1

Introduction to Information Systems

Essentials for the Internetworked E-Business Enterprise

Eleventh Edition

James A. O’Brien

Chapter
2
Competing
with
Information Technology
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 James A. O’Brien Introduction to Information Systems Eleventh Edition 2

Chapter Objectives
• Identify several basic competitive strategies
and explain how they can use information
technologies to confront the competitive forces
faced by a business.
• Identify several strategic uses of information
technology for electronic business and
commerce, and give examples of how they give
competitive advantages to business.
• Give examples of how business process
reengineering frequently involves the strategic
use of e-business technologies.

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 3

Chapter Objectives
• Identify the business value of using e-business
technologies for total quality management, to
become an agile competitor, or to form a virtual
company.
• Explain how knowledge management systems
can help a business gain strategic advantages.

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 4

The Competitive Environment

Threat of
New
Entrants
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors

Threat of
Substitutes Bargaining Power
of Customers

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 5

Fundamental Competitive Strategies - Cont.

Cost Leadership Strategies

Differentiation Strategies

Innovation Strategies

Growth Strategies

Alliance Strategies

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 6

Strategic Uses of Information Technology

Improving Promote Locking in
Strategy Business Business Customers
Process Innovation and Suppliers

IT Role Use IT to Use IT to •Use IT to

reduce costs create new improve quality
of doing products or •Use IT to link
business services business to
customers and
suppliers

Create New Maintain Valuable

Outcome Enhance Business Customers and
Efficiency Opportunities Relationships

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 7

Strategic Uses of Information Technology

Raise Build a Build a
Strategy Barriers Strategic IT Strategic
to Entry Platform Information Base

IT Role Increase Leverage Use IT to

amount of investment in provide
investment or IS resources information to
complexity of from operat- support firm’s
IT needed to ional uses to competitive
compete strategic uses strategy

Create New Enhance

Outcome Increase Business Organizational
Market Share Opportunities Collaboration

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 8

The Value Chain

Administrative Coordination & Support Services

e
Human Resource Management

ag
nt
Technology Development

d va
A
Procurement of Resources

ive
Marketing
Inbound Outbound Customer

tit
Operations and

e
Logistics Logistics Service

mp
Sales

Co
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 James A. O’Brien Introduction to Information Systems Eleventh Edition 9

The Internet Value Chain

Marketing and Sales and Support and
Internet Distribution Customer
Product
Capability Feedback
Research

Data for •Low cost •Access to

Benefits customer com-
market distribution
to ments online
research, •Reaches new
Company •Immediate re-
establishes customers
consumer •Multiplies sponse to
responses contact points customer
problems

Opportunity
for Enhanced
Increase Lower Customers
Advantage Cost Margins
Market Share Satisfaction

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 10

Strategic Positioning of Internet Technologies

High
Customer Competition Connectivity

Global Market Product and Services

Penetration Transformation Strategy
External Drivers

E-Commerce Website E-Business; Extensive

Value-added IT Services Intranets and Extranets Solution

Performance
Cost and
Improvements in
Efficiency
Business
Improvements
Effectiveness
E-Mail, Chat Systems Intranets and Extranets

Low E-Business Processes Connectivity

High
Internal Drivers
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 James A. O’Brien Introduction to Information Systems Eleventh Edition 11

Customer-Focused e-Business
Let customers
place orders
directly
Let customers
check order history
and delivery status Let customers
place orders thru
Build a distribution
community partners
of customers,
employees,
and partners Customer Transaction
Database Database

Link Employees
Give all and distribution
employees a partners
complete view
of customers

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 12

Business Reengineering and Quality Management

Business Quality Business

Improvement Reengineering
Incrementally Improving Radically Redesigning
Definition Existing Processes Business Systems
Any Process Strategic Business
Target Processes

Potential 10%-50% Improvements 10-Fold Improvements

Payback
Low High
Risk

Same Jobs - More Efficient Big Job Cuts; New Jobs;

What Changes? Major Job Redesign

Primary IT and Work Simplification IT and Organizational

Enablers Redesign

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 13

The Customer- Focused Agile Competitor

Cooperate with
Anticipation of Business Partners
future needs and Competitors

Customization

y
ilit
Conformance

e
ib
Give Customers

Tim
Organize to

ss

et
Solutions

ce
Master

o m ’s
ery

ark
Ac

e t mer
to Problems Change

liv

tim sto
De

Cu
Co nsact

Leverage the
Tra
st o ion
Co ue-a

Impact of
Va vices
Se

f
st

People and
l
r

of ded

IS Resources
d

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 14

Virtual Corporations

Adaptability

Borderless Excellence

Six
Characteristics
of Virtual
Companies

Technology Trust-Based

Opportunism

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 15

Knowledge Management Systems

Technical Solution
Support Knowledge
Staff

Customers
Development
Engineers Intranet
The
Internet

Product
Other
Managers
Vendors

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 16

Chapter Summary
• Information systems can play several strategic
roles in business.
• The Internet, intranets, extranets, and other
Internet-based technologies can be used
strategically for e-business and e-commerce
that provide a competitive advantage.
• A key strategic use of Internet technologies is
to build an e-business which develops its
business value by making customer value its
strategic focus.

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 17

Chapter Summary (cont)

• IT is a key ingredient in reengineering business
operations, by enabling radical changes to
business processes that dramatically improve
their efficiency and effectiveness.
• IT can be strategically used to improve the
quality of business performance.
• A business can use IT to help it become an
agile company, that can respond quickly to
changes in its environment.

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 18

Chapter Summary (cont)

• Forming virtual companies has become
an important competitive strategy in
today’s dynamic global market.
• Lasting competitive advantages today
can only come from innovative use and
management of organizational knowledge
by knowledge creating companies and
learning organizations.

Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.