Presentation on theme: "Why study Strategic Information Systems?"— Presentation transcript:
1 Why study Strategic Information Systems? Technology is no longer an afterthought in forming business strategy, but the actual cause and driver.IT can change the way businesses compete.Information systems are a means of organizational restructuring to allow organizations to adaptInformation Systems are a necessary investment in technologies that help a company adopt strategies and business processes that enable it to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment.
2 What’s the difference? What is a strategic IS? Any kind of information system that uses information technology to help an organization gain a competitive advantage, reduce a competitive disadvantage, or meet other strategic enterprise objectives.These systems provide Competitive Advantage as opposed to Competitive NecessityWhat’s the difference?
3 What is the difference between competitive advantage and competitive necessity? developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forcesCompetitive Necessityproducts, services, processes, or capabilities that are necessary simply to compete and do business in an industry
4 Factors Influencing Competitive Forces Factors shaping the structure of competition in its industry.Number CompetitorsIntense rivalry if many companiesCompetitorsRivalryGrowth PotentialIncreased rivalry if growth potential and high profitsThe competitive forces model includes rivalry of competitors within its industry, threat of new entrants, threat of substitutes, the bargaining power of customers, and the bargaining power of suppliers.CapacityPrivate Space Shuttles v. AirlinesComplexityGenetic Research v. Hot Dog Stands
5 Factors Influencing Competitive Forces Factors discouraging/encouraging new competitorsEconomies of ScaleProduction of large outputs at lower costs than smaller rivalsNew EntrantsProprietary ProductsCPUs v. 7-11CompetitorsRivalryBrand IdentityCoca-Cola v. Top SoilDistribution ChannelsEasy Access?Profit MarginSupermarkets v. Jewelry StoresGovernment PolicyNetwork Broadcasting v. Lemonade StandsRetaliationOperating Systems v. Slide-rule manufacture
6 Factors Influencing Competitive Forces Factors influencing supplier powerConcentrationDeBeers v. Diing SenNew EntrantsDifferentiation (branding)Rolls RoyceVolumeIs the industry vital to the supplier?CompetitorsRivalryVendorsSwitching CostsMicrosoft for Linux?Can suppliers easily find new customers?
7 Factors Influencing Competitive Forces Factors influencing buyer powerbuyer concentration to firm concentration ratioMany buyers/Few SuppliersNew EntrantsInformationSurfers v. unaware Customers.CompetitorsRivalryVendorsBuyersImportance of volumeCalpersNecessary (electricity) v. impulse buyingPrice Sensitivity
8 Factors Influencing Competitive Forces Factors influencing SubstitutesSwitching CostsDVD v. VCRNew EntrantsBuyer inclination to substituteiPodCompetitorsRivalryVendorsBuyersPrice-PerformanceDoes it give a good ‘bang for the buck?”SubstitutesHeating (necessary) v. impulse buyingTrade-off substitutes
9 What Competitive Strategies are available? Cost LeadershipBecoming a low-cost producer of products and servicesFinding ways to help suppliers and customers reduce their costsIncrease costs of competitorsExample?Know the competitive strategies.
10 What Competitive Strategies are available? DifferentiationDeveloping ways to differentiate a firm’s products and services from its competitors’Reduce the differentiation advantages of competitorsExamples?
11 What Competitive Strategies are available? InnovationDevelopment of unique products and servicesEntry into unique markets or market nichesMaking radical changes to the business processes for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industryExamples?
