BUS1MIS Management Information Systems Semester 1, 2012 Week 3 Lecture 1

To be a Good Student in MIS Stay aware of MIS web page Have the textbook and Subject Learning Guide Print off slides before lectures Attempt tutorial questions before tutorials Keep looking ahead for upcoming online tests and tutorial assessments Relate content to business experience

Business Strategy Ref: Textbook section 1.2 pp Business constantly strives to gain competitive advantages incorporating IT and IS To achieve a competitive advantage a business needs to: 1.Identify potential opportunities that can lead to a competitive advantage (Porter’s Five Forces Model). An opportunity might involve entering a new market, for instance. 2.Formulate a strategy for implementing the opportunity (Porter’s Three Generic Strategies) 3.Identify how IT can be used to add value to one or more business activities to provide a competitive advantage (Value Chain Analysis)

Business Strategy Competitive Advantage To survive and thrive an organisation must create a competitive advantage Competitive advantage – a product or service that an organization’s customers place a greater value on than similar offerings from a competitor First-mover advantage – occurs when an organisation can significantly impact its market share by being first to market with a competitive advantage Example FedExFedEx delivers parcels. FedEx developed a system to allow a customer to request parcel pickups, print mailing slips and track parcels on-line … so they gained a first-mover advantage over their competitors

Business Strategy Competitive Advantage Can you contribute some examples of competitive advantage to the lecture?

Business Strategy Environmental Scanning To create a competitive advantage you have to be aware of what your competitors are doing. The term used to describe this is environmental scanning. Information technology can play a role in this ….. … from accessing a competitor’s on-line presence to the use of hand held computers to record product offerings, product placements and product listings by your representatives at a competitor’s retail site. For example – how does the junk mail for Big W and Target feature the same products each week?Big W

Business Strategy Porter’s Five Forces Model Used to identify and analyse a potential business opportunity that may lead to a competitive advantage. Figure 1.13

Business Strategy Porter’s Five Forces Model Buyer power - the ability of your customers to influence what they are prepared to pay for your goods/services. High when buyers have many sellers to choose from. Supplier power - the ability of your suppliers to influence how much they will charge for the raw materials they are supplying to you. High when there are few suppliers. Threat of substitute products or services – high when there are many alternative products or services available from other businesses. Threat of new entrants – high when it is easy for new competitors to enter a market. Rivalry among existing competitors – high when competition is fierce in a market.

Business Strategy Porter’s Five Forces Model - Examples Buyer power High – Low - Supplier power High – Low - Threat of substitute products or services High – Low - Threat of new entrants High – Low - Rivalry among existing competitors High – Low - Eco-Pole AshtrayEco-Pole Ashtray

Business Strategy Porter’s Five Forces Model – Gaining a Competitive Advantage Buyer power – need to reduce. Make changing business difficult - for example, loyalty programs. Supplier power – need to reduce. Use standardised parts that can be obtained from multiple suppliers. Threat of substitute products or services – need to reduce. Increase quality, lower price, improve after purchase service, etc. Threat of new entrants – increase entry barriers. Improve brand name recognition, tie up distribution channels, etc. Rivalry among existing competitors – need to reduce. Brand loyalty and switching costs need to be increased.

Business Strategy Organizations typically follow a strategy when entering a new market: Entering a new market A broad strategy aims to target a large market segment A focused strategy aims to target a niche market within the broader market Porter has identified three generic strategies based around these ideas

Business Strategy Entering a new market

Business Strategy Once an organization chooses its strategy, it can use tools such as the value chain analysis to determine how a competitive advantage can be achieved. Value Chain Analysis A value chain – views an organization as a series of processes, each of which adds value to the product or service

Value Chain Analysis Business Strategy IT can used to support those activities which have been targeted as being important in adding value. To gain a competitive advantage the value chain must enable the organisation to provide unique value to its customers. This may be expressed as lower costs or superior benefits to the customer.

Business Strategy A video will be played from the textbook web site featuring Panera Bread. As you watch the movie contemplate the following questions: 1.How does CEO Ron Shaich use employee empowerment to affect Porter’s Five Forces? 2.What type of generic strategy is Panera Bread using?