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Strategic Information Systems for Competitive Advantage

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Title: Strategic Information Systems for Competitive Advantage


1
Chapter 3
  • Strategic Information Systems for Competitive
    Advantage

2
Learning Objectives
  • Describe various information systems and their
    evolution, and categorize specific systems you
    observe.
  • Describe transaction processing and functional
    information systems.
  • Identify the major support systems, and relate
    them to managerial functions.
  • Discuss information infrastructure and
    architecture.

3
Learning Objectives (cont.)
  • Compare client/server architecture,
    enterprisewide computing, and legacy systems, and
    analyze their interrelationship.
  • Describe the major types of Web-based information
    systems and understand their functionality.
  • Describe how information resources are managed.
  • Describe the role of the information systems
    department and its relationship with end-users.

4
Case Rosenbluth International
  • Rosenbluth Int., a global player in the travel
    agency industry, faced threats due to the digital
    revolution.
  • They responded with 2 strategies
  • (1) Withdrawal from the leisure travel business
  • (2) Implementation of web-based travel
    technology, such as
  • ? DACODA ? A Globalization Network
  • ? Electronic Messaging Services ? Customer-Res
  • ? E-Ticket Tracking Solution ? IntelliCenters
  • ? Res-Monitor ? NOC

5
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

6
Strategic Information Systems (SISs)
  • SISs provide strategic solutions to the 5
    Business Pressures

7
Elements of Strategic Management
  • 1. Long Range Planning
  • 2. Response Management
  • 3. Proactive Innovation
  • - Information Technologies

8
The Role of IT
  • IT creates applications that provide strategic
    advantages to companies
  • IT is a competitive weapon
  • IT supports strategic change, e.g,
    re-engineering
  • IT networks with business partners
  • IT provides cost reduction
  • IT provides competitive business intelligence

9
Competitive Intelligence
The Internet is central to supporting
competitive intelligence
  • Such activities drive business
  • performance by
  • Increasing market
  • knowledge
  • Improving internal
  • relationships
  • Raising the quality of
  • strategic planning

Many companies monitor the activities of
competitors
10
Competitive Advantage in the Web Economy
Competitive Advantage Look for a competitive
necessity, which will help your company keep up
with the competitors.
Competitive Strategy Search for a competitive
advantage in an industry, which leads to control
of the market.
Sustainable Strategic Advantage Maintain
profitable sustainable position against the
forces that determine industry competition.
11
CASE McKesson Drug (www.Mckesson.com)
  • Whole Sale Drug Distributor
  • Economost (McKessons Web-based service)
  • Allows for customers to phone, fax or e-mail
    orders.
  • Order is transferred to an IBM main frame, quick
    delivery to pharmacies.
  • Significant benefits to customers.
  • Due to Economost, McKesson has survived the new
    economy, revenues have escalated.
  • Early 2001, McKesson offered a suite of
    comprehensive Internet-based applications.

12
Porters 5 Competitive 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.

13
Response Strategies (Porter, 1985)
FOCUS Selecting a niche market and achieving
cost leadership and/or differentation.
DIFFERENTATION Being unique in the industry
COST LEADERSHIP Providing products and/or
services at the lowest cost in the industry.
14
Response Strategies (added by Porter and others)
GROWTH Increasing market share, acquiring more
customers or selling more products
IMPROVE INTERNAL EFFICIENCY To improve employee
and customer satisfaction
ALLIANCES Working with business partners to
create synergy provide opportunities for growth
CRM Customer-oriented approaches, e.g. the
customer is king (queen)
INNOVATION Developing new products services
15
Case Trucking , IT Cost Leadership
  • JB Hunt (www.jbhunt.com)
  • Uses web-based technology to
  • trigger lowest possible fuel costs
  • notify customers of accurate fuel surcharge
  • provide an on-line proof of delivery
  • Roadway Express (www.roadway.com)
  • Uses IT technology to
  • compare vendors prices and related procurement
    expenses
  • monitor the exact location of trucks

16
Porters Model in Action
17
Porters Model in Action (cont.)
  • Step 1 The players in each force are listed.
  • Step 2 An analysis is made which relates
    Porters determining factors.
  • Step 3 A strategy is devised to defend against
    these factors.
  • Step 4 Support information technologies are
    employed.

18
CASE Daimler Chrysler
  • Problem
  • In 1999, the company lost US 2.6 Billion
  • Chryslers program with part suppliers was
    failing
  • Solution
  • Suppliers began using Lotus notes/ Damino
  • Measurement reports to static HTML web pages
  • E-procurement exchange at Convisint
  • Results
  • Chrysler saves billions

19
Porters Value Chain Model
  • PRIMARY ACTIVITIES
  • In bound logistics (in puts)
  • Operations (manufacturing testing)
  • Outbound logistics (storage distribution)
  • Marketing sales
  • Service

Supply Chain
20
Porters Value Chain Model
  • SUPPORT ACTIVITIES
  • Firm Infrastructure
  • Human Resources Management
  • Technology Development
  • Procurement

21
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.

22
CASE Frito Lay uses IT the Value Chain
  • Worlds largest snack food producer and owner of
    Pepsi products.
  • SIS System
  • Integrates marketing, sales, manufacturing,
    logistics, finance.
  • Provides managers with information about
    suppliers, customers competitors.
  • Enables employees to access valuable information.
  • Frito Lays use of IT allows for an optimal
    functioning of the value chain.

