1 INFSY540 Information Resources in Management Lesson 12 Chapter 11 Strategic Analysis Operations Tactics Strategy

2 Outline  Operations, Tactics, Strategy and Change  The Competitive Environment  External Agents  Customers  Suppliers  Rivals (new entrants. Substitute products)  Government Regulations  Methods to Gain Competitive Advantage  How IS can help  The Search for Innovation  How IS can help  Costs and Dangers of Strategies  How IS can hurt

3 Lewin’s model for organizational change Organizations must be able to change as their environment changes. Change can happen at any level: Operational, Tactical, Strategic Change can be incremental (continuous improvement, TQM) or sweeping (business process reengineering)

4 Strategies Competitors Customers Suppliers Barrier to Entry Product Differentiation Switching Costs Control of Distribution Quality Control Cost Advantage Company

5 Rivalry Among Existing Competitors Bargaining Power of Buyers Bargaining Power of Suppliers Threat of New Entrants Threat of Substitute Products or Services Porter’s Five Forces Model

6 Methods to Gain Competitive Advantage  Barriers to Entry  Additional costs of creating an information system. People’s Express  Distribution Channels  Prevent others from entering the industry. Movie distribution  Switching Costs  Consumers incur learning and data transfer costs. Baxter Healthcare  Lower Production Costs  IS to cut costs. Wal-Mart  Product Differentiation  Add new features or create new products with IT. Federal Express & Merrill Lynch  Quality Management  Monitoring production lines and analyzing data. Digital Equipment Corp.  Value Chain  Expanding forward or back the value chain to find greater profits. Boeing Information Systems

7 Market Measures - Market share - Concentration - Growth - Profitability monitor rivals Business Operations & Rules Existing Data and IS Performance Measures - ROA- ROI - EPS- Growth - Subjective Corporate Strategy Development expectations goals rivalry strengths weaknesses opportunities critical success factors Business Strategies and Priorities Process Changes Data Needs IS Changes System Development & Implementation - Cost leadership - Differentiation - Innovation - Linkages - Re-engineering - Organization - Decentralization Developing Strategies

8 Search for Innovation  Research  Analysis & modeling, project management, work group support, databases, decision support.  Engineering & Design  CAD/CAM, testing, networks, work group support.  Manufacturing  Mass customization, links to customers & suppliers, quality monitoring, expert systems for maintenance, production databases, business integration.  Logistics & Supply  Just-in-time linkages, forecasts, models, links for design, transaction processing.

9 Search for Innovation  Marketing  Frequent buyer database, target market & media analysis, survey design and analysis, multimedia promotion design, links to customers and designers.  Sales & Orders  Portable computers for sales, ES for order customization, work group tools for customer support.  Service  Phone support, GIS locators, scheduling, ES diagnostics, databases.  Management  EIS, , bulletin boards, decision support systems, personal productivity tools, work group support  Links to service providers  Accountants  Consultants  Lawyers,...

10 Dangers

11 Conclusions

12 Money for research Money for information technology Dangers: Capital Cost

13 You Rival Time IS Costs Time IS Costs Transaction Processing Network & DSS Network & link sales people Link to suppliers & customers Experimental technology & global links Danger: Competition Follows

14 Industry 1 (expands into industry 2) Industry 2 (new competitor) Customer New technology New services Same technology Danger: Changing Industry & Government Intervention

15 Danger: Security Production Firm Customer Data we wish to share. Data we want to protect. Need to control access. Need to worry about network interceptions and hackers. Security firewall Hackers or competitors rejected

16 Conclusions?  IT can help achieve strategic competitive advantage.  Use of IS to add value is strongly influenced by organizational structure, culture and change.  Oftentimes, IT is a smokescreen for the action that provides the real strategic competitive advantage.  IS can provide more value than just cost cutting  Strategic gains based on IT solutions are often fleeting and require continual improvements.  Others...

17 Questions about Strategic Analysis ?

18 Questions to Consider  How do companies compete?  What are the ways to achieve competitive advantage?  How can IT be used to help achieve competitive advantage?  What are the costs and risks of using these methods?

19 Barrier To Entry FirmRival Supplier Consumer Decreased Costs Improved Quality Ties To Customers Increased Switching Costs Wholesale Ties To Suppliers Control Of Distribution Innovation and Differentiation Methods to Gain Competitive Advantage

20 Barriers to Entry  Economies of Scale (size)  Economies of Scope (breadth)  Product Differentiation  Capital requirements  Cost Disadvantages (independent of size)  Distribution Channel Access  Government Policy

21 Firm Infrastructure Human Resources Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Value Chain

22 Manufacturing Engineering and Design Marketing Research Customer Service Management Sales and Order Management Logistics/ Supply Suppliers Customers Production Process Innovation

23 Research  Analysis and models  Statistical analysis of data  Project management and budgeting  Work-group collaboration and communication

24 Engineering and Design  CAD/CAM  Integrated design database  Production databases and model testing  Expert Systems for manufacturability  Work group communication

25 Manufacturing  Links to customers  Links to suppliers  Mass customization  Robotics  Diagnostic Expert Systems  Quality monitoring and control

26 Logistics and Supply  Just-In-Time Inventory and EDI  Configuration and design  Searching for availability, pricing,... networks

27 Marketing  Frequent buyer databases  Point-of-Sale and trends  Statistical analysis of data  Geographic Information Systems  Links to external marketing agencies  Multimedia development of promotions

28 Sales and Orders  Sales force automation, hand-held computers  Customer workstation access  Expert Systems for product and option selection  Expert Systems for configuration and shipping  Front-line support: ES, , work groups

29 Service  Portable computers for service anywhere  Databases (e.g., customer service)  Location monitoring of service personnel  Product internal, automatic diagnostics  Expert System diagnostic tools

30 Management  Executive Information Systems  Simulation (and rivalry games)  Links to external partners (accounting, law,...)  Electronic conferencing  Work group communication,  Standardization, Modularization, Franchises  Knowledge Workers  Client-server instead of hierarchical computing