Management

Information Systems
Eleventh Edition

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Chapter 2 : Competing with Information
Technology

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|
 Foundation Business
Concepts Applications

Module 1

Information Development
Technology & Security
Infrastructure Challenges
 Learning Objectives

Understand the concept of a system and

how it relates to information system.
Explain fundamental role and importance of
information system in business.
What are the new trends in information
systems?
Provide examples of several major types of
information systems from business
organizations in the real world.

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|
 Learning Objectives

Understand the basic competitive strategies and

how to use information technologies to confront
the competitive forces faced by a business.
Identify several strategic uses of Internet
technologies and how they can help a business in
gaining competitive advantages.
Understand how business process reengineering
is involved in the strategic use of Internet
technologies.

2-5
 Learning Objectives

Recognize the business value of using

Internet technologies to become an agile
competitor or to form a virtual company.
Explain how knowledge management
systems can help a business gain strategic
advantages.

2-6
 Strategic IT
Strategic Information System can be any kind of information
system (e.g., TPS, MIS, and DSS) that uses information
technology to help an organization gain a competitive
advantage, reduce a competitive disadvantage, or meet other
strategic enterprise objectives.
Technology is no longer an afterthought in business strategy,
but the cause and driver
IT can change the way businesses compete
• Vital competitive networks
• Organizational renewal
• Necessary investment
Integral to success
2-7
 Competitive Strategy Concepts

A strategic information system uses IT to

help an organization…
• Gain a competitive advantage
• Reduce a competitive disadvantage
• Meet other strategic enterprise objectives
What is Competitive Advantage?
• Capability for advantage over competitive forces
• Leading the industry in some identifiable way
• Sustains profits above the industry average
• Hard to maintain over a long period of time
2-8
 RWC 1: Quantify IT Risks and Value

IT is a business asset, like buildings and

land
Quantify IT Value and Risks
• How much would normal operations cost
without IT systems?
• How much would operations cost if the IT
system goes down?

IT is investment not cost

Must align IT with company strategy

2-9
 Porter’s Five Forces of Competition

Rivalry of Competitors
• Positive, natural, healthy
Threat of new entrants
• Apple, TRS 80, Commodore, IBM, HP,
Compaq, Gateway, Dell, Acer
Threat of substitutes
• Salon shampoo vs Wal-Mart brand
• VCR vs DVD vs BluRay
Customer bargaining power
• Buy from competitors or don’t buy
Suppliers bargaining power
• Your competitor pays in days not weeks
2-10
Competitive Forces and Strategies

2-11
 Five Competitive Strategies

Cost Leadership
• Become low-cost producers
• Help suppliers or customers reduce costs
• Increase cost to competitors
• Example: Priceline

Differentiation Strategy
• Set a firm’s products apart from competitors’
• Focus on a particular segment or niche market
• Example: Dell

2-12
 Competitive Strategies (continued)

•Innovation Strategy
– Unique products, services, or markets
– Radical changes to business processes
• Example: Dell

•Growth Strategy
– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services
• Example: Wal-Mart

2-13
 Competitive Strategies (continued)

Alliance Strategy
• Includes mergers, acquisitions, joint
ventures, virtual companies
• Customers, suppliers, competitors,
consultants, and other companies
• Example: Wal-Mart uses automatic inventory
replenishment by supplier

2-14
 Using Competitive Strategies

Not mutually exclusive

• One alone won’t usually fix the problem
• Generally need a combination
Innovation not necessarily differentiated
• Kindle v. iPad
• MP3 players vs iPod
• Gateway made in US, relaxed office
Differentiation not necessarily
innovative
• Shipping more efficient but not different
• Telecom companies compete
2-15
Using IT to Implement Basic Strategies

2-16
Implementing Competitive
Strategies

2-17
Other IT strategies (update as per
figure 2.5)

2-18
 Other Competitive Strategies

Lock in Customers and Suppliers

• Deter them from switching to competitors
Create Switching Costs
• Time, money, effort or inconvenience
needed to switch to a competitor
Raise Barriers to Entry
• Discourage or delay other companies from
entering the market
• Increase the technology or investment
needed to enter

