1 / 68

Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage

Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage. It is all about …. Competitive Advantage Providing a product or service in a way that customers value more than what the competition is able to do. In perspective (do not be fooled) ….

haruko
Download Presentation

Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

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

  2. It is all about … Competitive Advantage Providing a product or service in a way that customers value more than what the competition is able to do. Management Information Systems for the Information AgeSecond Canadian Edition

  3. In perspective (do not be fooled) … Its not the IT, it’s the People It is not the information technology that gives a company the competitive advantage; it is the way people use the technology that makes the difference. Management Information Systems for the Information AgeSecond Canadian Edition

  4. Think about it … Like the car and its driver The car is a Ferrari. The drivers are a regular average everyday Chevrolet car driver, and a race-car driver. Only the race-car driver can take full advantage of the Ferrari by using the technology embodied into it more effectively and appropriately. Management Information Systems for the Information AgeSecond Canadian Edition

  5. Like an Architect … The house and the Architect To build a house to meet a certain objective you need an Architect. To build / have an information system (IS) you need an IS Architect that understands the business problem and the available technologies. Management Information Systems for the Information AgeSecond Canadian Edition

  6. … Main Chapter Menu… Competitive Advantage Examples • FedEx • Schwabs • Dell • Cisco Developing A Strategy For The Internet Age • The five forces model • The three generic strategies • The value chain Key E-Commerce Strategies • Mass customization • Disintermediation • Global reach The U.S. Airline Industry Management Information Systems for the Information AgeSecond Canadian Edition

  7. Competitive Advantage Examples In this book, we feel that the best way to understand competitive advantage is by seeing it in action. Here you have 4 examples showing you how IT is used to gain a competitive advantage Management Information Systems for the Information AgeSecond Canadian Edition

  8. Competitive Advantage ExamplesFederal Express • Before • Call a 1 800 number • Listen to some music • Get your tracking number from your order ready • After a while you end up speaking with a customer service clerk • The clerk will access the database • The clerk will tell you • Whether the product has arrived or not • Who signed for the product if it has arrived to its destination Management Information Systems for the Information AgeSecond Canadian Edition

  9. Competitive Advantage ExamplesFederal Express • Strategy • Build an information system to allow the customer to access the database. • Use the internet as the vehicle to deploy the information system Management Information Systems for the Information AgeSecond Canadian Edition

  10. Competitive Advantage ExamplesFederal Express • Now • Go to www.fedex.ca • Enter customer service area • Enter you tracking number to access the database and obtain all the information you need Management Information Systems for the Information AgeSecond Canadian Edition

  11. Competitive Advantage ExamplesFederal Express • Gains • To the customer • Easier and less painful process to track your shipment • Less time consuming • Better information • To FedEx • Cheaper, as they would need now less customer service clerks • Happier customers Management Information Systems for the Information AgeSecond Canadian Edition

  12. Competitive Advantage ExamplesFederal Express Figure 2.2 FedEx Package Tracking Screenpage 45 Management Information Systems for the Information AgeSecond Canadian Edition

  13. Competitive Advantage ExamplesCharles Schwab • Before • Typical brokerage business • Call offices • Speak with an agent • Get advice • Make buy/sell decisions Management Information Systems for the Information AgeSecond Canadian Edition

  14. Competitive Advantage ExamplesCharles Schwab • Strategy • Pioneer in the discount brokerage business • Target investors that are comfortable making their own trades • Develop and deploy an information system to accommodate the target investor • Embrace the internet as the technology vehicle for attaining objectives Management Information Systems for the Information AgeSecond Canadian Edition

  15. Competitive Advantage ExamplesCharles Schwab • Now • www.schwab.com • Internet brokerage service • Buy/sell and get information online, in real-time and 24hrs a day. Management Information Systems for the Information AgeSecond Canadian Edition

  16. Competitive Advantage ExamplesDell Computer • Before • Dell would sell its computers via retailers • Buy-hold-sell approach • Build computers • Stock computers on shelves in warehouse • Sell computers • Customer service all by telephone Management Information Systems for the Information AgeSecond Canadian Edition