12 What Competitive Strategies are available? GrowthSignificantly expanding a company’s capacity to produce goods and servicesExpanding into global marketsDiversifying into new products and servicesIntegrating into related products and servicesExamples?electrical and electronic equipment, plastics, aircraft engines, medical imaging equipment, and financial services
13 What Competitive Strategies are available? AllianceEstablishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companiesExamples?Proctor and Gamble
14 How does that work?In the early 1990’s, Wal-Mart invited its major suppliers to jointly develop powerful supply chain partnershipsThe Wal-Mart/Procter & Gamble (P&G) alliance incorporated vendor-managed inventory, category management, and other inter-company innovations.For example, P&G monitors and replenishes all of the merchandise at Wal-Mart Stores (Wal-Mart does not place any orders, although occasionally it reviews P&G’s orders)Based on in-store sales, P&G also modifies it product mixThe outcome has been increased sales and JIT inventory, resulting in increased sales/profits for both Wal-Mart and P&G
16 Additional Competitive Advantage Tactics Locking in customers or suppliers:McKesson Drugs, as well as others, have developed their own proprietary automated dispensing and reporting systems along with consulting services to deepen their relationships with clients.Airlines and hotels have benefited from frequent flier and frequent guest (Loyalty) programsKey Competitive Strategies:Locking in customers.Building switching costs which make customers or suppliers dependent on them for the continued use of innovative, mutually beneficial inter-organizational information systems.Raising barriers to entry.These programs are possible because companies keep more information about their customers' historical purchasing patterns. Retailers collect detailed information on individual customers' buying patterns. These methods require tracking individual customer purchases over time, establishing accounts for each
17 Additional Competitive Advantage Tactics Locking in customers or suppliers:Building switching costs:A firm’s customers or suppliers are reluctant to pay the costs in time, money, effort, and inconvenience that it would take to switch to a company’s competitors.The benefits (of Frequent Flier/Frequent guest programs) become part of the total switching costs: Either the customer loses them (a customer switching cost) or the new carrier matches them (a supplier switching cost).
18 Additional Competitive Advantage Tactics Locking in customers or suppliers:Building switching costs:Raising barriers to entry:Without the technology in use by the industry (e.g., ATMs) new entrants would be at a severe disadvantage
19 Additional Competitive Advantage Tactics Locking in customers or suppliers:Building switching costs:Raising barriers to entry:Leveraging investment :Using investments in information technology that have developed new products and services that can not be duplicated without a strong IT capability.Leveraging investment in information technology aids in building strategic information resourcesFor example, the use of intranets and extranets which enables them to leverage previous investments in web browsers, PCs, servers and client-server networks.
20 JetBlue Airlines Another example of SIS At a time when airlines (especially low-cost airlines) have failed JetBlue (founded 1999) has prospered.2009 Revenues: $3.286 billionLeveraging investment in information technology aids in building strategic information resourcesJD Powers 2010 rankings of low-cost carriers:1. JetBlue Airways2. Southwest Airlines3. WestJet4. AirTran Airways5. Frontier Airlines
21 Some Reasons Another example of SIS Combination reservation system and accounting systemSupports customer services and sales trackingElectronic ticketsNo paper handling or expenseEncourages online ticket purchasesAvoids travel agentsLeveraging investment in information technology aids in building strategic information resourcesSignificant cost savingsAutomated Maintenance SystemsLogs all airplane parts and time cyclesReduced tracking costs
22 Some Reasons Another example of SIS Flight planning software Maximize seats occupied on a flightReduced planning costsIn-house software for tracking operational dataUpdated on a flight by flight basisSystems are accessible by all employeesLeveraging investment in information technology aids in building strategic information resourcesEmployees are given wireless devices so they can Report and respond to irregular eventsAll training records are stored electronicallyDo not use the hub and spoke routing
23 Some Reasons Another example of SIS Paperless Cockpits Pilots provided with laptopsLive TV through contract with DirecTVExcellent on-schedule arrivals/departuresFewest mishandled baggageRapid check-in timesLeveraging investment in information technology aids in building strategic information resourcesPartnershipIn 2009, signed a 6 year strategic agreement with Verizon Business to manage its IT data center and network needs, as well as provide security and IT consulting services.
24 Business that: Such as? Customer Focused Businesses provide top-quality customer servicerespond to customer interests and concernsanticipate customers’ future needsSuch as?Consider Hilton Hotels Reservations World-Wide (HRW)2,400 hotels in 65 Countries31M calls, 9M reservations annuallyAverage time to complete reservation: less than 2 minutes
25 How? OR Customer Orders Placed Directly Distribution Partner Orders (e.g., Expedia, Priceline)ORBuild Web Community (Customers, Providers, Partners)Customer DatabaseTransaction DatabaseCreate/Revise as necessaryView customer InformationCheck/Revise ReservationPersonalize ServiceCustomers and Distribution PartnersEmployees(Intranet/Extranet)(Internet/Extranet)(Internet/Extranet)
26 Value ChainsViewing a firm as a series, chain, or net-work of basic activities that add value to its products and services, and thus add a margin of value both to the firm and its customers.Primary processes add to revenues (Line)Support Processes are intended to assist primary processes (Staff)
27 Value Chains and Strategic IS Examples of applying information technologies to business processes using the value chain network: Collaborative workflow intranet based system to increase the communications and collaboration needed to dramatically improve administrative coordination and support services.Computer aided engineering and design extranets to enable a company and its business partners to jointly design products and processes.Career development intranet that can help the human resources management function provide employees with professional development training programs.
