adopt a service because "everyone" uses.
IT Role?
Network Externality offers a reason for value derived from plentitude (Era IV & V)

17. INFORMATION RESOURCES AS STRATEGIC TOOLS

18. Information Resources
The term information resources is defined as the available data, technology, people, and processes available to perform business processes and tasks.
Information resources can be either assets or capabilities.
IT asset is anything, tangible or intangible, that can be used by a firm in its processes for creating, producing and/or offering its products (IT infrastructure is an asset).
IT capability is something that is learned or developed over time in order for the firm to create, produce or offer it products. 18
Copyright 2010 John Wiley & Sons, Inc. 18

19. Copyright 2010 John Wiley & Sons, Inc.
IT Assets
IS infrastructure:
It includes data, technology, people, and processes.
The infrastructure provides the foundation for the delivery of a firm’s products or services.
Information repository.
Logically-related data that is captured, organized and retrievable by the firm.
Web 2.0 assets now include resources used but not owned by the firm (eBay, Facebook, etc.). 19
Copyright 2010 John Wiley & Sons, Inc. 19

20. Copyright 2010 John Wiley & Sons, Inc.
IT Capabilities
Three major categories of IT capabilities:
Technical skills - applied to designing, developing and implementing information systems.
IT management skills - critical for managing the IT function and IT projects.
Relationship skills - can either be externally-focused or spanning across departments. 20
Copyright 2010 John Wiley & Sons, Inc. 20

21. Type of Information Resource
Definition
Example
IT Asset
Anything that can be used by a firm in its processes for creating, producing and/or offering its products (goods or services)
IS infrastructure
Base foundation of the IT portfolio shared through the firm3
Hardware, software, network, data components, proprietary technology, web-based services
Information repository
Data that is logically related and organized in a structured form accessible and able for decision making purposes.”
Critical information about customers that can be used to gain strategic advantage. Much of this information is increasingly available on the web.
IT Capability
Something that is learned or developed over time in order for the firm to create, produce or offer it products using IT assets
Technical skill
Ability applied to designing, developing and implementing information systems
Proficiency in systems analysis and design; programming skills
IT management skills
Ability to managing IT function and IT projects
Being knowledgeable about business processes and managing systems to support them; evaluating technology options; envisioning creative IS solutions to business problems
Relationship skills
Ability of IS specialists to work with parties outside the IS department.
Spanning: having a good relationship between IT and business managers
Externally-forced: have a good relationship with an outsourcing vendor
Figure 2.2 Information Resources 21

22. Advantages of Information Resources – What General Managers want are …
General managers evaluating an information resource for competitive advantage needs to ask:
What makes the information resource valuable?
Who appropriates the value created by the information resource?
Is the information resource equally distributed across firms?
Is the information resource highly mobile?
How quickly does the information resource become obsolete?
When, where and …
1. What makes the information resource valuable? [Network Externality]
-- Era I-III (tied to physical delivery mechanism – scarcity)
-- Era IV (network externally – broadly connected)
-- [Network Externality offers a reason for value derived from plentitude (IV & V)
2. Who appropriates the value created by the information resource?
-- value chain model can help determine where a resource’s value lies and how the appropriation can be improved in a firm’s favor
3. Is the information resource equally distributed across firms?
-- NO, and therefore, it creates strategic advantage
4. Is the information resource highly mobile?
-- Therefore, a KM system should be developed for “keeping” employees’ knowledge, experience and that can be “shared” and “re-used”. It also helps reduce the impact of the loss of a mobile employee.
5. How quickly does the information resource depreciate?
-- “Things” wear out, whereas information does not – information resources lose value over time.
-- CRM, DBMS, Data warehouse
What tools are available to help shape their strategic use?
What are the risks of using information resource to gain strategic advantage 22

23. Using Information resources to create strategic advantage
Strategic advantage must be crafted by combining all of the firm’s resources including:
production resources,
human resources, and
Information resources
Information resources include not only data, but also technology, people and processes.
VALUE CHAIN
WHO: People
What: Technology
How: Process

24. Figure I.9 System Hierarchy
System’s
Architecture
Oversee
Develop
Information
Requirements
Strategies
Design
and
Structure
Management
Infrastructure
Information System
People – Who
Technology – what
Process – How
Architecture (of a system): How the current or proposed system operates mechanically; summarized in terms of its components, the way the components are linked, and the way the components operate together.
Infrastructure (of a system): The human and technical resources the work system depends on and shares with other systems.
People
Technology
Process N

25. Examples of information resources available to a firm:
IS infrastructure
Information and knowledge
Proprietary technology
Technical skills of the IT staff
End users of the IS
Relationship between IT and business managers
Business processes

26. HOW CAN INFORMATION RESOURCES BE USED STRATEGICALLY?

27. The Strategic Landscape
Managers confront elements that influence the competitive environment.
Slim tolerance for error requires managers take multiple view of the strategic landscape, such as:
First view - Porter’s five competitive forces model.
Second view - Porter’s value chain.
Third view – focuses on the types of IS resources needed (Resource Based View). 27
Copyright 2010 John Wiley & Sons, Inc. 27