  17. Competitive Advantage ExamplesDell Computer • Strategy • Eliminate the retail middle man and sell directly to customer • Build and deploy an information system for purchasing • Use internet as the technology vehicle to reach its customer for sales and service Management Information Systems for the Information AgeSecond Canadian Edition

  18. Competitive Advantage ExamplesDell Computer • Now • www.dell.ca • Sell-source-ship • Dell receives an order by internet • Dell outsources to initiate the construction of the computer sold • Dell then ships the product • Top of the line automated customer care component Management Information Systems for the Information AgeSecond Canadian Edition

  19. On Your Own Looking for Opportunities Close to Home(p. 47) Competitive Advantage ExamplesDell Computer • Information partnership - lets two or more companies cooperate by integrating their IT systems. Management Information Systems for the Information AgeSecond Canadian Edition

  20. Competitive Advantage ExamplesDell Computer Figure 2.3 Buy-hold-sell versus sell-source-shippage 48 Management Information Systems for the Information AgeSecond Canadian Edition

  21. 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 AgeSecond Canadian Edition

  22. Developing A Strategy For The Internet Age • Business people quite often use the three frameworks of Professor Michael Porter to think about business strategies. • Professor McFarland showed how these three frameworks can also be used in coming with ideas on how information technology can be harnessed to create a competitive advantage. • Professor Porter observed that the internet provides better opportunities for companies to establish business strategies than previous IT. Management Information Systems for the Information AgeSecond Canadian Edition

  23. 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 AgeSecond Canadian Edition

  24. Developing A Strategy For The Internet AgeThe Five Forces Model Figure 2.4 The Five Forces Modelpage 50 Management Information Systems for the Information AgeSecond Canadian Edition

  25. Developing A Strategy For The Internet AgeThe Five Forces Model • Five forces model - determines the relative attractiveness of an industry. • This model was intended to be used as a tool for managers to use in deciding whether they should enter a new market or expand in the one they are already in. Management Information Systems for the Information AgeSecond Canadian Edition

  26. Developing A Strategy For The Internet AgeThe Five Forces Model • Buyer power - high when buyers have many choices of whom to buy from, and low when the choices are few. (Less attractive market if buyer power is high) • Supplier power - high when buyers have few choices of whom to buy from, and low when there are many choices. (Less attractive market if supplier power is high) Management Information Systems for the Information AgeSecond Canadian Edition

  27. 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. If there are switching costs then it is an advantage to the supplier. • Threat of new entrants - high when it is easy for competitors to enter the market. • Rivalry among existing competitors – An industry is less attractive to enter when the rivalry is high and more attractive when it is low. Management Information Systems for the Information AgeSecond Canadian Edition

  28. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Buyer power • Giving choices to the buyer • For example: hotel chains • Give points • Other loyalty programs • Cash the points for free hotel stays at one of their resort hotels • Such programs have the effect of increasing the likelihood that a traveler will stay at a single chain. Management Information Systems for the Information AgeSecond Canadian Edition

  29. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Supplier power • The objective is to reduce supplier power. • How to reduce supplier power • B2B marketplace - an Internet-based service which brings together many buyers and sellers. • Find a way to put more information into the buyer’s hands Management Information Systems for the Information AgeSecond Canadian Edition

  30. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Threat of substitute products or services • Consider the introduction of alternative IT products such as income tax preparation software. • Consumers now use it. • Accountant has less clients. • Accountant livelihood is threatened. Management Information Systems for the Information AgeSecond Canadian Edition

  31. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Threat of new entrants • It is not a good thing when it is very easy for others to enter into your market. • Companies can use IT to develop and create barriers for others. • Entry barrier - a product or service feature that customers have come to expect from companies in a particular industry. • A good example is what banks did: • Introduce the bank card and as many ATMs around the world as possible. • Banking on the internet to pay bills, transfer funds and print reports. Management Information Systems for the Information AgeSecond Canadian Edition

