1. Tonga Institute of Higher Education
Management Information Systems
Lecture 3
Competing with IT 1
Fundamentals of Strategic Advantage

2. Homework for the week Week 4 Homework
Do Chapter1 Case 3 – 5, and hand in case 5 for marking
Discussion Question Chapter 1 Q1, Q5, Q7 and Q10, and hand in for marking

3. Strategic IT
Technology is no longer an afterthought in forming business strategy, but the actual cause and driver
Do Ch2 Real World Case 1

4. Competitive Strategy Concepts
Involves using information technology to develop products, services, and capabilities that give a company major advantages over the competitive forces it faces in the global marketplace.
Create Strategic information systems – IS that support or shape the competitive position and strategies of an E-Business enterprise. Can be any kind of IS such as (TPS, MIS, DSS, ETC)

5. Roles of Strategic Information Systems
How should a business professional think about competitive strategies?
How can competitive strategies be applied to the use of IS by an E-Business Enterprise?

6. Roles of Strategic Information Systems
Any Firm can survive and succeed in the long run if it successfully develops strategies to deal with Competitive Forces that shape the structure of competition in its industry.

7. Competitive Forces Bargaining Power of Customers
Bargaining Power of Suppliers
Rivalry of Competitors
Thread of New Entrants
Thread of Substitutes

8. Competitive Strategies
Differentiation Strategy: - Developing ways of differentiate a firm’s product and services from its competitors or reduce the differentiation advantages of competitors. This may allow a firm to focus its products or services to give it an advantage in particular segments or niches of a market.
Niches – specialize but profitable corner of the market.

9. Competitive Strategies
Cost Leadership Strategy – Becoming a low-cost producer of products and services in the industry. Also a firm can find ways to help its suppliers or customers reduce their cost or increase the costs of their competitors.
Discuss How can a Firm reduce or increase cost of their of their competitors

10. Competitive Strategies
Innovation Strategy – Finding new ways of doing business. This may involve the development of unique products and services, or entry into unique markets or market niches.
It may also involve making radical changes to the business processes for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industry.

11. Competitive Strategies
Growth Strategy – Significantly expanding a company’s capacity to produce goods and services, expanding into global markets, diversifying into new products and services or integrating into related products and services.

12. Competitive Strategies
Alliance Strategy – Establishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companies. These linkages may include
Merges
Acquisitions
Joint Ventures
Forming of “Virtual Companies” or other marketing, manufacturing, or distribution agreements between a business and its trading partners.

14. Summary of how IT can be used to implement the five basic competitive strategies.

15. Examples of how companies used IT to implement five competitive strategies for strategic advantage.

16. Other Competitive Strategies
There are many other competitive strategies in addition to the five basic strategies
Lock in Customers and Supplier :- Building valuable relationships with customers and suppliers that deter (discourage a person through fear or dislike of the consequences) them from abandoning a firm for its competitors or intimidating it into accepting less-profitable relationships.

17. Other Competitive Strategies
Switching Costs: - The cost in time, money, effort, and inconveniencies that it would take a customer or supplier to switch its business to a firm’s competitors.
Barriers to entry :- Technological, financial, or legal requirements that deter firms from entering an industry.

18. Other Competitive Strategies
Leverage investment in information technology: -developing new products and services that would not be possible without a strong IT capability. Eg. Development of corporate intranets and extranets by many companies, which enables them to level their previous investments in Internet Browsers.

19. Value Chain and Strategic IS
Another important concept that can help you identify opportunities for strategic information systems – “Value Chain and Strategic IS” develop by Michael Porter.

20. Internet-Base Value Chains
Value chains can also be used to strategically position a company’s Internet-Base applications to gain competitive advantage.

21. Identifying E-Business & E-Commerce Strategies
E-Business & E-Commerce applications, and Internet technologies can be used strategically for competitive advantage,

22. Identifying E-Business & E-Commerce Strategies
Cost and Efficiency Improvements: - Represent a low amount of internal company, customer, and competitor connectivity and use of IT via the Internet and other network. So one recommended strategy would be to focus on improving efficiency and lowering costs by using the Internet and the WWW, as a fast ,low-cost way to communicate and interact with customers, suppliers, and business partners.