28. Striving for Competitive Advantage
level: Industry & Competitive Analysis
Competitive Forces Model
Competitive Strategy
D’Aveni’s Hypercompetition Model (7-Ss)
level
Value-Chain Analysis
Firm
Business
Two views that can help G.M. align IS strategy with business strategy
(These views provide a G.M. with varied perspectives from which to identify strategic opportunities to apply the firm’s information resources)
Porter’s five forces model
-- look at the major influences on a firm’s competitive environment
-- Information resources should be directed strategically to alter the competitive forces to benefit the firm’s position in the industry.
Porter’s value chain model
--assess the internal operations of the organization and partners in its supply chain
--Information resources should be directed at altering value-creating or value-supporting activities of the firm.
Wiseman’s theory of strategic thrusts
Defense or offense perspective

29. Porter’s Five Forces Model and Value Chain
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force.
Under the perspective of market structure, Porter’s competitive forces model has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Two views that can help G.M. align IS strategy with business strategy
(These views provide a G.M. with varied perspectives from which to identify strategic opportunities to apply the firm’s information resources)
Porter’s five forces model
-- look at the major influences on a firm’s competitive environment
-- Information resources should be directed strategically to alter the competitive forces to benefit the firm’s position in the industry.
Porter’s value chain model
--assess the internal operations of the organization and partners in its supply chain
--Information resources should be directed at altering value-creating or value-supporting activities of the firm.
Wiseman’s theory of strategic thrusts
Defense or offense perspective

30. Figure Five (5) Competitive Forces with Potential Strategic Use of Information Resources (Porter)
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force (Porter, 1985). Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Using Porter’s Model, General Managers can:
-- Identify key sources of competition they face
-- Recognize uses of information resources to enhance their competitive position against competitive threat
-- Consider likely changes in competitive threats over time
The changing forces drive both the business strategy and IS strategy, and this model provides a way to RE-think about how information resources can create competitive advantage. N

31. PORTER’S FIVE COMPETITIVE FORCES MODEL
Threats
NEW MARKET ENTRANTS
SUBSTITUTE PRODUCTS & SERVICES
Switching cost
Access to distribution channels
Economies of scale
Redefine products and services
Improve price/performance
Selection of suppler
Threat of backward integration
Buyer selection
Switching costs
Differentiation
Cost-effectiveness
Market access
Differentiation of product or service
THE FIRM
INDUSTRY COMPETITORS
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force (Porter, 1985). Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Contemporary strategic planning frameworks
-- 1) too narrow and pessimistic
-- 2) they are based on projections of market share and market growth
COMPETITIVE FORCES that SHAPE strategy
-- depends on the type of the industry
The ability to manage complexity and responsiveness has become a powerful source of competitive advantage.
Internal Forces: 1.customer focus, 2.communication, 3.core competencies, 4.complexity, 5.Quality
Due to characteristics of the instability of the markets in e-Commerce, Downes and Mui (1998) show that there are three forces that must be added to Porter’s five forces model: globalization, digitalization, and deregulation.
digitalization – the improvement and cost reductions in digital technology have had significant impact in business for many years now. The Internet has simply accelerated much of what was already happening and spread it into other industries across the world (esp. the information-based industries).
Deregulation and liberalization – it opened up new opportunities for many firms, and recent years have seen an increase in the number of related diversifications. (e.g., UK companies in the energy sector have branched out into related markets such as other forms of energy or telecommunications, making use of their physical distribution networks).
Globalization – an international level of many industries and liberalization of many markets (e.g., Eastern Europe) have opened up new foreign markets for Western firms while bringing Western firms into competition with multinationals based in other countries.,
Such international competition is likely to accelerate following political moves, such as the signing of the General Agreement on Trade and Tariffs by the leading industrial nations which promise to reduce barriers to international trade. Concept of “localization” where organizations must be a part of the local environmental setting. That is to think global and act according to local customs to survive and thrive in local conditions.
SUPPLIERS
CUSTOMERS
Bargaining power N
Dr. Chen, The Trends of the Information Systems Technology
TM -31

32. Figure Five (5) Competitive Forces with Potential Strategic Use of Information Resources (Porter)
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force (Porter, 1985). Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Using Porter’s Model, General Managers can:
-- Identify key sources of competition they face
-- Recognize uses of information resources to enhance their competitive position against competitive threat
-- Consider likely changes in competitive threats over time
The changing forces drive both the business strategy and IS strategy, and this model provides a way to RE-think about how information resources can create competitive advantage. N

33. PORTER’S FIVE COMPETITIVE FORCES MODEL
Threats
NEW MARKET ENTRANTS
SUBSTITUTE PRODUCTS & SERVICES
Internal Forces:
1.customer focus
2.communication,
3.core competencies
4.complexity
5.Quality
Other forces should be considered in the e-Age:
1. Digitalization
2. Globalization
3. Deregulation
THE FIRM
INDUSTRY COMPETITORS
Cost-effectiveness
Market access
Differentiation of product or service
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force (Porter, 1985). Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Contemporary strategic planning frameworks
-- 1) too narrow and pessimistic
-- 2) they are based on projections of market share and market growth
COMPETITIVE FORCES that SHAPE strategy
-- depends on the type of the industry
The ability to manage complexity and responsiveness has become a powerful source of competitive advantage.
Internal Forces: 1.customer focus, 2.communication, 3.core competencies, 4.complexity, 5.Quality
Due to characteristics of the instability of the markets in e-Commerce, Downes and Mui (1998) show that there are three forces that must be added to Porter’s five forces model: globalization, digitalization, and deregulation.
digitalization – the improvement and cost reductions in digital technology have had significant impact in business for many years now. The Internet has simply accelerated much of what was already happening and spread it into other industries across the world (esp. the information-based industries).
Deregulation and liberalization – it opened up new opportunities for many firms, and recent years have seen an increase in the number of related diversifications. (e.g., UK companies in the energy sector have branched out into related markets such as other forms of energy or telecommunications, making use of their physical distribution networks).
Globalization – an international level of many industries and liberalization of many markets (e.g., Eastern Europe) have opened up new foreign markets for Western firms while bringing Western firms into competition with multinationals based in other countries.,
Such international competition is likely to accelerate following political moves, such as the signing of the General Agreement on Trade and Tariffs by the leading industrial nations which promise to reduce barriers to international trade. Concept of “localization” where organizations must be a part of the local environmental setting. That is to think global and act according to local customs to survive and thrive in local conditions.
SUPPLIERS
CUSTOMERS
Bargaining power N
Dr. Chen, The Trends of the Information Systems Technology
TM -33

34. The Five Forces Model and IS
The Five Forces Model provides a way to think about how information resources can create competitive advantage.
Using Porter’s Model, General Managers can:
Identify key sources of competition they face.
Recognize uses of information resources to enhance their competitive position against competitive threats
Consider likely changes in competitive threats over time
The changing forces drive both the business strategy and IS strategy, and this model provides a way to RE-think about how information resources can create competitive advantage.
Value chain
-- focus on activities
Yet, in applying the value chain, competitive forces may be affected to the extent that the proposed technology may add value to suppliers, customers, or even competitors and potential new entrants. N

35. Porter’s Value Chain Model
The value chain model highlights specific activities (i.e. create, deliver, and support a company’s product or service) in the business where competitive strategies can be best applied and where information systems are most likely to have a strategic impact.
Therefore, the value chain model can be employed to identify specific, critical leverage points where a firm can use IT most effectively to enhance its competitive position.
Two views that can help G.M. align IS strategy with business strategy
(These views provide a G.M. with varied perspectives from which to identify strategic opportunities to apply the firm’s information resources)
Porter’s five forces model
-- look at the major influences on a firm’s competitive environment
-- Information resources should be directed strategically to alter the competitive forces to benefit the firm’s position in the industry.
Porter’s value chain model
--assess the internal operations of the organization and partners in its supply chain
--Information resources should be directed at altering value-creating or value-supporting activities of the firm.
Wiseman’s theory of strategic thrusts
Defense or offense perspective

36. Figure 2.6 Process View of the Firm: The Value Chain
Competitive
Advantage
(Value)
A company’s value activities fall into nine generic categories.
-- Primary activities are those involved in the physical creation of the product, its marketing and delivery to buyers, and its support and servicing after sale.
-- Support activities provide the inputs and infrastructure that allow the primary activities to take place.
IT can profoundly affect one or more of these activities -
- sometimes simply by improving effectiveness,
- sometimes by fundamentally changing the activity, and
- sometimes by altering the relationship between activities.
In addition, the actions of one firm can significantly affect the value chain of key customers and suppliers.
Operations: Boeing -- Lean Manufacturing
After-Sale Service - maintenance technology
Devices identify potential problems before the customer notices a difficulty and enable the service representative to fix the elevator before it breaks down, reducing repair costs and increasing customer satisfaction.
Corporate Infrastructure
- on-line links to integrate remote locations (27% sales growth)
MANAGEMENT CONTROL
- more sophisticated reward systems software (sales commission on each
product sold by its sales force; thus
(a) maximum incentive: sales force
(b) NO incentive: ensure the customer continued to be satisfied with the
services coordination of activities
- coordination of activities
airline, truck, railroad: optimizing schedule, fueling, cargoes by using ,
groupware, videoconferencing: a networked “workflow” system.
Technology Development
support for research and development
CHINA(SPARK MIS)
Procurement
market knowledge (purchase price, exert pressure on --> supplier
Two broad categories:
Primary activities – relate directly to the value created in a product or service.
Support activities – make it possible for the primary activities to exist and remain coordinated N

37. Using Information Resources to Alter the Value Chain
The Value Chain model suggest that competition can come from two sources:
Lowering the cost to perform an activity and
Adding value to a product or service so buyers will be willing to pay more.
Lowering costs only achieves competitive advantage if the firm possesses information on the competitors’ cost structure
Adding value is a strategic advantage if a firm possesses accurate information regarding its customer such as: which products are valued? Where can improvements be made? When to …
Lowering the cost to perform an activity
-- Even though reducing isolated costs can improve profits temporarily, it does not provide a clear competitive advantage unless a firm can lower its costs below a competitors’. Doing so enables the firm to lower its prices so as to grow its market share.
Adding value to a product or service (DIFFERENTIATED)
-- deep understanding of how a customer obtains the product or service (p.44)
And WHEN to deliver products/services to customers? N

