Strategic Information Systems

1
Chapter 3

• Strategic Information Systems
• for
• Competitive Advantage

2
Case Rosenbluth International

• Rosenbluth Int. - a global player in the travel
  agency industry
• They responded with 2 strategies
• Withdrawal from the leisure travel business
• Implementation of web-based travel technology
• DACODA (Discount Analysis Containing Optimal
  Decision Algorithms)
• Electronic Messaging Services E-Ticket Tracking
  Solution
• Res-Monitor A Globalization Network
• Customer-Res IntelliCenters
• NOC (Network Operations Center)
• Lessons from the Case
• Need for exchange business models and strategies
• Importance of web-based IT
• Global competition over service is key
• Large investment over time
• Importance of networked infrastructure for global
  systems
• Web-based applications for superior customer
  service
• Need to patent innovative systems

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Strategic Advantage and IT

• Strategic Information System (SIS)
• Definition
• Systems that support or shape a business units
  competitive strategy
• Competitive Advantage
• An advantage over competitors in some measure
  such as cost, quality, or speed
• A difference in the Value Chain Data
• Improving Core Competency
• Employee productivity
• Operational efficiency
• Approach
• Outwardly - Aiming at direct competition
• Inwardly - Focused on enhancing the competitive
  position of the firm
• Strategic alliance

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Strategic Information Systems (SISs)
Any information system--EIS, OIS, TPS, KMS--that
changes the goals, processes, products, or
environmental relationships to help an
organization gain a competitive advantage or
reduce a competitive disadvantage.

• SISs provide strategic solutions to the 5
  Business Pressures

5
strategic management

• Strategic management
• the way an organization maps or crafts the
  strategy of its future operations
• 3 Elements
• Long-range planning
• Response management
• Proactive innovation

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Strategic Evaluation Development

• SWOT Analysis
• Product Life Cycle
• Quality Preference

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The role of IT in Strategic Management

• Innovative applications - Create innovative
  applications that provide direct strategic
  advantage to organizations
• Competitive weapons - IS(s) themselves are
  recognized as a competitive weapon
• Changes in processes - IT supports changes in
  business processes that translate to strategic
  advantage
• Links with business partners - IT links a company
  with its business partners effectively and
  efficiently
• Cost reductions - IT enables companies to reduce
  costs
• Relationships with suppliers and customers -IT
  can be used to lock in suppliers and customers,
  or to build in switching costs
• New products -A firm can leverage its investment
  in IT to create new products that are in demand
  in the marketplace
• Competitive intelligence - by collecting and
  analyzing information about products, markets,
  competitors, and environmental changes

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Competitive Intelligence (cont.)

• Overview
• One of the most important aspects in developing a
  competitive advantage is to acquire information
  on the activities and actions of competitors
• Collect information about market, technologies,
  and governments actions
• Analyze and interpret the information

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Competitive Advantage in the Web Economy
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Internet Competitive Intelligence
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Porters Competitive Forces Model

• The model recognizes five major forces that could
  endanger a companys position in a given industry
• 5 major forces
• The threat of entry of new competitors
• The bargaining power of suppliers
• The bargaining power of customers (buyers)
• The threat of substitute products or services
• The rivalry among existing firms in the industry
• Use of the model
• List players in each competitive force
• Relate the major determinants of each competitive
  force
• Devise a strategy
• Look for supportive IT

External Competitive Forces
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Porters 5 Forces Model
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The analysis

• First Competitive Force - Competitor Analysis
• What Drives them?
• What are they Doing and can do?
• What are their strengths weaknesses?
• Is Competition intense?
• Second Competitive Force - Entry Barriers
• If nothing slows entry of competitors competition
  will become intense.
• Incumbent Reaction?
• What Actions are required to build market share?
• Production Process?
• Third Competitive Force - Substitute Products
• Products or services from another industry enter
  the market
• Customers becoming acclimated to using
  substitutes
• Is the substitute market growing?
• Fourth Fifth Competitive Force Supply Chain
• Suppliers/Buyers? Who controls the transaction?
• Each element adds value question who captures
  it?

