1. Introduction to Information Systems
Professor Paul Morrison
March 22, 2006

2. SM 122 Information Systems I, March 22, 2006
Today’s Lecture
Module focus: IT Transforms industries
Porter 5-Force Model of Competition
IT effects on competition
Types of IT systems
Types of E-commerce
Focus: B2B and B2C
SM 122 Information Systems I, March 22, 2006

3. IT Transforms Industries
Changes cost structure & economics
Disconnects service, info, tangibles
Hard to imitate successful change
Must change human, technical, business process, and “customer” systems
“First-mover advantages”, natural monopolies – Microsoft, eBay, Yahoo!
Technical change from science change continues at rapid pace
SM 122 Information Systems I, March 22, 2006

4. Porter’s 5-Forces Model (p306)
SM 122 Information Systems I, March 22, 2006

5. SM 122 Information Systems I, March 22, 2006
Power of Suppliers
Greater if few suppliers
Greater if large relative to firms
Greater if supply is vital
Greater if many customers
Greater if customers cannot backward integrate
Greater if no substitutes for supply
SM 122 Information Systems I, March 22, 2006

6. Power of Buyers (customers)
Greater if few buyers
Greater if large relative to firms
Greater if there are many firms
Greater if buyers have substitutes
Greater if buyers can backward integrate
Greater if product is a commodity
SM 122 Information Systems I, March 22, 2006

7. SM 122 Information Systems I, March 22, 2006
Threat of Entry
Greater if few barriers to entry
Low capital, scale, patent protection, brand-name, distribution network requirements, first-mover advantage
Greater if outside firms large, rich
Greater if industry profits high
Greater if low barriers to exit
SM 122 Information Systems I, March 22, 2006

8. SM 122 Information Systems I, March 22, 2006
Threat of Substitutes
Greater if different product/ service provides very similar function, cost
Greater if industry product / service very expensive, important
Greater if rate of technological change high
Greater if switching costs low
Greater if high variety outside strat.
SM 122 Information Systems I, March 22, 2006

9. SM 122 Information Systems I, March 22, 2006
Intensity of Rivalry
High barriers to exit
Low barriers to entrance
Commodities
Similar size, strategies, technology
High capital intensity, fixed costs, scale
Slow industry growth in demand
SM 122 Information Systems I, March 22, 2006

10. IT Effects on Competition
Reduce Costs Increase Speed
Customization Segmentation
Convenience Flexibility
Automate Reduce Inventories
Info available More Value-Added
Separate services, info, tangibles
Wide scope markets: buyers, suppliers
SM 122 Information Systems I, March 22, 2006

11. SM 122 Information Systems I, March 22, 2006
IT effects on 5 forces
Increase threat of substitutes
Increase differentiation, variety of strategies
Increase number of suppliers, buyers
Various effects on barriers to entry
Increase barriers to exit
Increase “perfect information”
Reduce switching costs
SM 122 Information Systems I, March 22, 2006

12. E-Commerce v. Business Processes
Business Processes Info Systems deliver on the promises made by E-Commerce Strategy
Just as... Operations Management delivers on the promises made by Marketing
SM 122 Information Systems I, March 22, 2006

13. SM 122 Information Systems I, March 22, 2006
Types of IT Systems
Business Process/ Operations Support
Transaction Processing
Office Automation / Productivity
Process Control
Collaboration
Expert systems
Knowledge Management
SM 122 Information Systems I, March 22, 2006

14. Management Support Information Systems
MIS (Management Information Systems) versus “DSS” (Decision Support Systems) – difference?
Older, rigid format, periodic reports
versus
Interactive, flexible, “what if” scenarios
SM 122 Information Systems I, March 22, 2006

15. Concepts in B2B E-Commerce
One-to-one connection between partners, or suppliers and buyers
“Electronic marketplaces” or “exchanges” with many companies
SM 122 Information Systems I, March 22, 2006

16. B2B E-Commerce, continued
Maint, Repair, Ops (MRO) supplies
versus
Direct Materials
Horizontal markets – many industries
versus (usually MRO)
Vertical markets – within an industry (usually Direct Materials)
SM 122 Information Systems I, March 22, 2006

17. Concepts in B2C E-Commerce
Go anywhere through Internet search
“Mass customization”
Types of products (remember Marketing?)
Convenience
Specialty / “Shopping”
Commodity-like (books, music)
Digital – low or zero tangibles
SM 122 Information Systems I, March 22, 2006

18. Concepts Not to worry about...
Systems development
IT Careers
Payment Systems
Security
“Differences” between MIS, DSS, ESS
Hardware, varieties of software
SM 122 Information Systems I, March 22, 2006