38. The Value System (Fig 2.5)
The value chain model can be extended by linking many value chains into a value system.
Much of the advantage of supply chain management comes from understanding how information is used within each value chain of the system.
This can lead to the formation of entire new businesses designed to change the information component of value-added activities.
The value system is a collection of firm value chains connected through a business relationship.
Opportunity also exists in the transfer of information across value chains.
Amazon – the new paradigm for Barnes and Noble and Borders means RETHINKING how their value chain works with the value offered to their customers through their traditional business.
Unlike the five competitive forces model, the focus of the value chain is on activities. Yet, in applying the value chain, competitive forces may be affected to the extent that the proposed technology may add value to suppliers, customers, or even competitors and potential new entrants. N

39. Interconnecting relationships between organizations
The Value System:
Interconnecting relationships between organizations
(1) IBM: also owns chip manufacturer, therefore, will affect its suppliers’ decisions regarding prices of chips
(2) Auto companies also own steel firms: will affect its suppliers’ decisions regarding prices of steel
The direction of flow of the goods is usually referred to as “downstream.”
Def. The value system is a collection of firm value chains connected through a business relationship.
The value chain for a company in a particular industry is embedded in a larger stream of activities that we term the “value system”.
The value system includes the value chains of suppliers, who provide inputs (such as raw materials, components, and purchased services) to the company’s value chain.
[Purpose] The company’s product often passes through its channels’ value chains on its way to the ultimate buyer.
Finally, the product becomes a purchased input to the value chains of its buyers, who use it to perform one or more buyer activities.
A company can create competitive advantage by optimizing or coordinating these links to the outside.
The company, suppliers, and channels can all benefit through better recognition and exploitation of such linkages. Every value activity has both a physical and an information-processing component.
The physical component includes all the physical tasks required to perform the activity.
The information-processing component encompasses the steps required to capture, manipulate, and channel the data necessary to perform the activity. Every value activity creates and uses information of some kind. E.g., logistics activity (p.152) and service activity
Value system analysis (p.218)
1) Name your price, 2) Find the best price, 3) affiliate marketing
Value chain analysis can be extended beyond the company to include other firms in the industry, such as suppliers and customers, in a “value system” analysis. E.g. revenue streams for websites can also be added potentially profitable opportunities in support services, infrastructure provision, security software and venture capital. The value system analysis is particularly useful in e-business as it can highlight one of the key strategic opportunities, restructuring an existing industry.
“Value innovation” meaning that strategy is driven by what is valued the customer without being constrained by existing industry rules. Since one of the most striking features of competition in e-business is that new entrants have often been able with limited resources to undermine existing competition in an industry through the use of new business models.
Downstream
value
Upstream
value
Firm
value N

40. BUSINESS FOCUS Customer centric What they need/want?
E-BUSINESS
Customer
centric
SCM
CRM
BPR
ERP
Demands
Products
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
Who are the customers?
Where are the customers?
Their purchasing habits
HOW TO REACH THEM?
IT/INTERNET/E-BUSINESS

41. CRM and the Value Chain
Customer Relationship Management (CRM) is a natural extension of applying the value chain model to customers.
CRM includes management activities performed to obtain, enhance relationships with, and retain customers.
CRM is a coordinated set of activities.
CRM can lead to better customer service, which leads to competitive advantage for the business. 41

42. Figure 2.7 Application of Value Chain Model
Activity
Zara’s Value Chain
PRIMARY ACTIVITIES
Inbound Logistics
IT-enabled Just-in-Time (JIT) strategy results in inventory being received when needed. Most dyes are purchased from its own subsidiaries to better support JIT strategy and reduce costs.
Operations
Information systems support decisions about the fabric, cut and price points. Cloth is ironed and products are packed on hangers so they don’t need ironing when they arrive at stores. Price tags are already on the products. Zara produces 60% of its merchandise in-house. Fabric is cut and dyed by robots in 23 highly automated Spanish factories.
Outbound Logistics
Clothes move on miles of automated conveyor belts at distribution centers and reach stores within 48 hours.
Marketing and Sales
Limited inventory allows low percentage of unsold inventory (10%); POS at stores linked to headquarters to track how items are selling; Customers ask for what they want and this information is transmitted daily from stores to designers over handheld computers.
Service
No focus on service on products
SUPPORT ACTIVITIES
Organization
IT supports tightly-knit collaboration among designers, store managers, market specialists, production managers and production planners.
Human Resources
Technology
Technology is integrated to support all primary activities. Zara’s IT staff works with vendor to develop automated conveyor to support distribution activities.
Purchasing
Vertical integration reduces amount of purchasing needed.
Figure 2.7 Application of Value Chain Model 42