23. Identifying E-Business & E-Commerce Strategies
Performance Improvement in Business Effectiveness: - Here a company has a high degree of internal connectivity and pressures to substantially improve its business processes, but external connectivity by customers and competitors is still low. A strategy of making major improvements in business effectiveness is recommended. For example, widespread internal use of Internet-based tech­nologies like intranets and extranets can substantially improve information sharing and collaboration within the business and with its trading- partners.

24. Identifying E-Business & E-Commerce Strategies
Global Market Penetration :- A company that enters this quadrant of the matrix must capitalize on a high degree of customer and competitor connectivity and use of IT. Developing E-business and E-commerce applications to optimize interaction with customers and build market share is recommended. For exam­ple, E-commerce websites with value-added information services and extensive online customer support would be one way to implement such a strategy.

25. Identifying E-Business & E-Commerce Strategies
Product and Service Transformation. Here a company and its customers, suppliers, and competitors are extensively networked. Internet-based technologies, including E-commerce websites, and E-business intranets and extranets, must now be implemented throughout the company's operations and business relationships.
This enables a company to develop and deploy new Internet­based products and services that strategically reposition it in the marketplace. Using the Internet for electronic commerce transaction processing with customers at company websites, and E-commerce auctions and exchanges for suppliers are typical examples of such strategic E-business applications. Let's look at a more specific example.

26. The revolutionary changes in business strategies enabled by Internet technologies that transformd AVNET Mashall into E-Business enterprise.

27. Concepts Revisions Strategic IT Competitive Strategy Concepts
Roles of Strategic Information Systems
Competitive Forces
Competitive Strategies
Other Competitive Strategies
Value Chain and Strategic IS
Internet-Base Value Chains
Identifying E-Business & E-Commerce Strategies

28. Competing with IT 2 Using IT for Strategic Advantage

29. Strategic Use of IT
There are many ways the organizations may view and use IT
They may choose to use IS strategically or
They may be content to use IT to support efficient everyday operations
Recall the differences between IT and IS

30. Strategic Use of IT
Emphasizing strategic use of IT, its management would view IT as a major competitive differentiator
It would then devise business strategies that would use IT to develop products, services, and capabilities that would give the company major advantages in the markets in which it competes.

31. Application !!!
Complete Real world Ch2 Case 2 McDonald’s and American Express.

32. Building a Customer Focused E-Business
The driving force behind world economic growth has changed from manufacturing volume to improving customer value.
As a result, the key success factor for many firms is maximizing customer value.

33. Building a Customer Focused E-Business
Becoming a Customer-Focused E-business lies in its ability to:
Keep customer loyal
Anticipate their future needs
Respond to customer concerns
Provide top quality customer service.

34. Building a Customer Focused E-Business
Strategic focus on Customer Value - recognizes that quality, rather than prices has become the primary determinant in a customer’s perception of value.

35. Customer’s Point of View
Companies that consistently offer the best value are able to keep track of their:-
customer’s individual preferences
Keep up with market trends
Supply product and services and information anytime anywhere
Provide customer services that closely fit into individual needs.

36. Customer Services Therefore
E-Commerce has become a strategic opportunity for companies, large and small, to offer fast, responsive, high quality products and services that closely fit into individual customer preferences

37. Internet Technologies
Internet Technologies make the Customer the focal point of all E-Business and E-Commerce Application.
Discuss the Statement Above…. How?

38. How E-Business Demonstrates its focus on customer values
Internet, Intranet and Extranet websites create new channels for interactive communications
within company
with customers
and with the suppliers, business partners,
and others in the external environment.
These enables continual interaction
With customers by most business functions
Encourages cross-functional collaboration with customers in product development, marketing, delivery, service and technical support.

39. How E-Business Demonstrates its focus on customer values
E-Commerce Customers uses Internet
to ask questions
air complaints
evaluate products
request support make and report their purchases.
Using the Internet and corporate intranets - specialists in business functions throughout the enterprise can contribute to an effective response.

40. How E-Business Demonstrates its focus on customer values
With an effective responses – it encourages the creation of cross-functional discussion groups problem solving team dedicated to customer involvement service and support.
Cross Functional Information Systems:- Information Systems that are integrated combinations of business information systems, thus sharing information resources across the functional units of an organization.

41. How E-Business Demonstrates its focus on customer values
Internet and extranet links to suppliers and business partners can be used to enlist them in a way of doing business that ensures prompt delivery of quality components and services to meet a company’s commitment to its customers.