28 Using IT for Strategic Advantage Organizational RedesignThe use of self-directed cross-functional or multidisci-plinary process teamsBusiness Process ReengineeringFundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service.
30 Agile Companies Agility is the ability to prosper: In rapidly changing, continually fragmenting global marketsBy selling high-quality, high-performance, customer-configured products and servicesBy using Internet technologies to integrate and manage business processes.An agile company profits in spite of:Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.Broad product rangesShort model lifetimesArbitrary lot sizes
31 Agile CompaniesSupport mass customization: Providing individualized products while maintaining high volumes of production.Presents products as solutions to customers’ problemsCooperates with customers, suppliers and competitorsBrings products to market as quickly and cost-effectively as possibleAgility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.Organizes to thrive on change and uncertaintyLeverages the impact of its people and the knowledge they possess
33 IT and Agile CompaniesForming a virtual company can be one of the most important strategic uses of information technology.A virtual company is an organization that uses information technology to link people, organizations, assets, and ideas.A virtual company uses the Internet, intranets, and extranets to form virtual workgroups and support alliances with business partners.
34 Creating a virtual company An organization that uses information technology to link people, organizations, assets, and ideas.Creation of Interenterprise Information Systems:Information systems implemented on an extranet among a company and its suppliers, customers, subcontractors, and competitors with whom it has formed alliances.Forming a virtual company can be one of the most important strategic uses of information technology.A virtual company is an organization that uses information technology to link people, organizations, assets, and ideas.A virtual company uses the Internet, intranets, and extranets to form virtual workgroups and support alliances with business partners.
35 Virtual company strategies Share infrastructure and risk with alliance partners.Link complementary core competenciesReduce concept-to-cash time through sharing.Increase facilities and market coverage.Gain access to new markets and share market or customer loyalty.Migrate from selling products to selling solutionsExample?
36 Virtual company strategies Cisco SystemsThe world’s largest supplier of telecom-munications product; manufacturer of noneOnline orders arrive simultaneously at Cisco (San Jose) and Jabil Circuit (St. Petersburg, FL).Jabil builds the product from 3 on-site warehouses: 1 owned by Jabil, 1-owned by Cisco, 1 owned by Hamilton StandardProduct is tested, checked against the order (at Cisco) and shipped (by Jabil)Jabil and Hamilton Standard send bills to CiscoCisco sends bill to customer
37 Knowledge Creation Companies “learning organizations” or “organizational learning”Creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.What does “knowledge” mean?Includes processes, procedures, patents, reference works, formulas, best practices, forecasts, and fixesKnowledge-creating companies or learning organizations consistently create new business knowledge, disseminate knowledge widely throughout the company and quickly build new knowledge into products and services.Explicit knowledge is data, documents, things written down or stored on computersExplicit knowledge: data, documents, things written down or stored on computersTacit knowledge: the “how-tos” of knowledge, which reside in workers
38 Knowledge Management Systems (KMS) Manages organizational learning and know-howHelps knowledge workers create, organize, and make available important knowledgeMakes this knowledge available wherever and whenever it is neededKnowledge-creating companies or learning organizations consistently create new business knowledge, disseminate knowledge widely throughout the company and quickly build new knowledge into products and services.Explicit knowledge is data, documents, things written down or stored on computers
40 SummaryInformation technologies can support many competitive strategies including cost leader-ship, differentiation, innovation, growth and allianceIT can helpBuild customer-focused businessesReengineer business processesBusinesses become agile companiesCreate virtual companiesBuild knowledge-creating companies
41 ??? Any Questions ???You Moron!!I know Evrythin!!!