43. Figure 2.7(b) Application of Value Chain Model
Activity
Grocery Chain’s Value Chain
Supplier’ Value Chain
Primary Activities
Inbound Logistics
Operations
Outbound logistics
Marketing and Sales
Service
Analysis of buying patterns suggest items should be stocked at local stores, including amounts and optimum delivery times
Automated checkout can speed checkout operations; may lead to reduced staffing of registers/ lower operating costs
Analysis of b. patterns can aid development of promotional strategies/ highlight customer preference
Automated checkout lanes shorten customer waiting times
Analysis of buying patterns can aid grocery chains in better determining demand, leading to better forecasting for both chain and supplier
Analysis of buying patterns can reduce ‘last-minute’ orders and improve suppliers processing of orders
Sharing analysis of buying patterns by grocery chain can aid supplier in scheduling
Suppliers may be able to offer economies of scale in its purchases
Sharing analysis of b. patterns allows better supplier service

44. Figure 2.7 (b) Application of Value Chain Model (cont.)
Activity
Grocery Chain’s Value Chain
Supplier’ Value Chain
Secondary (Support) Activities
Organization Human Resources
Technology
Purchasing
Staffing needs for cash registers may be reduces with automated checkout
Shopping card can provide data for market research
Grocery chain may be able to capture more discounts for volume purchases
Grocery chain can provide information to help supplier’s marketing research
Supplier chain may be able to capture more discounts for volume purchases

45. WHY CRM?
In this competitive age when product differentiation is difficult, CRM is one of the most valuable assets a company can acquire.
The sooner a company embraces CRM the better off it will be and the harder it will be for competitors to steal loyal and devoted customers.
CRM is more than just “Marketing” (what else?)
Q: What else?
Sales, Services etc.
How about IS/IT? IT is an enabler that empowers business operations efficiently, effectively or even innovatively.

46. CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH
CRM Business Drivers
Brother International experienced skyrocketing growth in its sales of multifunction printers
Along with skyrocketing sales growth came a tremendous increase in customer service calls
When Brother failed to answer the phone fast enough, product returns started to increase
Brother purchased, designed, developed, and deployed SAP’s CRM solution
The 1.8 million calls dropped to 1.57 million – reducing call center staff from 180 agents to 160 agents
The CRM system has also reduced call duration by an average of one minute, saving the company $600,000 per year
CLASSROOM EXERCISE
CRM AGAIN
Break your students into groups and ask them to identify how each of the “CRM business drivers” in the figure is supported by a CRM system
For example, how does CRM help an organization automate, increase productivity, and improve efficiency?
Ans: The Brother example mentioned above is a perfect example of how a CRM system can do all three of these things for an organization
The answers to these questions will vary and the goal of the activity is for students to understand the many different benefits an organization can gain through a CRM system

47. New Forces in Today’s Economy
Overcapacity and hypercompetition.
Overcapacity is 25% pharmaceuticals, 30% chemicals, 35% automobiles
Leads to falling prices and margins, mergers, and company failures
Ascendant power of customers.
Customer shortage
Price transparency
Ascendant power of distributors over manufacturers.
Growth of digitalization and the Internet as major sources of efficiency and profitability.
Proliferation of channels and media.
Globalization and global interdependence.
Kotler-2

48. Supply Chain Management
An approach that improves the way a company finds raw components it needs to make a product or service, manufactures that product or service, and delivers it to customers.
Technology permits supply chains of customer’s and supplier’s to be linked.
Requires collaboration and the IT to support the seamless connection.
Electronic marketplaces can be used to limit information sharing. 48

49. BASICS OF SUPPLY CHAIN
Organizations must embrace technologies that can effectively manage supply chains
CLASSROOM EXERCISE
(e.g., any potential pitfalls of erroneous or missing information [upstream flows], suppliers can react in near real-time to fluctuations in end-customer demand)
Supply Chaining
Break your students into groups and ask them to design a supply chain for an organization of their choice
Ask your students to try to choose an organization that is currently experiencing supply chain issues, perhaps an organization where the student has had recent issues, such as not receiving an order, receiving an incorrect order, or receiving someone else's order
Be sure to have them list the names of the suppliers, manufacturers, distributors, retailers, and customers
Ask the students to identify one or two areas where the organization can improve its supply chain
Have each group present their supply chains to the class along with their recommendations for improvement
Involvement
(integration)

50. FIVE BASIC SUPPLY CHAIN MANAGEMENT COMPONENTS
Best Buy checks inventory levels at each of its 750 stores in North America as often as every half-hour with its SCM system, taking much of the guesswork out of inventory replenishment
Supply chain management improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers
Plan – This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers (marketing, sales depts)
Source – Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.
Make – This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity.
Deliver – This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.
Return – This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products (service dept).
Plan
Source
Make
Deliver
Return

51. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN
IT’s primary role is to create integrations or tight process and information linkages between functions within a firm
Considerable evidence shows that this type of supply chain integration results in superior supply chain capabilities and profits.
Information technology – only recently have advances in IT made it possible to bring the idea of a truly integrated supply chain to life
CLASSROOM EXERCISE
Near Beer Supply Chain Game
This is an excellent exercise for students who are just learning about the supply chain.

