CHAPTER OUTLINE 2.1 Business Processes 2.2 Business Process Reengineering and Business Process Management 2.3 Business Pressures, Organizational Responses, and Information Technology Support 2.4 Competitive Advantage and Strategic Information Systems 2.5 Business – Information Technology Alignment
Learning Objectives 1.Understand the concept of business processes, and provide examples of business processes in the functional areas of an organization. 2.Differentiate between the terms business process reengineering and business process management. 3.List and provide examples of the three types of business pressures, and describe one IT response to each.
Learning Objectives (continued) 4.Identify the five competitive forces described by Porter, and explain how the Web impacts each one. 5.Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage. 6.Define business – information technology alignment, and describe the characteristics of effective alignment.
BP Had $3 billion budget (targeted to be reduced by $800 million 4,200 IT employees 8,500 software applications
What Happened at BP 1,000 of 1,900 contract workers were eliminated The business unit CIOs had to double report – to the BP CIO and also to the business unit leader Since much of the IT applications were contracted, they were re-bid and BP ended up with 5 major vendors 80% of the top IT leadership was replaced The BP case demonstrates the need to have the right person lead an IT organization
Competitive Advantage an advantage over competitors in some measure such as cost, quality, or speed; leads to control of a market and to larger-than-average profits.
Porter’s Value Chain 1. Rivalry among existing firms in the industry 2. Threat of entry by new competitors 3. Bargaining power of customers 4. Bargaining power of suppliers 5. Threat of substitute products
Competitive Advantage Photodisc/Getty Images, Inc.
2.1 Business Processes Business Process a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers Cross-Functional Business Processes one in which no single functional area is responsible for its execution
Example of Business Process (Figure 2.1) The next slide shows an example of a business process: Ordering an E-ticket from an airline Web site Table 2.1 on page 36 depicts many common business processes
Notify Traveler Receive Ticket Order Reserve Seats Charge Credit Card Confirm Flight(s) Issue e-Ticket Plan Trip Check Flights Submit Ticket Order Receive e-Ticket Seats Available Use Credit Card? Charge OK? Seats Available ? Notify Traveler Frequent Flyer Mileage Sufficient? Subtract Mileage NO YES NO YES NO YES NO YES Traveler Airline Web Site YES NO
2.2 Business Process Reengineering and Business Process Management Business Process Reengineering a radical redesign of a business process that improves its efficiency and effectiveness, often by beginning with a “clean sheet” Business Process Management a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes
2.3 Business Pressures, Organizational Responses, and IT Support Business Pressures Market/Competition Technology Societal Economic Legal Political
Business Pressures, Organizational Responses, and IT Support In this class we focus on IT issues
Christopher Columbus Globalization 1.0 * 1492 to 1800 * World went from large to medium-size * All about countries and muscles * Key agents of change: brawn and horsepower
Steam engine Railroads Globalization 2.0 * 1800 to 2000 * World has shrunk from medium to small-size * Key agent of change: multinational companies * First half: global integration powered by falling transportation costs (steam engine and railroad) * Second half: global integration powered by falling telecomm costs (telephone, PC, satellites, fiber-optic cable)
Threat of entry of new competitors is high when it is easy to enter a market and low when significant barriers to entry exist. A barrier to entry is a product or service feature that customers expect from organizations in a certain industry. For most organizations, the Internet increases the threat that new competitors will enter a market.
Porter’s Competitive Forces Model The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices. Internet impact is mixed. Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers. On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers.
Porter’s Competitive Forces Model The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices. Internet increases buyers’ access to information, increasing buyer power. Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere. This also increases buyer power.
Porter’s Competitive Forces Model The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes. Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently.
Porter’s Competitive Forces Model The rivalry among firms in an industry is high when there is fierce competition and low when there is not.
Porter’s Value Chain Model This model identifies specific activities where organizations can use competitive strategies for greatest impact. Primary activities Support activities those business activities that relate to the production and distribution of the firm’s products and services, thus creating value for which customers are willing to pay. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and customer service do not add value directly to a firm’s products and services, but support the primary activities. Support activities include accounting, finance, management, human resources management, product and technology development (R&D), and procurement
Chapter Closing Case The Problem The Solution The Results Consider the process of students registering for a course. 1)Who are the main entities? 2)What is to be accomplished? 3)How do you know when a solution is attained? 4)When is the process complete?
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