23
The Value Chain Model
  • The Value System Model is 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.

24
Bakos Treacy Framework
25
McFarlans Portfolion Framework (1984)
  • For Analyzing Existing, Planned Potential
    Information Systems

26
Stages in Customer Resources Life Cycle (1-7)
  • (1) Establish Customer Requirements
  • (2) Specify Customer Requirements
  • (3) Select a source, match customer with a
    supplier
  • (4) Place an order
  • (5) Authorize and pay for goods services
  • (6) Acquire goods or services
  • (7) Test accept goods or services

27
Stages in Customer Resources Life Cycle (8-13)
  • (8) Integrate into and manage inventory
  • (9) Monitor use and behavior
  • (10) Upgrade if needed
  • (11) Provide maintenance
  • (12) Transfer or dispose of product or service
  • (13) Accounting for purchases

28
Web-based Strategic Information Systems (SISs)
  • Many of the SISs of the 70s - 90s were based on
    privately owned networks, or organizational
    information systems (OISs).
  • EDI-based systems are of key importance.
  • SISs are changing the nature of competition.
  • In some cases, SIS renders traditional business
    procedures obsolete.
  • E.g, Encyclopedia Britannia

29
CASE Mobile Oil Moves to Web-based System
  • Problem
  • Largest marketer of lubricants in the USA
  • In 1995, introduced EDI system
  • Used to place orders, submit invoices exchange
    business documents
  • It was too expensive, too complex to use
  • Solution
  • In 1997, moved to web-based extranet-supported
    B2B system
  • Results
  • Reduced transaction cost from 45/order to 1.25
  • Fewer shortages, better customer service
  • decline in distributor administration costs

30
Examples of EDI/Internet-based SIS (for
individual Companies)
  • Electronic Auctions
  • Electronic Biddings
  • Buyer-Driven Commerce
  • Single Company Exchange
  • Direct Sales

31
Examples of EDI/Internet-based SIS (for Groups
of Companies)
  • Industry Consortiums
  • Horizontal Consortiums
  • Web-based Call Centers
  • Web-based Tracking Systems
  • Web-based Intelligent Agents
  • Web-based Cross Selling
  • Accessing knowledge via Intranets

32
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

33
A Global Drivers Framework (Ivers et al., 1993)
  • The success of companies doing business in a
    competitive environment depends on the link
    between their information systems AND their
    global business strategy.
  • This framework provides a tool for identifying
    the firms global business drivers.
  • Drivers look at the current and future needs,
    focusing on worldwide implementation.

34
Examples of Who is Using SIS
  • Otis Elevator
  • Centralized call center, self diagnosing
    elevators malfunctions and maintenance analysis
  • Baxtar International
  • Terminals in customers hospitals
  • Merrill Lynch
  • Cash management accounts system
  • American Airlines
  • Computerized reservation system (SABRE)

35
CASE Total Quality Management at FPL
  • Florida Power Light ? largest US utility
    company
  • Leader in implementing total quality management
  • Several successful SIS programs
  • Generation Equipment Management System (GEMS)
  • Tracks electrical generators, saving 5 million/
    yr.
  • 20 different quality control applications
  • Reduced customer complaints by 50
  • Trouble Call Management System
  • Reduced black out time from 70 to 48 min.

36
CASE Geisinger Implements an Intranet
  • Problem
  • As a result of mergers acquisitions, Geisinger
    (a health maintenance organization) had 40
    different IT legacy systems in need of an upgrade
    integration.
  • Solution
  • In 1993, Geisinger implemented an innovative
    Intranet with the following features
  • Tel-a-Nurse
  • Clinical Management System
  • Human Resource Management
  • Results
  • Geisinger reduced costs and unnecessary medical
    work.

37
CASE Caltex Corporation
  • Major multinational company selling gasoline
    petrol products.
  • In 2000, created a centralized e-purchasing
    corporate exchange (www.caltex.com)
  • Suppliers build electronic catalogues with
    Aribas software.
  • Many benefits to buyers and suppliers,
    particularly in Asia, Africa the Middle East.
  • System enables Caltex to successfully handle
    complex multinational business environments.

38
CASE Port of Singapore
  • 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

39
CASE Volvo Speed Cars
  • Problem
  • In comparison to global competitors, Volvos cars
    were to expensive, with a slow delivery time.
  • Solution
  • Creation of global ISDN-based network
  • Result
  • Reduction in delivery time from 12 - 16 weeks to
    4 - 6 weeks for customized cars.
  • Reduction in cost of doing business, along with
    the price of the car.

40
CASE Caterpiller Corporation
  • Problem
  • This world leader in manufacturing of heavy
    machines faced strong competition from Japanese
    companies.
  • Solution
  • Computer-aided manufacturing and robots
  • Computerized inventory management
  • Supply chain web-based management
  • Global Intranet EDI
  • Sensory Intelligent Agents attached to products.
  • Results
  • CAT experienced such a high rate of success that
    their main competitor was forced to shift its
    strategy.

41
CASE Dun Bradstreet (D B)
  • Problem
  • Clearing house that provides risk analysis
    maintains database of credit ratings.
  • Customers complained about long waiting periods
    and inaccuracies.
  • Solution
  • Implementation of Web-based expert system.
  • Results
  • Response time reduced from 3 days to a few
    seconds
  • Credit ratings became more accurate.

42
SIS Implementation
  • Major Issues to be Considered
  • 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.

43
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.

44
Managerial Issues
  • Implementing SIS Can Be Risky.
  • The investment involved in implementing
    Strategic Information Systems (SIS) is high.
  • Strategic Information Systems Requires Planning.
  • Planning for an SIS is a major concern of
    organizations.

45
Managerial Issues (cont.)
  • 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.
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