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T Ch3: Strategic Information SystemsT Ch3: Strategic Information Systems

LEARNING OBJECTIVESLEARNING OBJECTIVES Strategic Information Systems & Their adv. Strategic Information Systems & Their adv. Some Str Info System Frameworks (4 ITOP)Some Str Info System Frameworks (4 ITOP)

• Port’s 5-Force analysisPort’s 5-Force analysis & how to use it for ITOP. & how to use it for ITOP.

• Value Chain ModelValue Chain Model and how to use it for ITOP and how to use it for ITOP

• Porter & Millar’s 5-step processPorter & Millar’s 5-step process..

• Customer Resource Life Cycle framework (CRLC)

• Global Business Drivers

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Strategic Information SystemsStrategic Information Systems StrategicStrategic Competitive Advantages (SCA) Competitive Advantages (SCA)

• Relative advantages of our org. vs competitors that:Relative advantages of our org. vs competitors that:– Have broad impacts in scope and organizationsHave broad impacts in scope and organizations– Have long term impactHave long term impact– Are hard to reverse in a shorter time frame (< 1yr)Are hard to reverse in a shorter time frame (< 1yr)– Usually need long time to plan and implementUsually need long time to plan and implement– Often involve use of significant resourcesOften involve use of significant resources

SustainableSustainable Strategic (Competitive) Advantage Strategic (Competitive) Advantage– SCA that is hard for competitors to copy or overcome for a long time. ( SCA that is hard for competitors to copy or overcome for a long time. (

say, 5 yr or longer)say, 5 yr or longer)

SIS (Strategic Information System)SIS (Strategic Information System)• An info sys that is characterized by its:An info sys that is characterized by its:

– Ability to create/enhance Str. Competitive Advantages.Ability to create/enhance Str. Competitive Advantages.– Ability to change significantly the manner the business is done.Ability to change significantly the manner the business is done.

NB: SIS ≠Strategic-level Information SystemNB: SIS ≠Strategic-level Information System

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Common Competitive StrategiesCommon Competitive Strategies Porter’s 3 generic strategies for SCAPorter’s 3 generic strategies for SCA

• Low Cost Low Cost • Product differentiationProduct differentiation

– Functions/Features; Quality Functions/Features; Quality

• Focus (Niche Market)Focus (Niche Market) We should also add:We should also add:

• Lead timeLead time• ServiceService• Flexibility (to order changes, etc.)Flexibility (to order changes, etc.)

Central issue of the course: How to use IT to help create SCCentral issue of the course: How to use IT to help create SCAs like those listed above.As like those listed above.• => ITOP for the best advantage of the org. => ITOP for the best advantage of the org. • Additional interest: desire Additional interest: desire sustainablesustainable SCA. SCA.

There are systematic way of finding ITOP.There are systematic way of finding ITOP.

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Recall 5-Force AnalysisRecall 5-Force Analysis新進入者

產業競爭者

強烈的敵對競爭

替代品

供應商 買方供應商議價能力

買方議價能力

替代品威脅

進入障礙：．規模經濟．產品差異化．品牌辨認．更換成本．資本需求．運輸通路．絕對成本優勢．學習曲線．產品設計．政府政策．預期報復

敵對決定因素：．產業成長．固定成本 /附加價值．間斷性產能過剩．產品差異化．品牌辨認．更換成本．集中與均衡．資訊複雜．競爭者之多樣化．公司賭注退出阻礙

供應商力量之決定因素：．投入之差別化．產業中供應商之更換成本．替代投入品之存在．供應商集中度．供應商之重要數量．相對於產業購貨之成本．投入成本或差異化之影響．公司在產業中向前整合對向後整合之威脅

替代品威脅之決定因素：．替代品之價格表現．更換成本．買方對於替代品之偏好

決定買方力量之因素：．議價槓桿．價格敏感性．買方對公司集中度．價值 /總購買量．買方數量．產品差異化．買方更換成本相對．品牌辨認　於公司之更換成本．買方對於後向整合．品質績效之影響　之資訊．替代品．買方獲利率．決策者之激勵

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5-Force Model (fg 3.4)5-Force Model (fg 3.4)

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Porter’s Model for Wal-MartPorter’s Model for Wal-Mart

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Using 5-Force Analysis 4 ITOP:Using 5-Force Analysis 4 ITOP:Method 1: consider determinants one by oneMethod 1: consider determinants one by one

Ask ourselves questions:Ask ourselves questions: Can an IS help us to:Can an IS help us to:

• Diminish Supplier bargaining power ?Diminish Supplier bargaining power ?– Reduce supplier differentiation to us?Reduce supplier differentiation to us?– Lower switching cost of supplier?Lower switching cost of supplier?– ……

• Create Entry Barriers ?Create Entry Barriers ?– Create economy of scale ?Create economy of scale ?– Create proprietary product diff?Create proprietary product diff?

