Strategy and Information Systems Chapter 3

3-2 “And We’ve Got a Lot of Process and Systems Work to Do.” Copyright © 2016 Pearson Education, Inc. Differentiates itself by having a large inventory of parts. Competitive strategy is threatened by 3D printing. Jason wants to respond by manufacturing some parts. Never been a manufacturer. Drew to explore possibilities and challenges associated with 3D printing.

3-3 Study Questions Copyright © 2016 Pearson Education, Inc. Q1: How does organizational strategy determine information systems structure? Q2: What five forces determine industry structure? Q3: How does analysis of industry structure determine competitive strategy? Q4: How does competitive strategy determine value chain structure? Q5: How do business processes generate value? Q6: How does competitive strategy determine business processes and the structure of information systems? Q7: How do information systems provide competitive advantages? Q8: 2025?

3-4 Q1: How Does Organizational Strategy Determine Information Systems Structure? Copyright © 2016 Pearson Education, Inc. Strategy Determines Information Systems

3-5 Q2: What Five Forces Determine Industry Structure? Copyright © 2016 Pearson Education, Inc. Competitive Forces Competition from vendors who manufacture substitutes. Competition from new competitors. Competition from existing rivals. Bargaining Power Forces Bargaining power of suppliers. Bargaining power of customers.

3-6 Use 5-forces Model to Identify Sources of Strong Competition Copyright © 2016 Pearson Education, Inc.

3-7 Assessing the Five Forces at AllRoad Copyright © 2016 Pearson Education, Inc.

3-8 Q3: How Does Analysis of Industry Structure Determine Competitive Strategy? Copyright © 2016 Pearson Education, Inc. Porter's Four Competitive Strategies

3-9 Yikes! Bikes! Copyright © 2016 Pearson Education, Inc. You are operations manager for Yikes! Bikes, a manufacturer of high-end mountain bicycles. New owners plan to pursue lowest-cost vendor strategy by importing low- cost, lower quality bikes. New owners are not being honest with employees about cutting jobs. Say you might be promoted to new general manager. Should you trust them? Q: Are the owner’s actions illegal? Unethical?

3-10 Q4: How Does Competitive Strategy Determine Value Chain Structure? Copyright © 2016 Pearson Education, Inc. Linkages

3-11 Task Descriptions for Primary Activities of the Value Chain Copyright © 2016 Pearson Education, Inc.

3-12 Q5: How Do Business Processes Generate Value? Copyright © 2016 Pearson Education, Inc. Activities interact with databases

3-13 Improved Material Ordering Process Using Integrated Databases. Copyright © 2016 Pearson Education, Inc. Queries both databases

3-14 Q6: How Does Competitive Strategy Determine Business Processes and the Structure of Information Systems? Copyright © 2016 Pearson Education, Inc. Low-Cost Rental Value Chain

3-15 High-Service Rental Value Chain Copyright © 2016 Pearson Education, Inc.

3-16 Business Process and Information Systems for High-Service Bike Rental Copyright © 2016 Pearson Education, Inc.

3-17 So What? What Strategy Do You Support? Copyright © 2016 Pearson Education, Inc. 1.Never propose an idea to anyone in your company that is not consistent with its competitive strategy. 2.Information systems development must mirror organization’s strategy.  What about you, personally? If you naturally like to save costs, a cost leader can be the place for you. Know organization’s competitive strategy.

3-18 Q7: How Do Information Systems Provide Competitive Advantages? Copyright © 2016 Pearson Education, Inc.

3-19 How Does This System Create a Competitive Advantage? Copyright © 2016 Pearson Education, Inc. Enhances existing products Differentiates products Locks in customers Raises barriers to market entry Increases profit margins by decreasing costs and decreasing errors

3-20 How Does an Actual Company Use IS to Create Competitive Advantages? (cont'd.) Copyright © 2016 Pearson Education, Inc. Maintains customer account data –IS collects information for ABC (adds value). –IS saves customers time by automatically filling in part of form (adds value for customer). Package & information delivery system –IS helps customer to select delivery address and generate shipping labels. –What value does shipper get?

3-21 Two Roles for Information Systems Regarding Products Copyright © 2016 Pearson Education, Inc.

3-22 ABC Web Page to Select Recipient from Customer’s Records Copyright © 2016 Pearson Education, Inc.

3-23 ABC Web Page to Select a Contact from Customer’s Records Copyright © 2016 Pearson Education, Inc.

3-24 ABC Web Page to Specify Notification Copyright © 2016 Pearson Education, Inc.

3-25 ABC Web Page to Print Shipping Label Copyright © 2016 Pearson Education, Inc.

3-26 Q8: 2025? Copyright © 2016 Pearson Education, Inc. Speed of business accelerating New businesses based on advances in self-driving cars, drones, Google glass, 3D printing Pace of change and integration of new technology will be fast and increasing

3-27 Security Guide: Differentiating on Security Copyright © 2016 Pearson Education, Inc. Major data centers harden their sites –Computer criminals turn to less protected assets of smaller organizations and individuals Reputation of effective security can be way to gain a competitive advantage

3-28 Guide: Your Personal Competitive Advantage Copyright © 2016 Pearson Education, Inc. Who will be your competitors when you seek a job after graduating from college? What will be your competitive advantage in the job market? What can you do before you graduate to develop a competitive advantage?

3-29 Guide: Your Personal Competitive Advantage (cont'd) Copyright © 2016 Pearson Education, Inc. How do these elements of competitive advantage apply to you personally? Switching costs? Differentiating products? Creating barriers? Establishing alliances? Reducing costs, increasing revenues?

3-30 Active Review Copyright © 2016 Pearson Education, Inc. Q1: How does organizational strategy determine information systems structure? Q2: What five forces determine industry structure? Q3: How does analysis of industry structure determine competitive strategy? Q4: How does competitive strategy determine value chain structure? Q5: How do business processes generate value? Q6: How does competitive strategy determine business processes and the structure of information systems? Q7: How do information systems provide competitive advantages? Q8: 2025?

3-31 Case Study 3: The Amazon of Innovation Copyright © 2016 Pearson Education, Inc.

3-32 Case Study 1: The Amazon of Innovation (cont'd) Amazon’s business lines three categories: 1.Online retailing –Own inventory –Associates program –Consignment 2.Order fulfillment 3.Cloud services Copyright © 2016 Pearson Education, Inc.

3-33 Fulfillment Fees for Regular-sized Goods for a Company Like AllRoad Copyright © 2016 Pearson Education, Inc.

3-34 Copyright © 2016 Pearson Education, Inc.