Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage

1. Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage Management Information Systems for the Information Age

2. Presentation Overview • Competitive Advantage Examples • Developing A Strategy For The Internet Age • Key E-Commerce Strategies • The U.S. Airline Industry • Summing It Up Management Information Systems for the Information Age

3. Opening Case StudyZara – Fashion Fast Forward • Zara sets itself apart with its computerized network that ties stores to design shops and company-owned factories in real time. • How can technology be used to respond quickly to shifts in consumer tastes? Management Information Systems for the Information Age

4. Introduction • Competitive advantage – a company provides a product or service in a way that customers value more than what the competition is able to do. • Application architect - information technology professional who can design creative technology-based business solutions. Management Information Systems for the Information Age

5. Competitive Advantage ExamplesFederal Express • FedEx – lets you access information about your packages through your Internet connection and Web browser. • Temporary advantage - whatever you do, sooner or later the competition duplicates what you’ve done. • First mover - the company who is first to market with a new IT-based product or service. Management Information Systems for the Information Age

6. Competitive Advantage ExamplesFederal Express Enter your tracking number here. Management Information Systems for the Information Age

7. Competitive Advantage ExamplesCharles Schwab • Schwab was a first mover in offering stock trades over the Internet, along with other online brokers such as E*Trade. • Schwab’s willingness to embrace the Internet early has made Schwab the largest online broker. Management Information Systems for the Information Age

8. Competitive Advantage ExamplesDell Computer • Dell computer has a direct sell model that gives the company a huge advantage over any competitor. • Distribution chain - the path followed from the originator of a product or service to the end consumer. • Alliance partner - a company you do business with on a regular basis in a cooperative fashion, usually facilitated by IT systems. Management Information Systems for the Information Age

9. On Your Own Looking for Opportunities Close to Home (p. 75) Competitive Advantage ExamplesDell Computer • Information partnership - lets two or more companies cooperate by integrating their IT systems. Management Information Systems for the Information Age

10. Competitive Advantage Examples - Dell Computer Management Information Systems for the Information Age

11. Competitive Advantage ExamplesCisco Systems • Cisco Systems - a leader in utilizing the direct sell model over the Internet. • Business to Business (B2B) - companies whose customers are primarily other businesses. • Business to Consumer (B2C) -companies whose customers are primarily individuals. Management Information Systems for the Information Age

12. Developing A Strategy For The Internet Age • Porter’s three frameworks are: • The Five Forces model • The Three Generic Strategies • The Value Chain Management Information Systems for the Information Age

13. Developing A Strategy For The Internet AgeThe Five Forces Model Management Information Systems for the Information Age

14. Developing A Strategy For The Internet AgeThe Five Forces Model • Five forces model - determines the relative attractiveness of an industry. • Buyer power - high when buyers have many choices of whom to buy from, and low when the choices are few. • Supplier power - high when buyers have few choices of whom to buy from, and low when there are many choices. Management Information Systems for the Information Age

15. Developing A Strategy For The Internet AgeThe Five Forces Model • Threat of substitute products or services - low if there are very few alternatives to using the product or service. • Switching costs - costs thatcan make customers reluctant to switch to another product or service. • Threat of new entrants - high when it is easy for competitors to enter the market. • Rivalry among existing competitors – high when the industry is less attractive. Management Information Systems for the Information Age

16. Developing A Strategy For The Internet AgeThe Three Generic Strategies Management Information Systems for the Information Age

17. Developing A Strategy For The Internet AgeThe Three Generic Strategies • Three generic strategies • Cost leadership • Differentiation • Focused strategy Management Information Systems for the Information Age

18. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Buyer power • Loyalty programs. • Supplier power • B2B marketplace - an Internet-based service which brings together many buyers and sellers. • Threat of substitute products or services • IT-based alternatives. Management Information Systems for the Information Age

19. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Threat of new entrants • Entry barrier - a product or service feature that customers have come to expect from companies in a particular industry. • Rivalry among existing competitors • Using IT systems to be more efficient. Management Information Systems for the Information Age

20. Developing A Strategy For The Internet AgeBridging the Gap Between Business People and Technical People • Project team - a team designed toaccomplish specific one-time goals, which is disbanded once the project is complete. • Form a team that draws the best knowledge of the business problem from the business people and the best technical solution from the technology people. Management Information Systems for the Information Age

21. Developing A Strategy For The Internet AgeViewing the Business Problem from Another Perspective • Take the perspective of a customer of the company. • Design the information system so it enhances the customer’s experience. Management Information Systems for the Information Age

22. Developing A Strategy For The Internet AgeUsing the Three Generic Strategies • Use the three generic strategies to change the basis of competition. • Amazon.com makes the buying experience a pleasure by using sophisticated software to personalize the site for each individual. Management Information Systems for the Information Age

23. Team Work Finding the Best IT Strategy For Your Industry (p. 83) Developing A Strategy For The Internet AgeDeveloping a Creative Design • Creative design - solves the business problem in a new and highly effective way rather than the same way others have done it. Management Information Systems for the Information Age