• Gain competitive edge w/i existing industry ? Gain competitive edge w/i existing industry ? – Create growthCreate growth– Brand identityBrand identity– .….…

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Using 5-Force Analysis 4 ITOP:Using 5-Force Analysis 4 ITOP:Method 2: matching player w/ determinants (fg 3.5)Method 2: matching player w/ determinants (fg 3.5)

Step 1: The players in each force are listed.Step 1: The players in each force are listed. (fg 3.5)(fg 3.5)

Step 2: Analysis to relate the determinants Step 2: Analysis to relate the determinants (fg 3.4 & more)(fg 3.4 & more) to each player to each player in fg 3.5. in fg 3.5.

– W/ each player: Analyze if we can achieve the effect as implied by each determinaW/ each player: Analyze if we can achieve the effect as implied by each determinant.nt.

Eg:Eg:

Step 3: Devise a strategy to defend org. against the listed threats. StraStep 3: Devise a strategy to defend org. against the listed threats. Strategies could be grouped/integrated.tegies could be grouped/integrated.

Step 4: Look for IT to support the business strategy.Step 4: Look for IT to support the business strategy.<Steps 3 & 4 could be mutual adjusting. Iterating back ad forth to fin<Steps 3 & 4 could be mutual adjusting. Iterating back ad forth to fin

d a set of ITOP.>d a set of ITOP.>

Force categoryForce category New EntrantsNew Entrants

PlayerPlayer Foreign discountersForeign discounters

DeterminantDeterminant Access to distribution.Access to distribution.

Analysis goalsAnalysis goals (How can I ) deny/suppress foreign discounters distribution (How can I ) deny/suppress foreign discounters distribution channel to my market. <List all possible measures>channel to my market. <List all possible measures>

ConsiderConsider Feasibility; level of effort; worthiness <gather data when needed>Feasibility; level of effort; worthiness <gather data when needed>

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Wal-Mart Example of 5-Force AnalysisWal-Mart Example of 5-Force Analysis

Force categoryForce category Substitute (Partial)Substitute (Partial)

PlayerPlayer Internet Shopping providersInternet Shopping providers

DeterminantDeterminant Access to distribution (own computer & service); relative Access to distribution (own computer & service); relative price/performance; Switching cost; Buyer propensity to e-shopping price/performance; Switching cost; Buyer propensity to e-shopping (shopping style)(shopping style)

Analysis goalsAnalysis goals (How can I ) suppress shopper from e-shopping?(How can I ) suppress shopper from e-shopping?Should I do the same thing to gain market?Should I do the same thing to gain market?

ConsiderConsider Feasibility; level of effort; worthiness <gather data when needed>Feasibility; level of effort; worthiness <gather data when needed>

Devise Devise StrategiesStrategies

Provide playground for kidsProvide playground for kids Hand out free samples of productsHand out free samples of products Recognize shopper personalityRecognize shopper personality Open up Wal-Mart onlineOpen up Wal-Mart online

IT support of IT support of the strategiesthe strategies

- Gigantic database; Gigantic database; - Online processing systemOnline processing system- Data analysis system to analyze shopper activities and preference.Data analysis system to analyze shopper activities and preference.

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Optional HW: 5-Force Analysis for ITOPOptional HW: 5-Force Analysis for ITOP

Use your project company/organization or Use your project company/organization or industry as the central organization.industry as the central organization.

Apply 5-force analysis to analyze the competitive Apply 5-force analysis to analyze the competitive dynamics of your subject organization.dynamics of your subject organization.

Pick one force & one target player in that force:Pick one force & one target player in that force:• Identify areas where:Identify areas where:

– You think are needing a boost to enhance your bargaining power & competitive You think are needing a boost to enhance your bargaining power & competitive position.position.

