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

2. 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 Organizational Strategy, Competitive Advantage, and Information Systems 2 Copyright John Wiley & Sons Canada

3. LEARNING OBJECTIVES 1.Understand the concept of business processes, and provide examples of business processes in the functionalareas 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. 3Copyright John Wiley & Sons Canada

4. LEARNING OBJECTIVES (CONTINUED) 4.Identify the five competitive forces described by Porter, and explain how the Web has an impact on each one. 5.Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage. 6.Define the term business-information technology alignment, and describe the characteristics of effective alignment. 7.Define the term “IT governance” and explain why information systems need to be effectively managed and planned. 4Copyright John Wiley & Sons Canada

5. CHAPTER OPENING CASE First problem: BP was underperforming; Deasy wanted to slash IT expenses & change IT into a strategic tool Solution: Reduce number of IT Workers 5Copyright John Wiley & Sons Canada

6. CHAPTER OPENING CASE Second problem: Deepwater Horizon well exploded Solution: cap the spill and spend huge amounts on public relations 6Copyright John Wiley & Sons Canada

7. DISCUSSION 1.How did Deasy’s solutions for BP’s underperformance impact the IT department? 2. Were the solutions used by BP to mitigate the damage from the well explosion effective? Why or why not? 7Copyright John Wiley & Sons Canada

8. 2.1 IT’S ABOUT (SMALL) BUSINESS Websites such as Amazon.com and the Canadian start- up Shopcaster (http://shopcaster.com) help retailers sell their products through promotion online. 8Copyright John Wiley & Sons Canada

9. 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. 9Copyright John Wiley & Sons Canada

10. 10 2.1 BUSINESS PROCESSES Examples of business processes in functional areas: Accounting: managing accounts payable & receivable Finance: Producing business forecasts Marketing: Handling customer complaints POM: Processing physical inventory Human Resources: Overseeing workplace safety MIS: Training computer users The next slide shows an example of a business process: Ordering an E-ticket from an airline Web site

11. BUSINESS PROCESSES (CONTINUED) 11Copyright John Wiley & Sons Canada

12. CROSS FUNCTIONAL PROCESSES A cross-functional business process is one in which no single functional area is responsible for its execution. Multiple functional areas collaborate to perform the process. For example, the materials procurement process includes all of the tasks involved in acquiring needed materials externally from a vendor. Procurement comprises five steps that are completed in three different functional areas of the firm: warehouse, purchasing, and accounting. 12Copyright John Wiley & Sons Canada

13. 13 2.2 BUSINESS PROCESS REENGINEERING AND BUSINESS PROCESS MANAGEMENT How does an organization ensure business process excellence? –Business Process Reengineering (BPR) is a strategy for improving the efficiency and effectiveness of an organization’s business processes. –Business Process Management (BPM) is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes

14. Copyright John Wiley & Sons Canada14 2.3 BUSINESS PRESSURES, ORGANIZATIONAL RESPONSES, AND IT SUPPORT Business Pressures: –Market: pressures are generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers –Technology: pressures involving Technological Innovation and Obsolescence and Information Overload –Societal: includes social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics

15. BUSINESS PRESSURES, ORGANIZATIONAL RESPONSES, AND IT SUPPORT 15Copyright John Wiley & Sons Canada

16. MARKET PRESSURES The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers 16Copyright John Wiley & Sons Canada

17. 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) 17Copyright John Wiley & Sons Canada

18. GLOBALIZATION 1.0 Christopher Columbus “discovering” the New World in 1492. 18Copyright John Wiley & Sons Canada

19. GLOBALIZATION 2.0 (FIRST HALF) Global integration during the first half of Globalization 2.0 was driven by falling transportation costs e.g. steam engine and the railroads 19Copyright John Wiley & Sons Canada

20. GLOBALIZATION 2.0 (SECOND HALF) 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 20Copyright John Wiley & Sons Canada

21. GLOBALIZATION 3.0 1.0 – Focus on Countries 2.0 – Focus on Companies 3.0 – Focus on Groups & Individuals 21Copyright John Wiley & Sons Canada

22. THOMAS FRIEDMAN’S TEN FLATTENERS 1.Fall of the Berlin Wall 2.Netscape goes public 3.Development of work-flow software 22Copyright John Wiley & Sons Canada

23. FRIEDMAN’S TEN FLATTENERS (CONTINUED) 4.Uploading 5.Outsourcing 6.Offshoring 23Copyright John Wiley & Sons Canada

24. FRIEDMAN’S TEN FLATTENERS (CONTINUED) 7.Supply Chaining – Real Canadian Superstore 8.Insourcing – Dell, FedEx 9.Insourcing – Google 10.Informing – Ask, Bing 24Copyright John Wiley & Sons Canada

25. FRIEDMAN’S TEN FLATTENERS (CONTINUED) The Steroids –Computing Charles Babbage’s Difference Engine (1822), Modern data centre –Instant Messaging and File Sharing Bit Torrent –Voice over Internet Protocol Skype, Vonage –Wireless Technologies Using a smart phone in motion, 25Copyright John Wiley & Sons Canada

26. THE STEROIDS (CONTINUED) –Wireless Technologies Using a smart phoen in motion, geostationary satellite, bluetooth phone sunglasses –Videoconferencing –Computer Graphics Using a smart phone in motion, 26Copyright John Wiley & Sons Canada

