CHAPTER 2 Organizational Strategy, Competitive Advantage, and Information Systems

CHAPTER OUTLINE 2.1 Business Processes 2.2 Business Process Reengineering and Business Process Management 2.3 Business Pressures, Organizational Responses, and Information Technology Support 2.4 Competitive Advantage and Strategic Information Systems 2.5 Business – Information Technology Alignment

Learning Objectives 1.Understand the concept of business processes, and provide examples of business processes in the functional areas of an organization. 2.Differentiate between the terms business process reengineering and business process management. 3.List and provide examples of the three types of business pressures, and describe one IT response to each.

Learning Objectives (continued) 4.Identify the five competitive forces described by Porter, and explain how the Web impacts each one. 5.Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage. 6.Define business – information technology alignment, and describe the characteristics of effective alignment.

Chapter Opening Case First problem Dana Deasy Solution: Reduce number of vendors

Chapter Opening Case (continued) BP’s second problem: Deepwater Horizon well exploded BP’s attempted solution

Before the Stores (IT’s About Business 2.1)

Competitive Advantage

2.1 Business Processes Business Process Cross-Functional Business Processes

Example of Business Process (Figure 2.1) The next slide shows an example of a business process: Ordering an E-ticket from an airline Web site

Notify Traveler Receive Ticket Order Reserve Seats Charge Credit Card Confirm Flight(s) Issue e-Ticket Plan Trip Check Flights Submit Ticket Order Receive e-Ticket Seats Available Use Credit Card? Charge OK? Seats Available ? Notify Traveler Frequent Flyer Mileage Sufficient? Subtract Mileage NO YES NO YES NO YES NO YES Traveler Airline Web Site YES NO

2.2 Business Process Reengineering and Business Process Management Business Process Reengineering Business Process Management

2.3 Business Pressures, Organizational Responses, and IT Support Business Pressures Market Pressures Technology Pressures Societal Pressures

Business Pressures, Organizational Responses, and IT Support

Market Pressures The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers

The Stages of Globalization (From Thomas Friedman in The World is Flat) Globalization 1.0 (from 1492 to 1800) Globalization 2.0 (from 1800 to 2000) Globalization 3.0 (from 2000 to the present)

Globalization 1.0 Christopher Columbus

Globalization 2.0 (first half) Steam engine Railroads

Globalization 2.0 (second half) Smart phones Satellites Tablet computers Fiber optics

Globalization

Globalization 3.0 (continued) Schematic Map of the Internet

Thomas Friedman’s Ten Flatteners Fall of the Berlin Wall Netscape goes public Development of work-flow software

Friedman’s Ten Flatteners (continued) Uploading Outsourcing Offshoring Call center in India

Friedman’s Ten Flatteners (continued) Supply chaining Insourcing Informing

Friedman’s Ten Flatteners (continued) The Steroids Computing Charles Babbage’s Difference Engine (1822) Modern data center

The Steroids (continued) Instant messaging and file sharing Voice over Internet Protocol

The Steroids (continued) Videoconferencing A telepresence system in a conference room

The Steroids (continued) Computer graphics

The Steroids (continued) Wireless technologies Using smart phone in motion Geostationary satellite Bluetooth phone sunglasses

Sleek Audio (IT’s About Business 2.2) Reverse Offshoring

Technology Pressures Technological Innovation and Obsolescence Information Overload

Technological Innovation and Obsolescence Innovation: Early calculator Obsolescence: Slide Rule

Technological Innovation and Obsolescence (continued) Innovation: Telegraph Obsolescence: Pony Express

Technological Innovation and Obsolescence (continued) Innovation: digital camera Obsolescence: old analog camera

Technological Innovation and Obsolescence (continued) Innovation: Ford Model T Obsolescence: Horse and Buggy

Information Overload

Societal/Political/Legal Pressures Social Responsibility Government Regulation and Deregulation Protection Against Terrorist Attacks Ethical Issues

Green IT See CBS video on disposal of e-wastevideo

Web sites that enable generosity Collaborative Consumption

Social Responsibility (continued) Bridging the Digital Divide

Social Responsibility (continued) One Laptop per Child initiative

Organizational Responses Strategic Systems Customer Focus Make-to-Order and mass customization See ReebokReebok See Bodymetrics videovideo E-business and E-commerce

2.4 Competitive Advantage andStrategic Information Systems Competitive Advantage Strategic Information Systems

Porter’s Competitive Forces Model The best-known framework for analyzing competitiveness is Michael Porter’s competitive forces model (Porter, 1985). Michael Porter

Porter’s Competitive Forces Model

Threat of entry of new competitors is high when it is easy to enter a market and low when significant barriers to entry exist. A barrier to entry is a product or service feature that customers expect from organizations in a certain industry. For most organizations, the Internet increases the threat that new competitors will enter a market.

Porter’s Competitive Forces Model The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices. Internet impact is mixed. Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers. On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers.

Porter’s Competitive Forces Model The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices. Internet increases buyers’ access to information, increasing buyer power. Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere. This also increases buyer power.

Porter’s Competitive Forces Model The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes. Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently.

Porter’s Competitive Forces Model The rivalry among firms in an industry is high when there is fierce competition and low when there is not.

Porter’s Value Chain Model This model identifies specific activities where organizations can use competitive strategies for greatest impact. Primary activities Support activities

Porter’s Value Chain Model

Strategies for Competitive Advantage Cost Leadership Differentiation Innovation Operational Effectiveness Customer-orientation

Strategies for Competitive Advantage Figure 2.5

2.5 Business – Information Technology Alignment

Chapter Closing Case