CIT 3122 Strategic Info Systems Lecture 2 - 2021.ppt
- 1. INFORMATION SYSTEMS STRATEGY & GOVERNANCE Strategic Information Systems for Competitive Advantage 1
- 2. STRATEGIC INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE Strategic Information System (SIS) Definition Systems that support or shape a business unit’s competitive strategy Competitive Advantage An advantage over competitors in some measure such as cost, quality, or speed A difference in the Value Chain Data Improving Core Competency Employee productivity Operational efficiency Approach Outwardly - Aiming at direct competition Inwardly - Focused on enhancing the competitive position of the firm Strategic alliance
- 3. STRATEGIC INFORMATION SYSTEMS (SISS) SISs provide strategic solutions to the 5 Business Pressures Any information system--EIS, OIS, TPS, KMS--that changes the goals, processes, products, or environmental relationships to help an organization gain a competitive advantage or reduce a competitive disadvantage.
- 4. DEFINITIONS An executive information system (EIS), also known as an executive support system (ESS), is a type of management support system that facilitates and supports senior executive information and decision-making needs. An office information system, or OIS, is an information system that uses hardware, software and networks to enhance work flow and facilitate communications among employees.
- 5. DEFINITIONS A transaction process system (TPS) is an information processing system for business transactions involving the collection, modification and retrieval of all transaction data. Characteristics of a TPS include performance, reliability and consistency Knowledge management systems refer to any kind of IT system that stores and retrieves knowledge, improves collaboration, locates knowledge sources, mines repositories for hidden knowledge, captures and uses knowledge, or in some other way enhances the KM process
- 6. STRATEGIC MANAGEMENT Strategic management the way an organization maps or crafts the strategy of its future operations 3 Elements Long-range planning Response management Proactive innovation
- 7. STRATEGIC EVALUATION & DEVELOPMENT SWOT Analysis Product Life Cycle Quality Preference Competitive Advantage Position, Capabilities, Cost- Quality Curve, Sustainability Company ARC, Coordination, Incentives, Explorer-Exploiter Value Chain Creation/Capture, PIE, Supplier, Buyer Performance Product Differentiation, Substitutions Competition Life Cycle, Market Structure, Behavior, Barriers to Entry Strategy Scope, Goals, Competitive Advantage, Logic Introductory Stage Growth Stage Maturity Stage Decline Stage Total Market Sales Time Laggards Late Majority Early Majority Early Adopters Innovators "The Chasm" Technology Adoption Process Weaknesses Opportunities Threats Strengths p r i c e product p l a c e promotion target market Mental Map SCOPE Exit Strategy Cash Cows Stars Market growth rate Relative market share ? Time & Action Oligopoly Dominant Monopoly Niche Competitive $ Low High High Low Preference UNC E RTA INTY& C HA NG E January 2002 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Implement G1 G2 G3 G4 G5 G6 Demand Needs Analysis Strategy Evaluation & Development Competitors Management Strategy Statement A B C D E F G H
- 8. THE ROLE OF IT IN STRATEGIC MANAGEMENT • Innovative applications - Create innovative applications that provide direct strategic advantage to organizations • Competitive weapons - IS(s) themselves are recognized as a competitive weapon • Changes in processes - IT supports changes in business processes that translate to strategic advantage • Links with business partners - IT links a company with its business partners effectively and efficiently • Cost reductions - IT enables companies to reduce costs • Relationships with suppliers and customers -IT can be used to lock in suppliers and customers, or to build in switching costs • New products -A firm can leverage its investment in IT to create new products that are in demand in the marketplace • Competitive intelligence - by collecting and analyzing information about products, markets, competitors, and environmental changes
- 9. COMPETITIVE INTELLIGENCE • Overview – One of the most important aspects in developing a competitive advantage is to acquire information on the activities and actions of competitors • Collect information about market, technologies, and government’s actions • Analyze and interpret the information The Internet is central to supporting competitive intelligence Such activities drive business performance by Increasing market knowledge Improving internal relationships Raising the quality of strategic planning Many companies monitor the activities of competitors
- 10. COMPETITIVE ADVANTAGE IN THE WEB ECONOMY Competitive Advantage Look for a competitive necessity, which will help your company keep up with the competitors. Competitive Strategy Search for a competitive advantage in an industry, which leads to control of the market. Sustainable Strategic Advantage Maintain profitable & sustainable position against the forces that determine industry competition.
- 11. INTERNET & COMPETITIVE INTELLIGENCE
- 12. PORTER’S COMPETITIVE FORCES MODEL • The model recognizes five major forces that could endanger a company’s position in a given industry – 5 major forces • The threat of entry of new competitors • The bargaining power of suppliers • The bargaining power of customers (buyers) • The threat of substitute products or services • The rivalry among existing firms in the industry • Use of the model – List players in each competitive force – Relate the major determinants of each competitive force – Devise a strategy – Look for supportive IT External Competitive Forces
- 13. PORTER’S 5 FORCES MODEL
- 14. THE ANALYSIS • First Competitive Force - Competitor Analysis – What Drives them? – What are they Doing and can do? – What are their strengths & weaknesses? – Is Competition intense? • Second Competitive Force - Entry Barriers – If nothing slows entry of competitors competition will become intense. – Incumbent Reaction? – What Actions are required to build market share? – Production Process? • Third Competitive Force - Substitute Products – Products or services from another industry enter the market – Customers becoming acclimated to using substitutes – Is the substitute market growing? • Fourth & Fifth Competitive Force – Supply Chain – Suppliers/Buyers? Who controls the transaction? – Each element adds value – question who captures it?