52. The Resource-Based View
The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources.
Determining whether a firm’s strategy has created value.
Two subsets of information resources have been identified:
Those that enable firms to attain competitive advantage (rare and valuable resources that are not common place).
Those that enable firms to sustain competitive advantage over the long-term (resources must be difficult to transfer or relatively immobile). 52

53. Porter’s Model vs. Resource-Based View
Porter’s Model/Value Chain
Resource-Based View (RBV)
Competitive Advantage (CA)
Argues that aspects of the firm’s industry create sources of CA.
Maintains that CA comes from the information and other resources at the firm
Focus (what adds value to the firm)
Firm’s activities
Resources that firm can manage

54. More to be discussed on the topic of “Strategic IT Resources”

55. 4. Use the resource-based view as described in this chapter to describe how information technology might be used to provide and sustain a winning position for each of these businesses: (p.72)
Ans: The resource based view The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources. Two subsets of information resources have been identified: Those that enable firms to attain competitive advantage (rare and valuable resources that are not common place), and those that enable firms to sustain competitive advantage (resources must be difficult to transfer or relatively immobile). The question asks the student to describe how each of these 5 businesses might use information resources to add value to the activities of their company.
Global airline- they could utilize their global relationships to market strategically to customers through a CRM system that would be difficult to imitate because of their global reach. They could utilize IT talent from all parts of the world to create systems that are innovative and strategic in nature (specialized billing system for example).
Bank- provide a new service through their ATM machines that takes advantage of a service that is unique to that bank, and difficult to emulate.

56. 4. (cont.)
Web-based wine retailer – take advantage of its online presence to offer other services like wine recommendations, possibly creative cooking recipes, and other services that would enhance its services.
Local dry cleaner- a customer preference system could be set up that markets to customers that have not utilized the cleaner recently. Perhaps offer coupons to these customers, etc.
Appliance Service Firm- similar to the local dry cleaner, an IS system could be used that tracks repairs of appliances and determines which appliances seem to have problems with specific components. They could then use customer service to get feedback on these appliances and help customers to select appliances in the future that are more reliable, thus generating customer loyalty and service.

57. STRATEGIC ALLIANCES Upstream integration
Steel firms – lost some of their power as suppliers to automobile industry because some of automobile companies also owns steel firm
IBM – can make chip, therefore, it has more power when it negotiates with its suppliers
Downstream integration
1. Amazon.com (and now Airlines) can also deliver its products to customers directly without going thru the ‘Distribution Channel’, it, therefore, has more power to negotiate with the ‘Channels’ if needed.
2. Internet firms (e.g., Amazon.com) are integrating backward within the industry by creating their own information supply and reselling it to other Internet sites.

58. Strategic Alliances
An interorganizational relationship that affords one or more companies in the relationship a strategic advantage.
IT can help produce the product developed by alliance, share information resources across the partners’ existing value systems, or facilitate communication and coordination among the partners.
E.g., Delta recently formed an alliance with e-Travel Inc to promote Delta’s inline reservation system.
This helps reduce Delta’s agency fees while offering e-Travel new corporate leads.
Also, Supply Chain Management (SCM) is another type of IT-facilitated strategic alliance. 58

59. Aligning IS strategy with Business Strategy
Using multiple approaches to evaluating the strategic landscape is helpful in determining strategic opportunities.
Here, we look at three such approaches:
Porter’s five forces model of the competitive advantage of firms
Porter’s value chain model of internal organizational operations
and strategic option generator (results in nine possible major options to secure a competitive advantage)
Two views that can help G.M. align IS strategy with business strategy (provide a G.M. with varied perspectives from which to identify strategic opportunities to apply the firm’s information resources)
Porter’s five forces model
-- look at the major influences on a firm’s competitive environment
-- Information resources should be directed strategically to alter the competitive forces to benefit the firm’s position in the industry.
Porter’s value chain model
--assess the internal operations of the organization and partners in its supply chain
--Information resources should be directed at altering value-creating or value-supporting activities of the firm.
Wiseman’s theory of strategic thrusts (results in nine possible major options to secure a competitive advantage) - three targets: suppliers, customers and competitors; - three strategic thrusts: cost, differentiation, and innovation
[cost thrust: 1) to reduce or avoid your costs vis-à-vis S,C, or comp, 2) help your S or C reduce or avoid their costs so that you gain preferred treatment from these stakeholders, 3) increase your competitor’s costs.]
[differentiation thrust: 1) reduce the differentiation advantages that S, C, comp enjoy vis-à-vis your organation, or 2) increase the differentiation you enjoy vis-à-vis your S,C or comp]
[innovation thrust: to find new ways of doing business thru the use of IS – transform steps on an existing industry chain (value-added), diversify into new industries or markets, redefine the existing business or create new businesses]
Defense or offense perspective - Are there opportunities to employ IS offensively to increase an edge or defensively to reduce an edge now held by one of the targets?
Wiseman’s theory of strategic thrusts N

