INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE BIS Chapter

Business Processes and Information Systems  In order to operate, businesses must deal with many different pieces of information about suppliers, customers, employees, invoices and payments and of course their products and services.  They must organize work activates that use this information to operate efficiently and enhance the overall performance of the firm.  Information systems make it possible for firms to a manage all their information, make better decisions and improve the execution of their business processes

Business Processes and Information Systems  Information systems are all about improving business processes which lie at the very heart of a business.  So it is important to understand just what is meant by business processes.  Business processes refer to the manner in which work is organized, coordinated, and focused to produce a valuable product or service.  Business processes are workflows of material, information and knowledge and set of activities.

Business Processes  Business processes also refer to the unique ways in which organizations coordinate work, information, and knowledge, and the ways in which management chooses to coordinate work.  Every business can be seen as a collection of business processes.

Business Processes  To a large extent, the performance of a business firm depends on how well its business processes are designed and coordinated.  Many business processes are tied to a specific functional area, such as sales and marketing, E.g. the sales and marketing would be responsible for identifying customers and the human resources function would be responsible for hiring employees

Examples of Business Processes. 6 IS. CSC 1203

Cross-functional process  Many business processes are cross- functional, transcending the boundaries between sales, marketing, manufacturing, and accounting.  Information systems support these cross- functional processes as well as processes for the separate business functions

Cross-functional process. The order fulfillment process. Generating and fulfilling an order is a multistep process involving activities performed by the sales, manufacturing and production, and accounting functions

Cross-functional process  Information systems can help organizations achieve great efficiencies by automating parts of these processes or by helping organizations rethink and streamline these processes.  Redesigning business processes requires careful analysis and planning. When systems are used to strengthen the wrong business model or business processes, the business can become more efficient at doing what it should not do.  As a result, the firm becomes vulnerable to competitors who may have discovered the right business model.

How Information Technology Enhances Business Processes  Information systems enhance business processes in primarily two ways:  Increasing the efficiency of existing processes  Enabling entirely new processes that are capable of transforming the business

Using Information Systems to achieve Competitive Advantage  Firms with a competitive advantage over others typically – have access to special resources that others do not – or are able to use resources more efficiently, resulting in higher revenue growth, profitability, or productivity growth (efficiency), all of which ultimately in the long run translate into higher stock market valuations than their competitors.

Strategic Information Systems  SIS are computer systems at any level of the organization that change goals, operations, products, services, or environmental relationships to help the organization gain a competitive advantage.  Used to achieve strategic goals of an organization.  Are any information system (ESS, OAS, TPS, KWS) that changes the goals processes, products or environmental relationships to help an organization gain competitive advantage or reduce a competitive disadvantage.

Competitive Advantage & IS Robson (1997) states that in order to decide whether IS falls to the inner circle, ‘strategic ’: – IS activities should be critical to the daily operation of the organisation – The planned applications should be critical for the future competitiveness of the organisation – Products and functional areas of the business should have a high intensity of information

Competitive Advantage & IS  With the variety of technologies, methods, and tools available today, organizations can find the ‘best way’ to select the most promising and suitable prospects which will yield competitive advantage to them  Despite the approach they take, competitive advantage is not a given. Even when a competitive position has been achieved, organizations need to realize that sustaining it over a period of time requires further planning and innovative approaches  Planning for IS that will enable an organization to achieve a competitive position in the market is known as IS strategy planning 

Competitive Advantage What is meant by ‘Competitive Advantage’? “An advantage over a competitor such as lower cost or quicker deliveries” (Turban et al., 2006)

Who is a competitor in business?  Other organisations offering the same product or service now.  Other organisations offering similar products or services now.  Organisations that could offer the same or similar products or services in the future.  Organisations that could remove the need for a product or service.

Using Information Systems to achieve Competitive Advantage  But why do some firms do better than others and how do they achieve competitive advantage?  How can you analyze a business and identify its strategic advantages?  How can you develop a strategic advantage for your own business?  How do information systems contribute to strategic advantages?  One answer to these questions is Michael Porters competitive forces model

Five Competitive Forces (Porter) A firm can survive and succeed in the long run if it successfully develops strategies to confront these 5 competitive forces 1.Rivalry of competitors within its industry 2.Threats of new entrants 3.Threats of substitutes 4.The bargaining power of customers 5.The bargaining power of suppliers

Example - Bank 1.Give examples of the competitive forces in a Bank situation 2.Mention examples for each of the five competitive forces.