42. The diagram below shows how a customer-focused E-business builds customer value and loyalty in E-Commerce

43. Explaining the Diagram
The diagram illustrates the interrelationships in a customer-focused E-business. Intranets, extranets, E-commerce websites, and web-enabled internal business processes form the invisible IT platform that supports this E-business model. This enables the E-business to focus on targeting the kinds of customers it really wants, and "owning" the customer's total business experience with the company. A successful E-business streamlines all business processes that impact their customers, and provides its employees with a complete view of each customer, so they can offer their customers top-quality personalized service. A customer-focused E-business helps their E-commerce customers to help themselves, while also helping them do their jobs. Finally, a successful E-business nurtures an online community of customers, employees, and business partners that builds great customer loyalty, while fostering cooperation to provide an outstanding customer experience.

44. Reengineering Business Processes
One of the most important implementations of competitive strategies today is Business Process Reengineering (BPR)
Reengineering is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed and service.
BPR combines a strategy of promoting business innovation with a strategy of making major improvements to business processes so that a company can become a much stronger and more successful competitor in the marketplace.

45. Reengineering Business Processes
Remember – while the potential payback of reengineering is high, so its risk of failure and level of disruption to the organizational environment.
Making radical changes to business processes to dramatically improve efficiency and effectiveness is not an easy task

46. How !!!
Some companies have used cross-functional enterprise resource planning (ERP) software to reengineer, automate, and integrate their manufacturing, distribution, finance, and human resource business processes. While many companies have reported impressive gains with such ERP reengineering projects, many others have failed to achieve the improvements they sought (as we saw in the real world examples of Boeing, Ana­log Devices, and A-DEC in Chapter 1).

47. Organizational Redesign
That's why organizational redesign approaches are an important enabler of reengineering, along with the use of information technology. For example, one common approach is the use of self-directed cross-functional or multidisciplinary process teams.
Employees from several departments or specialties including engineering, marketing, customer service, and manufacturing may work as a team on the product development process.
Another example is the use of case managers, who handle almost all tasks in a business process, instead of splitting tasks among many different specialists.

48. This Table shows how business process reengineering differs from business improvement.

49. The Role of IT
Information technology plays a major role in reengineering most business processes. The speed, information processing capabilities, and connectivity of computers and Internet technologies can substantially increase the efficiency of business processes, as well as communications and collaboration among the people responsible for their operation and management.

50. For example,
the order management process illustrated above is vital to the success of most companies. Many of them are reengineering this process with enterprise resource planning software and Web-enabled electronic business and commerce systems. BUT…

51. Examples of information technologies that support reengineering the sales and order management processes.

52. The Tables below dramatically illustrates the results of several reengineering projects at CIGNA Corporation.

53. Agility
Agility in business performance is the ability of a company to prosper in rapidly changing, continually fragmenting global markets for high quality, high performance and customer configured products and services.

54. Agile Competition
The ability of a company to profitably operate in a competitive environment of continual and unpredictable changes in customer preferences, market conditions and business opportunities.

55. Agile Company
We are changing from a competitive environment in which mass market products and services were standardized, long lived, information poor, and exchanged in one time transactions to an environment in which companies compete globally with niche market products and services that are individualized, short-lived, information-rich and exchanged on an on going basis with customers.

56. Agile Company
Can make profit in markets with broad product ranges and short model lifetimes
Can produce orders in arbitrary lot sizes
Support mass customization by offering individualized products while maintaining high volumes of productions

57. Agile Company
Agile Companies depend heavily on Internet technologies to integrate and manage business processes, while providing the information processing power to treat masses of customers as individuals

58. Virtual Company
A form of organization that uses telecommunications networks and other information technologies to link the people, assets, and ideas of a variety of business partners, no matter where they may located, in order to exploit a business opportunity.
These days, thousands of companies, large and small, are setting up virtual corporations that enable executives, engineers, scientists, writers, researchers, and other professionals from around the world to collaborate on new products and services without ever meet­ing face to face. Once the exclusive domain of Fortune 500 companies with banks of powerful computers and dedicated wide area networks, remote networking is now available to any company with a phone, a fax, and access to the Internet

59. Virtual Company
In today's dynamic global business environment, forming a virtual company can be one of the most important strategic uses of information technology. A virtual company (also called a virtual corporation or virtual organization) is an organization that uses information technology to link people, assets, and ideas.

