Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1 I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien C h a p t e r 2 Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. Competing with Information Technology

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 2 Identify several basic competitive strategies and explain how they can be used to confront the competitive forces faced by a business. Identify several strategic uses of information technology and give examples of how they give competitive advantages to business. Identify several strategic uses of Internet technologies for electronic business and commerce, and give examples of each. Chapter Objectives

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 3 Give examples of how business process reengineering involves the strategic use of information technology. Identify how total quality management differs from business process reengineering in its use of information technology. Identify how information technology can be used to help a company be an agile competitor, or to form a virtual company to meet strategic business opportunities Chapter Objectives

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 4 Explain how knowledge management systems can help a business build a knowledge-creating company. Chapter Objectives

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 5 The Competitive Environment Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 6 Fundamental Competitive Strategies Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Cost Leadership Strategies

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 7 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 8 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 9 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 , 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1010 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1 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 Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Internet Capability Benefits to Company Opportunity for Advantage

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1212 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1313 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1414 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1515 Borderless Technology Excellence Trust-Based Adaptability Opportunism Six Characteristics of Virtual Companies Virtual Corporations

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1616 Knowledge Management Systems Solution Knowledge Development Engineers Technical Support Staff Product Managers Other Vendors Customers The Internet Intranet

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1717 Firm Environment Performance Size Geographical scope Product scope Organization structure Technological resources Knowledge resources Creating switching costs Exploiting knowledge Developing response strategies Managing risks Key Factors for Sustaining Strategic Success

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1818 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. 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

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 1919 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)

Irwin/McGraw-Hill Copyright © 2001, The McGraw-Hill Companies, Inc. All rights reserved. I n t r o d u c t i o n t o I n f o r m a t i o n S y s t e m s Tenth Edition James A. O’Brien 2020 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. Successful strategic information systems are not easy to develop and implement. They may require major change in how businesses operate.