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Competing with Information Technology. Learning Objectives. Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business.
Competing with Information Technology

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Slide 1

Competing with Information Technology

Slide 2

Learning Objectives

  • Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business.

  • Identify several strategic uses of Internet technologies, and give examples of how they give competitive advantages to a business.

  • Give examples of how business process reengineering frequently involves the strategic use of Internet technologies.

Slide 3

Learning Objectives

4. Identify the business value of using Internet technologies to become an agile competitor or to form a virtual company.

5. Explain how knowledge management systems can help a business gain strategic advantages.

Slide 4

Section I

Fundamentalsof Strategic Advantage

Strategic IT

  • Supports Efficient Business Operations

  • Workgroup or Enterprise Collaboration

  • Effective Business Decisions

    Real World Case 1- GE,

    Dell, Intel, and Others

Click to go to

Case 1

Slide 5

Strategic Advantage

Competitive Strategy Concepts

Strategic Information Systems

  • Support Competitive Position

  • Can Be Any Kind of Information System

  • Gain Competitive Advantage

  • Reduce a Competitive Disadvantage

Slide 6

Strategic Advantage

Cost

Leadership

Differentia-

tion

Innovation

Competitive Strategies

Growth

Alliance

Other

Strategies

Rivalry of

Competitors

Threat of

New

Entrants

Threat of

Substitutes

Bargaining

Power of

Customers

Bargaining

Power of

Suppliers

Competitive Forces

Slide 7

Strategic Advantage

Other Competitive Strategies

  • Lock in Customers

  • Lock in Suppliers

  • Switching Costs

  • Barriers to Entry

  • Leverage Investment in IT

Slide 8

Strategic Advantage

Wal-Mart and Others

  • Satellite Network Linking all Point-of-Sale Terminals

  • Immediate Sales and Inventory Information

  • Extended to Customers and Suppliers

  • Interenterprise Information Systems

  • Stockless Inventory Replenishment Systems

Slide 9

Value Chain & Strategic IT

Support Processes

  • Administrative Coordination and Support Services

  • Human Resources Management

  • Technology Development

  • Procurement of Resources

Slide 10

Value Chain & Strategic IT

Primary Business Processes

  • Inbound Logistics

  • Operations

  • Outbound Logistics

  • Marketing and Sales

  • Customer Service

Slide 11

COMPETITIVE

ADVANTAGE

Value Chain & Strategic IT

The Value Chain of a Firm

Administrative Coordination & Support Services

Collaborative Workflow Intranet

Human Resources Management

Employee Benefits Intranet

SUPPORT

PROCESSES

Technology Development

Product Development Extranet with Partners

Procurement of Resources

E-Commerce Web Portals for Suppliers

Inbound

Logistics

Outbound

Logistics

Marketing

& Sales

Customer

Service

Operations

PRIMARY BUSINESS

PROCESSES

Computer-

Aided

Flexible

Manufactu-

ring

Customer

Relation-

ship

Manage-

ment

Online

Point-of-Sale

And Order

Processing

Automated

Just-in-Time

Warehousing

Target

Marketing

Slide 12

Using IT forStrategic Advantage

Section II

Strategic Uses of IT

  • Major Competitive Differentiator

  • Use IT to Develop Competitive Advantage

    Real World Case 2-

    Intec Engineering:

Click to go to

Case 2

Slide 13

Using IT forStrategic Advantage

Building a Customer-Focused Business

  • Building Customer Value

  • Fast Response to Individual Customer Needs

  • Use of Internet, Intranets, and Extranets

Slide 14

Using IT forStrategic Advantage

Hilton Hotels

  • Hilton.Com Reservation System

  • Services Tailored Automatically to Last Visit

  • High Level of Personalization

  • Deeper Personal Relationship

  • Direct-to-Customer Business Model Via the Web

Slide 15

Building Customer Value

Customer

Place Orders

Directly

Customer

Orders

Through

Partners

Customer

Database by

Preferences &

Profitability

Internet

Intranets

Extranets

Transaction

Database

Customer

Database

Customers

Linked With

Distribution

Web Personal-

ization Builds

Loyalty

Customers

Check Own

History

Employee

View of

Customer is

Complete

Intranets

Extranets

Internet

Intranets

Build a Web

Community of

Customers, etc.

