1. IS For Competitive Advantage

2. Learning Objectives Know the general systems model of the firm. Understand the eight-element environmental model as a framework for understanding the environment of a business organization. Understand that supply chain management involves the planning and coordination of physical resources that flow from the firm’s suppliers, through the firm, and to the firm’s customers. Recognize that competitive advantage can be achieved with virtual as well as physical resources.

3. Learning Objectives (Cont’d) Understand Michael E. Porter’s concepts of value chains and value systems. Know the dimensions of competitive advantage. Recognize the increasing challenges from global competitors and the importance of information and coordination in meeting those challenges. Understand the challenges of developing global information systems.

4. Learning Objectives (Cont’d) Know the basic types of information resources available to the firm. Know the dimensions of information that should be provided by an information system. Know how to manage knowledge in the form of legacy systems, images, and knowledge. Understand how a firm goes about strategic planning – for the firm, its business areas, and its information resources.

5. Electronic commerce Buying & selling, marketing & servicing of products, services and information over a variety of computer networks Many businesses now use Internet, Intranet and other network to support every step of the commercial process. This might include everything from advertising, sales and the customer support on the www. Internet security and payment mechanisms that ensure completion of delivery & payment process. E.g. E-commerce system includes internet website for online sales and the use of intranet by sales representative to access customers record Case study Cisco, IBM, Amazon and Toshiba

6. Competitive Advantage Gaining a strategic advantage over competitors requires innovative use of IT. E.g. store management might make a decision to install touch screen kiosks in all of their stores with links to their e-commerce website for online shopping This might attract new customers and build customer loyalty because of ease of shopping Thus strategic IS can help provide products and services that give a business a comparative advantage over its competitors E.g. Dell was the first PC Manufacturer to use the Web to take the customers orders and gained more experience than others and still sell computers via web

7. Strategic Moves to achieve competitive advantage Initiative # 1: Reduce Cost Initiative # 2: Raise Barriers to Market Entrants By making it difficult or impossible for other organization to produce the products or service by using expertise or technology i.e. unavailable or very expensive may bar new entrants Obtaining a legal protection of IPR e.g. Microsoft Initiative # 3: Establish a High Switching Cost E.g. binding agreement of DSL or EVO wireless for 12 months Postpaid Mobile Connection in UK

8. Strategic Moves to achieve competitive advantage Initiative # 4: Create New Product or Services E.g. MS-Office vs. Star Office with new features Banks with Internet Banking & ATMs vs. Manual Initiative # 5: Differentiate Products or Services E.g. through brand names e.g. Levi’s Jeans IBM Products HP Imaging & Printing Devices Initiative # 6: Enhance Product or Services E.g. by providing free extended warranty Car dealer may attract more customers by providing useful information on financing

9. Initiative # 7: Establish Alliances Combining services, which is cheaper, to make them more attractive e.g. LINK1 Other example hotels and car rentals to offer travel, lodging and pick & drop from airport METRO & HBL for credit Initiative # 8: Lock in Suppliers & Buyers Lock in either suppliers to their mode of operation or buyer to their product Possessing bargaining power – the leverage to influence buyers and suppliers – is the key to this approach E.g Suppliers & Wal-Mart agreement to use IS for supplies to WAL-MART

10. Strategic Moves to achieve competitive advantage Other example is that setup standards e.g. msn messenger is only compatible to MS-Windows and can not be used in LINUX.

11. Figure 2.1 The General System Model of the Firm

12. The General Systems Model of the Firm (Physical resource flow) Physical resource flow includes personnel, material, machines, and money. Personnel are hired by the firm, transformed to higher skill levels through training & experience & eventually leave firms Material enters in the firm in the form of raw input & is transformed into finished goods, which are then sold to the firm’s customers. Machines are purchased, used & eventually scrapped Money enters the firm in firm in form of sales receipts, shareholder investments, and loans & is transformed into payments to the supplier, taxes to the Govt and returns to the stockholders

13. The General Systems Model of the Firm (Physical resource flow) While in the firm, physical resources are used to produce the products and services the firms provide to its customers

14. The General Systems Model of the Firm (Virtual resource flow) Virtual resource flow includes data, information, and information in the form of decisions. The two way flow of data and information that connects the firm to its environment is shown in right in figure 2.1 System’s Environment: Everything pertinent to the system that is outside of firms boundaries e.g. competitive challenges, laws apply to interstate shipping etc.

15. The General Systems Model of the Firm Firm’s control mechanism include Performance standards to meet if the firm wants to achieve overall objectives. Firm’s management. Information processor that transform data into information. Feedback loop is composed of the virtual resources. Data is gathered from the firm & from the environment and entered into the information processor, which transforms into info. The info is made available to managers who make decisions in the physical systems.

