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Chapter 2 Strategic Uses of Information Systems


JetBlue: A Success Story. Gained competitive advantage where others failed ... JetBlue: A Success Story (Cont.) Management Information Systems, 4th Edition. 26 ... – PowerPoint PPT presentation

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Title: Chapter 2 Strategic Uses of Information Systems

Chapter 2 Strategic Uses of Information Systems
Learning Objectives
  • Explain what business strategy and strategic
    moves are
  • Illustrate how information systems can give
    businesses a competitive advantage
  • Identify basic initiatives for gaining a
    competitive advantage

Learning Objectives (Cont.)
  • Explain what makes an information system a
    strategic information system
  • Identify fundamental requirements for developing
    strategic information systems
  • Explain circumstances and initiatives that make
    one SIS succeed and another fail

Strategy and Strategic Moves
  • Strategy
  • A plan designed to help an organization
    outperform its competitors
  • Strategic Information Systems
  • Information systems that help seize opportunities
  • Can be developed from scratch, or they can evolve
    from existing ISs

Strategy and Strategic Moves (Cont.)
  • Strategic advantage
  • Using a strategy to maximize strength
  • Competitive advantage
  • The result of the use of a strategic advantage

Achieving a Competitive Advantage
  • Increase profits through increased market share
  • Innovation results in advantage
  • Strategies that no one has tried before
  • Example Dell using the Web to take customer

Achieving a Competitive Advantage (Cont.)
Achieving a Competitive Advantage (Cont.)
Initiative 1 Reduce Costs
  • Lower costs results in lower price
  • Bigger Market Share
  • Implement automation to become more productive
  • The Web has made this possible for many

Initiative 2 Raise Barriers to Market Entrants
  • Patenting
  • High expense of entering industry
  • State Street, Inc. (Pension fund management

Initiative 3 Establish High Switching Costs
  • Explicit Switching Costs
  • Fixed and nonrecurring
  • Implicit Switching Costs
  • Indirect costs in time and money of adjusting to
    a new product

Initiative 4 Create New Products or Services
  • Lasts only until competition offers an identical
    or similar product or service for a comparable or
    lower price
  • First Mover Creates assets
  • Brand Name
  • Better Technology
  • Delivery Methods
  • Critical Mass body of clients that attracts
    other clients

Initiative 5 Differentiate Products or Services
  • Product differentiation
  • Brand recognition
  • Examples of brand name success
  • Levis jeans
  • Chanel perfumes
  • Gap clothes

Initiative 6 Enhance Products or Services
  • Examples
  • Auto manufacturers enticing customers with a
    longer warranty
  • Real estate agents providing useful financing
    information to potential buyers
  • Charles Schwab moving stock trading services
    on-line before Merrill Lynch

Initiative 7 Establish Alliances
  • Combined service may attract customers
  • Lower cost
  • Convenience
  • Examples
  • Travel industry
  • HP and FedEx

Establishing Alliances (Cont.)
Initiative 8 Lock in Suppliers or Buyers
  • Bargaining Power
  • Purchase volume
  • Strengthen perception as a leader
  • Create a standard

Strategic Information Systems (SIS)
  • An IS that helps achieve long-term competitive
  • SIS embodies two types of ideas
  • Potentially-winning business move
  • How to harness IT to implement that move
  • Two conditions for SIS
  • Serve an organizational goal
  • Work with the managers of the other functional

Creating an SIS
  • Top management involvement
  • From initial consideration through development
    and implementation
  • Must be a part of the overall organizational
    strategic plan

Steps for Considering a new SIS
Steps to Take in an SIS Idea-Generated Meeting
Re-engineering and Organizational Change
  • To implement an SIS and achieve a competitive
    advantage, organization must rethink entire
  • Goal of re-engineering
  • Achieve efficiency leaps of 100 or higher

Competitive Advantage as Moving Target
  • SISs developed as strategic advantages quickly
    become standard business
  • Banking industry (ATMs and banking by phone)
  • Continuous search for new ways of utilizing
    information technology to their advantage
  • SABRE, American Airlines reservation system

JetBlue A Success Story
  • Gained competitive advantage where others failed
  • Proper technology and management methods
  • Reducing costs resulting in reduced pricing
  • Improving service