  32. Developing A Strategy For The Internet AgeUsing the Five Forces Model • Rivalry among existing competitors • Using IT systems to be more efficient and compete more strongly with others. • An example would be PRICE. • Computer systems can be bought from two different stores but one is cheaper than the other. • This is possible when one company uses IT in such a way to reduce its price. Management Information Systems for the Information AgeSecond Canadian Edition

  33. Developing A Strategy For The Internet AgeThe Three Generic Strategies • Porter says that a business should adopt only one of the three generic strategies: • Cost leadership • Differentiation • Focused strategy Management Information Systems for the Information AgeSecond Canadian Edition

  34. Developing A Strategy For The Internet AgeThe Three Generic Strategies Trying to follow more than one of these strategies at the same time is almost always unsuccessful. Management Information Systems for the Information AgeSecond Canadian Edition

  35. Developing A Strategy For The Internet AgeThe Three Generic Strategies Figure 2.5 The Three Generic Strategiespage 52 Management Information Systems for the Information AgeSecond Canadian Edition

  36. Developing A Strategy For The Internet AgeUsing the Three Generic Strategies • Companies can use the three generic strategies to change the basis of their competition to their advantage. • If they find that they are caught in a fierce marketplace of low pricing then they could modify their strategy to compete of the basis of differentiation. Management Information Systems for the Information AgeSecond Canadian Edition

  37. Developing A Strategy For The Internet AgeUsing the Three Generic Strategies • Amazon.com is a good example of this. • Provides competitive low prices • Informative • Easy to navigate and • Uses sophisticated software to personalize the site for each individual. Management Information Systems for the Information AgeSecond Canadian Edition

  38. Developing A Strategy For The Internet AgeThe Value Chain Once you understand how IT can help you develop business strategy, you can ensure that IT supports all important business processes. Management Information Systems for the Information AgeSecond Canadian Edition

  39. 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. • An important tool to visualize the important processes is Porters’ value chain. • 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 AgeSecond Canadian Edition

  40. Developing A Strategy For The Internet AgeThe Value Chain Figure 2.6 The Components of a Value Chainpage 54 Management Information Systems for the Information AgeSecond Canadian Edition

  41. Developing A Strategy For The Internet AgeThe Value Chain • Talbott (a premier necktie manufacturer in North America) used the value chain to better meet customer demands: • 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 AgeSecond Canadian Edition

  42. Developing A Strategy For The Internet AgeThe Value Chain Figure 2.7The Value-Added View of a Necktie Manufacturerpage 55 Management Information Systems for the Information AgeSecond Canadian Edition

  43. Developing A Strategy For The Internet AgeThe Value Chain Figure 2.8The Value-Reduced View of a Necktie Manufacturerpage 55 Management Information Systems for the Information AgeSecond Canadian Edition

  44. Key E-Commerce Strategies • With the Internet and the WWW, new wave of creative entrepreneurship developed. • New ways were found to reach out to customers and suppliers. • New never have been seen business models were created. • A time of experimentation with some spectacular successes and failures. Management Information Systems for the Information AgeSecond Canadian Edition

  45. Key E-Commerce Strategies • The main difference between the NEW and OLD economies is the INTERNET. • The Internet is global. • The Internet is affordable. Management Information Systems for the Information AgeSecond Canadian Edition

  46. Key E-Commerce Strategies • Three capabilities made possible by the Internet should be kept in mind by companies searching for ways to use the new economy to gain competitive advantage: • Mass customization and personalization • Disintermediation • Global reach Management Information Systems for the Information AgeSecond Canadian Edition

  47. 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 AgeSecond Canadian Edition

  48. 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 AgeSecond Canadian Edition

  49. Key E-Commerce StrategiesDisintermediation Figure 2.10Disintermediation at Workpage 58 Management Information Systems for the Information AgeSecond Canadian Edition

  50. Key E-Commerce StrategiesGlobal Reach Team Work • Global reach - the ability to extend a company’s reach to customers anywhere there is an Internet connection, and at a much lower cost. Finding the Best IT Strategy for your Industry(p. 56) Management Information Systems for the Information AgeSecond Canadian Edition

More Related