Information Systems for Strategic Advantage

BUS 782

Strategic Information System

• Information systems that provide a firm with competitive products and services which give it a strategic advantage over its competitors in the marketplace.– Information systems that promote

business innovation, improve operational efficiency.

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• PayPal• Micropayments• SkyPe: http://pages.ebay.com/skype/

– Special SkyPe services for eBay sellers and buyers

• Amazon Associates:– Amazon.com's affiliate marketing program.

By linking to Amazon products and services you can add compelling content for your site visitors enjoyment and receive up to 8.5% in referral fees for doing so.

– aStore

Being the First

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

New Way of Doing Business

• Dell:– Customization

• America West website -- http://www.americawest.com/awa/

• Select your seats• Web check-In (Travel Tools and Services)

Comparing Websites

• Travel:Yahoo vs Expedia– Hotels– Cars– Vacations– Cruises

• Real Estate:Century 21 vs ReMax– Buy: neighborhood, school– Sell– Finance– Learn

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:

– Become a low cost producer of products and services – Find ways to help suppliers or customers reduce their costs

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

business, enter new market.• 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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Becoming an Agile Competitor • Agility in competitive performance is the

ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services. An agile company can:– 1. Make a profit in markets with broad product

ranges and short model lifetimes– 2. Process orders in arbitrary lot sizes– 3. Offer individualized products while maintaining

high volumes of production.

IT and Agility• Agile companies depend heavily on

information technology to:– 1. Enriched its customers with customized

solutions to their needs.• Mass customization

– 2. Cooperate with other businesses to bring products to market as rapidly and cost-efficient as possible.

– B2B E-Commerce• Electronic Exchange: An electronic forum where

manufacturers, suppliers, and competitors buy and sell goods.

• Example: WorldWide Retail Exchange (WWRE)

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:– Webvan - wiki– Peapod