Slide 16

Business

Improvement

Business

Reengineering

Incremental

Radical

Improved New

Version of Process

Brand New

Process

Existing Processes

Clean Slate

One-time or

Continuous

Periodic One-time

Change

Long

Short

Broad, Cross-

Functional

Narrow, Within

Functions

Past and Present

Future

Bottom-up

Top-down

Cultural

Cultural Structural

Statistical Control

Information Technology

Moderate

High

Reengineering Business Processes

Level of Change

Process

Change

Starting Point

Frequency of

Change

Time Required

Typical Scope

Horizon

Participation

Path to

Execution

Primary Enabler

Risk

Slide 17

Order Management Process

CO

NFIGURATION

COLLECTIONS

COMMITMENT

P

R

O

P

O

S

A

L

CHECK

ING

DELIVERY

BILLING

C

REDIT

Business Processes

SALES

Business

Functions

MANUFACTURING

FINANCE

LOGISTICS

Slide 18

Order Management Process

Johnson Controls:

Success with Reengineering

  • Web-Based Reengineering Project

  • Fixing a Problem During Engineering Costs 1/10 of Correction at the Prototype Stage

  • Web-Based Collaboration Saved 80% on R&D Investments

Slide 19

Reengineering Order Management

  • Customer Relationships Using Intranets and the Internet

  • Supplier Managed Inventories Using the Internet

  • Cross-Functional ERP Software Integrating Manufacturing, Distribution, Finance, and Human Resource Processes

  • Customer-Access to Web Order Entry, Status-Checking, Payment, and Services

  • Customer, Product, and Order Status Databases accessed via Intranets and Extranets by Employees and Suppliers

Slide 20

Reengineering Order Management

Agilent Technologies:

Failure in Reengineering

  • Rocky ERP Reengineering Project

  • Lost $105 Million in Revenue and $70 Million in Profits

  • Implementation Disruptions More Extensive than Expected

  • ERP Changes Affect People, Processes, Policies, and Company Culture

Slide 21

Becoming an Agile Company

  • Customers Perceive Products and Services as Solutions to their Individual Problems

  • Cooperates with Customers, Suppliers, and Even Competitors to Bring Products to Market Quickly and at Lowest Cost

  • Organized to Thrive on Uncertainty

  • Leverages the Impact of its People and Knowledge

Slide 22

Becoming an Agile Company

Dell Computer –

Agility in Action

  • Customer-Focused Company

  • Champion of Mass Customization

  • Build-to-Order Business Model

  • 25,000 on a Typical Day

  • Tight Supply Chain Management

  • Rarely More than Two Hours Worth of Parts Inventory

Slide 23

The Virtual CompanyInterenterprise IS

Alliance -

Subcontractors

Boundary of a Firm

Alliance -

Major

Supplier

Customer

Response

and Order-

Fulfillment

Teams

Intranets

Alliance -

Major

Customer

Extranets

Manufacturing

Teams

Alliance -

Small

Suppliers

Alliance -

Complementary

Services

Cross-Functional

Teams

Engineering

Teams

Slide 24

Virtual Company Strategies

  • Share Infrastructure and Risk with Alliance Partners

  • Link Complementary Core Competencies

  • Reduce Concept-to-Cash Time Through Sharing

  • Increase Facilities and Market Coverage

  • Gain Access to New Markets and Share Market or Customer Loyalty

  • Migrate from Selling Products to Selling Solutions

Slide 25

Virtual Company Strategies

Cisco Systems: Virtual Manufacturing Alliances

  • Alliances Create a Virtual Manufacturing Company

  • Three Companies Involved in the Alliance

  • Provides and Agile Build-to-Order Capability in Fiercely Competitive Industry

Slide 26

Knowledge Creating Company

Learning Organizations

Knowledge Management

Explicit Knowledge

Knowledge Management Systems (KMS)

Slide 27

Knowledge Management

Enterprise

Intelligence

Information

Creation, Sharing,

and Management

Document Management

Slide 28

Knowledge Management

Siemens AG: Global Knowledge Management System

  • Stop Employee Problem of Knowledge Hoarding

  • Created ShareNet Web Site

  • Profitable Real-time Worldwide Collaboration

    Real World Case 3-

    Yellow, JetBlue and

    Gentex:

