Chapter 3 Information Systems for Chapter 3 Information Systems for Competitive Advantage - Case & Exercise Jason C. H. Chen, Ph.D. Professor of MIS School of Business Gonzaga University Spokane, WA 99258 USA chen@jepson.gonzaga.edu

In-Class-Exercise (p.99-100) (UYK - 4&5) 4. Consider the two different bike rental companies in Figure 3-10. Think about the bikes that they rent. Clearly, the student bikes will be just about anything that can be ridden out of the shop. The bikes for the business executives, on the other hand, must be new, shiny, clean, and in tip-top shape.

#4-a) Compare and contrast the operations value chains of these two businesses as they pertain to management of bicycles.   In the low-cost student rental business, used bicycles are acquired as cheaply as possible (e.g., garage sales, campus and community police unclaimed bicycle auctions, classified ads, etc.). Minimal care and maintenance is provided, such as tire repair, lubrication, and brake and gear adjustment. If anything significant is damaged on the bicycle, it is disposed of at the landfill. In the high-service rental business, new bicycles are purchased from known, quality bicycle manufacturers. An array of types, models, and sizes will be acquired to satisfy a range of bicycle preferences. Maintenance will be meticulous so that every bicycle is well-tuned prior to each rental. When a bicycle gets to the end of its service life, possibly after a year or two of use, it is sold because it will still have a good market value.

#4b) Describe a business process for maintaining bicycles for both businesses. In the low-cost student rental business, maintenance is performed only in response to a customer complaint. Otherwise, the bicycle is assumed to be OK. In the high-service rental business, a maintenance checklist is performed after each bicycle is returned from a rental before it is released to be rented again. #4c) Describe a business process for acquiring bicycles for both businesses. In the low-cost student rental business, cheap bicycle sources are utilized (e.g., garage sales, campus and community police unclaimed bicycle auctions, classified ads, etc.). In the high-service rental business, the latest models are purchased from the most well-known bicycle manufacturers.

#4d) Describe a business process for disposing of bicycles for both businesses.   In the low-cost student rental business, bicycles are used until they break down completely. Disposal involves taking them to the landfill. In the high-service rental business, the bicycles will have a lot of market value and so disposal will involve reselling them, perhaps using eBay to get the best possible price for the bicycle.

#4e) What roles do you see for information systems in your answers to the earlier questions? The information systems can be those you develop within your company or they can be those developed by others, such as “Craig’s List.” The information system for the low-cost student rental business will be quite simple, perhaps an index card for each bicycle in inventory. The information system for the high-service rental business could be more sophisticated, with complete information on each bicycle’s acquisition and maintenance records.

5. Samantha Green owns and operates Twigs Tree Trimming Service 5. Samantha Green owns and operates Twigs Tree Trimming Service. Samantha graduated from the forestry program of a nearby university and worked for a large landscape design firm, performing tree trimming and removal. After several years of experience, she bought her own truck, stump grinder, and other equipment and opened her own business in St. Louis, Missouri. Although many of her jobs are one-time operations to remove a tree or stump, others are recurring, such as trimming a tree or groups of trees every year or every other year. When business is slow, she calls former clients to remind them of her services and of the need to trim their trees on a regular basis. Samantha has never heard of Michael Porter or any of his theories. She operates her business “by the seat of her pants.”

#5a) Explain how an analysis of the five competitive forces could help Samantha.   By looking at the five competitive forces, Samantha can better understand how to achieve a profitable performance in her industry. In this situation, the bargaining power of customers may be relatively strong with the ability to select another tree service based on price and responsiveness. Customers will not perceive differences in quality when removing a tree, other than judging response time and the thoroughness of cleanup. With tree trimming for tree maintenance, quality work will be harder for customers to appreciate. Samantha will have to sell her training and experience.

#5a) cont. The threat of substitution is a fairly weak force with few alternatives available to customers who have a dead or damaged tree that needs removing. There is, however, the option of doing nothing in terms of tree maintenance. Samantha needs to emphasize the benefits of performing regular tree trimming for long-term tree health. The bargaining power of suppliers of equipment is a weak force with many options available for machinery and equipment. The threat of new entrants is somewhat strong since anyone with a ladder, saw, and no fear of heights could sell him/herself as a tree trimmer. Samantha will have to sell her training and expertise. Finally, rivalry among existing firms is probably strong. Samantha will have to work to make her company’s name well known, sell her professional knowledge and training, be responsive and keep her prices competitive.

#5b) Do you think Samantha has a competitive strategy #5b) Do you think Samantha has a competitive strategy? What competitive strategy would seem to make sense for her?   Samantha probably has not thought about a competitive strategy. Many small business owners have not stepped back from the hectic pace of just keeping the business going to consider this issue. For Samantha, given her forestry education, a differentiation strategy with a focus on the tree health and maintenance industry segment may make sense. Her education will clearly distinguish her from many others in the field, and she should be able to capitalize on that with residential and commercial properties requiring regular tree maintenance.