24. Developing A Strategy For The Internet AgeThe Value Chain • Business process - a standardized set of activities that accomplishes a specific task, such as processing a customer’s order. • Value chain - views the organization as a chain – or series – of processes, each of which adds value to the product or service for the customer. Management Information Systems for the Information Age

25. Developing A Strategy For The Internet AgeThe Value Chain Management Information Systems for the Information Age

26. Developing A Strategy For The Internet AgeThe Value Chain • Talbott used the value chain to: • Plan for a better way of meeting customer demands. • Identifying processes that add value. • Identifying processes that reduce value. Management Information Systems for the Information Age

27. Developing A Strategy For The Internet AgeThe Value Chain Management Information Systems for the Information Age

28. Developing A Strategy For The Internet AgeThe Value Chain Management Information Systems for the Information Age

29. Developing A Strategy For The Internet AgeLooking Beyond The Four Walls Of The Company • Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it. • Supply chain - consists of the paths reaching out to all of a company’s suppliers of parts and services. • Collaborative planning, forecasting, and replenishment (CPFR) - a concept that encourages and facilitates collaborative processes between members of a supply chain. Management Information Systems for the Information Age

30. Key E-Commerce Strategies • Three capabilities made possible by the Internet are: • Mass customization and personalization • Disintermediation • Global reach Management Information Systems for the Information Age

31. Key E-Commerce StrategiesMass Customization and Personalization • Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications. • Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you. • Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics. Management Information Systems for the Information Age

32. Key E-Commerce StrategiesDisintermediation • Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can be bypassed. Management Information Systems for the Information Age

33. Key E-Commerce StrategiesGlobal Reach • Global reach - the ability to extend reach to customers anywhere there is an Internet connection, and at a much lower cost. Management Information Systems for the Information Age

34. The U.S. Airline IndustryAirline Reservation Systems • The airlines really began using IT in a significant way when American Airlines and United Airlines introduced the first airline reservations systems. • SABRE • APPOLO Management Information Systems for the Information Age

35. The U.S. Airline IndustryFrequent Flyer Programs • Frequent flyer programs are a great example of using IT to alter Porter’s five forces. • They reduced buyer power by making it less likely a traveler would choose another airline. • They reduced the threat of substitute products or services by increasing switching costs. • They erected entry barriers by making a frequent flyer program a practical necessity for any airline to compete effectively. Management Information Systems for the Information Age

36. The U.S. Airline IndustryYield Management Systems • Yield management systems are designed to maximize the amount of revenue that an airline generates on each flight. • Yield management systems are the reason that an airfare you’re quoted over the phone can be $100 higher when you call back an hour later. Management Information Systems for the Information Age

37. The U.S. Airline IndustryYield Management Systems Management Information Systems for the Information Age

38. The U.S. Airline IndustryDisintermediating the Travel Agent • Expert surveys have estimated that the number of travel agents in the U.S. will be sharply reduced as a result of disintermediation. Team Work Helping the Little Guy Compete (p. 93) Management Information Systems for the Information Age

39. The U.S. Airline IndustryUtilizing Emerging Technologies • Permission marketing- when you have given a merchant your permission to send you special offers. Management Information Systems for the Information Age

40. Summing It Up • Important considerations you should keep in mind as you work to bring an IT competitive advantage to your organization include: • Be efficient and effective. • Competition is all around you. • Push the state-of-the-art. • IT competitive advantages are only temporary. Management Information Systems for the Information Age

41. On Your Own Building on the State of the Art (p. 95) Summing It Up Management Information Systems for the Information Age

42. Closing Case Study OneGM Tries to Lure Customers with OnStar • GM added an in-car cellular service, OnStar, to update its image and increase sales. • Did the OnStar system give GM a competitive advantage? Management Information Systems for the Information Age

43. Closing Case Study TwoSpeedpass: Throw Away Your Plastic? • Speedpass offers a short plastic cylinder, called a Key Tag, that transfers customer billing information automatically. • Speedpass is an alternative to a credit card. • How is Speedpass an example of a first mover? Management Information Systems for the Information Age

44. Summary Student Learning Outcomes • Illustrate how the creative use of information technology can give an organization a competitive advantage. • Describe how to develop business strategies for the Internet Age and use tools that can help. • Describe how e-commerce technologies up the stakes and give organizations even more opportunities. Management Information Systems for the Information Age

45. Summary Student Learning Outcomes • Summarize how one specific industry has consistently used information technology for competitive advantage. • Summarize how to use information technology for competitive advantage in an organization. Management Information Systems for the Information Age

46. Summary Assignments & Exercises • Evaluating telemedicine • Comparing parcel delivery services • Disintermediation in the travel agent industry Management Information Systems for the Information Age

47. Visit the Web to Learn Morewww.mhhe.com/haag • Auction houses • Books and music • Clothing and accessories • Computers • Automobiles • Information partnerships Management Information Systems for the Information Age