Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Introduction to Information Technology 2 nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc. Strategic Systems and Reorganization Prepared by: Roberta M. Roth, Ph.D. University of Northern Iowa

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Chapter Preview  In this chapter, we will study:  How IT can support an organization’s strategy  A model that helps reveal competitive strategies that IT can support  Real examples of strategic information systems  How organizations must adapt their structures with IT support to remain competitive  How business processes can be revised with IT support to enhance competitiveness  How IT can enable new organizational forms (e.g., the Virtual Corporation)

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Strategic Information Systems  Strategic Information Systems – systems that support or shape an organization ’ s competitive strategy  May significantly change the way the business operates  Makes substantial contribution toward achieving strategic goals  May increase performance and productivity significantly

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Strategic Information Systems  Outward focus: aimed at direct competition in an industry  Inward focus: enhance the competitive position of the firm through …  Increasing employee productivity  Improving teamwork  Enhancing communication  Strategic Alliances - two or more companies share an inter-organizational system for mutual benefit

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Competitive Strategy & IT  Strategy is the creation of a unique and valuable position, involving a set of activities different than what rivals do  IT creates competitive advantage by giving companies new ways to outperform their rivals  Create new applications  Enable reengineering of business processes  Enable innovation  Provide competitive intelligence

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Competitive Intelligence  Gather information about competitors’ performance and activities  Gather information about markets, technologies, and governmental actions  Often enabled by use of intelligent agents  Not the same as industrial espionage

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Competitive Intelligence on the Internet Intelligence Search StrategyDescription Review competitor’s Web sites Reveal information about marketing information Analyse related newsgroups Find out what people think about a company and its products Examine publicly available financial documents By entering a number of databases and analyse findings Do market research at your own Web site Pose questions to Web site visitors Use an information delivery service to gather news on competitors Find what is published on the Internet about competitors Use corporate research companies Provide information ranging from risk analysis to stock market analysts’ reports about competitors

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Porter ’ s Competitive Forces Model and IT  Porter ’ s Competitive Forces Model  Competition - at the core of a firm ’ s success or failure  Used to develop strategies for companies to increase their competitive edge  Demonstrates how IT can enhance the competitiveness of corporations  5 major forces: Threat of entry of new competitorsThreat of substitute products or services Bargaining power of suppliersBargaining power of customers (buyers) Rivalry among existing firms in the industry

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Porter ’ s Five Forces Model

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Porter ’ s Competitive Forces Model and IT  Response Strategies (Per Porter and Others) – may be supported in part by IT  Cost leadership strategy - producing at lowest cost  Differentiation strategy - being unique  Focus strategy - selecting a narrow-scope segment  Growth strategy - increasing market share  Alliances strategy - working with business partners  Innovation strategy - developing new products  Internal efficiency strategy - improving the manner in which business processes are executed  Customer-oriented strategy - concentrating on making customers happy

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Impact of IT on Competitive Forces Key Forces Affecting the Industry Business Implications Potential IT Responses Threat of new entrants Additional capacity Reduced prices New basis for competition Exploit existing economies of scale Differentiate products / services, Control distribution channels Segment markets High power suppliers Raise prices/costs Reduce quality of supply Reduce availability Implement sourcing systems Extend quality control into suppliers’ operations Use forward planning with suppliers High power buyers Forces prices down Higher quality demanded Service flexibility required Encourage competition Differentiate and improve products/ services Increase switching costs of buyers Facilitate buyers product selection

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Key Forces Affecting the Industry Business Implications Potential IT Responses Substitute products threatened Limits potential and profit Imposes price ceilings Use differentiation strategy Incorporate IT into product, service, or method of provision Intense competition from rivals Price competition Need to develop new products and services Distribution and service become critical Customer loyalty required Improve price/performance Redefine products and services to increase value Redefine market segments Differentiate products and services in distribution channels and to consumers Get closer to the end consumer - understand the user requirements Impact of IT on Competitive Forces

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Sustaining a Competitive Advantage  Early examples of SIS were difficult to sustain  Outward systems will probably eventually be duplicated by competition  Combining SISs with structural changes in the organization can provide a sustainable strategic advantage  Inward systems can be kept secret  Install a comprehensive, complex, innovative, and expensive system that cannot easily be duplicated

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc Competing Globally  Global opportunities also increase competitive pressure  Global strategies and IT must be aligned for success  Electronic commerce provides many options for global competitive advances