#5c) How would knowledge of her competitive strategy help her sales and marketing efforts?   Samantha should not try to be all things to all parts of her market. She should focus her efforts on making her company’s name well known, selling her professional knowledge and training, being responsive to customer calls; and keeping her prices competitive but not necessarily rock-bottom.

#5d) Describe, in general terms, the kind of information system that she needs to support sales and marketing efforts.   Samantha needs several things from an information system. She needs to be responsive to customer calls, so she needs a system to help her track and respond to calls in a timely way. This system should also build her database of customer prospects so that she can target her follow up and ongoing tree maintenance sales efforts. The system should allow her to keep good notes about each customer’s trees so she can provide helpful information and services as needed to combat diseases that might threaten tree health.

CASE STUDY 3 Bosu Balance Trainer (p.101-102) (1,2,3, 6,7) Case Study 3: BOSU balance trainer

BOSU Case Study Analyze the five competitive forces (Fig. 3-2) for Bosu’s market. Visit www.bosu.com. What appears to be Bosu’s competitive strategy? Explain your answer. Explain the nature of the five primary value chain activities (Fig. 3-7) for Bosu. Review the principles of competitive advantage in Figure 3-8 . What information systems can Bosu create to enhance its product or differentiate it from existing and emerging competition? 

BOSU Case Study What information systems can Bosu develop to create barriers to entry to the competition? What information system can Bosu develop to lock in customers? What information systems can Bosu develop to establish alliances?

Bosu Balance Trainer Case Study (Video) Analyze the five competitive forces for Bosu’s market. Visit www.bosu.com. What appears to be Bosu’s competitive strategy? Explain your answer. Explain the nature of the five primary value chain activities for Bosu. Review the principles of competitive advantage in Figure 3-8. What information systems can Bosu create to enhance its product or differentiate it from existing and emerging competition?  What information systems can Bosu develop to create barriers to entry to the competition? What information systems can Bosu develop to lock in customers? What information systems can Bosu develop to establish alliances?

A. Product Implementation Summary on Principles of Competitive Advantage: Two Ways to Respond to the Five Competitive Forces (cont.) A. Product Implementation 1. Create a new product or service 2. Enhance products or services 3. Differentiate products or services B. System Implementation (Business Process) 4. Lock in customers and buyers 5. Lock in suppliers 6. Raise barriers to market entry 7. Establish alliance 8. Reduce costs Figure 3-12: Principles of Competitive Advantage

1. Review the principles of competitive advantage in Figure 3-12 1. Review the principles of competitive advantage in Figure 3-12. Which types of competitive advantage has Bosu used to defeat copycat products? Bosu has successfully used the principles of (2) product enhancement, (4) customer lock-in, (6) raising entry barriers, and (7) alliances to defeat copycat products 2. What role did information systems play in your answer to question 1? Information systems were very important. The database of trainer data was used extensively to help create and maintain the close relationship Fitness Quest desired with their trainers.

3. What additional information systems could Fitness Quest develop to create barriers to entry to the competition and to lock in customers? Fitness Quest could enhance its products through information systems. Bosu buyers could register for email-based newsletters. Bosu buyers could participate in chat groups about how they like and use their Bosu trainers. Fitness instructors could share ideas about Bosu-based classes. Bosu buyers could track and monitor their weight loss and fitness goals on the Web site and share progress with others. These features would help distinguish Bosu from copycats. The systems described here would also help to strengthen ties to customers. Having sophisticated and valuable information systems distinguishes Fitness Quest/Bosu from other competitors. Barriers to entry are raised since a competitor would not only have to develop the trainer, but would also have to develop the supporting information systems that customers expect. If Bosu provides valuable product enhancement through its information systems, then customers are likely to stay loyal to Bosu (therefore, lock in customers).

6. Describe major differences between the Bosu product and the IndoRow product. Consider product use, product price, customer resistance, competition, competitive threats, and other factors related to market acceptance.   The Bosu Balance Trainer is at a considerable lower price point that the IndoRow product. The Bosu easily transitions from a fitness class use to a home use, but that is probably not the case with the IndoRow device. The IndoRow is relying on the fun, competitive spirit formed in the group classes to overcome people’s resistance to rowing machines (ever notice how rowing machines typically gather dust at the fitness center?). Buyers of an IndoRow for home use would have to be convinced to spend much more money on a device that takes up a lot of space and might not ultimately be used very much. In addition, the IndoRow enters a fitness equipment market that already has many rowing machines. The Bosu Balance Trainer was an innovative new product with nothing else like it in the market.

7. Describe information systems that FitnessQuest could use to strengthen its strategy for bringing IndoRow to market. Consider the factors you identified in your answer to question 6 in your response.   Fitness Quest should focus initially on information systems that help communicate with and support its trainers who are interested in creating IndoRow classes. Trainers could register for email-based newsletters. Trainers could participate in chat groups about how they like and use their IndoRow machines. Fitness instructors could share ideas about IndoRow-based classes in forums. Trainers could provide feedback on the devices that could lead to product enhancements or extensions of the product line. Referral rewards could be provided to trainers who sign up their colleagues