Using IT as a Competitive Advantage - PowerPoint PPT Presentation

Loading...

PPT – Using IT as a Competitive Advantage PowerPoint presentation | free to download - id: 456fc4-YWFkY



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Using IT as a Competitive Advantage

Description:

Using IT as a Competitive Advantage By Marisa Anekratchadaporn Nolan Bayliss Bill Burgard Tony Mercadante ... – PowerPoint PPT presentation

Number of Views:138
Avg rating:3.0/5.0
Slides: 60
Provided by: ICL6
Learn more at: http://www.umsl.edu
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Using IT as a Competitive Advantage


1
Using IT as a Competitive Advantage
By Marisa Anekratchadaporn Nolan Bayliss Bill
Burgard Tony Mercadante
2
How can IT create a competitive advantage?
  • IT can differentiate a product or service.
  • IT can improve business processes.
  • IT can change a business structure.
  • IT can spawn new business.
  • Source Lecture and notes, Mary Lacity, 2002

3
Critical Commodities Critical Differentiators
Useful Commodities Eliminate/Migrate
Critical
Useful
Commodity
Differentiator
Source Lecture and notes, Mary Lacity, 2002
4
Outstanding case studies
  • American Airlines SABRE
  • Bergen Brunswig
  • Walmart

5
SABRE
  • Semi
  • Automated
  • Business
  • Research
  • Environment

Source American Airlines, Simon Forty, 1997
6
SABRE What is it?
  • SABRE is a completely automatic , centralized ,
    electronic airlines reservations system developed
    by IBM for American Airlines.

Source IBM Corporate Archives, New York
7
Overview
  • Size of company 2.1 billion revenue in 2001
  • Employee Approximately 5,500 employees in 45
    countries
  • Major Product Airline ticket
  • Customers Travelers and Travel agents
  • Headquartered Southlake, Texas
  • SABRE connects more than 59,000 travel agents
    around the world, providing content from 450
    airlines, 53,000 hotels, 54 car rental companies,
    eight cruise lines, 33 railroads and 228 tour
    operators

Source www.sabre.com and Business and Company
Resource Center, www.infotrac.galegroup.com
8
Revenue from SABRE Inc. declined 19 from 2000 to
2001 and has grown a total of 18 since 1997
Data as of March 14, 2002
Source Goldman Sachs, PrimeAccess Research
9
Organization Chart
William J. Hannigan CEO
Sam Gilliand CMO
Carol Kelly CIO
Michael Haefner HR
Jeffery Jackson CFO
Source www.sabre.com
10
What prompted change?
  • Needed a system to regulate the flow of
    passengers due to the increasing number of people
    who want to travel by plane.
  • Lost millions of dollars due to the manual
    reservation system.

Source High Technology Business, Wheeler Helen,
Boston, 1987 Historical Dictionary
of Data Processing Technology p.331-332, James W.
Cortada, New York
11
The History of SABRE
12
SABRE 1959-1969
  • - American Airlines and IBM signed
  • contract for the development of a
  • communications-bases reservation
  • system
  • - The first SABRE system is installed. SABRE
    becomes one of the first of the large , online ,
    real-time applications using computer developed
    in the United States.

1959
1960
13
SABRE 1959-1969
  • - SABRE system is complete.

1964
- The initial research, development and
installation investment in this system took a 400
person staff and cost almost 40 million
Source Historical Dictionary of Data Processing
Technology p.331-332, James W. Cortada, New York
www.sabre.com
14
SABRE 1959-1969 Initial startup success
  • Once the system was complete in 1964, AA saved
    30 on its investments in staff alone.
  • Average time required to complete the processing
    of reservations transaction reduce from 45
    minutes to 3 seconds.
  • Error rate reduce to less than 1
  • Automatically reminds AA agents at various
    locations to advise their scheduled passengers of
    any changes affecting them.

15
SABRE 1959-1969 Initial startup success
  • More airline seats will be available to the
    customers.
  • Automatically advise agents to check on
    passengers who have not picked up their tickets
    within the time limit.
  • Maintain and automatically process waiting lists
    of passengers desiring space on fully-booked
    flights.
  • Automatically supply fare quotations for most
    flights.
  • Automatically supply information on arrival and
    departure time for the current days flight.

