1 Competitive Advantage Providing a product or service in a way that customers value more than what the competition is able to do. Chapter 2 STRATEGIC AND COMPETITIVE OPPORTUNITIES Using IT for Competitive Advantage

2 Its not the IT, it’s the People It is not the information technology that gives a company the competitive advantage; it is the way people use the technology that makes the difference. In perspective (do not be fooled) …

3 Competitive Advantage Examples FedEx Schwabs Dell Cisco Developing A Strategy For The Internet Age The five forces model The three generic strategies The value chain Key E-Commerce Strategies Mass customization Disintermediation Global reach The U.S. Airline Industry … Main Chapter Menu…

4 Competitive Advantage Examples Federal Express FedEx Package Tracking Screen page

5 Competitive Advantage Examples Charles Schwab

6 Competitive Advantage Examples Dell Computer Buy-hold-sell versus sell-source- ship page 48

7 Competitive Advantage Examples Dell Computer Information partnership - lets two or more companies cooperate by integrating their IT systems.

8 Competitive Advantage Examples Cisco Systems Cisco Systems - a leader in utilizing the direct sell model over the Internet. Business to Business (B2B) - companies whose customers are primarily other businesses. Business to Consumer (B2C) -companies whose customers are primarily individuals.

9 Developing A Strategy For The Internet Age Porter’s three frameworks are: The Five Forces model The Three Generic Strategies The Value Chain

10 Developing A Strategy For The Internet Age The Five Forces Model Video: porter

11 Developing A Strategy For The Internet Age Using the Five Forces Model Buyer power Giving choices to the buyer For example: hotel chains Give points Other loyalty programs Cash the points for free hotel stays at one of their resort hotels Such programs have the effect of increasing the likelihood that a traveler will stay at a single chain.

12 Developing A Strategy For The Internet Age Using the Five Forces Model Supplier power The objective is to reduce supplier power. How to reduce supplier power B2B marketplace - an Internet-based service which brings together many buyers and sellers. Find a way to put more information into the buyer’s hands

13 Developing A Strategy For The Internet Age Using the Five Forces Model Threat of substitute products or services Consider the introduction of alternative IT products such as income tax preparation software. Consumers now use it. Accountant has less clients. Accountant livelihood is threatened.

14 Developing A Strategy For The Internet Age Using the Five Forces Model Threat of new entrants It is not a good thing when it is very easy for others to enter into your market. Companies can use IT to develop and create barriers for others. Entry barrier - a product or service feature that customers have come to expect from companies in a particular industry. A good example is what banks did: Introduce the bank card and as many ATMs around the world as possible. Banking on the internet to pay bills, transfer funds and print reports.

15 Developing A Strategy For The Internet Age Using the Five Forces Model Rivalry among existing competitors Using IT systems to be more efficient and compete more strongly with others. An example would be PRICE. Computer systems can be bought from two different stores but one is cheaper than the other. This is possible when one company uses IT in such a way to reduce its price.

16 Developing A Strategy For The Internet Age The Three Generic Strategies Figure 2.5 The Three Generic Strategies page 52

17 Developing A Strategy For The Internet Age The Value Chain Once you understand how IT can help you develop business strategy, you can ensure that IT supports all important business processes.

18 Developing A Strategy For The Internet Age The Value Chain The Components of a Value Chain

19 Developing A Strategy For The Internet Age The Value Chain The Value-Added View of a Necktie Manufacturer

20 Manufacturing Value Chain Where has information system added value in the value chain?

21 Key E-Commerce Strategies Three capabilities made possible by the Internet should be kept in mind by companies searching for ways to use the new economy to gain competitive advantage: Mass customization and personalization Disintermediation Global reach

22 Key E-Commerce Strategies Mass Customization and Personalization Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications. Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you. Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics.

23 Key E-Commerce Strategies Disintermediation

24 Key E-Commerce Strategies Disintermediation Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can be bypassed.

25 Key E-Commerce Strategies Global Reach Global reach - the ability to extend a company’s reach to customers anywhere there is an Internet connection, and at a much lower cost. Permission marketing - when you have given a merchant your permission to send you special offers.

26 The U.S. Airline Industry Airline Reservation Systems Reservations systems Frequent flyer programs Yield management systems Disintermediating the Travel Agent Show porter video

27 Chips system from earlier What kinds of information systems could be beneficial? Why? What kinds of information products would be helpful? Why?

28 Utz Chips case Answer the following What is the major role of UTZ information systems? What are the characteristics of the information UTZ receives that would make it valuable? Analyze the industry that UTZ is in using the porter model, is it a good industry to be in? What competitive advantage do you feel Utz has? How does information play into that competitive advantage