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Information Systems and Business Strategy

ow IS Impact Organizations
- Lconom|c Impact
l1 can help flrms lower Lhe cosL of markeL parLlclpaLlon
(LransacLlon cosLs)
- LocaLlng communlcaLlng Lo suppller maklng conLracL
buylng lnsurance producL lnformaLlon eLc
llrms can conLracL wlLh exLernal suppllers lnsLead of
uslng lnLernal sources (Chrysler CorporaLlon obLalns more Lhan 70
percenL of lLs parLs from oLher companles)
lS/l1 enables flrms Lo lower Lhelr LransacLlon cosLs and
lncrease revenues wlLh ouLsourclng few acLlvlLles
(LransacLlon cosL Lheory)
- Accordlng Lo Agency Lheory as flrms grow ln slze
coordlnaLlon cosL lncreases because more supervlslon
managemenL ls requlred
- lS/l1 enables flrms Lo reduce managemenL cosLs and
supervlslon cosL So lL reduces agency cosL
- av|ora| Impact
l1 faclllLaLes flaLLenlng of hlerarchles by broadenlng Lhe
dlsLrlbuLlon of lnformaLlon Lo empower lowerlevel
employees
lS/l1 has moved declslonmaklng Lo lower levels of
managemenL and managers make declslons fasLer
because lnformaLlon ls readlly avallable
- 9ost|ndustr|a| tor|s
ln developed lndusLrles AuLhorlLy arlses from knowledge
and compeLence raLher Lhan formal poslLlons
knowledge workers Lend Lo be selfmanaged
knowledge lnformaLlon should become more
decenLrallzed
How IS Impact Organizations (cont)
- rgan|zat|ona| ks|stanc to cang
new lnformaLlon sysLem may change organlzaLlon
sLrucLure buslness process
new lnformaLlon sysLem may change rouLlnes of Lhe
people So employees reslsL Lhese changes
ow IS Impact Organizations (cont)
- @Intrntandrgan|zat|ons
1he lnLerneL lncreases Lhe accesslblllLy sLorage
dlsLrlbuLlon of lnformaLlon and knowledge for buslness
flrms
1he lnLerneL lowers Lhe LransacLlon and agency cosLs of
flrms dramaLlcally
8uslnesses are rapldly rebulldlng Lhelr key buslness
processes based on lnLerneL Lechnology Lxample
onllne order enLry cusLomer servlce and fulflllmenL of
orders
IS and Business Strategy
- us|nss stratgy dtrm|ns
1he producLs and servlces a flrm produces
1he lndusLrles ln whlch Lhe flrm compeLes
CompeLlLors suppllers and cusLomers of Lhe flrm
LongLerm goals of Lhe flrm
- 1o undersLand how l1 flLs lnLo Lhe sLraLeglc Lhlnklng
process lL ls useful Lo conslder Lhe Lhree levels of buslness
sLraLegy
Lhe buslness Lhe flrm and Lhe lndusLry level
- AL each level of sLraLegy l1 plays an lmporLanL role
:siness Level Strategy - Val:e Chain Model
- 1he value chaln model looks aL a buslness ln Lerms of a seL
of prlmary and supporL acLlvlLles LhaL add value Lo Lhe
flrm's producLs or servlces
- llrm galns a compeLlLlve advanLage when lL provldes Lhe
producL or servlce wlLh more value or Lhe same value aL a
lower prlce
- vC model can be used Lo deLermlne where lnformaLlon
sysLems can have Lhe mosL lmpacL Lo effecL Lhe compeLlLlve
poslLlon of Lhe flrm
W
'alue Chain
!rimary Activities oI the VC Model
- lnbound loglsLlcs recelvlng and sLorlng of maLerlals
sLockless lnvenLory sysLems
- CperaLlons LransformaLlon of lnpuLs Lo flnlshed goods or
Lhe process of provldlng a servlce
compuLer conLrolled machlnery used by CllleLLe for
produclng razor blades
!rimary Activities oI the VC Model
- CuLbound loglsLlcs sLorlng and dlsLrlbuLlng Lhe producL
alrllne reservaLlon sysLem
auLomaLed shlpplng schedullng sysLems
- Sales and markeLlng promoLlng and selllng Lhe flrm's
producL
S:pport Activities Ior the VC Model
- AdmlnlsLraLlon and managemenL
volce mall and emall lnLraneLs
- Puman resources
employee skllls daLabase sysLems LhaL faclllLaLe
compllance wlLh governmenL regulaLlons
- 1echnology developmenL lmprovlng producLs and Lhe
producLlon process
an oll company uses lnfrared daLa gaLhered by saLelllLe
Lo search for oll deposlLs
S:pport Activities Ior the VC Model
- rocuremenL (purchaslng lnpuLs)
onllne elecLronlc aucLlons exlsL LhaL provlde access Lo
excess lnvenLory
reLallers use onllne sysLems Lo access Lhe lnvenLory flles
and producLlon schedules of Lhelr suppllers
irm-Level Strategy and InIormation Technology
- CreaLlng synergles
Comblnlng Lwo organlzaLlons Lo achleve efflclency
cosL advanLage
eg uS Alrways and Amerlca WesL were merged Lo creaLe
synergles lL comblnes experlence sLrong neLwork of
uS Alrways and low cosL sLrucLure lnformaLlon sysLems
and rouLes of Amerlca WesL Alrllnes
- Lnhanclng core compeLencles
A core compeLency ls an acLlvlLy for whlch a flrm ls a
worldclass leader lL ls galned over many years of
experlence
Any lnformaLlon sysLem LhaL encourages Lhe sharlng of
knowledge across buslness unlLs enhances compeLency
rocLer and Camble(world leader ln brand mgL
producL lnnovaLlon)
uses lnLraneL called lnnovaLlonneL" Lo help people
worklng on slmllar problems Lo share ldeas
irm-Level Strategy and InIormation Technology
- neLwork based sLraLegles
1) neLwork economlcs
ln a neLwork larger Lhe number of subscrlbers greaLer
Lhe value Lo all Lhe parLlclpanLs
Lg e8ay
1he more people offerlng producLs on e8ay Lhe more
valuable ls Lhe e8ay slLe Lo everyone because more
producLs are llsLed and more compeLlLlon among
suppllers lowers prlces
lnLerneL slLes can be used Lo bulld communlLles of users
irm-Level Strategy and InIormation Technology
) vlrLual company
- lL uses oLher organlzaLlons Lo creaLe dlsLrlbuLe
producLs
- lL uses neLworks Lo llnk people asseLs ldeas
Lg Ll lung
- lL does noL own any facLory or machlnes
- CuLsources lLs work Lo more Lhan 7300 suppllers ln 37
counLrles all over Lhe world
- lL sends order Lo raw maLerlal suppllers facLorles Lo
produce cloLhes
- lLs exLraneL Lracks Lhe enLlre producLlon process
irm-Level Strategy and InIormation Technology
eneral Ways that IS Contributes to
Strategic Business Objectives
W IS can contrib:te to strategic objectives in the Iollowing ways
W Operational excellence
W ew prod:cts, services, and b:siness models
W C:stomer and s:pplier intimacy
W Improved decision making
W The contrib:tions listed above can lead to
W Competitive advantage
W S:rvival
Ind:stry-Level Strategy and InIormation Systems
- 1he prlnclpal concepLs for analyzlng sLraLegy aL Lhe lndusLry
level ls Lhe compeLlLlve forces model
!orter`s Competitive orces Model
This model provides a general view oI the Iirm, its competitors &
the Iirm`s environment
THE FIRM
EXISTING
COMPETITOR
NEW
MARKET
ENTRANTS
SUPPLIERS
CUSTOMERS
SUBSTITUTE
PRODUCTS
& SERVICES
- LxlsLlng compeLlLors
ulfferenLlaLlon compeLlLlve advanLage
- new MarkeL enLranLs
LnLry barrlers
- SubsLlLuLes
roducL/ servlce performlng Lhe same funcLlon
- Suppllers