Source IBM Corporate Archives, New York
www.sabre.com The story of
American Airlines, Serling Robert, New York, 1985
16
SABRE 1970-1979
  • AA began marketing SABRE to travel agencies and
    airlines throughout the US.
  • The SABRE system is installed in a travel agency
    for the first time. Passengers can also ask for
    hotel reservations, car rentals, special meals
    etc.
  • 86 of the top 100 agency accounts located in
    highly competitive markets elect to use SABRE
    system.
  • United Airlines introduces their Apollo System.

1975
1976
Source Datacomm Advisor, Waltham, June1976
www.sabre.com
17
SABRE 1970-1979
  • Internal Users, Travel Agents, Travelers and
    External Users.
  • United Airlines with the Apollo Computer
    Reservation System (CRS).
  • Being a first mover with products and services

Customers
Competitors
Competitive
Advantage
18
SABRE 1980-1989
  • SABRE had 41 of the market share Apollo had
    39, started offering computer terminals to
    travel agents.
  • Started to market a travel awards program
    AADVANTAGE
  • Unveiled AAirpass with 5 year to lifetime options
  • Reorganized to AMR Corporation
  • 10,000 travel agencies were now using SABRE
  • AMR builds worlds largest private data base in
    Tulsa Ok.

1981
1982
1985
1987
Source Business Week, Transportation, August
1982 www.sabre.com
19
SABRE 1980-1989
  • Internal Users, External Users, Travel Agents and
    Travelers.
  • Apollo, PARS (TWA) and Amadeus.
  • Being a first mover with products and services

Customers
Competitors
Competitive
Advantage
20
SABRE 1990 -1999
  • SABRE introduces SABRE AirFlite a flight
    scheduling system
  • To prepare for Y2K, new software is sent to
    40,000 travel agents
  • SABRE becomes a separate legal entity of AMR
    followed by an IPO of 18 percent of its stock.
  • Travelocity.com is launched

1992
1995
1996
Source Air Transport World, Sabre Unleashed,
Nov. 1996 www.sabre.com
21
SABRE 1990-1999
  • External Users, Travel Agents and Travelers.
  • Apollo, Galileo (buys Apollo in 1993), Amadeus,
    Expedia.com (Microsoft)
  • Being a first mover with products and services

Customers
Competitors
Competitive
Advantage
22
SABRE 2000- Present
  • SABRE acquires GetThere.com a B2B internet
    provider of travel services.
  • SABRE is completely spun off from AMR
    Corporation.
  • AMR spun off SABRE due to decrease in options
    SABRE is guiding AMR and it should be the other
    way around.
  • AMR looking for ways to expand profits.
  • Internet allows access to more people without
    travel agents.
  • AMR is to retain 25 leading developers

2000
Reasons
Source Air Transport World, AAdios to Sabre,
Feb. 2000 www.sabre.com
23
SABRE 2000- Present
  • AMR now competes against SABRE with Orbitz.com
  • SABRE signs a long term contract with AMR
  • SABRE sells IT outsourcing business to EDS, SABRE
    will focus on software, distribution, travel
    marketing and reservation hosting
  • transfer 4,200 employees to EDS
  • transfer 250 employees to AMR Corp.
  • Selling the Data CenterThey obviously dont view
    anything as a sacred cow

2001
Source Computerworld, Sabre sells IT business
to EDS, March, 2001
24
SABRE Summary
  • American Airlines designed the system initially
    to be a competitive advantage to increase the
    number of reservations and reduce transaction
    errors
  • Sold CRS to external vendors (first mover)
  • Gave travel agents a terminal (first mover)
  • Added services, travel, hotel, etc. (first mover)
  • Added features EaasySABRE, SABRE AirFlite
    (first mover)
  • Added Travelocity.com (first mover)

25
SABREs Competitive Advantage
  • New products
  • Set the market and make change prefer not to
    follow the competitors
  • Need continued change to keep customers
  • Customers like new ideas and better services
  • Update products services
  • Add extra features to feel continued value added

26
  • BERGEN BRUNSWIG
  • Pharmaceutical Distributor

27
Bergen Brunswig
  • Founded in 1969 from Lucien Brunswigs Brunswig
    Drug Co in Los Angeles merged with Emil
    Martinis Bergen Drug Co. in New Jersey.
  • Today now called AmerisourceBergen as of 8/01
  • 3rd largest pharmaceutical distributor in the
    world.

