Chapter 1: Creating Business Advantage with IT MIS 524

Major Models Macroeconomic Model Evolution (pg. 27) Value Chain (pg. 30) Market Roles (pg. 31) Industrial vs. Network Economy (pg. 32) Porter’s Five Competitive Forces (pg. 33) Strategic Grid (pg. 34) MIS 524

Porter’s Model Along Industry Boundaries Threat of Substitutes Along the Extended Value Chain Traditional Rivalry Among Competitors Bargaining Power Of Suppliers Bargaining Power Of Buyers Threat of New Entrants MIS 524

A Closer Look at the Value / Supply Chain Along the Extended Value Chain Focal Firm Suppliers Buyers IT can help integrate and strengthen the supply chain. What does this imply for suppliers and buyers? MIS 524

Integration Focal Firm Suppliers Buyers Integration means the boundaries between the focal firm and its suppliers and buyers becomes more “permeable” and “transparent”. What does THIS imply? MIS 524

Strengthening Focal Firm Suppliers Buyers Strengthening means that suppliers’ and buyers’ freedom to act outside the supplying, buying relationship becomes restricted; hence unique identity becomes lowered. What does THIS imply for the suppliers and buyers? MIS 524

OffLoading Focal Firm Suppliers Buyers Offloading means that processes that used to be costs or risks for the focal firm become costs or risks for suppliers and/or buyers. Coupled with other effects, what does that mean? MIS 524

Potential Downside? Effects of IT Integration Strengthening Offloading Brittleness, Overcontrol, Lack of Variety Culture of Lack of Risk Taking MIS 524

Value Chain DATA INFORMATION KNOWLEDGE Informa-tion Activities Core Opera-ting Activities Infra-structure Activities Inbound Operations Outbound Sales After Sales Logistics Logistics Service Facilities & Technology People Equipment What is the relationship among these three levels? How does it come about? How is it maintained? MIS 524

Market Roles The Market Producers Suppliers Customers Distributors MIS 524

Components of a Business Model CONCEPT: Opportunity & Strategy CAPABILITIES: Resources needed VALUE: Benefits to stakeholders MIS 524

Strategic Impact of IT Support: No strategic impact now or planned Turnaround: No strategic impact now, but in the future Factory: Current strategic impact, but nothing new planned Strategic: Now and in the future MIS 524

Strategic Grid FACTORY “Reengineer” STRATEGIC “Change Management” Low Operations Impact High SUPPORT: “Improvement” TURNAROUND “New Venture Development” Low Strategy Impact High MIS 524

Strategic Grid -Evolution FACTORY STRATEGIC Low Operations Impact High SUPPORT TURNAROUND Low Strategy Impact High MIS 524

Critical Questions What is “Strategic”? What are “core operations”? What are “strategic activities”? Can an entire organization be so characterized? MIS 524

Making the Case for IT Type I Benefit: from IT infrastructure investment (to IT itself) Type II Benefit: From doing business using IT infrastructure Commerce: Production and Marketing Content/Knowledge: Intelligence Community: Human Process MIS 524

Analyzing the Impact of IT on Strategic Decision Making Can IT Be Used to Reengineer Core Value Activities and Change the Basis of Competition? (economies of scale, scope, style) Can IT Change the Nature of Relationships and the Balance of Power among Buyers and Suppliers? MIS 524

Analyzing the Impact of IT on Strategic Decision Making, Cont’d Can IT Build or Reduce Barriers to Entry? Can IT Increase or Lower Switching Costs? Can IT Add Value to Existing Products and services? Can IT Create NEW Products and Services? MIS 524

THEMES Market Structure and Industry Dynamics Evolving Business Models IT Impact Prioritizing IT Investments Assimilation and Organizational Learning Buy vs. Make Partnership among Key Constituencies as IT Evolves Protecting IT Assets and Managing Risks Pervasive Computing: Opportunities & Risks MIS 524