Porter

1
Porters Competitive Forces
New entrants
Industry competitors
Suppliers
Buyers
Intensity of rivalry
Substitutes
2
Strategies for Competitive Advantage
Competitive Advantage
Cost
Differentiation
Broad focus
Cost leadership
Competitive Scope
Differentiation
Narrow focus
Differentiation focus
Cost focus
3
Role of IT in Competitive Strategy

• Raise Barriers to Entry
• offer unique services that are hard to copy
• first mover advantages
• knowledge barriers

4
Role of IT in Competitive Strategy

• Establish Switching Costs
• integrate IT services with other services
• response time and service quality
• value-added services

5
Role of IT in Competitive Strategy

• Generate New Products
• tailor existing products to meet customer needs
• emergence of new IT-based industries

6
Role of IT in Competitive Strategy

• Change cost structure or product/service
  offerings
• cheaper production, distribution through IT
• use IT to differentiate

7
Role of IT in Competitive Strategy

• Change supplier/buyer relationships
• process automation
• inventory management and JIT
• electronic linkages
• reducing the role of the middleman

8
Role of IT in the Value Chain

• Inbound logistics
• inventory and ordering
• links to suppliers
• Operations
• process control
• on-line processing
• telecommunications

9
Role of IT in the Value Chain

• Outbound logistics
• links to buyers
• Marketing and sales
• customer service
• linking suppliers and buyers
• database marketing

10
Role of IT in the Value Chain

• After-sales service
• on-line support
• expert systems

11
Classification of Companies Use of Information
Systems

• Adopters
• Adapters
• Inventors

12
Characteristics of Adopters

• Use purchased, off-the-shelf systems for routine
  applications
• Goal is short-term survival or catching up with
  competitors

13
Characteristics of Adopters

• Most often found in
• stagnant industries
• areas of depressed economy
• companies with insufficient capital resources

14
Characteristics of Adapters

• IT is an essential element of planning
• Have awareness, capability, and funds to
  undertake internal development

15
Characteristics of Adapters

• Have close working relationships with suppliers
  to take advantage of developments in which timing
  is critical
• Invest significantly in maintenance of existing
  applications, but also focus on adapting new
  technology through expansion and innovation

16
Characteristics of Inventors

• Create new technologies that represent
  significant departures from current practice
• Can leapfrog the competition

17
Characteristics of Inventors

• Strong RD department
• Ability to market needs and bring products or
  services to the market at the right time and at a
  competitive cost

18
Information Technology Strategic Development
Cycles

• Assessment Cycle
• Planning/Development/Implementation Cycle

19
Assessment Cycle

• Evaluate position and approach used by
  competitors
• Identify strong and weak points of competitors
  products and services
• Identify competitors major applications of IT
• Identify competitors technical and financial
  strength and their ability to invest in IT

20
Assessment Cycle

• Evaluate companys current IT status
• should be performed by independent group within
  company or outside consultant
• develop description of applications of IT to
  critical operations or products and identify gaps
  in applications ability to meet its objectives

21
Assessment Cycle

• Evaluate companys current IT status (contd)
• appraise skills, methods, and tools of
  application developers
• review work mix (e.g., percentage of time spent
  on maintenance versus new development)

22
Assessment Cycle

• Understand how information technology could be
  applied
• appraise available IT that could be used for
  competitive advantage now
• appraise anticipated changes or new developments
  that could be used for competitive advantage over
  the next 3-5 years

23
Assessment Cycle

• Understand how information technology could be
  applied
• identify potential applications of current and
  future technology -- how will they affect
  competition?
• identify potential changes in current
  applications driven by market demands or
  technology development

24
Assessment Cycle

• Assess environmental factors
• technology
• industry structure
• external economic and political forces

25
Planning/Development/Implementation Cycle

• Identify major threats and opportunities
• summary of results of assessment cycle
• what areas would most benefit from improved use
  of IT?
• relate to business objectives

26
Planning/Development/Implementation Cycle

• Develop an IT strategy
• what areas deserve high-priority attention
• how competitors maximize their use of IT
• how does company respond to competitors
• identify any important new threats

27
Planning/Development/Implementation Cycle

• Develop an IT strategy (contd)
• identify and analyze new uses of IT for products
  and services
• assess threats and opportunities
• identify parts of company infrastructure that
  will need to be improved

28
Planning/Development/Implementation Cycle

• Develop the infrastructure to implement the plans
• Specify
• goals
• strategy
• approach
• expected results
• critical milestones
• requisite resources

29
Planning/Development/Implementation Cycle

• Perform detailed planning and implementation
• improve the IT infrastructure
• begin detailed planning for the application
• establish a steering group to ensure that all
  interests are represented during this phase

30
Planning/Development/Implementation Cycle

• Evaluate realized returns on investment
• evaluation may not be possible for months due to
  application migration, test marketing, redesign
  of business processes
• maintain updated estimates on return of
  technology investments

31
Planning/Development/Implementation Cycle

• Evaluate realized returns on investment (contd)
• measure return in terms of success criteria
• Reiterate these cycles to improve competitive
  position

32
Risks

• Failure to continue investing in new technology
• Lowered barriers to entry
• Litigation
• Dominance of customer or supplier (elimination of
  middleman)

33
Risks

• Timing
• Threats to large firms
• Misunderstanding segments
• Cultural lag

34
Management Perspective

• Importance of IT in the strategic plan
• Securing confidentiality
• Evaluating financial and accounting measures for
  IT
• Partnership with IT specialists