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Chapter 3. Strategic Information Systems for Competitive Advantage. Learning Objectives. Describe strategic information systems (SIS) and explain their advantages. Describe Porter’s competitive forces model & how IT helps companies improve their competitive positions.

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Chapter 3

Chapter 3

Strategic Information Systems for Competitive Advantage


Learning objectives
Learning Objectives

  • Describe strategic information systems (SIS) and explain their advantages.

  • Describe Porter’s competitive forces model & how IT helps companies improve their competitive positions.

  • Describe Porter’s value chain model and its relationship to information technology.

  • Describe several other frameworks that show how IT supports the attainment of competitive advantage.


Learning objectives cont
Learning Objectives (cont.)

  • Describe and understand the role of web-based SIS and the nature of competition in the digital age.

  • Describe global competition and its SIS framework.

  • Describe representative strategic information systems and the advantage they provide to organizations.

  • Discuss implementation issues including possible failures of SIS.


Case rosenbluth international
Case: Rosenbluth International

  • Rosenbluth Int., a global player in the travel agency industry, faced threats due to the digital revolution.

  • They responded with 2 strategies:

    (1) Withdrawal from the leisure travel business

    (2) Implementation of web-based travel technology, such as:

     DACODA  A Globalization Network

     Electronic Messaging Services  Customer-Res

     E-Ticket Tracking Solution  IntelliCenters

     Res-Monitor NOC


Lessons from the case
Lessons from the Case

  • Need for exchange business models and strategies

  • Importance of web-based IT

  • Global competition over service is key

  • Large investment over time

  • Importance of networked infrastructure for global systems

  • Web-based applications for superior customer service

  • Need to patent innovative systems


Strategic information systems siss

SISs provide strategic solutions to the 5 Business Pressures:

Strategic Information Systems (SISs)


Elements of strategic management
Elements of Strategic Management Pressures:

1. Long Range Planning

2. Response Management

3. Proactive Innovation

- Information Technologies


The role of it

IT creates applications that provide strategic advantages to companies

IT is a competitive weapon

IT supports strategic change, e.g, re-engineering

IT networks with business partners

IT provides cost reduction

IT provides competitive business intelligence

The Role of IT


Competitive intelligence
Competitive Intelligence companies

Many companies monitor the activities of competitors

  • Such activities drive business

  • performance by:

    • Increasing market

      knowledge

    • Improving internal

      relationships

    • Raising the quality of

      strategic planning

The Internetis central to supporting competitive

intelligence


Competitive advantage in the web economy
Competitive Advantage in the Web Economy companies

Competitive Strategy

Search for a competitive advantage in an industry, which leads to control of the market.

Competitive Advantage

Look for a competitive necessity, which will help your company keep up with the competitors.

Sustainable Strategic Advantage

Maintain profitable & sustainable position against the forces that determine industry competition.


Case mckesson drug www mckesson com
CASE: McKesson Drug companies(www.Mckesson.com)

  • Whole Sale Drug Distributor

  • Economost (McKesson’s Web-based service)

    • Allows for customers to phone, fax or e-mail orders.

    • Order is transferred to an IBM main frame, quick delivery to pharmacies.

    • Significant benefits to customers.

    • Due to Economost, McKesson has survived the new economy, revenues have escalated.

    • Early 2001, McKesson offered a suite of comprehensive Internet-based applications.


Porter s 5 competitive forces
Porter’s 5 Competitive Forces companies

  • 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.


Response strategies porter 1985
Response Strategies companies(Porter, 1985)

COST LEADERSHIP

Providing products and/or services at the lowest cost in the industry.

DIFFERENTATION

Being unique in the industry

FOCUS

Selecting a niche market and achieving

cost leadership and/or differentation.


