1. Chapter 2 plus, little bit of chapter 7 and 8 Competing with IT Enterprise Systems

2. Why Study Strategic IT? Technology is no longer an afterthought in forming business strategy, but the actual cause and driver.Technology is no longer an afterthought in forming business strategy, but the actual cause and driver. IT can change the way businesses compete.IT can change the way businesses compete.

3. Strategic View of IS Information systems are vital competitive networks.Information systems are vital competitive networks. Information systems are a means of organizational renewal.Information systems are a means of organizational renewal. An IS can enable a businesses to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment.An IS can enable a businesses to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment.

5. Porter’s Competitive Forces To survive and succeed, a business must develop and implement strategies to effectively counter the: 1.Rivalry of competitors within its industry 2.Threat of new entrants into an industry and its markets 3.Threat posed by substitute products which might capture market share 4.Bargaining power of customers 5.Bargaining power of suppliers

6. Rivalry of competitors Online-shopping, price comparison tools (Froogle, Shopzilla, etc.) increase rivalry.Online-shopping, price comparison tools (Froogle, Shopzilla, etc.) increase rivalry. Industries with high rivalryIndustries with high rivalry –Automotive –Cell Phone –Retail Clothing –Fast Food Industries with low rivalry?Industries with low rivalry?

7. Threat of new entrants Internet/E-commerce enables a business to emerge overnightInternet/E-commerce enables a business to emerge overnight Almost any medium-sized retail store can become a global e- commerce competitor at little cost.Almost any medium-sized retail store can become a global e- commerce competitor at little cost. It costs a lot to become a global donut competitor

8. Substitute Products Internet makes substitutes easier to find.Internet makes substitutes easier to find. –Can’t afford to fly...take a train. –Ipod not available...buy a Dell DJ –Thomas the Tank Engine costs too much...consider Imaginarium.

9. Bargaining power Customer: Here is where the Internet has empowered the customerHere is where the Internet has empowered the customer –Ebay –Lending Tree –Reverse auctions Suppliers: Home Depot, Walmart, etc. can persuade suppliers to lock-out the little guys Buy forcing suppliers into investing SCM software

10. Competitive Strategies 1.Cost Leadership 2.Differentiation 3.Innovation 4.Growth 5.Alliance

11. Cost Leadership Strategy Becoming a low-cost producer of products and servicesBecoming a low-cost producer of products and services Finding ways to help suppliers and customers reduce their costsFinding ways to help suppliers and customers reduce their costs Increase costs of competitorsIncrease costs of competitors

12. Differentiation Strategy Developing ways to differentiate a firm’s products and services from its competitors’Developing ways to differentiate a firm’s products and services from its competitors’

13. Innovation Strategy Development of unique products and servicesDevelopment of unique products and services Entry into unique markets or market nichesEntry into unique markets or market niches Making radical changes that alter the fundamental structure of an industryMaking radical changes that alter the fundamental structure of an industry

14. Growth Strategy Significantly expanding a company’s capacity to produce goods and servicesSignificantly expanding a company’s capacity to produce goods and services Expanding into global marketsExpanding into global markets Diversifying into new products and servicesDiversifying into new products and services Integrating into related products and servicesIntegrating into related products and services Eric’s Quick Lube, Movie Theater and Dentist’s Office

15. Alliance Strategy Establishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companiesEstablishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companies

16. ExamplesExamples Cost Leadership: Priceline.comBidding Buyer set pricing

17. ExamplesExamples Differentiation:Moen Online customer design Increase in market share

18. ExamplesExamples Innovation:E-trade Online discount stock trading Market leader, then problems...

19. ExamplesExamples Growth:Walmart Beer, diapers, discount beef jerky, country music CD’s, NASCAR merchandise, cheap plastic furniture, and every ingredient you need to make napalm (all at low prices). Market leadership

20. ExamplesExamples Alliance: Walmart & Proctor N’ Gamble Beer, diapers, discount beef jerky, country music CD’s, NASCAR merchandise, cheap plastic furniture, every ingredient you need to make napalm, and oxycontin (all at low prices). Even more Market leadership

21. Other Competitive Strategies Locking in customers or suppliers by building valuable new relationships with them.Locking in customers or suppliers by building valuable new relationships with them. Building switching costs so a firm’s customers or suppliers are reluctant to pay the costs in time, money, effort, and inconvenience that it would take to switch to a company’s competitors.Building switching costs so a firm’s customers or suppliers are reluctant to pay the costs in time, money, effort, and inconvenience that it would take to switch to a company’s competitors.

22. Other Competitive Strategies Raising barriers to entry that would discourage or delay other companies from entering a market.Raising barriers to entry that would discourage or delay other companies from entering a market. Leveraging investment in information technology by developing new products and services that would not be possible without a strong IT capability.Leveraging investment in information technology by developing new products and services that would not be possible without a strong IT capability.

