STRATEGIC AND COMPETITIVE OPPORTUNITIES Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage 2-1 Management Information Systems for the Information Age

Presentation Overview Competitive Advantage Examples Developing A Strategy For The Internet Age Key E-Commerce Strategies The U.S. Airline Industry Summing It Up 2-2 Management Information Systems for the Information Age

Opening Case Study Zara – Fashion Fast Forward Zara sets itself apart with its computerized network that ties stores to design shops and company-owned factories in real time. How can technology be used to respond quickly to shifts in consumer tastes? 2-3 Management Information Systems for the Information Age

Management Information Systems for the Information Age Introduction Competitive advantage – a company provides a product or service in a way that customers value more than what the competition is able to do. Application architect - information technology professional who can design creative technology-based business solutions. 2-4 Management Information Systems for the Information Age

Competitive Advantage Examples Federal Express FedEx – lets you access information about your packages through your Internet connection and Web browser. Temporary advantage - whatever you do, sooner or later the competition duplicates what you’ve done. First mover - the company who is first to market with a new IT-based product or service. 2-5 Management Information Systems for the Information Age

Competitive Advantage Examples Federal Express Enter your tracking number here. 2-6 Management Information Systems for the Information Age

Competitive Advantage Examples Charles Schwab Schwab was a first mover in offering stock trades over the Internet, along with other online brokers such as E*Trade. Schwab’s willingness to embrace the Internet early has made Schwab the largest online broker. 2-7 Management Information Systems for the Information Age

Competitive Advantage Examples Dell Computer Dell computer has a direct sell model that gives the company a huge advantage over any competitor. Distribution chain - the path followed from the originator of a product or service to the end consumer. Alliance partner - a company you do business with on a regular basis in a cooperative fashion, usually facilitated by IT systems. 2-8 Management Information Systems for the Information Age

Competitive Advantage Examples Dell Computer Information partnership - lets two or more companies cooperate by integrating their IT systems. On Your Own Looking for Opportunities Close to Home (p. 75) 2-9 Management Information Systems for the Information Age

Competitive Advantage Examples - Dell Computer 2-10 Management Information Systems for the Information Age

Competitive Advantage Examples Cisco Systems Cisco Systems - a leader in utilizing the direct sell model over the Internet. Business to Business (B2B) - companies whose customers are primarily other businesses. Business to Consumer (B2C) -companies whose customers are primarily individuals. 2-11 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age Porter’s three frameworks are: The Five Forces model The Three Generic Strategies The Value Chain 2-12 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Five Forces Model 2-13 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Five Forces Model Five forces model - determines the relative attractiveness of an industry. Buyer power - high when buyers have many choices of whom to buy from, and low when the choices are few. Supplier power - high when buyers have few choices of whom to buy from, and low when there are many choices. 2-14 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Five Forces Model Threat of substitute products or services - low if there are very few alternatives to using the product or service. Switching costs - costs that can make customers reluctant to switch to another product or service. Threat of new entrants - high when it is easy for competitors to enter the market. Rivalry among existing competitors – high when the industry is less attractive. 2-15 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age The Three Generic Strategies 2-16 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age The Three Generic Strategies Three generic strategies Cost leadership Differentiation Focused strategy 2-17 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age Using the Five Forces Model Buyer power Loyalty programs. Supplier power B2B marketplace - an Internet-based service which brings together many buyers and sellers. Threat of substitute products or services IT-based alternatives. 2-18 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age Using the Five Forces Model Threat of new entrants Entry barrier - a product or service feature that customers have come to expect from companies in a particular industry. Rivalry among existing competitors Using IT systems to be more efficient. 2-19 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age Bridging the Gap Between Business People and Technical People Project team - a team designed to accomplish specific one-time goals, which is disbanded once the project is complete. Form a team that draws the best knowledge of the business problem from the business people and the best technical solution from the technology people. 2-20 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age Viewing the Business Problem from Another Perspective Take the perspective of a customer of the company. Design the information system so it enhances the customer’s experience. 2-21 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age Using the Three Generic Strategies Use the three generic strategies to change the basis of competition. Amazon.com makes the buying experience a pleasure by using sophisticated software to personalize the site for each individual. 2-22 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age Developing a Creative Design Team Work Finding the Best IT Strategy For Your Industry (p. 83) Creative design - solves the business problem in a new and highly effective way rather than the same way others have done it. 2-23 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Value Chain Business process - a standardized set of activities that accomplishes a specific task, such as processing a customer’s order. Value chain - views the organization as a chain – or series – of processes, each of which adds value to the product or service for the customer. 2-24 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Value Chain 2-25 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Value Chain Talbott used the value chain to: Plan for a better way of meeting customer demands. Identifying processes that add value. Identifying processes that reduce value. 2-26 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Value Chain 2-27 Management Information Systems for the Information Age