Source bergenbrunswig.com
28
Company Officers
Source bergenbrunswig.com
29
IT Organization
  • CIO- Linda Burkett
  • 12,200 Employees for entire corporation
  • 300 IT Employees
  • 1999 Annual IT Budget 58 million

Source schwab.com/bergenbrunswig.com/Drug Store
News 12/13/99 v21 i20 p36.
30
Major Products Being Sold
  • Generic Pharmaceuticals
  • Pharmaceutical Services
  • Pharmaceutical Solutions

Source Bergenbrunswig.com
31
History of the System
  • 1995 Linda Burkett promoted to CIO.
  • 1996 Interlinx first implemented.
  • 1999 Interlinx evolved into COE (Catalog Order
    Entry), when Bergen moved from a desktop
    application to the web.
  • Known to customers as IBERGEN.COM

Source Brooke Walton, Bergenbrunswig Marketing
dept
32
Revenue Trend (bn)
Source Goldman Sachs PrimeAccess Research Mar
14-02
33
Earnings Per Share/Profit ()
Source SP Stock Report 09-MAR-02
34
Customers
Hospitals
Traditional Pharmacies
Supermarket Pharmacies
Residential Delivery
Source bergenbrunswig.com
35
Customer Interaction
  • Orders placed through worldwide web.
  • Customers enter order, receive next day,
    sometimes same day.
  • Patients pickup prescription at pharmacy, store,
    hospital, or have home delivery.

36
Economic Forces on Bergen (1990-present)
  • 1990-1992 Recession
  • Clintons Healthcare Plan
  • Mergers/Acquisitions
  • FTC Antitrust concerns
  • 1990s Price fixing lawsuits
  • FTC ma approvals during G.W. Bush era
  • HMOs, third party payers lower payments

Source Drug Topics, Dec 13, 1993 v 137 n23
p102(3) Wall Street Journal
37
Critical Differentiator
  • Rather than be acquired, Bergen Brunswig decided
    to invest in IT to lower costs/maximize profit
  • Build the best pharmaceutical
    distribution platform through inventory/regional
    distribution centers
  • Moved from telephone ordering to desktop
    networks, and then onward to the worldwide web.

Sources Brady, R. The Strategic Use of
Information Seizing the Competitive Edge,
Information Week May 26, 1986 pp 26-62.
Kettinger, William J. MIS Quarterly, Minneapolis
Mra 1994 Vol 18 Iss. 1 pg 31,28pgs
38
Key Features of a Successful System
  • Building relationships/Brand recognition.
  • Mass of Force. Ability to grow leaps and bounds
    in a short time.
  • Showing customers how Bergen can save them money
    which keeps customers in business for the long
    run.
  • Investing in IT to compete in low margin
    environment.
  • Fulfillment.
  • Regional distribution centers.
  • Competitive pricing.
  • Same Day Service/Next day service (bulk
    shipments).
  • Solid supplier agreements as well as 3rd party
    carrier agreements.

Source Drug Store News, Dec 13, 1999 v21 i20 p20
39
EPS Comparisons
  • Bergen vs. main
    competitors

Source Schwab.com/SP Stock Report 9-Mar-02
40
Competitive Advantage
  • System Designed for Competitive Advantage from
    the beginning to continue brand recognition and
    dominance while building solid long term
    relationships.