- 15. CASE STUDY: PORTER’S MODEL FOR WAL- MART
- 16. IMPACT OF COMPETITIVE FORCES & ROLE OF IT Key force Business implications Potential IT effects Threat of new entrants Additional capacity Reduced prices New basis for competition Provide entry barriers/reduce access by: exploiting existing economies of scale differentiate product and service control distribution channels segment markets Buyer power high Force price down Demand higher quality Require service flexibility Encourage competition Differentiate product and service Improve price/performance Increase switching costs of buyer Facilitate buyer product selection Supplier power high Raise prices/costs Reduced quality of supply Reduced availability Supplier sourcing system. Extended quality control into supplier Forward planning with supplier Substitute products threatened Limits potential market & profit Price ceilings Improve price/performance Redefine product and service to increase value Redefine market segments Intense competition from rivals Price competition Product development Distribution and service critical Customer loyalty required Improve price/performance Differentiate product and service in distribution channel and to consumer Get closer to end customer
- 17. STRATEGIES FOR COMPETITIVE ADVANTAGE Niche/Focus Select a narrow-scope segment (niche market) and be the best in quality, speed, or cost in that market Differentation Being unique in the industry Cost leadership Provide products and/or services at the lowest cost in the industry Growth Increase market share, acquire more customers or selling more products Improve internal efficiency To improve employee & customer satisfaction CRM Customer-oriented approaches (the customer is king) Alliances Working with business partners to create synergy & provide opportunities for growth Innovation Developing new products & services Time Treat time as a resource, then manage it and use it to the firm’s advantage Lock in customers/suppliers Encourage customers/suppliers to stay with you rather than going to competitors Entry-barriers Developing new products & services Increase switching cost Discourage customers/suppliers from going to competitors for economic reasons
- 18. PORTER’S VALUE CHAIN MODEL The initial purpose of the value chain model was to analyze the internal operations of a corporation, in order to increase its efficiency, effectiveness, and competitiveness. We can extend that company analysis, by systematically evaluating a company’s key processes and core competencies to eliminate any activities that do not add value to the product.
- 19. THE AIRLINE INDUSTRY VALUE CHAIN
- 20. VALUE SYSTEM • A firm’s value chain is part of a larger stream of activities, which Porter calls a “Value System”. – Includes the suppliers that provide the necessary inputs AND their value chains – Applies to both products & services, for any organization, PUBLIC or PRIVATE – Is the basis for the Supply Chain Management – Many of these alliances and business partnerships are based on Internet connectivity are called interorganizational information systems (IOSs) – Used to • Evaluate a company’s process and competencies • Investigate whether adding IT supports the value chain • Enable managers to assess the information intensity and the role of IT
- 21. VALUE SYSTEM CONT’D These Internet-based EDI systems offer strategic benefits Faster business cycle (PO to Receiving) Automation of business procedures (Automated Replenishment) Reduced operational costs Greater advantage in a fierce competitive environment Consortia – Horizontal vs. Vertical
- 22. GLOBAL COMPETITION • Growth of Companies Operating in a Global Environment – Fully Global or Multinational Corporations – Companies that export or import – Companies facing competitions of low labor cost and high natural resources – Companies with low cost production facilities abroad – Small companies that can now use EC to buy/sell internationally • Global dimensions along which management can globalize – Product – Markets & Placement – Promotion – Where value is added to the product – Competitive strategy – Use of non-home-country personnel - labor – Multi-domestic Strategy: Zero standardization along the global dimensions. Global Strategy: Complete standardization along the seven global dimensions.
- 23. GLOBAL BUSINESS DRIVERS FRAMEWORK
- 24. SISS: EXAMPLES • Cases – Wiring the “customer supply chain” at 1-800-Flowers – Increasing Tax Collection Efforts at the Wisconsin Department of Revenue – Time-based Competitive Advantage at Cannondale – Southwest Airlines Flies high with SWIFT – Using ERP to Meet Strategic Challenges at Turner Industries – The Port of Singapore exports its intelligent systems over its enterprise portal • Problem - The Port of Singapore, the world’s largest international port, faced increased global competition. • Solution - Implementation of Intelligent Systems • Results – Reduction in Cycle Time: 4 hours versus 16 - 20 hours in neighboring ports – Reduction in uploading/ loading time: 30 sec. versus 4-5 min./ truck in neighboring ports
- 25. SIS IMPLEMENTATION & SUSTAINING SIS Major Issues in SIS Implementation Justification Justifying SIS may be difficult due to the intengible nature of their benefits Risks & Failures The magnitude, complexity, continuous changes in technology and business environment may result in failures Finding appropriate SIS Identifying appropriate SIS is not a simple task
- 26. SIS IMPLEMENTATION & SUSTAINING SIS • Sustaining SIS & Strategic Advantage – A Major problem that companies face is how to sustain their SIS competitive advantage. – 3 Major approaches • Create inward systems which are not visible to competitors • Provide a comprehensive, innovative & expensive system that is difficult to duplicate • Combine SIS with structural changes. This would include business processes, reengineering & organizational transformation
- 27. MANAGERIAL ISSUES • Implementing SIS Can Be Risky – The investment involved in implementing SIS is high • Strategic Information Systems Requires Planning – Planning for an SIS is a major concern of organizations • Sustaining Competitive Advantage Is Challenging. – As companies become larger and more sophisticated, they develop resources to duplicate the systems of their competitors quickly. • Ethical Issues – Gaining competitive advantage through the use of IT may involve unethical or even illegal actions – Companies can use IT to monitor the activities of other companies and may invade the privacy of individuals working there.