Click to go to

Case 3

Slide 29

Summary

Strategic Uses of Information Technology

  • Cut Costs

  • Differentiate and Innovate Products and Services

  • Promote Growth

  • Develop Alliances

  • Lock in Customers & Suppliers

  • Create Switching Costs

  • Create Barriers to Entry

  • Leverage IT Investment

  • Develop Competitive Advantage

Slide 30

Summary

Building a Customer-Focused Business

  • Develop Business Value

  • Make Customer Value the Strategic Focus

  • Use of Internet, Intranets, and Extranets to Track and Serve Customer Needs and Interests

  • Provide Services Tailored to Specific Customer Needs

Slide 31

Summary

Reengineering Business Processes

  • Enable Radical Changes to Business Processes

  • Improves Efficiency and Effectiveness

  • IT Supports Innovative Changes in Work Flows, Job Requirements, and Organizational Structures in a Company

Slide 32

Summary

Becoming an Agile Company

  • Rapid Response to Market Changes

  • Broad Product Ranges

  • Short Model Lifetimes

  • Heavy Dependence Upon IT to Respond to Customer’s Unique Situations

  • Enhance Cost Effectiveness

Slide 33

Summary

Creating a Virtual Company

  • Use of Internet and IT Provide Computing and Communications Resources

  • IT Enables Management of a Network of People, Knowledge, Financial, and Physical Resources

  • Takes Advantage of Rapidly Changing Markets

Slide 34

Summary

Building a Knowledge-Creating Company

  • Creates a Lasting Competitive Advantage

  • Innovative Use of Organization Knowledge

  • Supports Development and Management of New Organization Knowledge

  • Integrates Into New Products and Services

Slide 35

KEY TERMS

Agile Competitor

Business Process Reengineering

Competitive Forces

Competitive Strategies

Creating Switching Costs

Customer-Focused e-business

Identifying e-business and e-commerce Strategies

Knowledge-Creating Company

Knowledge Management System

Slide 36

KEY TERMS

Leveraging Investment in IT

Locking in Customers and Suppliers

Raising Barriers to Entry

Strategic Information System

Strategic uses of Information Technology

Strategic uses of Internet Technologies

Total Quality Management

Value Chain

Virtual Company

Slide 37

Optional Case Studies

Click to go to

Case 1

Real World Case 1

G.E., Dell, Intel, and Others: The Competitive Advantage of I.T.

Real World Case 2

Intec Engineering Company: The Strategic Value of Knowledge Information Systems

Click to go to

Case 2

Real World Case 3

Yellow, JetBlue, and Gentex: Using I.T. for Competitive Advantage

Click to go to

Case 3

Real World Case 4

CDW and Harrah’s Entertainment: Developing Strategic Customer-Loyalty Systems

Click to go to

Case 4

Slide 38

Next...

Computer Hardware

Module II – Information Technologies

Chapter 3

Slide 39

GE - Dell - Inteland Others:

Case 1

  • Do you agree with the argument made by Nick Carr to support his position that IT no longer gives companies a competitive advantage? Why or why not?

The Competitive Advantage of

Information Technology

Return to

Chapter 2

Return to

Cases Page

Slide 40

GE - Dell - Inteland Others:

Case 1

Discussion points would include the following:

  • IT costs now the same as other traditional costs and as such do not have as great an impact on a company’s strategic planning.

  • If all companies in an industry invest in similar levels of IT then IT cannot be a strategic advantage to a given company.

  • The IT infrastructure changes rapidly and requires a continual investment in new IT and impacts a company’s strategic planning.

  • The IT infrastructure’s continual improvements allow a company to adjust the mix of traditional resources such as physical and human resources.

Slide 41

GE - Dell - Inteland Others:

Case 1

2. Do you agree with the argument made by the business leaders in this case in support of the competitive advantage that IT can provide to a business? Why or why not?

The Competitive Advantage of

Information Technology

Slide 42

GE - Dell - Inteland Others:

Case 1

Discussion points would include the following:

  • The productivity lifeblood for a service oriented company is IT and not plants and equipment.

  • How it is used determines the competitive advantage of the IT infrastructure.

  • Some segments of the IT infrastructure are reaching maturity and not much can be gained by additional changes; however other areas aren’t close to maturity and gains in competitive advantage can still be made.

  • All companies are not at the same level of IT usage and you cannot generalize that increased IT expenditures no longer have value to a company.