Developing A Strategy For The Internet Age The Value Chain 2-28 Management Information Systems for the Information Age

Management Information Systems for the Information Age Developing A Strategy For The Internet Age Looking Beyond The Four Walls Of The Company Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it. Supply chain - consists of the paths reaching out to all of a company’s suppliers of parts and services. Collaborative planning, forecasting, and replenishment (CPFR) - a concept that encourages and facilitates collaborative processes between members of a supply chain. 2-29 Management Information Systems for the Information Age

Key E-Commerce Strategies Three capabilities made possible by the Internet are: Mass customization and personalization Disintermediation Global reach 2-30 Management Information Systems for the Information Age

Key E-Commerce Strategies Mass Customization and Personalization Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications. Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you. Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics. 2-31 Management Information Systems for the Information Age

Key E-Commerce Strategies Disintermediation Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can be bypassed. 2-32 Management Information Systems for the Information Age

Key E-Commerce Strategies Global Reach Global reach - the ability to extend reach to customers anywhere there is an Internet connection, and at a much lower cost. 2-33 Management Information Systems for the Information Age

The U.S. Airline Industry Airline Reservation Systems The airlines really began using IT in a significant way when American Airlines and United Airlines introduced the first airline reservations systems. SABRE APPOLO 2-34 Management Information Systems for the Information Age

The U.S. Airline Industry Frequent Flyer Programs Frequent flyer programs are a great example of using IT to alter Porter’s five forces. They reduced buyer power by making it less likely a traveler would choose another airline. They reduced the threat of substitute products or services by increasing switching costs. They erected entry barriers by making a frequent flyer program a practical necessity for any airline to compete effectively. 2-35 Management Information Systems for the Information Age

The U.S. Airline Industry Yield Management Systems Yield management systems are designed to maximize the amount of revenue that an airline generates on each flight. Yield management systems are the reason that an airfare you’re quoted over the phone can be $100 higher when you call back an hour later. 2-36 Management Information Systems for the Information Age

The U.S. Airline Industry Yield Management Systems 2-37 Management Information Systems for the Information Age

The U.S. Airline Industry Disintermediating the Travel Agent Expert surveys have estimated that the number of travel agents in the U.S. will be sharply reduced as a result of disintermediation. Team Work Helping the Little Guy Compete (p. 93) 2-38 Management Information Systems for the Information Age

The U.S. Airline Industry Utilizing Emerging Technologies Permission marketing - when you have given a merchant your permission to send you special offers. 2-39 Management Information Systems for the Information Age

Management Information Systems for the Information Age Summing It Up Important considerations you should keep in mind as you work to bring an IT competitive advantage to your organization include: Be efficient and effective. Competition is all around you. Push the state-of-the-art. IT competitive advantages are only temporary. 2-40 Management Information Systems for the Information Age

Management Information Systems for the Information Age Summing It Up On Your Own Building on the State of the Art (p. 95) 2-41 Management Information Systems for the Information Age

Closing Case Study One GM Tries to Lure Customers with OnStar GM added an in-car cellular service, OnStar, to update its image and increase sales. Did the OnStar system give GM a competitive advantage? 2-42 Management Information Systems for the Information Age

Closing Case Study Two Speedpass: Throw Away Your Plastic? Speedpass offers a short plastic cylinder, called a Key Tag, that transfers customer billing information automatically. Speedpass is an alternative to a credit card. How is Speedpass an example of a first mover? 2-43 Management Information Systems for the Information Age

Summary Student Learning Outcomes Illustrate how the creative use of information technology can give an organization a competitive advantage. Describe how to develop business strategies for the Internet Age and use tools that can help. Describe how e-commerce technologies up the stakes and give organizations even more opportunities. 2-44 Management Information Systems for the Information Age

Summary Student Learning Outcomes Summarize how one specific industry has consistently used information technology for competitive advantage. Summarize how to use information technology for competitive advantage in an organization. 2-45 Management Information Systems for the Information Age

Summary Assignments & Exercises Evaluating telemedicine Comparing parcel delivery services Disintermediation in the travel agent industry 2-46 Management Information Systems for the Information Age

Visit the Web to Learn More www.mhhe.com/haag Auction houses Books and music Clothing and accessories Computers Automobiles Information partnerships 2-47 Management Information Systems for the Information Age