1. CHAPTER 2
Organizational Strategy, Competitive Advantage, and Information Systems

2. CHAPTER OUTLINE 2.1 Business Processes
2.2 Business Process Reengineering and Business Process Management
2.3 Business Pressures, Organizational Responses, and Information Technology Support
2.4 Competitive Advantage and Strategic Information Systems
2.5 Business – Information Technology Alignment

3. Learning Objectives
1. Understand the concept of business processes, and provide examples of business processes in the functional areas of an organization.
2. Differentiate between the terms business process reengineering and business process management.
3. List and provide examples of the three types of business pressures, and describe one IT response to each.

4. Learning Objectives (continued)
4. Identify the five competitive forces described by Porter, and explain how the Web impacts each one.
5. Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage.
6. Define business – information technology alignment, and describe the characteristics of effective alignment.

5. Chapter Opening Case Dana Deasy Solution: Reduce number of vendors
First problem
Dana Deasy
Solution: Reduce number
of vendors

6. Chapter Opening Case (continued)
BP’s attempted solution
BP’s second problem: Deepwater Horizon well exploded

7. Before the Stores (IT’s About Business 2.1)

8. Competitive Advantage
Competitive advantage is an advantage over competitors in some measure such as cost,
quality, or speed; leads to control of a market and to larger-than-average profits.

9. 2.1 Business Processes
Business Process Cross-Functional Business Processes
A business process is a collection of related activities that produce a product
or a service of value to the organization, its business partners, and/or its customers.
A cross-functional business process is one in which no single functional area is
responsible for its execution.

10. Example of Business Process (Figure 2.1)
The next slide shows an example of a business process: Ordering an E-ticket from an airline Web site

11. Frequent Flyer Mileage Sufficient?
Receive Ticket Order
Traveler
Airline Web Site
Seats Available NO
Notify Traveler
Plan Trip
YES
Reserve Seats
Check Flights NO
Frequent Flyer Mileage Sufficient?
Use Credit Card? NO
Seats Available? NO
YES
YES
Charge Credit Card
YES
Subtract Mileage
Submit Ticket Order
Charge OK? NO
Notify Traveler
Receive e-Ticket
YES
Confirm Flight(s)
Issue e-Ticket

12. 2.2 Business Process Reengineering and Business Process Management
Business process reengineering is a radical redesign of a business process that improves
Its efficiency and effectiveness, often by beginning with a “clean sheet.”
Business process management is a management technique that includes methods and
tools to support the design, analysis, implementation, management, and optimization
of business processes.

13. 2.3 Business Pressures, Organizational Responses, and IT Support
Market Pressures
Technology Pressures
Societal Pressures
Business Pressure - The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities.
Significant changes in any of these factor are likely to create business pressure on the organization.
The three types of business pressures faced are: market, technology, and societal pressures.

14. Business Pressures, Organizational Responses, and IT Support

15. Market Pressures The Global Economy and Strong Competition
The Changing Nature of the Workforce
Powerful Customers

16. The Stages of Globalization (From Thomas Friedman in The World is Flat)
Globalization 1.0 (from 1492 to 1800)
Globalization 2.0 (from 1800 to 2000)
Globalization 3.0 (from 2000 to the present)
Globalization 1.0
* 1492 to 1800
* World went from large to medium-size
* All about countries and muscles
* Key agents of change: brawn and horsepower
Globalization 2.0
* 1800 to 2000
* World has shrunk from medium to small-size
* Key agent of change: multinational companies
* First half: global integration powered by falling transportation costs
(steam engine and railroad)
* Second half: global integration powered by falling telecommunications costs
(telephone, PC, satellites, fiber-optic cable)
Globalization 3.0
* 2000 – now
* World is now tiny (everyone is everyone else’s close neighbor)
* Competitive playing field is being leveled
* Key agent of change: software, in conjunction with the global fiber-optic network
* Enabling people to collaborate and compete globally

17. Globalization 1.0 Christopher Columbus
Christopher Columbus “discovering” the New World in 1492.

18. Globalization 2.0 (first half)
Railroads
Global integration during the first half of Globalization 2.0 was driven by falling transportation
costs (for example, steam engine and the railroads).
Steam engine

19. Globalization 2.0 (second half)
Fiber optics
Satellites
Global integration during the second half of Globalization 2.0 was driven by falling communications
costs (e.g., satellites, fiber optics, the personal computer, and wireless smart phones).
Tablet computers
Smart phones

20. Globalization 3.0
Key agent of change: software, in conjunction with the global fiber-optic network enabling people to
collaborate and compete globally
3.0
2.0
1.0

21. Globalization 3.0 (continued)
Schematic Map of the Internet

22. Thomas Friedman’s Ten Flatteners
Fall of the Berlin Wall
Netscape goes public
Development of work-flow software

23. Friedman’s Ten Flatteners (continued)
Uploading
Outsourcing
Offshoring
Call center in India

24. Friedman’s Ten Flatteners (continued)
Supply chaining
Insourcing
Informing

25. Friedman’s Ten Flatteners (continued)
The Steroids
Computing
Charles Babbage’s Difference Engine (1822)
Modern data center