Response strategies added by porter and others
Response Strategies companies(added by Porter and others)

  • GROWTH

    • Increasing market share, acquiring more customers or selling more products

  • IMPROVE INTERNAL EFFICIENCY

    • To improve employee and customer satisfaction

  • ALLIANCES

    • Working with business partners to create synergy & provide opportunities for growth

  • CRM

    • Customer-oriented approaches, e.g. the customer is king (queen)

INNOVATION

Developing new products & services


Case trucking it cost leadership
Case: Trucking , IT & Cost Leadership companies

  • JB Hunt(www.jbhunt.com)

    • Uses web-based technology to:

      • trigger lowest possible fuel costs

      • notify customers of accurate fuel surcharge

      • provide an on-line “proof of delivery”

  • Roadway Express(www.roadway.com)

    • Uses IT technology to:

      • compare vendor’s prices and related procurement expenses

      • monitor the exact location of trucks



Porter s model in action cont
Porter’s Model in Action companies(cont.)

Step 1:The players in each force are listed.

Step 2: An analysis is made which relates Porter’s determining factors.

Step 3: A strategy is devised to defend against these factors.

Step 4: Support information technologies are employed.


Case daimler chrysler
CASE: Daimler Chrysler companies

Problem:

  • In 1999, the company lost $US 2.6 Billion

  • Chrysler’s program with part suppliers was failing

    Solution:

  • Suppliers began using Lotus notes/ Damino

  • Measurement reports to static HTML web pages

  • E-procurement exchange at Convisint

    Results:

  • Chrysler saves billions


Porter s value chain model

PRIMARY ACTIVITIES companies

In bound logistics (in puts)

Operations (manufacturing & testing)

Outbound logistics (storage & distribution)

Marketing & sales

Service

Porter’s Value Chain Model

Supply

Chain


Porter s value chain model1

SUPPORT ACTIVITIES companies

Firm Infrastructure

Human Resources Management

Technology Development

Procurement

Porter’s Value Chain Model


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.

VALUE SYSTEM


Case frito lay uses it the value chain

World’s largest snack food producer and owner of Pepsi products.

SIS System:

Integrates marketing, sales, manufacturing, logistics, finance.

Provides managers with information about suppliers, customers & competitors.

Enables employees to access valuable information.

Frito Lay’s use of IT allows for an optimal functioning of the value chain.

CASE: Frito Lay uses IT & the Value Chain


The value chain model
The Value Chain Model products.

  • The Value System Model is 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.



Mcfarlan s portfolion framework 1984

For Analyzing Existing, Planned & Potential Information Systems

McFarlan’s Portfolion Framework (1984)


Stages in customer resources life cycle 1 7

( Systems1)Establish Customer Requirements

(2) Specify Customer Requirements

(3) Select a source, match customer with a supplier

(4) Place an order

(5) Authorize and pay for goods & services

(6) Acquire goods or services

(7) Test & accept goods or services

Stages in Customer Resources Life Cycle (1-7)


Stages in customer resources life cycle 8 13

(8) SystemsIntegrate into and manage inventory

(9) Monitor use and behavior

(10) Upgrade if needed

(11) Provide maintenance

(12) Transfer or dispose of product or service

(13) Accounting for purchases

Stages in Customer Resources Life Cycle (8-13)


Web based strategic information systems siss
Web-based Strategic Information Systems (SISs) Systems

  • Many of the SISs of the 70s - 90s were based on privately owned networks, or organizational information systems (OISs).

  • EDI-based systems are of key importance.

  • SISs are changing the nature of competition.

  • In some cases, SIS renders traditional business procedures obsolete.

    • E.g, Encyclopedia Britannia


Case mobile oil moves to web based system
CASE: Mobile Oil Moves to Web-based System Systems

Problem:

  • Largest marketer of lubricants in the USA

  • In 1995, introduced EDI system

    • Used to place orders, submit invoices & exchange business documents

    • It was too expensive, too complex to use

      Solution:

  • In 1997, moved to web-based extranet-supported B2B system

    Results:

  • Reduced transaction cost from $45/order to $1.25

  • Fewer shortages, better customer service

  • decline in distributor administration costs


Examples of edi internet based sis for individual companies
Examples of EDI/Internet-based SIS Systems(for individual Companies)

  • Electronic Auctions

  • Electronic Biddings

  • Buyer-Driven Commerce

  • Single Company Exchange

  • Direct Sales


Examples of edi internet based sis for groups of companies
Examples of EDI/Internet-based SIS Systems(for Groups of Companies)

  • Industry Consortiums

  • Horizontal Consortiums

  • Web-based Call Centers

  • Web-based Tracking Systems

  • Web-based Intelligent Agents

  • Web-based Cross Selling

  • Accessing knowledge via Intranets


Growth of companies operating in a global environment
Growth of Companies Operating in a Global Environment Systems

  • 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


A global drivers framework ivers et al 1993
A Global Drivers Framework Systems(Ivers et al., 1993)

  • “The success of companies doing business in a competitive environment depends on the link between their information systems AND their global business strategy.”

