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Week 6 Strategic Uses of Information Systems. Learning Objectives. When you finish this week, you will: Understand business strategy and strategic moves. Recognize how information systems can give business a competitive advantage.

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Week 6 strategic uses of information systems

Week 6Strategic Uses of Information Systems


Learning objectives
Learning Objectives

  • When you finish this week, you will:

    • Understand business strategy and strategic moves.

    • Recognize how information systems can give business a competitive advantage.

    • Understand basic initiatives for gaining a competitive advantage.


Learning objectives1
Learning Objectives

  • Know what makes an information system a strategic information system.

  • Understand the fundamental requirements for developing strategic information systems.

  • Recognize circumstances and initiatives that make one SIS succeed and another fail.


Strategy and strategic moves
Strategy and Strategic Moves

  • Strategy

    • A plan designed to help an organization outperform its competitors.

  • Strategic Information Systems

    • Information systems that help seize opportunities.

    • Can be developed from scratch, or they can evolve from existing ISs.


Achieving a competitive advantage
Achieving aCompetitive Advantage

  • Profits increase significantly through increased market share.

  • The essence of strategy is innovation, so competitive advantage often occurs when an organization tries a strategy that no one has tried before.

  • Dell was the first PC manufacturer to use the Web to take customer orders.


Achieving a competitive advantage1
Achieving aCompetitive Advantage

Figure 2.1

Eight basic ways

to gain advantage


Achieving a competitive advantage2

Figure 2.2 Many strategic moves can work together to achieve a competitive advantage

Achieving aCompetitive Advantage


Achieving a competitive advantage3
Achieving aCompetitive Advantage

  • Initiative #1: Reduce Costs

    • Lower Costs

    • Lower Price

    • Bigger Market Share


Achieving a competitive advantage4
Achieving aCompetitive Advantage

  • Initiative #2: Raise Barriers to Entrants

    • Patenting

    • High expense of entering industry

      • State Street, Inc. (Pension fund management business)


Achieving a competitive advantage5
Achieving aCompetitive Advantage

  • Initiative #3: Establish High Switching Costs

    • Explicit Switching Costs

      • Fixed and nonrecurring

    • Implicit Switching Costs

      • Indirect costs in time and money of adjusting to a new product


Achieving a competitive advantage6
Achieving aCompetitive Advantage

  • Initiative #4: Create New Products and Services

    • Dynamic

      • The advantage lasts only until other organizations in the industry start offering an identical or similar product or service for a comparable or lower price.


Achieving a competitive advantage7
Achieving aCompetitive Advantage

  • Initiative #5: Differentiate Products and Services

    • Product differentiation

    • Brand recognition

    • Examples of brand name success

      • Levi’s jeans

      • Chanel perfumes

      • Calvin Klein clothing


Achieving a competitive advantage8
Achieving aCompetitive Advantage

  • Initiative #6: Enhance Products and Services

    • Examples

      • Auto manufacturers enticing customers with a longer warranty

      • Real estate agents providing useful financing information to potential buyers

      • Charles Schwab moving stock trading services on-line before Merrill Lynch


Achieving a competitive advantage9
Achieving aCompetitive Advantage

  • Initiative #7: Establish Alliances

    • Combined service may attract customers

      • Lower cost

      • Convenience

    • Examples

      • Travel industry

      • HP and FedEx


Achieving a competitive advantage10

Figure 2.3 Strategic alliances combine services to create synergies

Achieving a Competitive Advantage


Achieving a competitive advantage11
Achieving aCompetitive Advantage

  • Initiative #8: Lock in Suppliers or Buyers

    • Bargaining Power

    • Purchase volume

    • Strengthen perception as a leader

    • Create a standard


Strategic information as a competitive weapon
Strategic Information as a Competitive Weapon

  • Strategic Information Systems (SIS)

    • Any IS that can help an organization achieve a long-term competitive advantage

    • SIS embodies two types of ideas

      • Potentially-winning business move

      • How to harness IT to implement that move

    • Two conditions for SIS

      • IS must be serving an organizational goal

      • IS unit must be working with the managers of the other functional units


Strategic information as a competitive weapon1
Strategic Information as a Competitive Weapon

  • Creating an SIS

    • Top management must be involved from initial consideration through development and implementation.

