MIS 7003 MBA Core Course in MIS Professor Akhilesh Bajaj The University of Tulsa Chapter Discussion Information Systems and Organizational Competition © Akhilesh Bajaj, All rights reserved.

Discussion Points Take business goals and translate into specific objectives. E.g., Better customer service translates to: retrieve customer history in 5 seconds. Data translates to information, if used in decision making, or to streamline processes. How do we measure competitive advantage? - Increase in market share? - Increase in revenue as compared to our competitors over time? -Technology infrastructure superiority over competition? - Product range more than competitions range? - Positioning in market better than competitors positions? What do we mean by positioning?

© Akhilesh Bajaj, All rights reserved. The Value Chain Chain: Suppliers  Our Organization  Distributors  Retailers  Customers How do we identify processes in the chain that add value? How do we identify processes that are losing value? Whose perspective do we take: Accountants? Customers? Other employees? If a process is losing value, do we outsource it, or turn it around, or throw technology at it? Discussion: Can every process potentially add value and yield competitive advantage?

© Akhilesh Bajaj, All rights reserved. Porter’s Five Forces Model Bargaining power of buyers Bargaining power of suppliers Threat of substitute products or services Threat of new entrants Competitive intensity in industry Discussion: What are example industries of each type? Overall, how helpful is this model? -Bargaining power of buyers: Loyalty programs, lock customers in -Bargaining power of suppliers: multiple suppliers, reverse auctions -Switching costs are usually switching to another competitor but same product OR switching to another similar product. E.g., DVDs, VHS & downloads -Threat of new entrants: Can IT help or hurt here? Discussion: Movie Rental Industry. What should Block buster & Netflix do? How about a new entrant: what strategy should they follow? Redbook?

© Akhilesh Bajaj, 2004,2005. All rights reserved. Can IT reduce or Increase Barriers to Entry? Easier to form buyer and supplier coalitions Low technology barriers to entry (compared to proprietary networks in the s) Spending 100s of millions of dollars to create a networks of players is no longer needed. Other barriers to entry exist: Customer base (e.g., ebay) Information (e.g., Amazon.com) Amazon.com: First mover in books, but not in CDs. Still, it crushed CDNow. Core strength: building a loyal customer community using: easy shopping, reliable transactions, brand name recognition and recommendations & evaluations of items. New business model: Offering to build a similar community for other etailers, amazon may become a service provider.

© Akhilesh Bajaj, All rights reserved. Can IT Increase or Decrease Switching Costs? Older Proprietary networks: very high switching costs Can we buy books as easily from amazon as borders.com? Once you get a reputation on ebay, will you sell anywhere else? How can customer loyalty be retained? How does ebay do it? Large community of buyers How does amazon do it? Easy to use and top-of-mind brand name. Intuit software: get customers to invest time in learning how to use the software and feeding in their data.

© Akhilesh Bajaj, All rights reserved. Can IT be Used to Reengineer Core values and Alter Competition? Initially, IT was used to automate routine activities: check processing, accounting. Next IT usage evolved to “front office” work like customer service, supplier transactions and distributor interactions. First automate, then inform the customers and suppliers and then transform the business. American Hospital Supply Corp.(AHSC): First automated in-house inventory systems, then asked customers to order directly from these systems. Reduced lead time, increased convenience to customer. Transaction costs at one end of the supply chain went down. American Airlines (AA) did the same for airline reservations: first automate inhouse, then share information with distributors (travel agents). Realtime information, ability to offer quick sales, ability to “get seats” for customers more easily on AA for travel agents since real time information on cancellations and vacancies was available. Again, transforming one end of the supply chain. Charles Schwab: First introduced discount brokers in 1975, since the 1990’s have offered online brokerage. Costs are down, prices are down, profits are up.

© Akhilesh Bajaj, All rights reserved. Can IT Change the Balance of Power Amongst Suppliers & Buyers? After getting buyers hooked onto its online system (proprietary: there was no WWW then), AHSC decided to get suppliers involved as well. Suppliers (driven by fear of losing customers) succumbed and put up their catalogs online. AHSC became an order broker. It’s inventory costs dropped dramatically. Basically, they became information brokers, controlling a proprietary network. Question: Today, with a standard WWW, and lower barriers to entry, can they do this? What about During the late 1990’s, many players like CommerceOne, Ariba & Oracle wanted to create Business-to-business exchanges, where they would act as information brokers. They failed, in large part. Why? -Not a core player -No pressure from customers, unlike AHSC -Lower barriers to entry (not a proprietary network) DISCUSSION: As buyer and supplier coalitions form today (say in healthcare) who will dominate? What are the regulatory issues here? What does it do to competition?

© Akhilesh Bajaj, All rights reserved. Can IT Add Value or Create New Products/Services? Grocery stores: better coupons for us, better store layout (based on data mining). Future: shoppers who shop for us, based on our earlier preferences? As cashiers become obsolete, this may be the model. Virtual Reality: Ability to test products, and try them out. E.g., Ability to hear music before buying Ability to buy only the songs we like Ability to research products before we buy Other examples?

© Akhilesh Bajaj, All rights reserved. Conclusion We looked at the historical basis of IT, and the effects that IT can have on business strategy We also analyzed many real cases to help us understand the impacts We learned HOW to analyze the potential impacts of new technologies, as they emerge later on, when we become managers.