60. Wiseman’s theory of strategic thrusts and strategic option generator
I. Major options to secure a competitive advantage
II. Option Generator
1. What is our strategic target?
2. What strategic thrust can be used against the target?
3. What strategic mode can be used?
4. What direction of thrust can be used?
5. What IS skills can we use?
Suppliers
Customers
Competitors
Differen-
tiation
Cost
Option generator:
What is our strategic target?
suppliers/customers/competitors
2. What strategic thrust can be used against the target?
differentiation/cost/innovation
3. What strategic mode can be used?
offensive/defensive
4. What direction of thrust can be used?
usage/provision
5. What IS skills can we use?
processing/storage/transmission
Source: Creating competitive weapons from IS- C. Wiseman and I.C. MacMillan
Innovation

61. Types of Strategic Alliances
Supply Chain Management: improves the way a company finds raw components that it needs to make a product or service.
Technology, especially Web-based, allows the supply chain of a company’s customers and suppliers to be linked through a single network that optimizes costs and opportunities for all companies in the supply chain
Wal-Mart and Proctor & Gamble.
Virtual Corporations: is a temporary (virtual) network of suppliers, customer and even rivals linked by IT to share skills, cost and access to each others’ markets
: a new strategy whereby companies cooperate and compete at the same time with companies in their value net
Covisint and General Motors, Ford, and DaimlerChrysler.
Supply Chain Management
-- by sharing information across the network, guesswork about order quantities for raw materials and products can be reduced and suppliers can make sure they have enough on hand if demand for their products unexpectedly rises.
-- Collaboration paid off for SCM partners Wal-Mart and P&G:
1) INTEGRATED system automatically alert P&G to ship more P&G products when Wal-Mart’s distribution centers run low.
2) SCM system also allows P&G to monitor shelves at individual Wal-Mart’s stores through real-time satellite linkups
-- Because high volumes and operating efficiencies derived from the SCM, P&G can offer discounted prices to help Wal-Mart offer its “low, everyday prices.”
Virtual Corporations
-- The type of environment in which virtual corporation THRIVE (prosper) is the same that underlies the concept of hypercompetiton.
-- B2B emerging then disbanded virtual corp. (e.g., companies in the metals industry, Kaiser Aluminum)
Co-opetition
-- value net includes a company and its competitors, complementors, as well as its customers and suppliers, and interactions among all of them.
-- is the strategy for creating the best possible outcome for a business by optimally combining competition and cooperation.
Co-opetition N

62. Summary of Key Strategy Frameworks
Usefulness in Information Systems
Discussions
Framework
Key Idea
Porter’s generic
strategies
framework
Firms achieve
competitive advantage
through cost leadership,
differentiation, or
focus.
Understanding which strategy is chosen
by a firm is critical to choosing IS to
complement that strategy.
Speed and aggressive
moves and counter-
moves by a firm
create
competitive advantage.
The 7-S’s give the manager suggestions
on what moves and counter moves to
make and IS are critical to achieve the
speed needed for these moves.
D’Aveni’s
hypercompetition
model
Brandenberg and
Nalebuff’s
co-opetition model
Companies cooperate
and compete at the
same time.
Being cooperative and competitive at the
same time requires IS that can manage
these two roles.

63. Virtual Companies (Portable Computing)
A Virtual Company is an Organization composed
of several Business Partners that Uses
Information Technology to Link/Share People,
Assets, Ideas, Costs, and Resources
for the purpose of producing a product or service.
Virtual Companies are Adaptable and Opportunity-
Exploiting Organizations Providing World-Class
Excellence in Their Competencies and
Technologies.

64. Characteristics of Virtual Companies
Excellence
Borderless
Adaptability
Six
Characteristics
of Virtual
Companies
Opportunism
“Virtual corporations” - organizations comprising many small, independent agents (or firms) serving as nodes on an information network, thereby allowing small, entrepreneurial units to achieve dramatic increases in scope and scale.
A Virtual Company is an Organization composed of several Business Partners that Uses Information Technology to Link/Share People, Assets, Ideas, Costs, and Resources for the purpose of producing a product or service.
Virtual Companies are Adaptable and Opportunity- Exploiting Organizations Providing World-Class Excellence in Their Competencies and Technologies.
(Excellence, Adaptability, Borderless, Opportunism, Technology, Trust-Based)
Such arrangements challenge both our legal and social definitions of an organization.
Just as IT has radically altered how we view the relationships between firms, it also challenges our notion of relationships within them -- telework, telcommute
creates (conditions)
IT > Changes
>
manages (as a tool)
(p.352)
Trust-Based
Technology N

