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

2. Q1: How does organizational strategy determine information systems structure? Q2: What five forces determine industry structure? Q3: What is competitive strategy? Q4: What is a value chain? Q5: How do value chains determine business processes and information systems? Q6: How do information systems provide competitive advantage? Study Questions 3-2 Copyright 2010 Pearson Education, Inc. for Prentice Hall

3. 1.Information systems exist to help organizations achieves goals and objectives 2.Goals and objectives are determined by competitive strategy 3.Competitive strategy defines structures, features, and functions of every information system 4.Organizations examine industry structure to determine a competitive strategy 5.Strategy determines value chains and business processes Q1: How Does Organizational Strategy Determine Information Systems Structure? 3-3 Copyright 2010 Pearson Education, Inc. for Prentice Hall

4. Organizational Strategy Determines Information Systems 3-4 Copyright 2010 Pearson Education, Inc. for Prentice Hall

5. Porter’s five competitive forces: 1.Bargaining power of customers 2.Bargaining power of suppliers 3.Threat of substitutions 4.Threat of new entrants 5.Rivalry among existing firms Q2: What Five Forces Determine Industry Structure? 3-5 Copyright 2010 Pearson Education, Inc. for Prentice Hall

6. Porter’s Five Competitive Forces 3-6 Figure 3-2 1 45 2 3 Copyright 2010 Pearson Education, Inc. for Prentice Hall

7. Porter identified four competitive strategies: 1.Broad cost leadership across industry (most efficient) 2.Broad differentiation across industry (most effective) 3.Narrow cost leadership focused on particular industry segment (most efficient) 4.Narrow differentiation focused on particular industry segment (most effective) Q3: What Is Competitive Strategy? 3-7 Copyright 2010 Pearson Education, Inc. for Prentice Hall

8. Porter’s Four Competitive Strategies 3-8 Copyright 2010 Pearson Education, Inc. for Prentice Hall Two Dimensions of Strategy – Scope <> Competitive AdvantageScope

9. A network of: –Value-creating activities Primary activities Support activities (Secondary) –With linkages between activities Q4: What Is a Value Chain? 3-9 Copyright 2010 Pearson Education, Inc. for Prentice Hall

10. Porter’s Value Chain Model 3-10 Figure 3-5 Copyright 2010 Pearson Education, Inc. for Prentice Hall

11. Five Primary Activities 1.Inbound logistics 2.Operations 3.Outbound logistics 4.Marketing and sales 5.Service Primary Activities in Value Chain 3-11 Copyright 2010 Pearson Education, Inc. for Prentice Hall

12. Four support activities 1.Firm infrastructure – general management, finance, accounting, legal, government affairs 2.Human resources – training, recruiting, compensation 3.Technology – R & D, new techniques, methods, procedures 4.Procurement – raw materials These contribute indirectly to production, sale, and service Support Activities 3-12 Copyright 2010 Pearson Education, Inc. for Prentice Hall

13. Interactions across value activities that are: –Sources of efficiencies –Readily supported by information systems –Improves Information flow and organizational efficiency (JIT) Linkages 3-13 Copyright 2010 Pearson Education, Inc. for Prentice Hall

14. Porter’s Value Chain is used to: –Create integrated, cross-departmental business systems –Create new, more efficient processes rather than automating existing ones –Focus is on: Creating integrated activities across entire value chain Eliminating redundant processes, and creating new, more efficient processes Business Process Re-engineering Business Process Design 3-14 Copyright 2010 Pearson Education, Inc. for Prentice Hall

15. Q5: How Do Value Chains Determine Business Processes and Information Systems? Bicycle Rental Competitive Strategies 3-15 Copyright 2010 Pearson Education, Inc. for Prentice Hall

16. Q6: How Do Information Systems Provide Competitive Advantages? 3-16 Copyright 2010 Pearson Education, Inc. for Prentice Hall

17. Organizations can gain a competitive advantage by: 1.Creating new products or services 2.Enhancing existing products or services 3.Differentiating products or services By cost By quality Roles for Information Systems Regarding Products: –As part of the Product –In support of the Product Competitive Advantage Via Products 3-17 Copyright 2010 Pearson Education, Inc. for Prentice Hall

