1. Strategic Information Systems for Competitive Advantage
Chapter 3
Strategic Information Systems for Competitive Advantage

2. A Good Strategy?

3. Why Have a Strategy? Does a business/organization need a strategy?
What makes a good strategy?
Does IT affect a strategy?
If so, how?

4. Elements of Strategic Management
Long Range Planning
Outside scope of this course
Response Management
Proactive Innovation
Information Technologies
Our focus

5. Where Does a Strategy Come From?
Mission
Goals
Organizational strategy
Functional strategies
Finance
Marketing
Operations
Tactics
operations

6. What is a Mission?
Mission: The reason for existence of an organization
Mission Statement: A statement of purpose that serves as a guide for strategy and decision making
Should answer:
What business are we in? Where should we be in 10 years?
Who are our customers?
What are our basic beliefs?
How do we measure success?

7. IBM Mission Statement
We create, develop and manufacture the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We have two fundamental missions:
We strive to lead in the creation, development, and manufacture of the most advanced information technologies. (Performance objective & Business definition)
We translate advanced technologies into value for our customers as the world’s largest information services company. Our professionals worldwide provide expertise within specific industries, consulting services, systems integration, and solution development and technical support. (Business definition, customers)

8. Goals Goal: Provides substance to the overall mission. Example: 3M
More specific
Example: 3M
Mission: “To solve unsolved problems innovatively …”
Possible Goal: Our corporate goal is to have 30% of sales come from new products.

9. Distinctive Competencies
Distinctive Competencies: Special attributes or abilities possessed by an organization that give it a competitive edge OR
Unique resources and strength of an organization that reflect the collective learning of an organization

10. Examples of Distinctive Competencies
Price
Low Cost
Half.com, Wal-Mart
Quality
High Performance Design
Amazon
Time
Rapid Delivery
On-Time Delivery
Office Max, Staples
Flexibility
Variety, Volume
Service
Superior Customer Service
Dell
Location
Convenience
BestBuy, McDonald’s, 7-Eleven

11. The Role of IT
IT creates applications that provide strategic advantages to companies
IT is a competitive weapon
IT supports strategic change, e.g. reengineering
IT networks with business partners
IT provides cost reduction
IT provides competitive business intelligence

12. Competitive Advantage in the Web Economy
Competitive Strategy
Search for a competitive advantage in an industry, which leads to control of the market
Competitive Advantage
Look for a competitive necessity, which will help your company keep up with the competitors
Sustainable Strategic Advantage
Maintain profitable and sustainable position against the forces that determine industry competition

13. Analyzing Competitiveness
Well-known framework is Porter’s competitive forces model (1985)
Used to develop strategies for companies to increase their competitive edge
Demonstrates how IT can enhance competitiveness of corporations
Recognizes 5 major forces that could endanger a company’s position in a given industry

14. Porter’s 5 Competitive Forces
The threat of entry of new competitors
The bargaining power of suppliers
The bargaining power of customers (buyers)
The threat of substitute products or services
The rivalry among existing firms in the industry

15. Competitive Forces Diagram

17. Porter’s Model in Action
Step 1: The players in each force are listed
Step 2: An analysis is made which relates Porter’s determining factors
Step 3: A strategy is devised to defend against these factors
Step 4: Support information technologies are employed

18. Porter’s Model in Action, cont’d.

19. Case: DaimlerChrysler
Problem:
In 1993, Chrysler lost $2.6 billion because its program with parts suppliers was failing
Solution:
Suppliers began using Lotus Notes/Domino
Measurement reports to static HTML pages
E-Procurement exchange at Covisint
Results
Chrysler saved millions of $

20. Porter’s Value Chain Analysis Model
Primary Activities
Inbound logistics (inputs)
Operations (manufacturing and testing)
Outbound logistics (storage and distribution)
Marketing and Sales
Service
These 5 activities constitute a supply chain

21. Value Chain Model, cont’d.
Support Activities
Firm infrastructure
Human resources management
Technology development
Procurement

22. Value System
A firm’s value chain is part of a larger stream of activities, which Porter calls a “Value System”
Includes the suppliers that provide the necessary inputs AND their value chains
Applies to both products & services, for any organization, PUBLIC or PRIVATE
Is the basis for the Supply Chain Management

23. Functional Departments and the Value Chain

25. Value Chain Model, cont’d.
The Value System Model is used to:
Evaluate a company’s process and competencies
Investigate whether adding IT supports the value chain
Enable managers to assess the information intensity and role of IT