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Porters model for Wal-Mart
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Impact of competitive forces role of IT
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Strategies for Competitive Advantage
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Porters value chain model
The initial purpose of the value chain model was
to analyze the internal operations of a
corporation, in order to increase its efficiency,
effectiveness, and competitiveness. We can extend
that company analysis, by systematically
evaluating a companys key processes and core
competencies to eliminate any activities that do
not add value to the product.
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The airline industry value chain
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VALUE SYSTEM

• A firms value chain is part of a larger stream
  of activities, which Porter calls a Value
  System.
• Includes the suppliers that provide the necessary
  inputs AND their value chains
• Applies to both products services, for any
  organization, PUBLIC or PRIVATE
• Is the basis for the Supply Chain Management
• Many of these alliances and business partnerships
  are based on Internet connectivity are called
  interorganizational information systems (IOSs)
• Used to
• Evaluate a companys process and competencies
• Investigate whether adding IT supports the value
  chain
• Enable managers to assess the information
  intensity and the role of IT
• These Internet-based EDI systems offer strategic
  benefits
• Faster business cycle (PO to Receiving)
• Automation of business procedures (Automated
  Replenishment)
• Reduced operational costs
• Greater advantage in a fierce competitive
  environment
• Consortia Horizontal vs. Vertical

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Global Competition

• Growth of Companies Operating in a Global
  Environment
• Fully Global or Multinational Corporations
• Companies that export or import
• Companies facing competitions of low labor cost
  and high natural resources
• Companies with low cost production facilities
  abroad
• Small companies that can now use EC to buy/sell
  internationally
• Global dimensions along which management can
  globalize
• Product
• Markets Placement
• Promotion
• Where value is added to the product
• Competitive strategy
• Use of non-home-country personnel - labor
• Multidomestic Strategy Zero standardization
  along the global dimensions. Global Strategy
  Complete standardization along the seven global
  dimensions.

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Global business drivers framework
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SISs Examples

• Cases
• Wiring the customer supply chain at
  1-800-Flowers
• Increasing Tax Collection Efforts at the
  Wisconsin Department of Revenue
• Time-based Competitive Advantage at Cannondale
• Southwest Airlines Flies high with SWIFT
• Using ERP to Meet Strategic Challenges at Turner
  Industries
• The Port of Singapore exports its intelligent
  systems over its enterprise portal
• Problem - The Port of Singapore, the worlds
  largest international port, faced increased
  global competition.
• Solution - Implementation of Intelligent Systems
• Results
• Reduction in Cycle Time 4 hours versus 16 - 20
  hours in neighboring ports
• Reduction in uploading/ loading time 30 sec.
  versus 4-5 min./ truck in neighboring ports
• The Summary Table 3.2 (p. 115)

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SIS Implementation Sustaining SIS

• Major Issues in SIS Implementation
• Justification
• Justifying SIS may be difficult due to the
  intengible nature of their benefits
• Risks Failures
• The magnitude, complexity, continuous changes in
  technology and business environment may result in
  failures
• Finding appropriate SIS
• Identifying appropriate SIS is not a simple task
• Sustaining SIS Strategic Advantage
• A Major problem that companies face is how to
  sustain their SIS competitive advantage.
• 3 Major approaches
• Create inward systems which are not visible to
  competitors
• Provide a comprehensive, innovative expensive
  system that is difficult to duplicate
• Combine SIS with structural changes. This would
  include business processes, reengineering
  organizational transformation

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Managerial Issues

• Implementing SIS Can Be Risky
• The investment involved in implementing SIS is
  high
• Strategic Information Systems Requires Planning
• Planning for an SIS is a major concern of
  organizations
• Sustaining Competitive Advantage Is Challenging.
• As companies become larger and more
  sophisticated, they develop resources to
  duplicate the systems of their competitors
  quickly.
• Ethical Issues
• Gaining competitive advantage through the use of
  IT may involve unethical or even illegal actions
• Companies can use IT to monitor the activities of
  other companies and may invade the privacy of
  individuals working there.