JetBlue A Success Story (Cont.)
  • Massive Automation
  • Automation of services with software
  • Combination reservation system and accounting
  • Supports customer services and sales tracking

JetBlue A Success Story (Cont.)
  • Massive Automation, continued
  • Electronic tickets
  • No paper handling or expense
  • Encourages online ticket purchases
  • Avoids travel agents
  • Significant savings in cost

JetBlue A Success Story (Cont.)
  • Massive Automation, continued
  • Maintenance information system
  • Logs all airplane parts and time cycles
  • Reduces manual tracking costs
  • Flight planning software
  • Maximize seats occupied on a flight
  • Reduced planning costs

JetBlue A Success Story (Cont.)
  • Massive Automation, continued
  • Blue Performance
  • In-house software for tracking operational data
  • Updated on a flight by flight basis
  • Accessible by airlines 2,800 employees
  • Managers are able to respond immediately to

JetBlue A Success Story (Cont.)
  • Massive Automation, continued
  • Wireless devices for employees
  • Report and respond to irregular events
  • Quick response
  • Events recorded for future analysis
  • Training records stored electronically
  • Easy to update
  • Efficient retrieval

JetBlue A Success Story (Cont.)
  • Away from Tradition
  • Decision to not use the hub and spoke routing
  • Paperless Cockpits
  • Laptops for Pilots
  • Harnessing IT to maintain a strategic gap

JetBlue A Success Story (Cont.)
  • Enhanced Service
  • Available on all flights and all class tickets
  • Live TV through contract with DirecTV
  • Leather Seating
  • Excellent on-schedule arrivals and departures
  • Fewest mishandled bags
  • Rapid check-in time
  • Security upgrades

JetBlue A Success Story (Cont.)
  • Impressive Performance
  • Maintains excellent statistics
  • 7 cent cost per available seat-mile (CASM)
  • 78 of seats are filled
  • Late Mover Advantage
  • New Technology vs. legacy systems

Ford on the Web A Failure Story
  • The Ideas
  • Wingcast telematics
  • Technology in vehicles to enable Web access
  • Business to Business Covisint
  • Joint venture with General Motors and
  • Electronic market for parts suppliers
  • Vendor bidding for proposals from automakers

Ford on the Web A Failure Story (Cont.)
  • The Ideas (cont.)
  • Business to Consumer
  • Sell vehicles direct to consumers via the Web
  • Bypass dealerships
  • Provide service while saving dealer fees
  • ConsumerConnect
  • Special unit to build Web site and handle direct

Ford on the Web A Failure Story (Cont.)
  • Hitting the Wall
  • Wingcast Failed
  • Buyers not interested
  • Product eliminated in June 2001
  • Covisint Successful
  • Now includes more automakers

Ford on the Web A Failure Story (Cont.)
  • Hitting the Wall
  • Failed
  • Not a result of faulty technology
  • Ford failed to consider state laws and dealership
  • Dealership relationship was still needed for
    purchases not on the Web

Ford on the Web A Failure Story (Cont.)
  • The Retreat
  • ConsumerConnect disbanded
  • used by dealerships now
  • Sells used cars
  • Price tag for failure 1 billion
  • today results in 10,000 sales
    transactions a month

Success and Failure on the Web
  • Being first is not enough for success
  • Business ideas must be sound
  • An organization must carefully define what buyers
  • Establishing a recognizable brand name is
    important but does not guarantee success
    satisfying needs is more important

The Bleeding Edge
  • Business owners must develop new features to keep
    the system on the leading edge
  • Adopting a new technology involves great risk
  • No experience from which to learn
  • No guarantee new technology will work or
    customers and employees will welcome it

The Bleeding Edge (Cont.)
  • The bleeding edge failure in an organizations
    effort to be on the technological leading edge
  • Allow competitors to assume the risk
  • Risk losing initial rewards
  • Can quickly adopt and even improve pioneer
    organizations successful technology

  • Business strategy and strategic moves can give an
    organization an advantage
  • Basic initiatives for gaining a competitive
  • Strategic information systems require fundamental
  • Circumstances and initiatives that make one SIS
    succeed and another fail