18. Organizations can gain a competitive advantage by implementing business systems that: 1.Lock in customers By creating high switching costs 2.Lock in suppliers Make it easy to connect to and work with your organization 3.Create entry barriers Make it difficult for new competitors to enter the market 4.Establish alliances Establish standards 5.Reduce costs To increase profit margins and profitability Competitive Advantage via Business Processes 3-18 Copyright 2010 Pearson Education, Inc. for Prentice Hall

19. Dee’s memo should include: –List of competitive advantages blog can create, such as: 1.Help sales team differentiate company’s drugs from competitors 2.Lock in customers (customers get up-to-date information) 3.Raise barriers to market entry for new drugs or pharmaceutical companies Applying Knowledge of Industry Structure 3-19 Copyright 2010 Pearson Education, Inc. for Prentice Hall

20. Knowledge of industry structure will make it easier to talk with senior management Understanding the organization’s competitive strategy translates that strategy into company projects The strategies in this chapter can justify the blog to promote the company’s competitive strategy through cost-effective dissemination of accurate, current and useful information How Does Knowledge in This Chapter Help Dee and You? 3-20 Copyright 2010 Pearson Education, Inc. for Prentice Hall

21. Q1:How does organizational strategy determine information systems structure? Q2:What five forces determine industry structure? Q3:What is competitive strategy? Q4:What is a value chain? Q5:How do value chains determine business processes and information systems? Q6:How do information systems provide competitive advantages? Active Review 3-21 Copyright 2010 Pearson Education, Inc. for Prentice Hall

22. Chapter Extension 4 Knowledge Management and Expert Systems

23. Q1:What are the benefits of knowledge management? Q2:What are content management systems? Q3:What are the challenges of content management? Q4:How do people share knowledge via collaboration? Q5:What are expert systems? Study Questions Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-23

24. KM – process of creating value from intellectual capital - sharing that knowledge with employees, managers, suppliers and customers who need it Benefits of KM –Fosters innovation by encouraging free flow of ideas –Improves customer service by streamlining response time –Boosts revenues by getting products, services to market faster –Enhances employee retention rates by recognizing employee value –Streamlines operations and reduces costs by eliminating redundant, unnecessary processes Preserves organizational memory –Lessons learned –Best practices Q1: What Are the Benefits of Knowledge Management? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-24

25. Information systems that track documents, Web pages, graphics and related material Do not directly support business operations Not part of operational system Used to create, manage, or deliver documents for purpose of imparting knowledge Document Life Cycle Management (Birth-Create to Death-Delete) Q2: What Are Content Management Systems? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-25

26. 1.Functions are complex –Databases are huge –Content changes constantly with additions, deletions, alterations 2.Documents do not exist in isolation –Linked to other documents 3.Document contents are perishable –Become obsolete –Need to be altered or removed 4.Documents must be translated into multiple languages 5.Content must be arranged and indexed with facility to search 6.Appropriate document formats to be used must be determined Q3: What Are the Challenges of Content Management? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-26

27. Team portals –Publish information about team activities Discussion groups –Post questions and queries online –Organize discussions as FAQs Emails –Lists Blogs –Open-ended, multiple formats, robust Podcasts –Audio and video digital files uploaded to Web Q4: How Do People Share Knowledge Via Collaboration? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-27

28. Employees reluctant to exhibit their ignorance Employee competition Employee shyness, fear of ridicule, inertia Cure: strong management endorsement for knowledge sharing, praise, and cash (Reward the appropriate behavior!) Resistance to Knowledge Sharing CE 4-28 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

29. Expert systems –Rule-based systems IF/THEN –Encode human knowledge Expert systems shells –Process IF side of rules until no value changes –Report values of all variables –Knowledge gathered from human experts in domain of interest Q5: What Are Expert Systems? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-29

30. Example of IF/THEN Rules CE 4-30 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

31. Drawbacks of Expert Systems Difficult and expensive to develop –Labor intensive –Ties up domain experts Difficult to maintain –Changes cause unpredictable outcomes Don’t live up to expectations –Can’t duplicate diagnostic abilities of humans –Constantly need expensive changes to programs to reflect new knowledge Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-31

32. PharmADE and DoseCheckerPharmADEDoseChecker –DoseChecker verifies appropriate dosages on prescriptions issued in the hospital –PharmADE ensures patients are not prescribed drugs that have harmful interactions Expert Systems for Pharmacies CE 4-32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

33. Active Review Q1:What are the benefits of knowledge management? Q2:What are content management systems? Q3:What are the challenges of content management? Q4:How do people share knowledge via collaboration? Q5:What are expert systems? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE 4-33

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