16. The Firm in Its Environment Environmental elements are organizations and individuals that exist outside the firm and have a direct or indirect influence on it. Such as suppliers, customers, labor unions, financial community (consists of institutions like banks and other lending institution that influence the financial resources that are available to firm), stockholders and owners, competitors (in marketplace), and governments. Global community is the geographic area where the firm performs its operations.

17. Figure 2.2 Eight Environmental Elements

18. Environmental Resource Flows Information flows from customers. Often. Material flow to customers. Often. Money flow to stockholders. Often. Raw materials flow from suppliers. Often. Money flow from government (on research projects). Less often. Material flow to suppliers (returned items). Less often. Personnel flow to competitors (employees pirated by competitors). Less often.

19. Managing the Physical Resource Flows–Supply Chain Management Supply chain Is the transaction, coordination and movement of goods between the firm’s suppliers & the firm is the pathway that facilitates the flow of physical resources from suppliers to the firm and then to customers. Supply chain management manages the resources through the supply chain to ensure timely and efficient flow. It can help a firm manufacture its product with less waste and less inventory

20. Supply chain management The basic approach is to create standardized electronic links and longer time agreements with suppliers This helps the firm price its products competitively. Within the firm, IS can improve sales processes by providing better information for salespeople and customers These systems can also improve service processes by maintaining customer records and hastening response. When the customers become involved, IS can help fit the product to the customer’s requirements and can help the product easier to use and maintain

21. Supply chain management (SCM) It helps managers know the status of the product being manufactured at any given point in time. Recent ISs have been designed also to control manufacturing processes, not only monitor them Controlling process is important to ensure quality. E.g. Ford Motors implemented software, called Project Execution, which combines bar coding and wireless technology to ensure quality. Since each vehicle is assembled on a chassis, each chassis isv tagged with a unique bar-code.

22. Supply chain management (SCM) A barcode sensor is installed in each stop of the assembly line. The sensor transmits wireless signals to computers and electronically controlled gates. The purpose of the system is to ensure that no assembly steps are skipped, and that each vehicle passes a series of performance and quality tests along the way. If step is missed, the gate does not let the vehicle leave the plant

23. Supply Chain Management (SCM) Activities The pathway that facilitates the flow of physical resources from supplier to customers is called supply chain The flow of resources through the supply chain must be managed to ensure that it occurs in a timely and efficient manner. This process is called SCM which consists of following activities: Forecasting customer demand Scheduling production Establishing transportation networks Ordering replenishment stock from suppliers Receiving stock from suppliers

24. Electronic Systems A resources flow through the supply chain can be tracked electronically, step-by-step. Actions recorded on the computer at supplier’s site, firm’s site, firm’s inventory site, firms shipping area, in the vehicle used by the transporters and at customer’s sites. E.g. TCS tracking Dates are entered into the system either through keyboard input or barcode scanner or RF ID As the data is entered the firms system is updated to reflect the current position/location of the resource to be tracked. The ability to track the flow of the resources as it occurs contribute to SCM

25. SCM and Electronic Resource Planning Systems (ERP) SCM is the only one aspect of Electronic Resource Planning Systems (ERP) system The use of ERP vendor like SAP, Oracle or other by member in the supply chain helps to facilitate the flow of supply chain info. Cost of ERP could be high and not every member in the supply chain may wish to purchase ERP Software

26. SCM and Electronic Resource Planning Systems (ERP) When one member of a supply chain has substantial power over the other members, such as retailer like Wal-Mart has over its supplier, the more powerful member can apply pressure on other member to use the same ERP software. In that case the transfer of data from one member to another is facilitated and all members benefit, but the most powerful member vof the supply chains receives the most benefit

27. Supply Chain Management Activities (Cont’d) Managing inventory–raw materials, work-in- process, and finished goods Executing production Transporting resources to customers Tracking the flow of resources from suppliers, through the firm, and to customers

28. Supply Chain Management Firm’s information systems can be used to perform the supply chain activities. Electronic systems provide the ability to track the flow of the resources as it occurs. Is a crucial aspect of a firm’s ERP system.

29. Competitive Advantage Competitive advantage refers to the use of information to gain leverage in the marketplace. Uses virtual as well as physical resources. Is used to meet the strategic objectives of the firm.

30. Porter’s Value Chains Value chain is created to achieve competitive advantage. Consists of the primary and support activities that contribute to margin. Margin is the value of the firm’s products and services minus their costs, as perceived by the firm’s customers. Increased margin is the objective of the value chain.

