1. Strategic Information Systems
Infsy 540 Dr. R. Ocker

2. Foundations of Information Systems
Chapter 3: Competing with Information Systems
Chapter Notes
First Edition
Foundations of Information Systems
Vladimir Zwass
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc.., 1998 1 1

3. Business challenges of an Information Society
Global competition
rapid product and process innovation
Increases in amount of knowledge that affect your business
need organizational knowledge management supported by IS
faster base of business events
time-based competition

4. How role of IS has evolved
1. Operational support
2. Support of management and knowledge work
3. Support of business transformation and competition
4. Ubiquitous computing

6. Era 1 operational support
1950s-1970s
Single data processing department
which developed all applications
end users - no direct access to computer technology
large backlog

8. Era II support management & knowledge work
Began late 1970s
Apple II PC 1977
end-user software
beginning of end user computing

10. Era III Support Business Transformation & Competition
Mid 1980s - orgs. heavy reliance on computers
strategic information systems became prominent
systems support line-of-business units, e.g. development and marketing of a product
line-of-business units control their own systems

12. Era IV Ubiquitous computing
Cannot pursue competitive advantage based on single system
Competing with information systems must be based on a broad and continually enhanced technology platform linked to corporate strategy
networks & client/server architecture
electronic integration of entire organization

13. Strategic Information Systems (SIS)
A strategic system alters the way an organization does business
some systems - offer a company a clear competitive advantage - higher profits or increased market share
most strategic systems - enable a company to be an effective competitor

14. Strategic Information Systems
rapid diffusion of technological change makes it difficult to maintain a competitive advantage
so strategic development of IS
dynamic capability of an org.
not a static attribute

15. What are Strategic Systems?
An information system designed to give the owner organization a strategic competitive advantage.
A strategic system supports or shapes a business unit's competitive strategy.
outward looking: customers, competitors, environments
inward looking: employees, systems, procedures

16. Characteristics of Strategic Information Systems:
significantly change business performance
contribute to attaining a strategic goal
fundamentally change the way a company does business,
or the way it competes,
or the way it deals with its customers or suppliers.

17. Strategic systems External focus innovative use of IT
changes way firm competes
innovative use of IT
high degree of project risk

18. Strategies, Forces, and Tactics in Competitive Markets

19. Competitive Strategies

20. Uncovering Strategic Use of Systems
1. Analyze competitive forces
2. Study the value chain

21. 1. Competitive Forces Model

22. 1. Competitive Forces model
used to describe the interaction of external influences -- threats and opportunities -- that affect an organization’s strategy and ability to compete
competitive advantage - can be achieved by enhancing the firm’s ability to deal with customers, suppliers, substitute products and services, and new entrants to its market

23. 1. Competitive Forces model
Objective - use this model to identify potential areas where IT can be used to gain a competitive advantage

24. Competitive Strategies for competing in marketplace
businesses can use four basic competitive strategies to deal with these competitive forces:
1. Product Differentiation
2. Cost leadership
3. Focused differentiation
4. Cost Focus

26. 1. Differentiation competitive strategy for creating brand loyalty
Develop products & services which are different from what the competition offers
. superior attributes
. distinguishing features

27. 2. Cost leadership
to prevent new competitors from entering their markets, businesses produce goods/services at lower price than competition
based on efficient operations
based on effective operations
economies of scale

28. 3. Focused differentiation
develop new market niche for specialized products or services
so that business can compete in target market better than its competitors

29. 4. Cost Focus
Company serves narrow market segment with product/service
which it offers at a significantly lower cost than competitors

30. Competitive Forces
Use competitive strategy to combat 5 competitive forces in marketplace
1. threat of new competitors
2. bargaining power of suppliers
3. bargaining power of customers
4. substitute products
5. rivalry within the industry

31. Competitive Forces
Use IT to enact or counteract these forces with respect to
customers
existing & potential competitors
suppliers

32. Threat of new competitors
Erect barriers to entry:
use IT to slow down new firms entering market
SABRE
ASAP

33. Intensify rivalry among competitors
Change basis of competition
novel IS can perhaps change the basis of competition - help offer product/service with new features
e.g. delivery service allows customer to track progress of package
you are now differentiated from competition
no longer compete just on price basis

34. Pressures from potential substitute products
Deliver products with better value
identify and track a market niche with IS that you can serve better than others
try to prevent substitution

35. Bargaining power of customers
Introduce switching costs
cost of switching to competitor
deters customers from switching
e.g. due to training and contracts, travel agents unlikely to switch to different airline reservation system

36. Bargaining power of suppliers
Develop Alternatives
use IS to maintain information on available alternative sources of supply

37. Tactical Moves in Pursuing a Strategy
Firm can use any of several tactics to change its products or processes through use of SIS
Internal innovation - generate new knowledge
internal growth - economies of scale
Mergers & acquisitions
Strategic alliances - partnerships with other companies

38. IOS & Strategic Alliances
information partnership - cooperative alliance formed between two firms
Advantages
share information systems
reciprocity of competencies
economy of time and money

40. 3. Value Chain

41. Value Chain
Tool to use to discover where a company can apply IS to gain a competitive advantage

42. Value Chain Analysis of Strategic Opportunities
value chain model
highlights the primary or support activities
that add a margin of value to a firm’s products or services
where information systems can best be applied
to achieve a competitive advantage

43. Value Chain Analysis of Strategic Opportunities
Value chain consists of the major activities that have been added to the product during its creation,development or sale.

44. Activities in the value chain
Activities in the creation of product or service
inbound logistics - obtain raw materials
Operations - transformation of inputs to finished goods
Outbound logistics - storing products and delivering them
Marketing/sales - establishing a customer need
Service activities - after-sale service and maintenance
each of these activities adds value to final product

46. Value Chain
besides determining discrete steps in chain - also need to analyze linkages between steps in value chain
Use value-chain analysis to identify strategic information systems
to use IS strategically, must identify potentially info.-related aspects of each activity in value chain and linkages between them.

47. Virtual Value Chain Mirrors with information the physical value chain
possible to integrate the systems mapped onto the physical value chain (fig. 3.14) to produce the virtual V.C.
can also link V.C. to that of suppliers and customers to form an integrated supply chain

48. point of analysis
identify stages and links where highest-impact potential is available and creatively use IS to bring about that potential.

49. Organizational Requirements for Successful SIS
Active support of Senior management - not just MIS management
Integrated Planning - for strategic use of IS into overall company strategic planning process
Readiness: successful use of MIS already, org. experience with tech. innovation

50. Sustainability of a competitive advantage
depends on:
1. lead time will allow the achievement of competitive advantage
2. Copy cats may fail because of Uniqueness
3. If copied: Your organization will still have preempted the marketplace