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Chapter 3

Chapter 3. Strategic Information Systems for Competitive Advantage. Case: Rosenbluth International. Rosenbluth Int. - a global player in the travel agency industry They responded with 2 strategies Withdrawal from the leisure travel business Implementation of web-based travel technology

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Chapter 3

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  1. Chapter 3 Strategic Information Systems for Competitive Advantage

  2. Case: Rosenbluth International • Rosenbluth Int. - a global player in the travel agency industry • They responded with 2 strategies • Withdrawal from the leisure travel business • Implementation of web-based travel technology • DACODA (Discount Analysis Containing Optimal Decision Algorithms) • Electronic Messaging Services E-Ticket Tracking Solution • Res-Monitor A Globalization Network • Customer-Res IntelliCenters • NOC (Network Operations Center) • 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

  3. Strategic Advantage and IT • Strategic Information System (SIS) • Definition • Systems that support or shape a business unit’s competitive strategy • Competitive Advantage • An advantage over competitors in some measure such as cost, quality, or speed • A difference in the Value Chain Data • Improving Core Competency • Employee productivity • Operational efficiency • Approach • Outwardly - Aiming at direct competition • Inwardly - Focused on enhancing the competitive position of the firm • Strategic alliance

  4. SISs provide strategic solutions to the 5 Business Pressures Strategic Information Systems (SISs) Any information system--EIS, OIS, TPS, KMS--that changes the goals, processes, products, or environmental relationships to help an organization gain a competitive advantage or reduce a competitive disadvantage.

  5. strategic management • Strategic management • the way an organization maps or crafts the strategy of its future operations • 3 Elements • Long-range planning • Response management • Proactive innovation

  6. SWOT Analysis Product Life Cycle Quality Preference Strategic Evaluation & Development

  7. The role of IT in Strategic Management • Innovative applications -Create innovative applications that provide direct strategic advantage to organizations • Competitive weapons- IS(s) themselves are recognized as a competitive weapon • Changes in processes -IT supports changes in business processes that translate to strategic advantage • Links with business partners -IT links a company with its business partners effectively and efficiently • Cost reductions -IT enables companies to reduce costs • Relationships with suppliers and customers -IT can be used to lock in suppliers and customers, or to build in switching costs • New products-A firm can leverage its investment in IT to create new products that are in demand in the marketplace • Competitive intelligence -by collecting and analyzing information about products, markets, competitors, and environmental changes

  8. Such activities drive business performance by • Increasing market knowledge • Improving internal relationships • Raising the quality of strategic planning Many companies monitor the activities of competitors The Internet is central to supporting competitive intelligence Competitive Intelligence (cont.) • Overview • One of the most important aspects in developing a competitive advantage is to acquire information on the activities and actions of competitors • Collect information about market, technologies, and government’s actions • Analyze and interpret the information

  9. 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. Competitive Advantage in the Web Economy

  10. Internet & Competitive Intelligence

  11. Porter’s Competitive Forces Model • The model recognizes five major forces that could endanger a company’s position in a given industry • 5 major forces • 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 • Use of the model • List players in each competitive force • Relate the major determinants of each competitive force • Devise a strategy • Look for supportive IT External Competitive Forces

  12. Porter’s 5 Forces Model

  13. The analysis • First Competitive Force - Competitor Analysis • What Drives them? • What are they Doing and can do? • What are their strengths & weaknesses? • Is Competition intense? • Second Competitive Force - Entry Barriers • If nothing slows entry of competitors competition will become intense. • Incumbent Reaction? • What Actions are required to build market share? • Production Process? • Third Competitive Force - Substitute Products • Products or services from another industry enter the market • Customers becoming acclimated to using substitutes • Is the substitute market growing? • Fourth & Fifth Competitive Force – Supply Chain • Suppliers/Buyers? Who controls the transaction? • Each element adds value – question who captures it?

  14. Porter’s model for Wal-Mart

  15. Impact of competitive forces & role of IT

  16. Niche/Focus Select a narrow-scope segment (niche market) and be the best in quality, speed, or cost in that market Cost leadership Provide products and/or services at the lowest cost in the industry Differentation Being unique in the industry • Growth • Increase market share, acquire more customers or selling more products • Improve internal efficiency • To improve employee & customer satisfaction • CRM • Customer-oriented approaches • (the customer is king) Innovation Developing new products &services • Time • Treat time as a resource, then manage it and use it to the firm’s advantage • Alliances • Working with business partners to create synergy & provide opportunities for growth Entry-barriers Developing new products &services • Increase switching cost • Discouragecustomers/suppliers from going to competitors for economic reasons Lock incustomers/suppliers Encourage customers/suppliers to stay with you rather than going to competitors Strategies forCompetitive Advantage

  17. Porter’s value chain model The initial purpose of the value chain model was to analyze the internal operations of a corporation, in order to increase its efficiency, effectiveness, and competitiveness. We can extend that company analysis, by systematically evaluating a company’s key processes and core competencies to eliminate any activities that do not add value to the product.

  18. The airline industry value chain

  19. 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 • Many of these alliances and business partnerships are based on Internet connectivityare calledinterorganizational informationsystems (IOSs) • 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 • These Internet-based EDI systems offer strategic benefits • Faster business cycle(PO to Receiving) • Automation of business procedures(Automated Replenishment) • Reduced operational costs • Greater advantage in a fierce competitive environment • Consortia – Horizontal vs. Vertical

  20. Global Competition • Growth of Companies Operating in a Global Environment • 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 • Global dimensions along which management can globalize • Product • Markets & Placement • Promotion • Where value is added to the product • Competitive strategy • Use of non-home-country personnel - labor • Multidomestic Strategy: Zero standardization along the global dimensions. Global Strategy: Complete standardization along the seven global dimensions.

  21. Global business drivers framework

  22. SISs: Examples • Cases • Wiring the “customer supply chain” at 1-800-Flowers • Increasing Tax Collection Efforts at the Wisconsin Department of Revenue • Time-based Competitive Advantage at Cannondale • Southwest Airlines Flies high with SWIFT • Using ERP to Meet Strategic Challenges at Turner Industries • The Port of Singapore exports its intelligent systems over its enterprise portal • 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 • The Summary – Table 3.2 (p. 115)

  23. SIS Implementation & Sustaining SIS • Major Issues in SIS Implementation • 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 • 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

  24. Managerial Issues • Implementing SIS Can Be Risky • The investment involved inimplementing SIS is high • Strategic Information Systems Requires Planning • Planning for an SIS is a majorconcern of organizations • 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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