    • SIS must be a part of the overall organizational strategic plan.


Strategic information as a competitive weapon2

Figure 2.4 Steps for considering a new SIS

Strategic Information as a Competitive Weapon


Strategic information as a competitive weapon3

Figure 2.5 Steps to take in an SIS idea-generating meeting

Strategic Information as a Competitive Weapon


Strategic information as a competitive weapon4
Strategic Information as a Competitive Weapon

  • Re-engineering and Organizational Change

    • To implement an SIS and achieve a competitive advantage, organization must rethink the entire way in which it operates.

    • Goal of re-engineering is to achieve efficiency leaps of 100 percent or even higher.


Strategic information as a competitive weapon5
Strategic Information as a Competitive Weapon

  • Competitive Advantage as Moving Target

    • SISs developed as strategic advantages quickly become standard business.

      • Banking industry (ATMs and banking by phone)

    • Companies must continuously contemplate new ways of utilizing information technology to their advantage.

      • SABRE, American Airlines’ reservation system


Strategic information as a competitive weapon6
Strategic Information as a Competitive Weapon

  • Sources of Strategic Information Systems

    • Existing System

    • New Service

    • New Technology

    • Excess Information

    • Vertical Information


Strategic information as a competitive weapon7
Strategic Information as a Competitive Weapon

  • From Automation to SIS

    • An organization can gain a competitive advantage through automation of a manual process.

    • American Hospital Supply automated manual orders and improved services, resulting in a 17 percent compound annual growth rate in sales.


Strategic information as a competitive weapon8
Strategic Information as a Competitive Weapon

  • SIS from a New Service

    • A company may gain competitive advantage by providing a new service using IT.

    • Merrill Lynch was the first to use IT to provide a cash-on-demand service for their investors and captured a lion’s share of the market.


Strategic information as a competitive weapon9
Strategic Information as a Competitive Weapon

  • SIS from New Technology

    • A company that figures out how to use a new technology can gain a competitive advantage.

    • American Express used new scanning technology to process credit charges and saved millions of dollars in reduced labor costs.


Strategic information as a competitive weapon10
Strategic Information as a Competitive Weapon

  • SISs from Excess Information

    • An organization can gain an advantage by putting excess information toward a new product or service.

    • Sears Roebuck and Company uses its customer record database to provide target information to its subsidiaries in insurance and real estate.


Strategic information as a competitive weapon11
Strategic Information as a Competitive Weapon

  • SISs from Vertical Information

    • Organizations use ISs to augment their businesses vertically by offering related services.

    • Realtors offer financing and relocation information in addition to information about houses for sale.


Strategic information as a competitive weapon12
Strategic Information as a Competitive Weapon

  • Good SIS ideas must be carefully executed if a company is to seize opportunities.

    • McKesson Drugs, Inc., automated its operations and gained a competitive advantage.

      • Enhanced existing services

      • Provided new services

      • Cut costs

      • Created high switching costs for clients


Strategic information as a competitive weapon13
Strategic Information as a Competitive Weapon

  • How one IS Failed

    • Citicorp tried to use an SIS to implement a 15-minute mortgage approval plan called MortgagePower Plus, but the program failed.

      • Failed strategically due to unwise business shortcuts.

      • Failed operationally due to poor technical implementation.


Strategic information as a competitive weapon14
Strategic Information as a Competitive Weapon

  • Success and Failure on the Web

    • Just being first on the Web is not enough to be successful; business ideas must be sound.

      • An organization must carefully define what buyers want.

      • Establishing a recognizable brand name is important but does not guarantee success; satisfying needs is more important.


The bleeding edge
The Bleeding Edge

  • Business owners must develop new features to keep the system on the leading edge.

  • Adopting a new technology involves great risk.

    • No experience from which to learn

    • No guarantee technology will work or customers and employees will welcome it


The bleeding edge1
The Bleeding Edge

  • The bleeding edge: failure in an organization’s effort to be on the technological leading edge.

  • Some organizations let competitors assume the risk associated with being on the leading edge.

    • Risk losing initial rewards.

    • Can quickly adopt and even improve pioneer organization’s successful technology.


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