23. Advantage vs. Necessity Competitive Advantage – developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forcesCompetitive Advantage – developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forces Competitive Necessity – products, services, processes, or capabilities that are necessary simply to compete and do business in an industryCompetitive Necessity – products, services, processes, or capabilities that are necessary simply to compete and do business in an industry

24. Customer-Focused Business A business that: can anticipate customers’ future needs.can anticipate customers’ future needs. responds to customer concerns.responds to customer concerns. provides top-quality customer service.provides top-quality customer service.

26. Value Chain Definition: View of a firm as a series, chain, or network of basic activities that add value to its products and services,View of a firm as a series, chain, or network of basic activities that add value to its products and services, and thus add a margin of value both to the firm and its customers.and thus add a margin of value both to the firm and its customers.

28. Business Process Reengineering Definition: Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service.Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service.

30. AgilityAgility The ability of a company to prosper in rapidly changing marketThe ability of a company to prosper in rapidly changing market –continually fragmenting global markets –market demands high-quality, high performance, customer-configured products and services.

31. Agile Company Definition: A company that can make a profit in markets withA company that can make a profit in markets with –broad product ranges –short model lifetimes can produce orders individually and in arbitrary lot sizes.can produce orders individually and in arbitrary lot sizes.

32. Mass Customization Definition: Providing individualized products while maintaining high volumes of productionProviding individualized products while maintaining high volumes of production

34. Enterprise Information Systems Definition: Information systems implemented on an extranet among a company and itsInformation systems implemented on an extranet among a company and its –suppliers, –customers, –subcontractors, and –competitors with whom it has formed alliances.with whom it has formed alliances.

35. Virtual Company Definition: An organization that uses information technology to link people, organizations, assets, and ideas.An organization that uses information technology to link people, organizations, assets, and ideas.

36. Virtual Company

37. Virtual Company Strategies Share infrastructure and risk with alliance partners.Share infrastructure and risk with alliance partners. Link complementary core competencies.Link complementary core competencies. Reduce concept-to-cash time through sharing.Reduce concept-to-cash time through sharing.

38. Virtual Company Strategies Increase facilities and market coverage.Increase facilities and market coverage. Gain access to new markets and share market or customer loyalty.Gain access to new markets and share market or customer loyalty. Migrate from selling products to selling solutions.Migrate from selling products to selling solutions.

39. Knowledge-Creating Companies Definition: Consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.Consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.

40. Types of Knowledge Explicit Knowledge – data, documents, things written down or stored on computersExplicit Knowledge – data, documents, things written down or stored on computers Tacit Knowledge – the “how-to’s” of knowledge, which reside in workersTacit Knowledge – the “how-to’s” of knowledge, which reside in workers

41. Knowledge Management Definition: Techniques, technologies, systems, and rewards for getting employees to share what they know and to make better use of accumulated workplace and enterprise knowledge.Techniques, technologies, systems, and rewards for getting employees to share what they know and to make better use of accumulated workplace and enterprise knowledge. Knowledge Management Systems – manage organizational learning and business know-howKnowledge Management Systems – manage organizational learning and business know-how

42. Levels of Knowledge Management

43. Enterprise Systems Integrate/”Bring together” the value chain in multiple CompaniesIntegrate/”Bring together” the value chain in multiple Companies Mattel ToysAmazon.com GE Plastics

44. Enterprise Systems The Umbrella the covers a virtual company.The Umbrella the covers a virtual company. ERP System monitors the integrated value-chains of all these connected firms A Small company can have the information and power of a large conglomerate

45. Customer Relationship Management (CRM) Definition: enterprise system that integrates and automates many of the customer-serving processes inenterprise system that integrates and automates many of the customer-serving processes in –sales, –marketing, and –customer services that interact with a company’s customersthat interact with a company’s customers

46. CRM Application Clusters

47. CRM to ERP Firms themselves are customers of other firms.Firms themselves are customers of other firms. Shared interests leads to...Shared interests leads to... –Shared information which leads towhich leads to –Shared information systems

48. Enterprise Resource Planning (ERP) Definition: A cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a companyA cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company Company may be virtualCompany may be virtual Value chain may cross-over to multiple partner firmsValue chain may cross-over to multiple partner firms

49. ERP Process & Information Flows

50. ERP Benefits Quality and Efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distributionQuality and Efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distribution Decreased Costs – Significant reductions in transaction processing costs and hardware, software, and IT support staffDecreased Costs – Significant reductions in transaction processing costs and hardware, software, and IT support staff

51. ERP Benefits Decision Support – Provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely mannerDecision Support – Provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner Enterprise Agility – ERP breaks down many former departmental and functional walls of business processes, information systems, and information resourcesEnterprise Agility – ERP breaks down many former departmental and functional walls of business processes, information systems, and information resources

52. Costs of ERP

53. Causes of ERP Failures Business mangers and IT professionals underestimate the complexity of the planning, development, and training neededBusiness mangers and IT professionals underestimate the complexity of the planning, development, and training needed Failure to involve affected employees in the planning and development phasesFailure to involve affected employees in the planning and development phases Trying to do too much too fast in the conversion processTrying to do too much too fast in the conversion process Failure to do enough data conversion and testingFailure to do enough data conversion and testing

54. Trends in ERP