41
  • Background Information
  • Financials
  • Customers/Suppliers/Competitors
  • IT Organization and Architecture
  • IT Strategic Advantage
  • EDI

42
Background
  • Founded by Sam Walton in 1962
  • Company founded with first store in Rogers, AR
  • Headquarters Bentonville, AR
  • 38 stores in 1970
  • 4732 stores today

http//www.walmartstores.com/wmstore/wmstores/Main
about.jsp
43
Financials
  • 191 Billion in Sales in 2001
  • Five Times that of AOL Time Warner
  • 8 billion in capital spending in 2001
  • Market Expansion
  • Cash flow of 9.8 billion
  • Up 17 from 2000

(5)
44
Competitors/Suppliers
  • Competitors
  • Kmart
  • Sears
  • Target
  • Suppliers
  • P G
  • Thousands of others

(4)
45
IT Organization
  • Most powerful computer system in the corporate
    world
  • Second largest data warehouse
  • Logistics Technology
  • Retail LinkTM
  • Enormous Network Infrastructure
  • CIO Kevin Turner
  • 500 million IT budget
  • .26 of Annual Sales Revenue

(6)
46
Distribution Structure
Vendor
Vendor
Vendor
Vendor
Vendor
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Store
Store
Store
Store
Store
Store
Store
Store
47
Distribution Structure
  • Supply Chain Management
  • Create superior efficiencies through SCM
  • Decentralize distribution through multiple
    distribution centers
  • Centralize management and control
  • Excellent coordination with multiple suppliers

(4)(3)(2)
48
IT Critical Differentiator EDI
  • Transmission of data to and from various
    companies
  • Examples
  • Purchase Orders
  • Payment information
  • Inventory information
  • Invoices

49
WHY EDI?
  • Realized the complexity of their supply chain
  • Thousands of Stores, Suppliers and Products
  • Inventory management removed from store level
  • Also
  • Transaction Costs
  • Paperless Environment
  • Inventory Management Efficiencies
  • JIT of Retail
  • Everyday low price strategy through up-to-date
    sales information

(1)(4)
50
EDI
  • How does it work?
  • Through telephone line
  • Item is purchased
  • Computer Adjusts Inventory
  • Need To Order Level reached
  • Purchase Order sent to vendor
  • Vendor replenishes and sends invoice
  • Wal-Mart sends electronic funds transfer

(2)(4)
51
Retail LinkTm
  • Software that enhances EDI functionality
  • Provided to vendor in 1991
  • Allows for much better forecasting and reporting
    abilities
  • Faster replenishment
  • Better communication between Wal-Mart and Vendors

(1)(3)(5)
52
EDI and Retail LinkTM Today
  • No longer through telephone lines
  • Cisco Networking
  • Web Enabled
  • Most vendors now utilize Retail LinkTm
  • Required enrollment EDI

(1)(2)
53
EDI
  • Critical Differentiator?YES
  • Has allowed for a 2-3 percent reduction in costs
  • Allowed for increased vendor responsiveness
  • Resulted in Wal-Mart out pricing its competitors
  • Superior Customer Satification
  • Sales Revenues tell the story

(3)(4)(5)
54
Sales Revenue
2001 Annual Report, Wal-Mart Inc.
55
EDI
  • Sustainable Differentiator? YES
  • Logistics System impossible to replicate
  • Most efficient infrastructure network
  • Continues to enhance traditional EDI
  • JIT?. Close

56
References
  • Ehrens,J. Scott,Wal-Mart Beyond Regional
    Merchandizing, Apr 1992, Pg. 1-3
  • Gilbert, A., Retails Super Supply Chain,
    Informationweek, Oct, 2000, Pg. 1-5
  • www.cisco.com/warp/public/779/ibs/vertical/retail/
    Wal-Mart.PDF
  • Caldwell, B., Wal-Mart Ups the Pace,
    Informationweek, Dec 9, 1996, Pg 1-6
  • Janoff, B., High-tech Knowledge, Progressive
    Grocer, Dec 2000, Pg. 1-5
  • 2001 Annual Report, Wal-Mart Inc.

57
Best Practice
  • IT might need a large budget but also can yield a
    prosperous benefit for the company.
  • The competitive advantage always works for the
    company that willing to be an innovator.
  • IT needs to be improved all the time, otherwise
    the competitor can catch up and the competitive
    advantage will no longer exist.

58
Best practice
  • CIO who pay close attention to IT and has a good
    capability in managing IT will lead the company
    to success.
  • Only a few number of company can sustain their
    competitive advantage for a long time.

59
Why most companies cannot sustain their
competitive advantage so long?
  • Lack of managing skill
  • Competitors
  • IT become obsolete
About PowerShow.com