  • This framework provides a tool for identifying the firm’s global business drivers.

  • Drivers look at the current and future needs, focusing on worldwide implementation.


Examples of who is using sis
Examples of Who is Using SIS Systems

Otis Elevator

Centralized call center, self diagnosing elevators’ malfunctions and maintenance analysis

Baxtar International

Terminals in customers’ hospitals

Merrill Lynch

Cash management accounts system

American Airlines

Computerized reservation system (SABRE)


Case total quality management at fpl
CASE: Total Quality Management at FPL Systems

  • Florida Power & Light  largest US utility company

  • Leader in implementing total quality management

  • Several successful SIS programs:

    • Generation Equipment Management System (GEMS)

      Tracks electrical generators, saving $5 million/ yr.

    • 20 different quality control applications

      Reduced customer complaints by 50%

    • Trouble Call Management System

      Reduced black out time from 70 to 48 min.


Case geisinger implements an intranet
CASE: Geisinger Implements an Intranet Systems

Problem:

  • As a result of mergers & acquisitions, Geisinger (a health maintenance organization) had 40 different IT legacy systems in need of an upgrade & integration.

    Solution:

  • In 1993, Geisinger implemented an innovative Intranet: with the following features:

    • “Tel-a-Nurse”

    • Clinical Management System

    • Human Resource Management

      Results:

  • Geisinger reduced costs and unnecessary medical work.


Case caltex corporation
CASE: Caltex Corporation Systems

  • Major multinational company selling gasoline & petrol products.

  • In 2000, created a centralized e-purchasing corporate exchange(www.caltex.com)

    • Suppliers build electronic catalogues with Ariba’s software.

    • Many benefits to buyers and suppliers, particularly in Asia, Africa & the Middle East.

    • System enables Caltex to successfully handle complex multinational business environments.


Case port of singapore
CASE : Port of Singapore Systems

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


Case volvo speed cars
CASE: Volvo Speed Cars Systems

Problem:

  • In comparison to global competitors, Volvo’s cars were to expensive, with a slow delivery time.

    Solution:

  • Creation of global ISDN-based network

    Result:

  • Reduction in delivery time from 12 - 16 weeks to 4 - 6 weeks for customized cars.

  • Reduction in cost of doing business, along with the price of the car.


Case caterpiller corporation
CASE: Caterpiller Corporation Systems

Problem:

  • This world leader in manufacturing of heavy machines faced strong competition from Japanese companies.

    Solution:

  • Computer-aided manufacturing and robots

  • Computerized inventory management

  • Supply chain web-based management

  • Global Intranet & EDI

  • Sensory Intelligent Agents attached to products.

    Results:

  • CAT experienced such a high rate of success that their main competitor was forced to shift its strategy.


Case dun bradstreet d b
CASE: Dun & Bradstreet (D & B) Systems

Problem:

  • Clearing house that provides risk analysis & maintains database of credit ratings.

  • Customers complained about long waiting periods and inaccuracies.

    Solution:

  • Implementation of Web-based expert system.

    Results:

  • Response time reduced from 3 days to a few seconds

  • Credit ratings became more accurate.


Sis implementation
SIS Implementation Systems

  • Major Issues to be Considered:

    • 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.


Sustaining sis strategic advantage
Sustaining SIS & Strategic Advantage Systems

  • 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.


Managerial issues
Managerial Issues Systems

  • Implementing SIS Can Be Risky.

    The investment involved inimplementing Strategic Information Systems (SIS) is high.

  • Strategic Information Systems Requires Planning.

    Planning for an SIS is a majorconcern of organizations.


Managerial issues cont
Managerial Issues Systems(cont.)

  • 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.


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