1. Eleventh Edition 1 Introduction to Information Systems Essentials for the Internetworked E-Business Enterprise Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. C h a p t e r James A. O’Brien 2 Competing with Information Technology

2. Eleventh Edition James A. O’Brien 2 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business. Identify several strategic uses of information technology for electronic business and commerce, and give examples of how they give competitive advantages to business. Give examples of how business process reengineering frequently involves the strategic use of e-business technologies. Chapter Objectives

3. Eleventh Edition James A. O’Brien 3 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Identify the business value of using e-business technologies for total quality management, to become an agile competitor, or to form a virtual company. Explain how knowledge management systems can help a business gain strategic advantages. Chapter Objectives

4. Eleventh Edition James A. O’Brien 4 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Competitive Environment Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes

5. Eleventh Edition James A. O’Brien 5 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Fundamental Competitive Strategies - Cont. Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Cost Leadership Strategies

6. Eleventh Edition James A. O’Brien 6 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Uses of Information Technology Improving Business Process Promote Business Innovation Locking in Customers and Suppliers Use IT to reduce costs of doing business Use IT to improve quality Use IT to link business to customers and suppliers Use IT to create new products or services Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Strategy IT Role Outcome

7. Eleventh Edition James A. O’Brien 7 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Uses of Information Technology Raise Barriers to Entry Build a Strategic IT Platform Build a Strategic Information Base Increase amount of investment or complexity of IT needed to compete Use IT to provide information to support firm’s competitive strategy Leverage investment in IS resources from operat- ional uses to strategic uses Increase Market Share Create New Business Opportunities Enhance Organizational Collaboration Strategy IT Role Outcome

8. Eleventh Edition James A. O’Brien 8 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Value Chain Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources Inbound Logistics Inbound Logistics Operations Outbound Logistics Outbound Logistics Marketing and Sales Marketing and Sales Customer Service Customer Service Competitive Advantage

9. Eleventh Edition James A. O’Brien 9 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Internet Value Chain Marketing and Product Research Sales and Distribution Support and Customer Feedback Data for market research, establishes consumer responses Access to customer com- ments online Immediate re- sponse to customer problems Low cost distribution Reaches new customers Multiplies contact points Increase Market Share Lower Cost Margins Enhanced Customers Satisfaction Internet Capability Benefits to Company Opportunity for Advantage

10. Eleventh Edition James A. O’Brien 10 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Positioning of Internet Technologies Global Market Penetration E-Commerce Website Value-added IT Services Product and Services Transformation E-Business; Extensive Intranets and Extranets Cost and Efficiency Improvements E-Mail, Chat Systems Performance Improvements in Business Effectiveness Intranets and Extranets Strategy Solution Low High Customer Competition Connectivity E-Business Processes Connectivity Internal Drivers External Drivers

11. Eleventh Edition James A. O’Brien 11 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Customer-Focused e-Business Let customers place orders thru distribution partners Transaction Database Link Employees and distribution partners Let customers check order history and delivery status Let customers place orders directly Customer Database Build a community of customers, employees, and partners Give all employees a complete view of customers

12. Eleventh Edition James A. O’Brien 12 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Business Reengineering and Quality Management Business Quality Improvement Business Quality Improvement Business Reengineering Business Reengineering Definition Target Potential Payback Potential Payback Risk What Changes? Primary Enablers Primary Enablers Incrementally Improving Existing Processes Radically Redesigning Business Systems Any Process Strategic Business Processes 10%-50% Improvements 10-Fold Improvements Low High Same Jobs - More Efficient Big Job Cuts; New Jobs; Major Job Redesign IT and Work Simplification IT and Organizational Redesign

13. Eleventh Edition James A. O’Brien 13 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Customer- Focused Agile Competitor Leverage the Impact of People and IS Resources Accessibility Delivery Time Customer’s time to market Anticipation of future needs Customization Conformance Cost of Transaction Cost of Value-added Services Give Customers Solutions to Problems Give Customers Solutions to Problems Cooperate with Business Partners and Competitors Cooperate with Business Partners and Competitors Organize to Master Change Organize to Master Change

14. Eleventh Edition James A. O’Brien 14 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Borderless Technology Excellence Trust-Based Adaptability Opportunism Six Characteristics of Virtual Companies Virtual Corporations

15. Eleventh Edition James A. O’Brien 15 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Knowledge Management Systems Solution Knowledge Development Engineers Technical Support Staff Product Managers Other Vendors Customers The Internet Intranet

16. Eleventh Edition James A. O’Brien 16 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Information systems can play several strategic roles in business. The Internet, intranets, extranets, and other Internet-based technologies can be used strategically for e-business and e-commerce that provide a competitive advantage. A key strategic use of Internet technologies is to build an e-business which develops its business value by making customer value its strategic focus. Chapter Summary

17. Eleventh Edition James A. O’Brien 17 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness. IT can be strategically used to improve the quality of business performance. A business can use IT to help it become an agile company, that can respond quickly to changes in its environment. Chapter Summary (cont)

18. Eleventh Edition James A. O’Brien 18 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Chapter Summary (cont) Forming virtual companies has become an important competitive strategy in today’s dynamic global market. Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations.