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CISB113 Fundamentals of Information Systems Competing With Information Technology

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CISB113 Fundamentals of Information Systems Competing With Information Technology Primary Activities Administration and Infrastructure General management of the ... – PowerPoint PPT presentation

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Title: CISB113 Fundamentals of Information Systems Competing With Information Technology


1
CISB113 Fundamentals of Information
Systems Competing With Information Technology
2
Learning Outcomes
  • At the end of this lesson, you should be able to
  • Describe Porters 5 competitive forces
  • Explain how IT/IS affects the competitive forces

3
Strategic IT beyond supporting operation
  • How can organization uses IT to achieve
    competitive advantages?
  • Important to understand
  • forces of competition
  • strategies applied to balance the competition.
  • Businesses can counter threats by implementing
    competitive strategies.

4
Competitive Forces and Strategies
Source OBrien Marakas (2010)
5
Porters 5 Competitive Forcesor
  • A business framework.
  • Devised by Michael Porter, for analyzing
    competitiveness by recognizing five major forces
    that could endanger a companys position.
  • Performance of individual corporations is
    determined by the extent to which they cope with,
    the five key 'forces.

6
Porters 5 Competitive Forces
Bargaining Power of Buyers
Bargaining Power of Suppliers
ORGANIZATION
Threats of New Entrants
Threat of substitute products or services
Rivalry amongst existing competitors
7
BUYERS
  • The power of buyers describes the effect that
    your customers have on the profitability of your
    business.
  • The transaction between the seller and the buyer
    creates value for both parties
  • If buyers have more economic power, your ability
    to capture a high proportion of the value created
    will increase, and you will earn higher profits

8
  • Any business requires inputslabor, parts, raw
    materials, and services.
  • The cost of your inputs can have a significant
    effect on your companys profitability.
  • Suppliers would prefer to sell to you at the
    highest price possible or provide you with no
    more services than necessary.
  • If the force is weak, then you may be able to
    negotiate a favorable business deal for yourself.
  • If the force is strong, then you are in a weak
    position and may have to pay a higher price or
    accept a lower level of quality or service.

SUPPLIERS
9
  • Rivalry among current competitors is often the
    strongest of the five competitive forces
  • If the competitive force is weak, companies may
    be able to raise prices, provide less product for
    the price, and earn more profits.
  • If competition is intense, it may be necessary to
    enhance product offerings to keep customers, and
    prices may fall below break-even levels.

COMPETITORS
Competing on Price, Products, Service
10
  • Products from one business can be replaced by
    products from another.
  • If you produce a commodity product that is
    undifferentiated, customers can easily switch
    away from your product to a competitors product
    with few consequences.
  • E.g. Aluminum beverage cans against glass bottles
    and plastic containers.
  • Coke and Pepsi are rivals, milk is a substitute
    for both
  • More difficult to try to raise prices and make
    greater profits if there are close substitutes
    and switching costs are low.

Examples of Substitutes Eyeglasses vs. Contact
Lenses Sugar vs. Artificial Sweeteners Newspapers
vs. TV vs. Internet E-mail vs. Overnight Delivery
SUBSTITUTES
11
  • The possibility that new firms will enter the
    industry.
  • New entrants bring a desire to gain market share
    and often have significant resources.
  • Their presence may force prices down and put
    pressure on profits.
  • Barriers to entry protect the companies already
    in business by being a hurdle to those trying to
    enter the market.

NEW ENTRANTS
12
Porters 5 Competitive Forces
  • To obtain a competitive edge within an industry
    sector, competitors must
  • Lock in suppliers and buyers
  • Establish alliances
  • Lower the possibility of substitute products by
    enhancing products and services
  • Create bariers / Discourage new market entrants

ORGANIZATION
SUBSTITUTES
13
Competitive Strategy in response to the forces
DIFFERENTIATION
COST LEADERSHIP
Providing products and/or services at the lowest
cost in the industry
The product or services must be unique and
outstanding to sustain customer preference and
loyalty
Developing new products services Find new ways
of doing business
INNOVATION
14
Competitive Strategy - in response to the forces
DEVELOP ALLIANCES
Working with business partners to create synergy
provide opportunities for growth
PROMOTE GROWTH
Increasing market share, acquiring more customers
or selling more products . Expand companys
capacity to produce, expand into global markets,
diversify into new products or services .
15
Discussion
  • You are the owner of a Travel Agency.
  • Discuss Porters 5 Forces in relation to your
    business.
  • Discuss how do you plan to develop alliances in
    order to achieve competitive advantage.
  • Discuss how do you plan to add the element of
    uniqueness in order to achieve competitive
    advantage.