2-19
 Other Competitive Strategies

Build a strong IT department

Use IT to:
• Take advantage of strategic opportunities
• Improve efficiency of business practices
• Develop products and services that would not
be possible without a strong IT capability
Use IT to do more than automate a
system, be creative

2-20
Competitive Advantage can become Competitive Necessity

2-21
 Customer-Focused Business

•Keep customers loyal

– Anticipate their future needs
– Respond to customer concerns
– Provide top-quality customer service
•Focus on customer value
– Quality, not price, has become the primary
determinant of value

2-22
 Providing Customer Value

•Companies that consistently offer the

best value from the customer’s
perspective…
– Track individual preferences
– Keep up with market trends
– Supply products, services, and information
anytime, anywhere
– Tailor customer services to the individual
– Use Customer Relationship Management
(CRM) systems to focus on the customer

2-23
Building Customer Value via the Internet

2-24
 Value Chain and Strategic IS
Activities that add value
• Primary processes – direct
• Support processes – indirect

2-25
 Strategic Uses of IT

Gain a competitive differentiation

• Products
• Services
• Capabilities

Somehow do things better

• Just-in-time

2-26
 Business Process Reengineering

Called BRP or simply Reengineering

• Radical
• Seeks improvements
High potential
High risk
Important enabler of reengineering
• IT
• Process teams
• Case managers

2-27
 Role of Information Technology

Major role
• Increase process efficiencies
• Improves communication
• Facilitates collaboration

2-28
 RWC 2: Running a Business on
Smartphones
CPS Energy
• Smartphones with digital cameras
• Cut response time
• Reduced inventory

Lloyd’s Construction
• Smartphones with GPS
• Mobile productivity software
• Low cost
• High return

2-29
BPR Versus Business Improvement

2-30
 Cross-Functional Processes

Reengineered with…
• Enterprise resource planning software
• Web-enabled electronic business and
commerce systems

2-31
Reengineering Order Management

2-32
Strategies for Becoming an Agile
Company
Presents products as solutions to
problems
• Can price as a solution not cost to produce
Cooperates with customers, suppliers and
competitors
• Brings products to market as quickly and cost-
effectively as possible
Thrives on change and uncertainty
• Responds to changing customer expectations
Leverages people and knowledge
• Provides incentives for responsibility,
adaptability, and innovation
2-33
How IT Helps a Company be Agile

2-34
 Creating a Virtual Company

•A virtual company uses IT to link…

– People
– Organizations
– Assets
– Ideas

•Inter-enterprise information systems

link…
– Customers
– Suppliers
– Subcontractors
– Competitors

2-35
A Virtual Company

2-36
Virtual Company Strategies

2-37
 Building a Knowledge-Creating
Company
A knowledge-creating company or learning
organization…
• Consistently creates new business knowledge
• Disseminates it throughout the company
• Builds it into its products and services

2-38
 Knowledge Management

Explicit Knowledge
• Data, documents, and things written down
or stored in computers
• Employee handbook

Tacit Knowledge
• The “how-to” knowledge in workers’ minds
• Most important information
Successful knowledge management
• Rewards sharing
• Makes better use of knowledge

2-39
Knowledge Management Techniques

2-40
Advantages & Challenges of KM

2-41
 RWC 3: Transforming the Business

Transformation is about enabling the

business to better engage with customers
and using this to guide strategic thinking.
NIIT technologies enabled Carey to transform
into an agile enterprise that has all the
necessary tools in place for future growth.
“Run IT” and “Build IT” strategy

2-42
 RWC 4: Trading Securities

Investment companies rely on technology

to gain competitive advantage
One-second delay can be costly
Wall Street
• Fewer floor traders
• New alternative exchanges and e-
communications networks

2-43
 RWC 5: Reinventing IT

Reliable and excellent IT services

Innovative solutions
Create new products and services
New business models
Lower cost
Highest possible profit margins

2-44
 RWC 6: Reinventing Automotive

Technology is being used as a Strategic

tool for gaining competitive edge.
Customer & Competition are the key drivers
in automotive sector
Shortening of Product life cycle
Innovative solutions

2-45