Introduction to Information Systems Professor Paul Morrison March 22, 2006

SM 122 Information Systems I, March 22, 2006 Today’s Lecture Module focus: IT Transforms industries Porter 5-Force Model of Competition IT effects on competition Types of IT systems Types of E-commerce Focus: B2B and B2C SM 122 Information Systems I, March 22, 2006

IT Transforms Industries Changes cost structure & economics Disconnects service, info, tangibles Hard to imitate successful change Must change human, technical, business process, and “customer” systems “First-mover advantages”, natural monopolies – Microsoft, eBay, Yahoo! Technical change from science change continues at rapid pace SM 122 Information Systems I, March 22, 2006

Porter’s 5-Forces Model (p306) SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 Power of Suppliers Greater if few suppliers Greater if large relative to firms Greater if supply is vital Greater if many customers Greater if customers cannot backward integrate Greater if no substitutes for supply SM 122 Information Systems I, March 22, 2006

Power of Buyers (customers) Greater if few buyers Greater if large relative to firms Greater if there are many firms Greater if buyers have substitutes Greater if buyers can backward integrate Greater if product is a commodity SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 Threat of Entry Greater if few barriers to entry Low capital, scale, patent protection, brand-name, distribution network requirements, first-mover advantage Greater if outside firms large, rich Greater if industry profits high Greater if low barriers to exit SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 Threat of Substitutes Greater if different product/ service provides very similar function, cost Greater if industry product / service very expensive, important Greater if rate of technological change high Greater if switching costs low Greater if high variety outside strat. SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 Intensity of Rivalry High barriers to exit Low barriers to entrance Commodities Similar size, strategies, technology High capital intensity, fixed costs, scale Slow industry growth in demand SM 122 Information Systems I, March 22, 2006

IT Effects on Competition Reduce Costs Increase Speed Customization Segmentation Convenience Flexibility Automate Reduce Inventories Info available More Value-Added Separate services, info, tangibles Wide scope markets: buyers, suppliers SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 IT effects on 5 forces Increase threat of substitutes Increase differentiation, variety of strategies Increase number of suppliers, buyers Various effects on barriers to entry Increase barriers to exit Increase “perfect information” Reduce switching costs SM 122 Information Systems I, March 22, 2006

E-Commerce v. Business Processes Business Processes Info Systems deliver on the promises made by E-Commerce Strategy Just as... Operations Management delivers on the promises made by Marketing SM 122 Information Systems I, March 22, 2006

SM 122 Information Systems I, March 22, 2006 Types of IT Systems Business Process/ Operations Support Transaction Processing Office Automation / Productivity Process Control Collaboration Expert systems Knowledge Management SM 122 Information Systems I, March 22, 2006

Management Support Information Systems MIS (Management Information Systems) versus “DSS” (Decision Support Systems) – difference? Older, rigid format, periodic reports versus Interactive, flexible, “what if” scenarios SM 122 Information Systems I, March 22, 2006

Concepts in B2B E-Commerce One-to-one connection between partners, or suppliers and buyers “Electronic marketplaces” or “exchanges” with many companies SM 122 Information Systems I, March 22, 2006

B2B E-Commerce, continued Maint, Repair, Ops (MRO) supplies versus Direct Materials Horizontal markets – many industries versus (usually MRO) Vertical markets – within an industry (usually Direct Materials) SM 122 Information Systems I, March 22, 2006

Concepts in B2C E-Commerce Go anywhere through Internet search “Mass customization” Types of products (remember Marketing?) Convenience Specialty / “Shopping” Commodity-like (books, music) Digital – low or zero tangibles SM 122 Information Systems I, March 22, 2006

Concepts Not to worry about... Systems development IT Careers Payment Systems Security “Differences” between MIS, DSS, ESS Hardware, varieties of software SM 122 Information Systems I, March 22, 2006