65. Copyright 2010 John Wiley & Sons, Inc.
RISKS 65
Copyright 2010 John Wiley & Sons, Inc. 65

66. Potential Risks
There are many potential risks that a firm faces when attempting to use IT to outpace their competition.
Awakening a sleeping giant – a large competitor with deeper pockets may be nudged into implementing IS with even better features
Demonstrating bad timing – sometimes customers are not ready to use the technology designed to gain strategic advantage
Implementing IS poorly – information systems that fail because they are poorly implemented
Failing to deliver what users want – systems that don’t meet the firm’s target market likely to fail
Web-based alternative removes advantages – consider risk of losing any advantage obtained by an information resource that later becomes available as a service on the web
Running afoul of the law – Using IS strategically may promote litigation
When IS are chosen as the tool to outpace their firm’s competitors, executives should be aware of the many risks that may surface.
Awakening a sleeping giant
-- FedEx (trace the transit and delivery info.) -(nudge) UPS
Demonstrating bad timing
s Pen-based computing (now, PDA)
-- too early to enter the market and become a test site for a new IT
Implementing IS poorly: originally not only streamline the supply chain communication, but also lower operating costs
-- 1) Nike implemented the system beyond the software supplier (i2) suggestions - failed
-- 2) Hershey brought the complex system up too quickly
Failing to deliver what users want
-- e-Grocers (Streamline.com, WebVan) home delivery once every week: less frequent and customers would like to inspect the produce when bags were dropped off (culture, life style)
Running afoul of the law N

67. Relationship between profits and time of market introduction
300
Profits relative to competitions (%)
250
200
150
100
Speed of Change (p.225)
Apart from the instability of the market, one of the greatest challenges for firms engaged in e-commerce is the sheer speed of change.
Speed is all the more critical in the case of Internet start-ups that need to match the “burn rate”, the rate at which the firm uses up its initial financing, or where the company needs to capture a large share of the market quickly before competitors catch up.
Speed to market is also important where products rapidly become obsolete. In consumer electronics, if a firm is able to launch a product 6 months earlier than it rivals, this result in profits that are three (3) times as large over its lifetime; however, a product that is 6 months later than its rivals earns negligible profits (p.227) 50
Time of market introduction relative to competition (months)
Figure (p.227)

68. Keen’s Six-Stage Competitive Advantage Model
Stimulus for action
First major move
Customer acceptance
Competitor catch-up moves
First-mover expansion moves
A well-known competitive advantage model suggests a six-stage sequence for tracking the life cycle of a technical innovation.
A problem or opportunity that might be addressed by an innovative application of technology is identified.
An organization (or multiple competitors) makes a first move by creating and implementing an appropriate solution, a significant investment that carries considerable risk – may create substantial profits and opportunities
customer acceptance, determines the investment’s success or failure.
4-a) if customers like the innovation, the first mover gains a CA and its competitors launch catch-up moves.
4-b) 1st mover expansion moves attempt to extend or sustain the CA - moves in a PERPETUAL cycle
5) NO one enjoys a CA, but not having the (outdated) innovation puts a company at a competitive DISADVANTAGE.
Commoditization N

69. When to Perform Activities
First Movers
Advantages
Build brand recognition
Control scarce resources
Establish networks
Early Economies-of-Scale
Disadvantages
Newer technology
Higher development costs
Reverse engineering by competitors

70. The new technology adoption curve
Impact
Readiness
Intensification
Level of Activity
The adoption and impact of a technical innovation often follows a three-stage S-curve.
Readiness (Keen’s 1,2,3) growth is slow as the technology gains acceptance and useful applications begin to evolve.
Eventually, those new apps intensify acceptance of the new technology which fuels further innovation (4-a, 4-b). During this stage, the new technology begins to influence how companies do business.
During final impact stage, the technology becomes mainstream (commoditization)
Q? (is just entering intensification stage) If they are right, its full impact has yet to be determined.
Which stage is the current e-Business?
Time

71. FOOD FOR THOUGHT: CO-CREATING IT AND BUSINESS STRATEGY
In the Internet economy, the pace of technological change continues to accelerate.
Classical strategic advantages are created and destroyed based on - take time to develop and implement
Which actions competitors take, 2) how soon they take them, and 3) how long each action takes
At strategic level, the organization is confronted with increasing flows of information between itself, its stakeholders environment, and competitors.
The combination of technology and information enables each of these information “partners” to quickly change its expectations of the future.
Information resources are the key to achieving a time-based advantage. Understanding how to use them is critical to the strategic success of business today. 71

72. Co-Creating IT and Business Strategy
Is FedEx a package delivery company?
What happens if FedEx’s IS goes down?
What is the core of FedEx?
Information is increasingly a core component of the product or service offered by the firm.
IT strategy is business strategy – they cannot be created without each other.
Some company’s main product is information (financial services).
FedEx can not function without IT even though they are primarily a package delivering company.
In the Internet economy, the pace of technological change continues to accelerate.
Classical strategic advantages are created and destroyed based on - take time to develop and implement
Which actions competitors take, 2) how soon they take them, and 3) how long each action takes
At strategic level, the organization is confronted with increasing flows of information between itself, its stakeholders environment, and competitors.
The combination of technology and information enables each of these information “partners” to quickly change its expectations of the future.
Information resources are the key to achieving a time-based advantage. Understanding how to use them is critical to the strategic success of business today. 72

73. SUMMARY 73

74. Summary
Using IS for strategic advantage requires more than just knowing the technology.
Remember that not just the local competition is a factor in success but the 5 competitive forces model reminds us of other issues.
Value chain analysis show us how IS add value to the primary activity of a business.
Know the risks associated with using IS to gain strategic advantage. 74

75. End of Chapter 2