CHAPTER 2 Organizational Strategy, Competitive Advantage, & Information Systems 1

1.Business Pressures, Organizational Responses, and Information Technology Support 2.Competitive Advantage and Strategic Information Systems 2

>>> 1.Identify effective IT responses to different kinds of business pressures. 2.Describe the strategies that organizations typically adopt to counter Porter’s five competitive forces. 3

OPENING> GrubHub Seamless  Look ahead in this chapter. Which one of Porter’s strategies for competitive advantage is GrubHub Seamless pursuing? Explain your answer.  Propose additional applications that GS could develop to gain a competitive advantage in the marketplace. 4

Business Pressures, Organizational Responses, and IT Support 2.1 Competitive Advantage Business Environment Business Pressures Organizational Responses 5

Business Pressures Market Pressures Technology Pressures Societal/Political/Legal Pressures 6

Figure 2.1: Business Pressures, Organizational Performance & Responses, and IT Support 7

Market Pressures Globalization  Competition from afar Powerful Customers  Informed  Connected and “united”  Freer/easier to switch Changing Nature of the Workforce  Diversity  Work mode 8

Stages of Globalization Thomas Friedman – The World is Flat  Globalization 1.0 (from 1492 to 1800)  Globalization 2.0 (from 1800 to 2000)  Globalization 3.0 (from 2000 to the present) 9

Thomas Freidman: Ten Flatteners 1.Fall of the Berlin Wall on 11/9/ Netscape goes public on 8/9/ Development of workflow software 4.Uploading 5.Outsourcing 6.Offshoring 7.Supply chaining 8.Insourcing 9.Informing 10.The Steroids 10

11 Flattener #1: Fall of the Berlin Wall November 9, Walls between the two “camps” collapsed  No barriers against trade, exchange of personnel, flow of info HR “poured in” from “the other world” Markets open up in “the other world”

12 Flattener #2: Netscape Goes Public – Aug 9, 1995 Marc Andreessen [then at U Illinois] (wrote Mosaic browser and later Netscape browser) “Prehistoric time”: Gopher (U Minnesota) April 22, 1993 Explosion of online consumer population

13 Flattener #4: Uploading What can we say about the manner of info flow with uploading?

1-14 Flattener #7: Supply Chaining

15 Flattener #9: Informing It’s not just Individuals have access to massive amounts of information – Q: more than just the amount?

And the result of all this? See the Power of TechnologyPower of Technology 16

Market Pressures The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers 17

Technology Pressures Technological Innovation and Obsolescence Information Overload 18

’S ABOUT BUSINESS 2.1 “Bring Your Own Device” Can Cause Problems  What are the advantages of allowing employees to use any mobile device to connect to the corporate network? The disadvantages?  Why is it necessary to be able to erase corporate data when a mobile device is lost or stolen? 19

Societal/Political/Legal Pressures Social Responsibility Compliance with Government Regulations Protection Against Terrorist Attacks Ethical Issues 20

Social Responsibility IT Assists “Go Green” Efforts in Three Areas: 1.Facilities design and management 2.Carbon management 3.International and U.S. environmental laws Digital Divide 21

Organizational Responses Strategic Systems Customer Focus Make-to-Order and Mass Customization E-Business and E-Commerce 22

’S ABOUT BUSINESS 2.3 The Weather Channel  Identify several reasons (not discussed in the case) why accurate weather predictions are so important. Can an accurate weather prediction be considered a competitive advantage for an organization that receives this information? Why or why not? Support your answer with specific examples.  Will Dark Sky, Sky Motion, and WeatherSphere have a lasting competitive advantage over The Weather Channel? Why or why not? Support your answer. 23

Competitive Advantage and Strategic IS’s 2.2 Porter’s Competitive Forces Model Porter’s Value Chain Model Strategies for Competitive Advantage Business – Information Technology Alignment 24