26. The Steroids (continued)
Instant messaging and file sharing
Voice over Internet Protocol

27. The Steroids (continued)
Videoconferencing
A telepresence system in a conference room

28. The Steroids (continued)
Computer graphics

29. The Steroids (continued)
Wireless technologies
Using smart phone in motion
Geostationary satellite
Bluetooth phone sunglasses

30. Sleek Audio (IT’s About Business 2.2)
Reverse
Offshoring

31. Technology Pressures Technological Innovation and Obsolescence
Information Overload

32. Technological Innovation and Obsolescence
Obsolescence: Slide Rule
Innovation: Early calculator

33. Technological Innovation and Obsolescence (continued)
Innovation: Telegraph
Obsolescence: Pony Express

34. Technological Innovation and Obsolescence (continued)
Obsolescence: old analog camera
Innovation: digital camera

35. Technological Innovation and Obsolescence (continued)
Horse and Buggy
Innovation: Ford Model T

36. Information Overload

37. Societal/Political/Legal Pressures
Social Responsibility
Government Regulation and Deregulation
Protection Against Terrorist Attacks
Ethical Issues

38. Green IT See CBS video on disposal of e-waste
Clicking on the Ares, Osaka, and Las Vegas logos will take you to their respective Web sites.
See CBS video on disposal of e-waste

39. Web sites that enable generosity
Collaborative Consumption
Clicking on the logos will take you to the respective Web pages.

40. Social Responsibility (continued)
Bridging the Digital Divide
Getting the satellite dish to the rural hamlet
* Interesting juxtaposition of Agricultural Age and Information Age

41. Social Responsibility (continued)
One Laptop per Child initiative
Bridging the Digital Divide

42. Organizational Responses
Strategic Systems
Customer Focus
Make-to-Order and mass customization
See Reebok
See Bodymetrics video
E-business and E-commerce
Strategic Systems provide advantages that enable organizations to increase market share and/or profits, to better negotiate with suppliers, or prevent competitors from entering their markets.
Customer Focus is the difference between attracting and keeping customers by providing superb customer service to losing them to competitors.
Make-to-Order is a strategy of producing customized products and services.
Mass Customization is producing a large quantity of items, but customizing them to fit the desire of each customer.
Reebok and Bodymetrics provide excellent examples of mass customization.
E-business and E-commerce: Buying and selling products and services electronically.
E-business is a broader concept than e-commerce.

43. 2.4 Competitive Advantage and Strategic Information Systems
Competitive Advantage: An advantage over competitors in some measure such as cost, quality, or speed, leads to control of a market and to larger- than average profits.
Strategic Information Systems (SIS) provide a competitive advantage by helping an organization to implement its strategic goals and to increase its performance and productivity.

44. Porter’s Competitive Forces Model
The best-known framework for analyzing competitiveness is Michael Porter’s competitive forces model (Porter, 1985).
* Model is used to develop strategies to increase their competitive edge.
* Demonstrates how IT can make a company more competitive.
Michael Porter

45. Porter’s Competitive Forces Model

46. Porter’s Competitive Forces Model
Threat of entry of new competitors is high when it is easy to enter a market and low when significant barriers to entry exist.
A barrier to entry is a product or service feature that customers expect from organizations in a certain industry.
For most organizations, the Internet increases the threat that new competitors will enter a market.

47. Porter’s Competitive Forces Model
The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices.
Internet impact is mixed. Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers.
On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers.

48. Porter’s Competitive Forces Model
The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices.
Internet increases buyers’ access to information, increasing buyer power.
Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere. This also increases buyer power.

49. Porter’s Competitive Forces Model
The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes.
Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently.

50. Porter’s Competitive Forces Model
The rivalry among firms in an industry is high when there is fierce competition and low when there is not.

51. Porter’s Value Chain Model
This model identifies specific activities where organizations can use competitive strategies for greatest impact.
Primary activities
Support activities
Primary activities are those business activities that relate to the production and distribution of the firm’s products and services, thus creating value for which customers are willing to pay. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and customer service.
Support activities do not add value directly to a firm’s products and services, but support the primary activities. Support activities include accounting, finance, management, human resources management, product and technology development (R&D), and procurement.

52. Porter’s Value Chain Model

53. Strategies for Competitive Advantage
Cost Leadership
Differentiation
Innovation
Operational Effectiveness
Customer-orientation
Cost Leadership. Produce products and/or services at the lowest cost in the industry.
Differentiation. Offer different products, services or product features.
Innovation. Introduce new products and services, add new features to existing products and services or develop new ways to produce them.
Operational Effectiveness. Improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals.
Customer-orientation. Concentrate on making customers happy.

54. Strategies for Competitive Advantage
Figure 2.5

55. 2.5 Business – Information Technology Alignment

56. Chapter Closing Case