31. Figure 2.3 A Value Chain

32. Porter’s Value Activities Primary value activities manage the flow of physical resources through the firm. Support value activities include the firm’s infrastructure. Each value activity includes purchased inputs, human resources, and technology.

33. Expanding the Scope of the Value Chain Interorganizational system (IOS) is the linking of the firm’s value chain to those of other organizations. Business partners are the participating firms in the IOS. Value system is the linking of the firm’s value chain with those of its distribution channel members.

34. The Dimensions of Competitive Advantage Strategic advantage has a fundamental effect in shaping the firm’s operations. By use of IS e.g; firm may decide to convert all of its existing data into a database with standard interfaces such as web browser interface, for possible sharing with business partners and customers. Standardized database accessible via Web Browsers would reflect a strategic shift in corporate position. Security can not be ignored as greater dangers come with greater opportunities for profit associated with web access to the firms info

35. The Dimensions of Competitive Advantage – Contd. Tactical advantage is when the firm implements a strategy better than its competitors. E.g. customer service may be enhanced by offering customers direct access to info like Assume a customer wishes to purchase 15000 worth of computer paper from your firm. The purchase of such office supplies is routine and the IS notes that customer has made purchases totaling 80000 during the month and there is 5% discount on purchase of over 100000 during any month. Previous purchase plus current purchase triggers a discount Customer may look for additional items that are to be purchased to avail discount Buy more pay less

36. The Dimensions of Competitive Advantage – Contd. Operational advantage deals with everyday transactions and processes. This is where the IS interacts directly with the process A web site that “remembers” customers and their preferences through past transactions would reflect an operational advantage. Websites use cookies, small file on user’s computer that can store passwords, account numbers and other info. a cookie (also tracking cookie, browser cookie, and HTTP cookie) is a small piece of text stored on a user's computer by a web browser. A cookie consists of one or more name-value pairs containing bits of information such as user preferences, shopping cart contents, the identifier for a server-based session, or other data used by websites.

37. Challenges from Global Competitors Multinational corporation (MNC) is a firm that operates across products, markets, nations, and cultures. It consists of a parent company and its subsidiaries. Firms outsource their operations to other countries and reason is economics e.g. Chinese is 25% of the US Labour Cost while disadvantage is IPR labour protection which are not adequately protected in many countries. solution is to acquire foreign owned outsourcer

38. Challenges from Global Competitors – Contd. Information processing is crucial to minimize uncertainty in its environment Uncertainty is the difference between the amount of information required to perform the task and the amount of information already possesed by the organization Most MNC executive recognize that they can cope with their environmental influence by making good use of IT

39. The Special Need for Coordination in a MNC Coordination is key to achieving competitive advantage globally. Advantages of coordination include: Flexibility in responding. Ability to respond market by market. Ability to keep abreast of market needs globally. Reduce overall costs of operation.

40. Challenges in Developing Global Information Systems Global information system (GIS) describes an information system that consists of networks that cross national boundaries. Challenges Politically imposed constraints. Cultural and communications barriers.

41. GIS Challenges (Cont’d) Restrictions on hardware purchases and imports Data processing Data communications Transborder data flow (TDF) is the movement of machine-readable data across national boundaries.

42. GIS Subsidiary Challenges Technological problems due to level of technology in subsidiary countries Telecommunications speed and quality Software copyrights and licenses Lack of support from subsidiary managers

43. Knowledge Management Information resources consist of hardware, software, information specialists, users, facilities, databases, and information. Knowledge management (KM) is acquiring data, processing data into information, using and communicating information in the most effective way, and discarding information at the proper time.

44. The Dimensions of Information Relevancy–pertains to the problem at hand. Accuracy–strive for 100%. Timeliness–should be available for decision making before a crisis situations develop or opportunities are lost. Completeness–the correct amount of aggregation and supports all areas of the decision being made. Information overload is having too much information.

45. The Changing Nature of Knowledge Management Legacy information systems are earlier systems software and hardware that are incompatible or partially incompatible with current information technology. Produce primarily historical information. Data may not be available in digital format. Image management

46. Strategic Planning for Information Resources (SPIR) Chief Information Officer (CIO) Chief Technology Officer (CTO) Strategic Planning Enterprise–executive committee Business areas–resources for human, information, financial, marketing, manufacturing

47. The SPIR Approach Concurrent development of strategic plans for information services and the firm so that the firm’s plan reflects the support to be provided by information services. The IS plan reflects future demands for systems support.

48. Figure 2.7 Strategic Planning for Information Resources

49. Core Content of a Strategic Planning for Information Resources The objectives to be achieved by each category of systems during the time period. The information resources necessary to meet the objectives. Self-contained report (See example Figure 2.8 in textbook).