Slide 43

GE - Dell - Inteland Others:

Case 1

3. What are several ways that IT could provide a competitive advantage to a business? Use some of the companies mentioned in this case as examples. Visit their websites to gather more information to help you answer.

The Competitive Advantage of

Information Technology

Slide 44

GE - Dell - Inteland Others:

Case 1

Ways to provide a competitive

advantage may include:

  • Improve the customer relationship management system.

  • Create new uses for information to remain competitive.

  • Leveraging the knowledge-capital as an integral part of strategic planning.

  • Determining the best mix of knowledge, software and hardware to be highly competitive.

Slide 45

GE - Dell - Inteland Others:

Case 1

Ways to provide a competitive

advantage may include:

  • Improve the customer relationship management system.

  • Create new uses for information to remain competitive.

  • Leveraging the knowledge-capital as an integral part of strategic planning.

  • Determining the best mix of knowledge, software and hardware to be highly competitive.

  • Improve the value chain for the company.

Return to

Chapter 2

Return to

Cases Page

Slide 46

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

  • What is the potential value for competitive advantage that a business might gain from knowledge management systems? Why might this value be difficult to measure?

Return to

Chapter 2

Return to

Cases Page

Slide 47

Intec Engineering:

Case 2

Discussion points would include the following:

  • Quickly building new knowledge into its products and services.

  • Facilitate organizational learning and knowledge creation.

  • Provide rapid feedback to knowledge workers by encouraging behavior changes in employees and improving business performance.

  • Help company become more innovative as an agile provider of high-quality products and customer services.

  • Help company become a formidable competitor in the marketplace.

Slide 48

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

2. Do you approve of how Intec Engineering is measuring the value of their KMS? Why or why not? How else could the strategic value of their KMS be measured?

Slide 49

Intec Engineering:

Case 2

Points to consider would include:

  • The value of the KMS can be quantified.

  • The quality of the KMS is not adequately measured.

  • The focus on measuring the value of the KMS permits Intec to consider the value of their employees’ time.

  • The real value is one of Intec being able to expand its knowledge base through questions being answered.

Slide 50

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

3. Does Intec’s knowledge management system give them a competitive advantage? Give several examples from the case to support your answer.

Slide 51

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

  • The Beijing project with different specifications

Slide 52

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

  • The Beijing project with different specifications

  • The prospective customer in Australia

Slide 53

Intec Engineering:

Case 2

The Strategic Value of Knowledge

Management Systems

  • The Beijing project with different specifications

  • The prospective customer in Australia

  • Ability to reduce the time of projects for clients so daily revenue is generated sooner by the client

Return to

Chapter 2

Return to

Cases Page

Slide 54

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

1. What strategies in the use of IT for competitive advantage are being used by each of the companies in this case? Explain your choices.

Return to

Cases Page

Slide 55

Progressive - Yellow JetBlue and Gentex:

Case 3

Progressive –

  • Lower Costs

  • Differentiate

  • Innovate

  • Promote Growth

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

Choices would include:

Slide 56

Progressive - Yellow JetBlue and Gentex:

Case 3

Yellow –

  • Lower Costs

  • Innovate

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

Choices would include:

Slide 57

Progressive - Yellow JetBlue and Gentex:

Case 3

JetBlue –

  • Lower Costs

  • Differentiate

  • Innovate

  • Develop interenterprise information systems to create switching costs.

Choices would include:

Slide 58

Progressive - Yellow JetBlue and Gentex:

Case 3

Gentex –

  • Lower Costs

  • Promote Growth

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

Choices would include:

Slide 59

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

2. Visit the website of one these companies for more information on their business. What other competitive strategies could you recommend for this company? Explain your recommendations.

Slide 60

Progressive - Yellow JetBlue and Gentex:

Case 3

Progressive –

  • Develop Alliances

  • Develop interenterprise systems creating switching costs that lock in customers.

  • Include IT components in services to make substitution of competing services more difficult.

Choices would include:

Slide 61

Progressive - Yellow JetBlue and Gentex:

Case 3

Yellow –

  • Differentiate

  • Develop alliances

  • Develop interenterprise systems creating switching costs that lock in customers.

  • Include IT components in services to make substitution of competing services more difficult.

Choices would include:

Slide 62

Progressive - Yellow JetBlue and Gentex:

Case 3

JetBlue –

  • Promote Growth

  • Develop Alliances

  • Include IT components in services to make substitution of competing services more difficult.

