Information Systems for Strategic Advantage ISYS 363.

Information Systems for Strategic Advantage

ISYS 363

Strategic Advantage and Strategic Necessity

• Strategic advantage refers to obtaining a sustainable competitive edge over competitors. The ability to obtain a greater than normal return on investment.

• A strategic necessity is a system that must be installed to remain competitive and stay in business.

Auction sites

• Yahoo, Ebay• Necessity:

– Ability to search and view items, view seller info and bid history, place a bid, online payment.

• Advantage:– Ebay

• Ebay store• Pay Pal• SkyPe

Being the First

• Internet Search Engines:– Yahoo, Google– Teoma– Mooter

• Desktop Search– Google Desktop– Copernic Desktop Search

Being the First

• Advantages:– higher market share– Higher price– Custom loyalty– Retention through switching costs– Enhanced reputation from being a leader

• Disadvantages– Product demand is not known– Higher development costs– Free rider effects by followers

• Information system can be copied.– The basis for competition changes

• Firms tend to stay with their way of doing things• Competitors are busy finding ways to change the market place

New Way of Doing Business

• Digital Photo Printing– SnapFish

• DVD rental– NetFlix– http://www.dvdrental101.com/

• Online music store– iTunes

• E-Learning– Demo: ForestGIS

PayPal

• PayPal is how individuals and businesses send and receive money online.

• Micropayments are means for transferring money, in situations where collecting money with the usual payment systems is impractical, or very expensive, in terms of the amount of money being collected.

IT Doesn’t Matter – Nicholas Carr

• The basis for a sustainable competitive advantage is not ubiquity but scarcity.

• The core functions of IT have become available to all.

• Computer programs today are industry specific, most “right out of box””. That is they are commodities.

• Costs of doing business – paid by all but provide distinction to none.

Carr’s Rules for Firms

• Spend less

• Follow, don’t lead

• Focus on the risks of IT, not the opportunities

Threat of New Entrants

Bargaining Powerof Suppliers

Bargaining Powerof Customers

Rivalry amongExisting Competitors

Threat of SubstituteProducts

Competitive forces model by Michael Porter

Competitive Strategies

• Cost leadership strategy.• Product differentiation strategy.• Innovation strategy: Finding new way of doing

business.• Alliance strategy: Establish alliances with

customer, suppliers, competitors, other company.

• Growth strategy: expanding, diversifying, integrating.

Strategic Roles for Information Systems

• Improving business operations• Promoting business innovation• Locking in customers and suppliers

– Interorganizational IS, EDI, automatic inventory replenishment system

• Creating switching costs– make customers dependent on the continued use of

innovative IS.• Raising barriers to entry

– discourage competitors from entering a market

The Value Chain and Strategic IS

• It views a firm as a series, or chain, or network of basic activities that add value to its products and services, and thus add a margin of value to the firm.– Margin is the value of the firm’s products and

services less their costs, as perceived by the firm’s customers.

• Support activities:– Administration, human resource management ,etc.

• Primary activities:– Inbound logistics, operations, outbound logistics,

marketing, etc.

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

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Adv

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Business Process Reengineering (BPR)

• Often used to react to systems that can no longer function adequately in the current business environment of the firm

• BPR is the fundamental rethinking and radical redesign of business process to achieve dramatic improvements, such as cost, quality, service, and speed.

• Example: Ford Motor Accounts Payable

E-Commerce

• B2C– Virtual storefront, catalog, ordering processing– Online customer support, secure payment

• B2B– Whole sale and supply– Integrating a company’s internal systems with

those of its suppliers, partners, and customers.

Interorganizational System (IOS)

• These link two or more firms so that they function as a single system to accomplish a common goal

• Generate internal efficiency in addition to interorganizational efficiency

• Provides customers with unique product features, reduced search-related costs, and raises the customer’s switching costs

Electronic Data Interchange (EDI)

Adheres to Standard Formats

Suppliers The Firm

Request for a price quotePrice quote

Purchase order

Acknowledge P.O. receiptInvoice

CRM (customer relationship management)

• CRM (customer relationship management) is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. – For example, an enterprise might build a database

about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth.

Major Functions of CRM• Helping an enterprise to enable its marketing

departments to identify and target their best customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales team.

• Allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service.

• Providing employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners.

Targeted Marketing

• Community: People in specific communities– Online chat, Blogging, special interest groups

• Content: Advertising banner placed on web pages.

• Context: Advertising appears only in web pages that are relevant to the product.

• Demographic • Online behaviors: cookies

Push/Pull

• Internet push marketing:– Email marketing– Web page personalization

• Internet pull marketing– Product web page

ERP (enterprise resource planning)

• ERP is an integrated system that helps a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system. – An integrated system