1. Chapter 3
Organizational Strategy, Information Systems, and Competitive Advantage

2. "It Means Changing Who We Are as a Business."
Differentiation strategy having a large inventory of parts
Competitive strategy threatened by 3D printing
Jason wants to respond by manufacturing some parts
Drew to explore possibilities and challenges associated with 3D printing

3. Study Questions
Q1: How does organizational strategy determine information systems requirements? Q2: What five forces determine industry structure? Q3: What is competitive strategy? Q4: How does competitive strategy determine value chain structure? Q5: How do value chains determine business processes and information systems? Q6: How do information systems provide competitive advantages?
Introduce the importance of understanding business processes.
Illustrate the advantages of process modeling and its use in communicating to others.
Understand that major changes in company operations (3D printing) necessitate major changes in processes and IS.

4. Q1: How Does Organizational Strategy Determine Information Systems Requirements?
Strategy determines value chains, which determine business processes
Business processes determine requirements and functions of information systems

5. Organizational Strategy Determines Information Systems
Figure 3-1 summarizes a planning process used by many organizations.
Start with Porter's Five Forces to analyze industry structure.

6. Q2: What Five Forces Determine Industry Structure?
Competitive Forces • Competition from vendors who manufacture substitutes • Competition from new competitors • Competition from existing rivals Bargaining Power Forces • Bargaining power of suppliers • Bargaining power of customers

7. Assessing the Five Forces at AllRoad
Review this slide and next one to see why Jason and Kelly are interested in exploring 3D printing at AllRoad.

8. Assessing the Five Forces at AllRoad (cont'd)

9. Q3: What Is Competitive Strategy?
Porter's Four Competitive Strategies
To be effective, organization goals, objectives, culture, and activities must be consistent with the organization’s strategy.
This means, all information systems in organization must facilitate the organization’s competitive strategy.
Each of the three competitive forces concerns the danger of customers taking their business elsewhere.
Have students examine table to see why AllRoad is exploring possibility of 3D printing.

10. How Does Competitive Strategy Determine Value Chain Structure?
Bicycle Manufacturer’s Value Chain--network of value-creating activities
Difference between value an activity generates and its cost is called margin.
Linkages--interactions across value activities.
Linkages

11. Task Descriptions for Primary Activities of the Value Chain
Summary of primary activities of the value chain

12. Q5: How Do Value Chains Determine Business Processes And Information Systems?

14. So What! What Strategy Do You Support?
What does this mean to your career?
Never propose an idea not consistent with company's competitive strategy
Information systems development must mirror organization’s strategy
What about you, personally? Where do you want to work?
Know organization’s competitive strategy before you first contact them

15. Q6: How Do Information Systems Provide Competitive Advantages?
Principles of Competitive
Advantage
Car rental agency like Hertz or Avis. An information system produces information about car’s location and provides driving instructions to destinations part of the product.
Information system that schedules car maintenance supports the product

16. How to Use IS to Create Competitive Advantages?
Maintains customer account data
IS collects information for ABC (adds value)
IS saves customers time by automatically filling in part of form (adds value for customer)
Package & information delivery system
IS helps customer to select delivery address and generate shipping labels
What value does shipper get?

17. Two Roles for Information Systems Regarding Products

18. ABC Web Page to Select Recipient from Customer’s Records
Shows a Web form that an ABC customer is using to schedule a shipment. When the ABC system creates the form, it fills the Company name dropdown list with the names of companies that the customer has shipped to in the past.

19. ABC Web Page to Select a Contact from Customer’s Records
When user clicks Company name, ABC information system reads customer’s contact data from a database. Data consist of names, addresses, and phone numbers of recipients from past shipments. User then selects a Contact name, and system inserts that contact’s address and other data into form using data from database

20. ABC Web Page to Specify Email Notification
On right-hand side of form, the customer can request ABC send messages to the sender (the customer), recipient, and others.
By adding this capability to shipment-scheduling system, ABC extended its product from a package-delivery service to a package- and information-delivery service.

21. ABC Web Page to Print Shipping Label
By doing this, the company reduces errors in preparation of shipping labels, and causes customer to provide paper and ink for document printing.

22. Ethics Guide: Yikes! Bikes!
You are operations manager for Yikes! Bikes, a manufacturer of high- end mountain bicycles.
New owners plan to pursue lowest-cost vendor strategy by importing low-cost, lower quality bikes
New owners are not being honest with employees about cutting jobs
Say you might be promoted to new general manager. Should you trust them?
Q: Are the owner’s actions illegal? Unethical?
GOALS
Sensitize students to the fact that a competitive strategy is not just an academic topic. Changing competitive strategy has dramatic impacts on personnel and company culture.
Understand practical applications of business reports.
Explore ethical questions concerning communication about sensitive topics.
This guide illustrates the uncomfortable position many managers face when they possess knowledge that cannot be communicated to others in the company.
As a manager, you will sometimes have information that you are not supposed to communicate to employees. If an employee asks you directly about that information, you can either divulge it or lie. Which would you choose? What are the consequences of either choice?
Is there an alternative between inappropriately divulging information and lying? What is it? What disadvantages does that alternative have?
In general what are the consequences on the organization’s culture of moving from a differentiation strategy to a low-cost strategy?
In general what are the consequences on the organization’s culture of moving from a low-cost strategy to a differentiation strategy?

23. Ethics Guide: Yikes. Bikes
Ethics Guide: Yikes! Bikes! (cont'd) Uncomfortable Position Many Managers Face
What does a change in competitive strategy mean to employees?
When a company changes ownership, what is a good posture for thinking employees to take?
How will you behave when you possess knowledge that you cannot disclose and someone directly asks you about it?
What will you do when you know something but cannot reveal it to your co- workers or subordinates?
Are there degrees of ethical behavior? If so, where do you draw the line?
What is job security, for you?

24. Guide: Your Personal Competitive Advantage
How do these elements of competitive advantage apply to you personally?
Switching costs?
Differentiating products?
Creating barriers?
Establishing alliances?
Reducing costs, increasing revenues?

25. Guide: Your Personal Competitive Advantage (cont'd)
Start thinking about what kind of job you want, and start preparing yourself to find that job. The last semester of your senior year will be too late.
If you’re not an IS major, combining IS knowledge with your other major can make for a great combination.
Think about taking some more IS classes.

26. How Does The Knowledge in This Chapter Help You?
Identify key points AllRoad must address in deciding whether to pursue the 3D opportunity
Develop guidance for yourself about relationship between competitive strategy and information systems requirements
Summarize what you have learned from AllRoad in a statement you could make in a job interview to demonstrate your understanding of the relationship of business strategy and use of information technology and systems

27. Active Review
Q1: How does organizational strategy determine information systems requirements? Q2: What five forces determine industry structure? Q3: What is competitive strategy? Q4: How does competitive strategy determine value chain structure? Q5: How do value chains determine business processes and information systems? Q6: How do information systems provide competitive advantages?