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

Choices would include:

Slide 63

Progressive - Yellow JetBlue and Gentex:

Case 3

Gentex –

  • Innovate

  • Develop Alliances

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

  • Include IT components in services to make substitution of competing services more difficult.

Choices would include:

Slide 64

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

3. How could other companies apply the competitive strategies being used by the companies in this case? Use examples from both a large and small business perspective to illustrate your answer.

Slide 65

Progressive - Yellow JetBlue and Gentex:

Case 3

  • Maintain or increase investment in IT to improve operating activities if they can be improved.

  • Use investment in IT to be innovative to distinguish company from competition.

  • IT can be used to develop alliances with customers and suppliers.

  • Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

Large business perspective –

Slide 66

Progressive - Yellow JetBlue and Gentex:

Case 3

  • Maintain or increase investment in IT to improve operating activities if they can be improved.

  • Use the investment in IT to establish alliances for the first time.

  • Use IT to differentiate your company from the competition.

  • Use IT to be innovative to distinguish your company from the competition.

Small business perspective –

Slide 67

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

  • The use of IT can permit a larger company to develop interenterprise systems.

Slide 68

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

  • The use of IT can permit a larger company to develop interenterprise systems.

  • IT can create barriers to restrict competition from entering the marketplace.

Slide 69

Progressive - Yellow JetBlue and Gentex:

Case 3

Using Information Technology

for Competitive Advantage

  • The use of IT can permit a larger company to develop interenterprise systems.

  • IT can create barriers to restrict competition from entering the marketplace.

  • IT can be leveraged to advance the company into more profitable uses for strategic applications.

Return to

Cases Page

Slide 70

CDW and Harrah’s Entertainment:

Case 4

Developing Strategic Customer-Loyalty Systems

1. Does CDW’s customer loyalty program give them a competitive advantage? Why or why not?

Return to

Cases Page

Slide 71

CDW and Harrah’s Entertainment:

Case 4

  • Loyalty program is a system that differentiates CDW from its competitors.

  • CDW used IT in an innovative way to move beyond a CRM package to a system that measures customer satisfaction and loyalty.

  • The loyalty program provides CDW with an alliance strategy with its customers by locking in the customers to the CDW system.

Discussion points to consider:

Slide 72

CDW and Harrah’s Entertainment:

Case 4

Developing Strategic Customer-Loyalty Systems

2. What is the strategic value of Harrah’s approach to determining and rewarding customer loyalty?

Slide 73

CDW and Harrah’s Entertainment:

Case 4

  • Differentiate Harrah from its competitors in terms of service to different groups of customers.

  • Promote growth through improved targeting of multiple customer groups on a real-time basis.

  • Creating switching costs in multiple customer groups to lock customers in all groups into continuing to have loyalty to Harrah’s.

Discussion points to consider:

Slide 74

CDW and Harrah’s Entertainment:

Case 4

Developing Strategic Customer-Loyalty Systems

3. What else could CDW and Harrah’s do to truly become customer-focused businesses? Visit their websites to help you suggest several alternatives.

Slide 75

CDW and Harrah’s Entertainment:

Case 4

CDW –

  • Online competitive pricing or auction features as products age.

  • Web site redesign to improve appearance.

  • Better leverage IT so that every order is filled as quickly as possible by creating alliances with suppliers that permit direct shipment to customers to ensure best price and delivery for loyal customers.

Suggestions could include:

Slide 76

CDW and Harrah’s Entertainment:

Case 4

Harrah’s -

  • Leverage IT investments by expanding the analytical mining of the data.

Suggestions could include:

Slide 77

CDW and Harrah’s Entertainment:

Case 4

Harrah’s -

  • Leverage IT investments by expanding the analytical mining of the data.

  • Differentiate Harrah’s from its competitors by using the data mining to expand products and services offered to repeat customers.

Suggestions could include:

Slide 78

CDW and Harrah’s Entertainment:

Case 4

Harrah’s -

  • Leverage IT investments by expanding the analytical mining of the data.

  • Differentiate Harrah’s from its competitors by using the data mining to expand products and services offered to repeat customers.

  • Use IT to develop new products and services that will attract new customers to Harrah’s.

Suggestions could include:

Return to

Cases Page


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