Porter’s Five Forces Model 1.The threat of new competitors 2.The bargaining power of suppliers 3.The bargaining power of customers (buyers) 4.The threat of substitute products or services 5.The rivalry among existing firms in the industry 25

Figure 2.2: Porter’s Competitive Forces Model 26

Competitive Forces (Graphical representation developed by Yüe Zhang) Company Competitors Suppliers Customers Substitutes New entrants Figure © , Yüe “Jeff” Zhang

Internet Age competition (Model proposed by Yüe Zhang) Company Competitors Customer Attention Substitutes New entrants © 2016, Yüe “Jeff” Zhang

Internet Age competition – “From the Cloud” (Model proposed by Yüe Zhang) Competitors Customer Attention Substitutes © 2016, Yüe “Jeff” Zhang

Porter’s Value Chain Model Value Chain Two Categories of Organization Activities in the Value Chain  Primary Activities  Support Activities 21

Primary Activities Inbound logistics Operations Outbound logistics Marketing and sales Services 31

Figure 2.3: Porter’s Value Chain Model 32

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Porter’s Value Chain 31

Support Activities The Firm’s Infrastructure Human Resources Management Product and Technology Development Procurement 34

Strategies for Competitive Advantage 1.Cost leadership strategy 2.Differentiation strategy 3.Innovation strategy 4.Operational effectiveness strategy 5.Customer orientation strategy 35

Figure 2.4: Strategies for Competitive Advantage 33

2-37 IS Impact on Competitive forces (compiled by Zhang) (Think about your own examples) Comp Forces Implication for FirmUse of IS to combat force Traditional rivals Comp in price, product distribution, and service ERP  reduce cost, act quickly; Web  service Customer power reduced price, increased qual, demand for more services CRM  serve better; CAD/CAM  improved quality Supplier power Price raised, reduced qualityNet  closer ties; relate w new suppliers far away New entrants increased cap, reduced price, decreased market share Web  reach, differentiate product; inv ctrl sys  lower costs Substitutes Returns; decreased market share; losing customers DSS & customer purchase DB  trends & needs; CAD  redefine products CAD – computer-aided design; CAM - com-aid manufacturing; DB - database

2-38 Strategic approaches to cope w competitive forces [Nickerson]

Strategies for Competitive Advantage (Think about your own examples) Cost Leadership Differentiation Innovation Operational Effectiveness Customer-orientation 36

2-40 Priceline.com: “Name your own price”

Panera Bread – what approach? 41

Business-Information Technology Alignment Business–Information Technology Alignment Six Characteristics of Excellent Business-IT Alignment: 42

Six Characteristics of Excellent Business-IT Alignment 1.Organizations view IT as an engine of innovation that continually transforms the business, often creating new revenue streams. 2.Organizations view their internal & external customers & their customer service function as supremely important. 43

Six Characteristics of Excellent Business-IT Alignment (continued) 3.Organizations rotate business & IT professionals across departments and job functions. 4.Organizations provide overarching goals that are completely clear to each IT and business employee. 44

Six Characteristics of Excellent Business-IT Alignment (continued) 5.Organizations ensure that IT employees understand how the company makes (or loses) money. 6.Organizations create a vibrant and inclusive company culture. 45

Efficiency and effectiveness metrics to measure the impact of IT 1.Speed 2.Throughput 3.Performance 【 Suggest: reliability 】 4.Scalability 5.Net Present Value (NPV) 6.Return on Investment (ROI) 7.Total Cost of Ownership (TCO) Indicators ; measures 44

IT as enabler of business Enabler: Making it possible to take a business endeavor/initiative 1.that would not have been possible without the IT support or facilitation 2.E-commerce 3.Online banking 4.Envelope-free check deposit 5.Wireless applications 6.Real-time flight info updates 7.… Read: IT Should be an Enabler to the Business management.com/blogs/IT_business html management.com/blogs/IT_business html 45

Touch Table at Keyes Woodland Hills Hyundai 48

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Olive Garden’s mobile kiosk 50

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