Strategy and Information Systems CHAPTER 3

“HOW WOULD WE DO THAT? WHERE’S THE DATA?” Buyers don’t communicate with operations when negotiating with vendors Buyers need data to look at prices and costs of dealing with individual vendors Need more data and people involved in negotiating deals Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

STUDY QUESTIONS QI: 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: 2023? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q1: HOW DOES ORGANIZATIONAL STRATEGY DETERMINE INFORMATION SYSTEMS STRUCTURE? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q2: WHAT FIVE FORCES DETERMINE INDUSTRY STRUCTURE? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

EXAMPLES OF FIVE FORCES Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

FIVE FORCES AT GEARUP Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q3: HOW DOES ANALYSIS OF INDUSTRY STRUCTURE DETERMINE COMPETITIVE STRATEGY? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

GEARUP’S COMPETITIVE STRATEGY Low Cost/Focused Do everything to keep costs down Focus within sporting goods category Focus on buyers interested in special, short-term sales Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ETHICS GUIDE: YIKES! BIKES 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 owners actions illegal? Unethical? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q4: HOW DOES COMPETITIVE STRATEGY DETERMINE VALUE CHAIN STRUCTURE? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

VALUE CHAIN STRUCTURE? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

SUPPORT ACTIVITIES IN THE VALUE CHAIN Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Support ActivityDescription Technology R & D, New Techniques, Methods, Procedures ProcurementRaw Materials Human ResourcesTraining, Recruiting, Compensation Firm Infrastructure General Management, Finance, Accounting, Legal, Government Affairs

Q5: HOW DO BUSINESS PROCESSES GENERATE VALUE? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

IMPROVED MATERIAL ORDERING PROCESS Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q6: HOW DOES COMPETITIVE STRATEGY DETERMINE BUSINESS PROCESSES AND THE STRUCTURE OF INFORMATION SYSTEMS? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

OPERATIONS VALUE CHAINS FOR BICYCLE RENTAL COMPANIES: HIGH SERVICE RENTALS Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

BUSINESS PROCESS AND INFORMATION SYSTEMS FOR HIGH-SERVICE BIKE RENTAL Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q7: HOW DO INFORMATION SYSTEMS PROVIDE COMPETITIVE ADVANTAGES? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

COMPETITIVE ADVANTAGE VIA PROCESSES IMPLEMENTATION 1.Lock in customers Create high switching costs 2.Lock in suppliers Make it easy to connect to and work with your organization 3.Create entry barriers  Make it difficult and expensive for new competition 4.Create better business processes to establish alliances Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

HOW DOES AN ACTUAL COMPANY USE IS TO CREATE COMPETITIVE ADVANTAGES? ABC, Inc. created competitive advantage in shipping industry through: Superior customer service Ease of customer business use by minimizing data entry: –Drop-down lists, automatic fill-ins, contact lists for customers –Minimizing data-entry errors  Following slides show Web pages of ABC’s information system. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

HOW DOES AN ACTUAL COMPANY USE IS TO CREATE COMPETITIVE ADVANTAGES? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

AUTOMATIC RETRIEVAL OF CUSTOMER DATA Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ABC, INC., WEB PAGE TO SPECIFY NOTIFICATION Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ABC, INC., WEB PAGE TO PRINT A SHIPPING LABEL Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

HOW DOES THIS SYSTEM CREATE A COMPETITIVE ADVANTAGE? Enhances existing products Differentiates products Locks in customers Raises barriers to market entry Increases profit margins by decreasing costs and decreasing errors Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q8: 2023? Unlikely GearUp will exist New opportunities for IT-based organizations Reduce medical costs by supporting governmental functions, like Medicare and related programs Web-based services to track medical bills, Medicare and supplemental insurance payments, track unpaid bills Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

SECURITY GUIDE: DIFFERENTIATING ON SECURITY! Major data centers harden their sites; computer criminals turn to less strongly protected assets held by small organizations and individuals Habit of effective security behavior easy way to gain a competitive advantage Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

GUIDE: YOUR PERSONAL COMPETITIVE ADVANTAGE 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 your competitive advantage? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

GUIDE: YOUR PERSONAL COMPETITIVE ADVANTAGE (CONT’D) How could these concepts help you get and keep a job? Switching costs? Differentiating products? Creating barriers? Establishing alliances? Reducing costs, increasing revenues? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall