Competing with Information Technology

Session 2

SESSION Objectives

Discuss & Identify several basic competitive strategies

Discuss how IT tackle different competitive forces of business

Discuss how IT is helping E-business and E-commerce to reengineer their business processes

Discuss how TQM give a competitive advantage to E-business

Discuss how knowledge management systems help to gain a business advantage

Competitive Forces
Forces shape the structure of competition in its industry are:

Rivalry of competitors within its industry Threats of new entrants

Threat of substitutes
The bargaining power of customers The bargaining power of suppliers

Using IS for Competitive /Strategic Advantage

Strategic role of IS involves using IT to develop products, services and capabilities that give a company major advantages over competitive forces it faces in the global market place. Creating strategic system with the help of IS a company needs to understand the entire firm and its relationships with external environment such as

Suppliers Consumers Workers Rivals

Competitive Forces and Strategies

Five basic competitive strategies

Cost Leadership Strategy

Becoming a low cost producer of products and services in the industry. Developing ways to differentiate a firms products and services from its competitors or reduce the differentiation advantages of competitors.

Differentiation Strategy

Five basic competitive strategies

Innovation Strategy

Finding new ways of doing business.

Growth Strategies

Significantly expanding a companys

capacity to produce goods and services,

expanding into global markets.

Five basic competitive strategies

Alliance Strategies

Establishing new business linkages and alliances with customers, competitors, consultants, and other companies.

Competing with Information Technology

STRATEGIC USES OF IT

Strategic Information Systems (SIS)

Strategic Information Systems (SIS) support or shape the competitive position and strategies of a business enterprise. SIS can be any kind of information system (TPS, MIS, DSS, etc.) that helps an organization gain or reduce a competitive advantage or meet other strategic enterprise objectives.

10

Strategic Uses of IT

Lower Costs

Use of IT to substantially reduce the cost of business process.

Use IT to lower the costs of customer or suppliers.

11

Strategic Uses of IT
Cost Leadership
COMPANY

STRATEGIC INFORMATION SYSTEM

Online price adjustment Online seller bidding Online auctions

BUSINESS BENEFIT Lowest price guarantee Buyer set pricing Auction set prices

Buy.com Priceline.com EBay.com

12

Strategic Uses of IT

Differentiate

Develop new IT features to differentiate products and services.

Make radical changes to business processes with IT.

Use IT features to reduce the differentiation advantages of competitors.

13

Strategic Uses of IT
Differentiation
COMPANY AVNET Marshall Ross Operating Values Consolidate Freightways STRATEGIC INFORMATION SYSTEM BUSINESS BENEFIT

Customer/Suppli Increase in er E-commerce market share Online customer design Customer online shipment tracking Increase in market share Increase in market share

14

Strategic Uses of IT

Innovate

Create new products and services that include IT components.

Make radical changes to business processes with IT.

Develop unique new markets or markets niches with the help of IT.

15

Strategic Uses of IT
Innovation
COMPANY STRATEGIC INFORMATION SYSTEM BUSINESS BENEFIT

Charles Online discount Schwab & Co. stock trading

Federal Express Amazon.com Online package tracking and flight management

Market leadership
Market leadership

Online full Market service customer leadership systems

16

Strategic Uses of IT

Promote Growth

Use IT to manage regional and global business expansions.

Use IT to diversify and integrate into other

products and services. 17

Strategic Uses of IT
Growth
COMPANY

STRATEGIC INFORMATION SYSTEM

Global Intranet Merchandise ordering by global satellite network

BUSINESS BENEFIT Increase in global market Market leadership Market leadership

Citicorp

Wal-Mart

Toys R Us Inc. POS inventory tracking

18

Strategic Uses of IT

Develop Alliances

Use IT to create virtual organizations of business partners. Develop inter-organizational information systems linked by the Internet, extranets, or other networks that support strategic business relationships with customers, suppliers, subcontractors, and others.

19

Strategic Uses of IT
Alliance
COMPANY STRATEGIC INFORMATION SYSTEM BUSINESS BENEFIT Reduced inventory cost / increase sales Increase in Market share

Wal-Mart / Procter & Gamble Airborne Express

Automatic inventory replenishment by supplier Online inventory management / shipment tracking

20

Strategic Uses of IT

Improve Quality and Efficiency

Use IT to dramatically improve the quality of products and services. Use IT to make continuous improvements to the efficiency of business processes. Use IT to substantially shorted the time needed to develop, produce, and deliver products and services.

21

Strategic Uses of IT

Build an IT Platform

Leverage investment in IS people, hardware, software, and networks from

operational uses into strategic applications.

Build a strategic information base of internal and external data collected and analyzed by using IT.

22

Strategic Uses of IT

Real Cases

Strategic Uses of IT (from Book Page # 51)

REAL CASE 1: Moen Inc.

