CLASS 2 SUPPLEMENTAL INTRODUCTORY MATERIALS CSE 7360

Five Forces To Determine Industry Profitability New Entrants Industry Competitors Rivalry Among Existing Firms Threat of New Entrants Buyers Bargaining Power of Buyers Suppliers Bargaining Power of Suppliers Threat of Substitute Products or Services Source: Porter, M., Competitive Advantage, NY: The Free Press, 1985 Substitutes

Impact on Competitive Forces Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

Impact on Competitive Forces Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

The Value Chain Firm Infrastructure Human Resources Management Technology Development Procurement M A R G I N N I G R A M Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Source: Porter, M., Competitive Advantage, NY: The Free Press, 1985

How long before a response? Who can respond? Will copying help? OTHERWISE Be prepared to be a fast/cheap follower

The Evolution of Customer Order Entry ONE-WAYONE-WAY COMMUNICATIONCOMMUNICATION TWO-WAYTWO-WAY COMMUNICATIONCOMMUNICATION 1957 Customer orders taken manually. Order entry and billing procedures automated 1960’s: Tel-American IBM 1001 Dataphone and 026 card punch sped the order process and increased accuracy 1970’s: ASAP Utilization of card reader developed by Tek-Pro with mainframe computer support widely implemented 1977: ASAP 2 Addition of Bell 43 terminal to allow customer response to orders; also allowed intra-company/ customer messaging capability 1980: ASAP 3 Enabled customers to use their internal stock numbers to order and build standing orders. Also produced inventory lists, P.O.’s and requisition forms to customer specifications 1983: ASAP 3 Plus Enabled customers to manage inventory through the incorporation of bar code scanning 1983: ASAP 4 Computer-to-computer order entry system that merely required customer approval for processing 1985: ASAP 5 Extended capabilities of ASAP 3 by using IBM PC with tutorial software and menu-driven functions. Also provided capability to edit order off-line, thus saving telephone expenses MULTI-WAYMULTI-WAY COMMUNICATIONCOMMUNICATION 1986: ASAP Express Capabilities expanded to include other vendors by using electronic clearing house to enter orders. Potential for total automation of hospital logistics

Porter Industry and Competitive Analysis Framework Prior to Introduction of ASAP Express High Medium High New Entrants Bargaining Power of Suppliers Positioning of Intraindustry Rivals Bargaining Power of Buyers Substitute Products or Services Information Technology Specialists EDS Perot Systems IBM GE Competing Systems as Good or Better than ASAP Direct Linkage With Hospitals Hospital Creation of Buyer Groups Improved Access Supplier Information Consolidated Ordering System Integrated Ordering and Material Management Systems

Porter Industry and Competitive Analysis Framework After Introduction of ASAP Express Medium Low MediumHigh New Entrants Bargaining Power of Suppliers Positioning of Intraindustry Rivals Bargaining Power of Buyers Substitute Products or Services ASAP Express Establishes Barrier to Entry for IT Specialist No ASAP Express Intraindustry Rivals Consolidated System Forces Supplier to Interface with ASAP Express Rather than Direct Link with Hospitals Hospital Creation of Buyer Groups Improved Access Supplier Information Consolidated Ordering System Integrated Ordering and Material Management Systems High

Phases of IT Assimilation PHASE 1 Decision to invest and project initiation PHASE 2 Technology learning and adaptation PHASE 3 Rationalization and management control PHASE 4 Widespread technology transfer Stagnation Block A Failure Success Stagnation Block B Narrowly focused and not marketed Success Stagnation Block C Too efficiency dominated Success Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., and Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

Architecture: A Plan for the Structure of IT Capabilities Why Do We Need an IT Architecture? Facilitate decision making on specific technology acquisitions Ensure compatibility of IT and business strategy Improve likelihood of IT integration and interconnectivity Define a framework for control Influence user decision making concerning IT

Components of an IT Architecture Source: Davenport, T., Budd Services, Unpublished Teaching Note, 1987.

Levels of an IT Architecture Source: Davenport, T., Budd Services, Unpublished Teaching Note, 1987.

Balancing Hardware/Data Distribution/Software Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., and Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

Sample IT Architecture Information Analysis (e.g., Lotus 123G) Information Packaging and Delivery (e.g., Commander EIS) Communications ( e.g., , Conferencing) Knowledge-Based Systems (e.g., Expert System) Application Development (e.g., CASE) Communications Wide area network Local area network Information Management Client server architecture DB2 relational database Data feeds from internal and external sources TOOLSTOOLS FOUNDATIONFOUNDATION Applications Industry News/IRI Dow Jones Sales Manu- facturing Accounting Purchasing Logistics External SystemsInternal Business Operations and Transaction Systems Source: Applegate, L., Frito-Lay, Inc.: A Strategic Transition (C), Harvard Business School Case # , 1990