1. Bargaining power of customers  Individual customers of yours may be important enough to your total market share or overall success that they become a 'force' in and of themselves -- with the power to significantly impact your competitive success.  Similarly, certain groups of customers have distinct bargaining power which can result in their having a unique ability to influence on your competitive prowess.  Examples

2. Bargaining power of suppliers:  It's widely recognized that there is value from managing the relationship that you have with vendors and other suppliers upon whom your organizational success may depend.  In order to effectively manage a relationship with suppliers, you need to understand how your current and potential suppliers are positioned in your competitive environment, with whom they have relationships (and what type of relationships) and determine the bargaining power of each.  Examples

3. Rivalry of competitors  Marketing, Sales and other professionals in just about any organization know how important it is to have answers to questions like: – Who is in your 'industry' and which organizations compete against you for the same customers? – What are their skills, capabilities, strengths, weaknesses, strategies and so on? – Which target markets are they going after? How do they compare to you? – And most important: How can you outsmart (outsell!) your competitor?  Examples

4.Threats of new entrants  Barriers to entry exist in that industry. Threat of new entrants: To become a new player in an industry, a 'potential entrant' will have to deal with whatever barriers to entry exist in that industry.  The flip-side: an organization that wants to protect a lucrative market will try to raise 'entry barriers' as high as possible to discourage others from entering "their" market.  Example

5. Threat of substitutes:  For almost any type of product or service, your customers have the choice to use an alternate service or product to satisfy their perceived needs. These products or services are not what your competitors offer, but serve as 'substitutes' for your products or services, nonetheless. Examples

Five Strategies

Strategies to Confront Competitive Forces Cost leadership – providing goods or services at the lowest possible cost. In most cases this is achieved by reducing the organization's costs in producing goods or providing services  A firm may also help its suppliers or customers reduce their costs usually by forming alliances and linkages that benefit all of the parties involved.  Cost leadership may also be achieved by causing a competitor’s costs to increase e.g. Example 1: introducing new product features that will be expensive for a competitor to duplicate. Example 2: Some airlines have reduced staff costs through transferring over 90% of their ticketing online.

Product differentiation Developing ways to differentiate a firm’s products and services from its competitors or create a distinction between the organization's products and those of its competitors.  Example 1: Newspaper personalizing content for its readers according to their preferences and then making it available via alerts on or mobile phone.  Example 2 : provide high quality e-banking services before its competitors such as ATM cards that are internationally accepted – VISA cards.  Example 3 : web based customized services e.g DELL

Innovation Concerned with finding new ways to approach an organization's activities or new ways of doing business. Examples  Improve existing products or creating new ones  Improving production processes and entering new markets  New ways to better serve customers  Reduce time to market

Growth Expand capacity of production, into global markets, diversification.  Expand production capacity  Expand into global markets  Diversify and Integrate into related products and services

Alliance Establishing new linkages & alliances. Broaden your base of support – create new linkages. Mergers, acquisitions, joint ventures, Marketing, manufacturing, or distribution agreements

Other Strategies  Locking in customers or suppliers Investment into IT Build value into your relationship  Creating switching cost

Applying competitive strategy to the strategic role of IS Information Systems can help a firm Improve its operational efficiency  Production in a typical manufacturing company might be improved by using an inventory control system to manage stock levels, reduce storage and transportation costs.  Increase productivity in management and administration throught the introduction of office automation systems. Examples: Use of robots and computer aided manufacturing  By allowing customers tap into your database to track their orders and shipments, you build loyalty and smooth relations (E.g. DHL – able to track packages)

Lock in Customers and Suppliers 1. Linking an organization ‘s computer based information system to those of its customers and suppliers can help to strengthen business relationships. 2. Computer based information systems are used to provide higher levels of customer service through the use telecommunication networks, up to date sales, shipping, inventory, and account status. Example : By creating exclusive computer communication with customers for order entry and exchange of product and service data thus eliminating competitors. Example : By setting up computer links between the treasurer’s office and your banks you can obtain financial information faster thus providing better cash management

Promote business innovation IS often helps to stimulate business innovation.  Example of innovative investment in IS in banks is the use of ATM. By employing ATMs banks have been able to gain strategic advantage over their competitors by luring other customers away from other financial institutions  Using Mobile money to pay 4 utility bills.

Build / Increase Switching Costs An organization that has invested time, money and effort in developing a computer based information system will be reluctant to bear the switching costs (hardware, software, training, converting data, interruptions to company operations) of moving to a new system.

Example  By building Switching costs into relationships between a firm and its customers or suppliers. Investments in IS technology can make customers/suppliers dependent on continued use of innovative, mutually beneficial inter- organizational IS such that they become reluctant to pay costs in time, money, effort and inconvenience that it would take to change to a firm’s competitors.

Application cont…. Strategic Information Systems can help a firm Build strategic information resources  By acquiring, hardware, software, developing telecommunication networks, hiring IS experts and training end users as a resource base, the firm is able to develop new products and services. Information about a firms operations, customers, suppliers, suppliers, economic data can be viewed as strategic resource for planning, marketing etc. Example of Gaining Competitive Edge with IS Resources

Sales Productivity  By giving sales people portable computers so they can get messages faster and enter orders directly adds up to quicker deliveries, better cash flow and less paper work

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