9-5 Strategy: Effective Managerial Approach Turbo-charged Production & Designing - Using Internet to design products fast ProjectNet- An online extranet site that Moen shares its designs with its suppliers worldwide SupplyNet Launched in 2000, an extranet with suppliers to check Moen orders online Benefit Included

More products reaching markets fast faster manufacturing and shorter product life cycle from 5 to15 fashion lines / year 17% increase in Sales in 1998 compare to 9% increase of the industry Investments of $1.5 Million have yielded 17% growth in sales

Other Achievements

24

Strategic Uses of IT
REAL CASE 2: Ford Motors
What Retailing How Set up BuyerConnection website and joined MSN CarPoint site, where consumers can order custom assembled cars, track their progress, and apply for financing. Goal Reduce working capital by shrinking excess inventories and wipe out costly rebates needed to move unwanted cars off dealer lots, thus saving up to $650 per car.

Customer OwnerConnecrion website Service lets owners get online help, manage their warranty service, and check on financing.

Improve service with 24hour access. Gather better data on customer problems. And cut cost with automated help.

25

Strategic Uses of IT
REAL CASE 2: Ford Motors
What Suppliers How Launched AutoXchange website for online purchasing and swapping of information between 30,000 suppliers and 6,900 dealers. Goal Save up to $8.9 billion a year in discounts and reduced transaction costs on parts, raw materials, and supplies. Speed data exchange with partners while collecting up to $3 billion a year in exchange fees. Improve factory efficiency by anticipating customer demand. Funnel data on customer preferences to car designers.

Marketing Teaming up with Yahoo!, TeleTech, CarPoint; {Village, and bolt-com to monitor the interests and buying patterns of Websurfing customers.

26

Strategic Uses of IT
REAL CASE 2: Ford Motors
What Digital Dashboard How Equip new cars with Web access, satellite phone services, and E-mail capabilities. Shift more of the activities of Ford Credit to the Net for online financing and collections. Offering all 350,000 employees a computer, printer, and Net access for $5 a month. Goal Make Ford the carmaker for an Internet generation. Collect millions of new customers. Cut services costs by 15% to 20% while boosting, revenues by reaching new customers. Makes the workforce Websavvy so it will quickly adopt the Internet initiatives while enabling the CEO to send weekly E-mail to employees.

Financing

Wired Workers

27

Competing with Information Technology

Chapter 2 Section II

Customer Focused E - Business

Customer focused E-business lies in the ability for the companies to help customers

Maintain their loyalty

Anticipate their future needs Respond to customer concerns Provide top quality customer service.

29

Customer Focused E - Business

Customers uses internet

To ask questions Air complaints

Evaluate products
Request support Report their purchases

30

Reengineering Business Processes

Reengineering is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed and service.
31

Business Process vs. Reengineering

Business Improvement Incrementally Definition improving existing processes Business Reengineering Radically redesigning business process Strategic business processes

Target

Any process

32

Business Process vs. Reengineering

Business Improvement Potential Payback 10% - 50% improvements Business Reengineering

What changes?
Risk of Failure & Level of Disruption

10 fold improvements Big job cuts; new Same jobs, just jobs; major job more efficient redesign Low High

33

Role of IT in Reengineering

Customer relationship management systems using corporate intranets and the Internet.

Supplier managed inventory systems using the

Internet and extranets.

Cross functional ERP software for integrating

manufacturing, distribution, finance, and

human resource processes.

34

Role of IT in Reengineering

Customer accessible E-commerce websites for order entry, status checking, payment and service.

Customer, product, and order status databases accessed via intranets and extranets by employees and suppliers.

35

What is Quality?
Quality is defines as meeting or exceeding the requirements and expectations of customers for a product or service. This may involve many features

and attributes, such as performance, reliability,

durability, responsiveness, and aesthetics.

36

Total Quality Management

TQM uses variety of tools and methods to seek continuous improvement of quality, productivity, flexibility, timeliness, and customer responsiveness.
37

Total Quality Management

Companies using TQM are committed to: 1. Even better, more appealing, less variable quality of the product or service. 2. Even quicker, less variable response. 3. Even greater flexibility in adjusting to customers requirements. 4. Even lower cost through quality improvement, rework reduction, and nonvalue adding waste elimination.

38

What is Agility?
Agile is the ability of a company to prosper in rapidly changing, continually fragmenting global market for high-quality, high-performance, customer-configured products and services.

39

Agile Company

Agile company

can make a profit in markets with broad product ranges and short model lifetimes can produce orders in arbitrary lot sizes depend heavily on Internet technologies to integrate and mange business processes.

treat masses of customers as individual 40

Virtual Company
A virtual company also called
virtual corporation or virtual organization is an organization that uses information technology to link people, assets, and ideas, without having any personal interaction between people involved in the process.
E X T R A N E T S
Alliance With Small Suuplier
Multi / Cross Functional Teams Designing Teams Alliance with a competitor providing services INTRANETS

Alliance with Sub contractors

Alliance with Major supplier

Customer Response Teams

Alliance with a major customer

Manufacturing teams

41

Knowledge Creating Company

Knowledge-creating companies mean consistently creating new business knowledge,

disseminating it widely throughout the

company, and quickly building the new

knowledge into their products and services.

42

Knowledge Managements Systems

The goal of knowledge management systems is to help knowledge workers create, organize, and make available important business knowledge. This includes processes, procedures, patents, reference works, formulas, "best practices," forecasts, and fixes. Internet and intranet websites, groupware, data mining, knowledge bases, and online discussion groups are some of the key information technologies for gathering, storing, and distributing this knowledge. 43