SwlLchlng cosL 8argalnlng power
- CusLomers
8argalnlng power affecLs proflL margln
SLraLegles used WlLh Lhe CompeLlLlve lorces
Model
1) ltoJoct Jlffeteotlotloo lnvolves developlng new and unlque
producLs and servlces noL easlly dupllcaLed by compeLlLors
eg
Lands' Lnd provldes Lallor made cloLhes
8ulld Lo order producLs (uell CompuLer)
) 8ecomlng Lhe lowcost ptoJocet (provlde same value buL aL
a lower cosL Lhan compeLlLors)
eg
WalmarL's lnvenLory replenlshmenL sysLem
) locos oo olcbe motket lnvolves
narrowlng Lhe markeL by developlng nlches for
speclallzed producLs or servlces where a buslness can
compeLe beLLer Lhan lLs rlvals
Analyzlng cusLomer buylng paLLern LasLe preferences
eg
CusLomer daLa analysls Lhrough C8M
PllLon PoLels
) 5tteoqtbeo costomet ooJ soppllet lotlmocy
use lS Lo develop sLrong Lles wlLh cusLomers and
suppllers (SCM and C8M are ma[or Lools ln Lhls area)
eg
Suppller lnLlmacy Chrsyler CorporaLlon 1aLa MoLors
glve suppllers access Lo producLlon schedules
CusLomer lnLlmacy Amazoncom
Competitive orces Model and the Internet
- SubsLlLuLe producLs/servlces
Cnllne banklng sLock Lradlng reservaLlons onllne
muslc books
- CusLomer's bargalnlng power
AvallablllLy of prlclng lnformaLlon
Lxpanslon of opLlons
- Suppller's bargalnlng power
Suppllers beneflL from ellmlnaLlon of lnLermedlarles
Competitive orces Model and the Internet
- 1hreaL of new enLranLs
1he lnLerneL has reduced barrlers Lo enLry such as Lhe
need for a sales force access Lo channels and physlcal
asseLs
- 8lvalrles among exlsLlng compeLlLors
Wldens Lhe geographlc markeL
lncreases number of compeLlLors
8educes dlfferences among compeLlLors
ressure Lo compeLe on prlce
anagement Issues
- CpporLunlLles
llrms face a conLlnulng sLream of l1based opporLunlLles
Lo achleve sLraLeglc advanLages
- Challenges
Some flrms face blg hurdles ln lmplemenLlng
conLemporary sysLems reslsLance Lo change
Cnce an advanLage ls achleved Lhere are dlfflculLles ln
susLalnlng Lhe advanLage
CrganlzaLlons ofLen cannoL change fasL enough Lo
accommodaLe new Lechnologles (kodak)
Solutions: What anagers Can Do
- Managers cannoL depend on lS professlonals Lo Lell Lhem
abouL sLraLeglc opporLunlLles
- Managers musL undersLand whaL ls happenlng ln Lhelr
lndusLry ln general and Lhe role of Lechnology ln parLlcular
- Pow do you do Lhls?
Solutions: Questions to Ask
- erform a sLraLeglc sysLems analysls
undersLand Lhe sLrucLure and compeLlLlve dynamlcs of
Lhe lndusLry where your flrm operaLes (le use orLer's
compeLlLlve forces model)
undersLand Lhe buslness flrm and lndusLry value chalns
(le use orLer's value chaln model)
Summary Thoughts
- uecreaslng cosLs of l1 means l1 ls avallable Lo all flrms
- CompeLlLlon hlnges on Lhe creaLlve use of l1 slnce all
compeLlLors have access Lo l1
- Lmployees who undersLand l1 and can use lL ln creaLlve
ways have hlgh value
- lnnovaLlon and creaLlve use of l1 ls lncreased by lncreaslng
Lhe number of l1knowledgeable employees
- lndlvlduallzlng compeLlLlve advanLage or how do you
conLrlbuLe Lo Lhe compeLlLlve advanLage of your flrm?
Strategic Option enerator (Wiseman)
- @argt
Supp||r customr compt|tor
- @rust
D|ffrnt|at|on cost |nnovat|on growt a|||anc
- ,od
ffns|v or dfns|v
- D|rct|on
Intrna| usrs trna| usrs or bot
- Lcut|on