60. The diagram below illustrates that virtual companies typically use an, organizational structure called a network structure, since most virtual companies are interlinked by the Internet, intranets, and extranets. Notice that this company has organized internally into clusters of process and cross-functional teams linked by intranets. It has also developed alliances and extranet links that form inter organizational information systems with suppliers, customers, subcontractors, and competitors. Thus, network structures create flexible and adaptable virtual companies keyed to exploit fast-changing business opportunities

61. Why people form Virtual Companies
Several major reasons such as,
People and corporations are forming virtual companies as the best way to implement key business strategies that promise to ensure success in today's turbulent business climate.
For example, in order to exploit a diverse and fast-changing market opportunity, a business may not have the time or resources to develop the manufacturing and distribution infrastructure, people competencies, and information technologies needed. Only by quickly forming a virtual company of all-star partners can it assem­ble the components it needs to provide a world-class solution for customers and cap­ture the market opportunity. Of course, today, the Internet, intranets, extranets, and a variety of other Internet technologies are vital components in creating a success­ful solution.

62. Virtual Companies
Basic business strategies of virtual Companies

63. Knowledge Creating Company
To many companies today, lasting competitive advantage can only be theirs if they become knowledge-creating companies or learning organizations. That, means consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.
Knowledge-creating companies exploit two kinds of knowledge. One is explicit knowledge-data, documents, things written down or stored on computers. The other kind is tacit knowledge-the "how-tos" of knowledge, which reside in work­ers. Successful knowledge management creates techniques, technologies, and rewards for getting employees to share what they know and to make better use of accumulated workplace knowledge. In that way, employees of a company are lever­aging knowledge as they do their jobs

64. Knowledge Creating Company
In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. When markets shift, technologies proliferate, competitors multiply, and products become obsolete almost overnight, successful compa­nies are those that consistently .create new knowledge, disseminate it widely throughout' the organization, and quickly embody it in new technologies and products. These activities define the "knowledge-creating" company, whose sole business is continuous innovation

65. Knowledge Management Systems
New knowledge always begins with the individual. A brilliant researcher has an insight that leads to a new patent. A middle manager's intuitive sense of market trends becomes the catalyst for an important new products concept. A shop-floor worker draws on years of experience to come up with new process innovation. In each case, an individual's personal knowledge is transformed into organizational knowledge valuable to the company as a whole.
Making personal knowledge available to others is the central activity of the knowledge-creating company. It takes place continuously and at all levels of the organ­ization

66. Knowledge Management Systems
Knowledge management has thus become one of the major strategic uses of infor­mation technology. Many companies are building knowledge management systems (KMS) to manage organizational learning and business know-how. The goal of such systems is to help knowledge workers create, organize, and make available important business knowledge, wherever and whenever it's needed in an organization. This includes processes, procedures, patents, reference works, formulas, "best practices," forecasts, and fixes. As you will see in Chapters 3 and 6, Internet and intranet web­sites, groupware, data mining, knowledge bases, and online discussion groups are some of the key technologies that may be used by a KMS.

67. Knowledge Management Systems
Knowledge management systems facilitate organizational learning and knowl­edge creation. They use Internet and other technologies to collect and edit infor­mation, assess its value, disseminate it within the organization, and apply it as knowl­edge to the processes of a business. KMS are sometimes called adaptive learning systems, because they create cycles of organizational learning called learning loops, where the creation, dissemination, and application of knowledge produces an adap­tive learning process within a company

68. Knowledge Management Systems
Knowledge management systems are designed to provide rapid feedback to knowledge workers, encourage behavior changes by employees, and significantly improve business performance. As the organizational learning process continues and its knowledge base expands, the knowledge-creating company works to integrate its knowledge into its business processes, products, and services. This helps the com­pany become a more innovative and agile provider of high-quality products and customer services, and a formidable competitor in the marketplace.

69. Concept Revision Strategic Use of IT
Building a Customer Focused E-Business
Customer’s Point of View, Services and IT
How E-Business Demonstrates its focus on customer values
Reengineering Business Processes
Organizational Redesign
The Role of IT
Agility, Agile Company, Agile Competition
Virtual Company
Knowledge Creating Company
Knowledge Management Systems