27. 2.2 IT’S ABOUT BUSINESS Sleek Audio http://www.sleek-audio.com/ Reverse Offshoring Dynamic Innovations LLC http://www.d-inno.com/ 27Copyright John Wiley & Sons Canada

28. TECHNOLOGY PRESSURES Technological Innovation and Obsolescence Information Overload 28Copyright John Wiley & Sons Canada

29. TECHNOLOGICAL INNOVATION AND OBSOLESCENCE (CONTINUED) Obsolescence: old analog camera Innovation: digital camera 29Copyright John Wiley & Sons Canada

30. SOCIETAL/POLITICAL/LEGAL PRESSURES 1.Social Responsibility 2.Government Regulation and Deregulation 3.Protection Against Terrorist Attacks 30Copyright John Wiley & Sons Canada

31. SOCIAL RESPONSIBILITY – GOING GREEN IT executives listed four areas where IT is particularly valuable for going green: 1.Facilities design and management. 2.Carbon management. 3.International and Canadian environmental laws 4.Energy management. 31Copyright John Wiley & Sons Canada

32. SOCIAL RESPONSIBILITY City of Vancouver –http://vancouver.ca/http://vancouver.ca/ Canada Green Building Council –http://www.cagbc.org/http://www.cagbc.org/ One laptop per child initiative 32Copyright John Wiley & Sons Canada

33. 2.3 IT’S ABOUT BUSINESS The Internet Facilitates Generosity GiftFlow Donors Choose Kiva Canadian Red Cross 33Copyright John Wiley & Sons Canada

34. ORGANIZATIONAL RESPONSES Strategic Systems Customer Focus Make-to-Order and mass customization See Bodymetrics videovideo E-business and E-commerce 34Copyright John Wiley & Sons Canada

35. 2.4 COMPETITIVE ADVANTAGE AND STRATEGIC INFORMATION SYSTEMS 1.Competitive Advantage: helps a company function profitably within a market and generate larger-than- average profits. 2.Strategic Information Systems (SIS) provide a competitive advantage by helping an organization implement its strategic goals and improve its performance and productivity. 35Copyright John Wiley & Sons Canada

36. 36 PORTER’S COMPETITIVE FORCES MODEL The best-known framework for analyzing competitiveness is Michael Porter’s competitive forces model (Porter, 1985).

37. PORTER’S COMPETITIVE FORCES MODEL 37Copyright John Wiley & Sons Canada

38. PORTER’S COMPETITIVE FORCES MODEL 1.Threat of entry of new competitors The threat that new competitors will enter your market is high when entry is easy and low when there are significant barriers to entry. 2.The bargaining power of suppliers is high when buyers have few choices from whom to buy and low when buyers have many choices. 38Copyright John Wiley & Sons Canada

39. PORTER’S COMPETITIVE FORCES MODEL 3.The bargaining power of customers (buyers) is high when buyers have many choices from whom to buy and low when buyers have few choices. 4.The threat of substitute products or services is high when there are many alternatives for an organization’s products or services and low where there are few alternatives. 39Copyright John Wiley & Sons Canada

40. PORTER’S COMPETITIVE FORCES MODEL 5.The rivalry among firms in an industry is high when there is intense competition among many firms in an industry. The threat is low when the competition is among fewer firms and is not as intense. 40Copyright John Wiley & Sons Canada

41. PORTER’S VALUE CHAIN MODEL This model identifies specific activities where organizations can use competitive strategies for greatest impact. –Primary activities –Support activities 41Copyright John Wiley & Sons Canada

42. PORTER’S VALUE CHAIN MODEL 42Copyright John Wiley & Sons Canada

43. STRATEGIES FOR COMPETITIVE ADVANTAGE Cost Leadership – Walmart Differentiation – WestJet, Dell Innovation – CITI Operational Effectiveness – Deloitte Customer-orientation - Amazon 43Copyright John Wiley & Sons Canada

44. STRATEGIES FOR COMPETITIVE ADVANTAGE Figure 2.5 44Copyright John Wiley & Sons Canada

45. 2.5 BUSINESS – INFORMATION TECHNOLOGY ALIGNMENT Business–information technology alignment is the tight integration of the IT function with the strategy, mission, and goals of the organization. That is, the IT function directly supports the business objectives of the organization. 45Copyright John Wiley & Sons Canada

46. CHARACTERISTICS OF EXCELLENT ALIGNMENT Organizations: –view IT as an engine of innovation that continually transforms the business, often creating new revenue streams. –view their internal and external customers and their customer service function as supremely important. –rotate business and IT professionals across departments and job functions. –provide overarching goals that are completely clear to each IT and business employee. –ensure that IT employees understand how the company makes (or loses) money. –create a vibrant and inclusive company culture. 46Copyright John Wiley & Sons Canada

47. CHAPTER CLOSING Functional areas of any organization: –are composed of a variety of business processes –must work together in an integrated fashion in order for the firm to respond adequately to business pressures & to gain competitive advantage in its marketplace –use a variety of strategic information systems to achieve goals –know how to analyze the organization’s strategy and value chain, as well as the strategies and value chains of competitors. 47Copyright John Wiley & Sons Canada

48. Copyright Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (the Canadian copyright licensing agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these files or programs or from the use of the information contained herein. Copyright John Wiley & Sons Canada