Fifth Edition 1 M a n a g e m e n t I n f o r m a t i o n S y s t e m s M a n a g I n g I n f o r m a t i o n T e c h n o l o g y i n t h e E – B u s i.

Fifth Edition

1

M a n a g e m e n t I n f o r m a t i o n S y s t e m sM a n a g I n g I n f o r m a t i o n T e c h n o l o g y i n t h e E – B u s i n e s s E n t e r p r i s e

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C h a p t e r

James A. O’Brien

2Competing

with

Information Technology

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• Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business.

• Identify several strategic uses of information technology for E-business and commerce, and give examples of how they give competitive advantages to business.

• Give examples of how business process reengineering frequently involves the strategic use of E-business technologies.

Chapter Objectives

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• Identify the business value of using E-business technologies for total quality management, to become an agile competitor, or to form a virtual company.

• Explain how knowledge management systems can help a business gain strategic advantages.

• Identify and evaluate several factors that could help a company sustain a strategic competitive advantage.

Chapter Objectives

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The Competitive Environment

Threat of New

Entrants

Rivalry AmongExisting

Competitors

Bargaining Powerof Customers

Bargaining Powerof Suppliers

Threat ofSubstitutes

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Fundamental Competitive Strategies

Differentiation StrategiesDifferentiation Strategies

Innovation StrategiesInnovation Strategies

Growth StrategiesGrowth Strategies

Alliance StrategiesAlliance Strategies

Cost Leadership StrategiesCost Leadership Strategies

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Strategic Uses of Information Technology

ImprovingBusinessProcess

PromoteBusinessInnovation

Locking in Customers and Suppliers

Use IT to reduce costs of doing business

•Use IT to improve quality•Use IT to link business to customers and suppliers

Use IT to create new products or services

EnhanceEfficiency

Create NewBusiness Opportunities

Maintain ValuableCustomers and Relationships

Strategy

IT Role

Outcome

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Strategic Uses of Information Technology

RaiseBarriersto Entry

Build aStrategic ITPlatform

Build a Strategic Information Base

Increase amount of investment or complexity of IT needed to compete

Use IT to provide information to support firm’s competitive strategy

Leverage investment in IS resources from operat- ional uses to strategic uses

IncreaseMarket Share

Create NewBusiness Opportunities

EnhanceOrganizational Collaboration

Strategy

IT Role

Outcome

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The Value Chain

Administrative Coordination & Support Services

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

Procurement of ResourcesProcurement of Resources

InboundLogisticsInboundLogistics OperationsOperations Outbound

LogisticsOutboundLogistics

Marketingand

Sales

Marketingand

Sales

CustomerServiceCustomerService

Com

petit

ive

Adv

anta

ge

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The Internet Value Chain

Marketing andProductResearch

Sales andDistribution

Support and Customer Feedback

Data for market research, establishes consumer responses

•Access to customer com-ments online•Immediate re-sponse to customer problems

•Low cost distribution•Reaches new customers •Multiplies contact points

EnhanceEfficiency

Create NewBusiness Opportunities

Maintain ValuableCustomers and Relationships

InternetCapability

Benefitsto

Company

Opportunityfor

Advantage

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Strategic Positioning of Internet Technologies

Global MarketPenetration

E-Commerce WebsiteValue-added IT Services

Product and ServicesTransformation

E-Business; ExtensiveIntranets and Extranets

Cost andEfficiency Improvements

E-Mail, Chat Systems

Performance Improvements inBusiness Effectiveness

Intranets and Extranets

Strategy

Solution

Low

High

High

Cu

sto

me

r C

om

pe

titio

n C

onn

ect

ivi ty

E-Business Processes Connectivity

Internal Drivers

Ex

tern

al D

rive

rs

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Customer-Focused E-Business

Let customersplace orders thrudistributionpartners

TransactionDatabase

Link Employees and distributionpartners

Let customers check order history and delivery status

Let customers place orders directly

CustomerDatabase

Build acommunityof customers,employees,and partners

Give allemployees acomplete viewof customers

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Business Reengineering and Quality Management

Business QualityImprovement

Business QualityImprovement

BusinessReengineering

BusinessReengineering

DefinitionDefinition

TargetTarget

PotentialPaybackPotentialPayback

RiskRisk

What Changes?What Changes?

PrimaryEnablersPrimaryEnablers

Incrementally Improving Existing ProcessesIncrementally Improving Existing Processes

Radically Redesigning Business SystemsRadically Redesigning Business Systems

Any ProcessAny Process Strategic Business ProcessesStrategic Business Processes

10%-50% Improvements10%-50% Improvements 10-Fold Improvements10-Fold Improvements

LowLow HighHigh

Same Jobs - More EfficientSame Jobs - More Efficient Big Job Cuts; New Jobs; Major Job RedesignBig Job Cuts; New Jobs; Major Job Redesign

IT and Work SimplificationIT and Work Simplification IT and Organizational RedesignIT and Organizational Redesign

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The Customer- Focused Agile Competitor

Leverage theImpact of People and IS Resources

Acc

essi

bilit

yD

eliv

ery

Tim

eC

usto

mer

’s

time

to m

arke

t

Anticipation offuture needs

Customization

Conformance

Co

st of

Tran

saction

Cost of

Value-added

Services

Give Customers Solutions

to Problems

Give Customers Solutions

to Problems

Cooperate with Business Partnersand Competitors

Cooperate with Business Partnersand Competitors

Organize toMasterChange

Organize toMasterChange

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Borderless

Technology

Excellence

Trust-Based

Adaptability

Opportunism

SixCharacteristics

of VirtualCompanies

Virtual Corporations

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Knowledge Management Systems

SolutionKnowledge

DevelopmentEngineers

TechnicalSupportStaff

ProductManagers Other

Vendors

Customers

The Internet

Intranet

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FirmFirm

EnvironmentEnvironment

PerformancePerformance

• Size• Geographical scope• Product scope• Organization structure

• Technological resources

• Knowledge resources

• Creating switching costs

• Exploiting knowledge

• Developing response strategies

• Managing risks

Key Factors for Sustaining Strategic Success

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• Information systems can play several strategic roles in business.

• The Internet, intranets, extranets, and other Internet-based technologies can be used strategically for E-Business and E-Commerce that provide a competitive advantage.

• A key strategic use of Internet technologies is to build an E-Business which develops its business value by making customer value its strategic focus.

Chapter Summary

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• IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness.

• IT can be strategically used to improve the quality of business performance.

• A business can use IT to help it become an agile company, that can respond quickly to changes in its environment.

Chapter Summary (cont)

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Chapter Summary (cont)

• Forming virtual companies has become an important competitive strategy in today’s dynamic global market.

• Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations.

• Successful strategic information systems are not easy to develop and implement. They may require major change in how businesses operate.