16
Strategic Uses of Information Technology
COST LEADERSHIP Use IT to substantially reduce the cost of business process
Examples
Company Strategic Use of IT Business Benefit
Dell Computer Online build to order Lowest-cost producer
eBay.com Online Auctions Customer able to purchase at auction set price
Another example
17
Value Chain Using Traditional Channels - Highest
Cost
Value Chain Using Online Sales and Internet
Delivery - Lowest Cost
18
Strategic Uses of Information Technology
DIFFERENTIATION Develop new IT features to make products /services unique
Example
Company Strategic Use of IT Business Benefit
Moen. Inc Online customer design Increase in market share
19
Strategic Uses of Information Technology
INNOVATION Create new products and services that include IT components
Examples
Company Strategic Use of IT Business Benefit
Amazon.com Online full service customer system Market leadership
Federal Express Online package tracking Market leadership
20
Strategic Uses of Information Technology
PROMOTE GROWTH Use IT to manage regional and global business expansion
Example
Company Strategic Use of IT Business Benefit
Toys R Us POS Inventory Tracking Increase in Market Share
21
Strategic Uses of Information Technology
DEVELOP ALLIANCES Use IT to manage and identify joint ventures opportunities
Example
Company Strategic Use of IT Business Benefit
Air Asia Car Rental Services Air Asia Hotels Offering packaged service/products Increase in market share
22
Discussion
  • You are the owner of a Travel Agency.
  • Discuss how do you plan to use IT in order to
  • Achieve cost leadership
  • Promote Growth
  • Offer Differentiation

23
Learning Outcomes
  • At the end of this lesson, you should be able to
  • Describe Porters 5 competitive forces
  • Explain how IT/IS affects the competitive forces

24
  • Extra Read

25
The Value Chain
  • Another concept to help identify opportunities
    for strategic IS
  • Value Chain An organization is a series of
    basic activities that add values to its products
    and services, hence add values to the
    organization and the customers

26
The Value Chain
Primary Processes Business activities that are directly related to the manufacture of products or delivery of service Support Processes Business activities that help support the day-to-day operation of the business (indirectly contribute to manufacturing of product and delivery of service)
Can highlight where competitive strategies can be
best applied in business
27
The Porters Value Chain
Support processes
Primary processes
The goal of these activities is to offer the
customer a level of value that exceeds the cost
of the activity, resulting in a profit margin
28
The Porters Value Chain
  • NOT JUST A COMPILATION OF ACTIVITIES THAT ARE
    INDEPENDENT OF EACH OTHER INSTEAD, IT IS A
    SYSTEM OF ACTIVITIES THAT ARE INTERDEPENDENT
    BECAUSE THEY ARE RELATED BY THEIR LINKAGES
  • One activity may affect the cost or performance
    of others
  • E.g. product design change reduces manufacturing
    costs improves reliability, service costs
    decrease

29
Primary Activities
The Primary Processes
  • Inbound logistics
  • Input and acquisition activities to receive,
    store and distribute the inputs to the product /
    service
  • Raw material handling,
  • stock control,
  • transport

30
Primary Activities
The Primary Processes
  • Operations
  • Transforming inputs to outputs
  • Manufacturing
  • Packaging
  • Production Control
  • Quality Control
  • Maintenance

31
Primary Activities
The Primary Processes
  • Outbound logistics
  • collect, store and distribute the products /
    services to customers
  • Finished goods
  • Order handling
  • Dispatch
  • Delivery
  • Invoicing

32
Primary Activities
The Primary Processes
  • Marketing / Sales
  • Providing ways in which the customer can purchase
    the product and inducing them to do so
  • Customer management
  • Order tacking
  • Promotion
  • Sales analysis
  • Market research

33
Primary Activities
The Primary Processes
  • Service
  • Enhancing or maintaining the value of the product
    / service once purchased
  • Warranty
  • Maintenance
  • Education / Training
  • Upgrade

34
Primary Activities
The Support Processes
  • Administration and Infrastructure
  • General management of the company as a business
    entity
  • Legal
  • Accounting
  • Financial management

35
Primary Activities
The Support Processes
  • Human Resource Management
  • Recruiting, training, developing and rewarding
    personnel
  • Payroll
  • Manpower planning

36
Primary Activities
The Support Processes
  • Product Technology Development
  • Developing the technology of the product and
    processes and business management
  • Product and process design
  • R D
  • IT
  • Production engineering

37
Primary Activities
The Support Processes
  • Procurement
  • Acquiring the required inputs to the value adding
    process
  • Supply management
  • Funding
  • Subcontracting
  • Specification

38
  • Questions?
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