– Where application of IT can help to enhance your position.Where application of IT can help to enhance your position. Submit HW in terms of:Submit HW in terms of:

• BRIEF Co. & industry descriptionBRIEF Co. & industry description• 5-force analysis (Method 1 or 5-force analysis (Method 1 or 22))• IT opportunities: IS name / Functionality / Benefits soughtIT opportunities: IS name / Functionality / Benefits sought

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L: Fg 2.13 Value Chain Model & Examples

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Value Chain Analysis Value Chain Analysis (Method 1)(Method 1)

Step 1: As-is descriptionStep 1: As-is description– Present value chain from (process) segments to Individual processes. Present value chain from (process) segments to Individual processes.

Clearly identify the sequence (chain) of the processes. Clearly identify the sequence (chain) of the processes.– May also have branches.May also have branches.

Step 2: Simplification/Rationalization/StandardizationStep 2: Simplification/Rationalization/Standardization– Examine the value/function for each process. (Is the step necessary? Examine the value/function for each process. (Is the step necessary?

Can it be removed?)Can it be removed?)– Ask: Is it possible to integrate/re-arrange steps to make the overall Ask: Is it possible to integrate/re-arrange steps to make the overall

processes simpler.processes simpler.

Step 3: IT opportunityStep 3: IT opportunity– Is it possible to use IT to make a target process more efficient?Is it possible to use IT to make a target process more efficient?– Is it possible to use IT to integrate/re-arrange steps.Is it possible to use IT to integrate/re-arrange steps.– Can we build an integrated IS to make the whole process more Can we build an integrated IS to make the whole process more

efficient?efficient?

Step 4: Requirement analysisStep 4: Requirement analysis– List the system requirements of such an IT system.List the system requirements of such an IT system.

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Information Intensity & ContentInformation Intensity & Content

Information Intensity: (I-I)Information Intensity: (I-I)• Measures the actual and planned usage of information. Measures the actual and planned usage of information.

(High intensity (High intensity High level of Info usage) High level of Info usage)• Measured separately 4 each link in the value chain.Measured separately 4 each link in the value chain.

Information Content: (I-C)Information Content: (I-C)• Refers to the amount of info included in the creation Refers to the amount of info included in the creation

of a product or service.of a product or service.

Porter/Millar’s 5-step ProcessPorter/Millar’s 5-step Process (VCA Method 2)(VCA Method 2)

Step 1: Assess info intensityStep 1: Assess info intensity• Assess I-I of each link in each of their value cAssess I-I of each link in each of their value c

hainhain• If supplier/customer highly dept on info, I-I is If supplier/customer highly dept on info, I-I is

high => likely to have strategic oppr for IS.high => likely to have strategic oppr for IS. Step 2: Determine Role of IT in inStep 2: Determine Role of IT in in

dustry structure.dustry structure.• Know how buyers/suppliers/competitors mighKnow how buyers/suppliers/competitors migh

t t be affected bybe affected by & & react react to IT.to IT. Step 3: Identify & rank ITOPStep 3: Identify & rank ITOP Step 4: Investigate how IT might sStep 4: Investigate how IT might s

pawn new businesspawn new business• What Info generated should be sold?What Info generated should be sold?• What IT capability could be used to start a neWhat IT capability could be used to start a ne

w businessw business• Can IT help produce new items for sale?Can IT help produce new items for sale?

Step 5: develop a plan 4 the ITOP.Step 5: develop a plan 4 the ITOP.• Process should be business driven rather than Process should be business driven rather than

technology driven.technology driven.

Benetton SPA caseBenetton SPA caseItalian fashion retailer.S1: Low I-C product but high I-I in its value chain. (Cloth design/production/sale highly dept on timely/accurate info flow) (20% of new fashion dept on previous ideas.) => ITOPs exist.

S2: Det the role ot IT.Reduce lead time improv response time to customer req.S3: via computerized mfg env. Benetton can let W.W. customer to receive items in 2-3 wks (3 times faster than major competitors.S5: Plan developed & implemented.

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Customer Resource Life Cycle F. (CRLC)

Idea: Org. differentiate itself from competitor in the eIdea: Org. differentiate itself from competitor in the eyes of customers.yes of customers.

=> Determine stages customers go thru in their=> Determine stages customers go thru in their transa transaction cycle. ction cycle. (Original: 13 stages but not quite good) (tbl 3.3)(Original: 13 stages but not quite good) (tbl 3.3)

On each stage of the life cycle Seek ITOP.On each stage of the life cycle Seek ITOP.

Global Business Drivers tbl 3.4

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On SustainabilityOn Sustainability

Pure IS can rarely provide sustainable SCA.Pure IS can rarely provide sustainable SCA. When SIS are combined w/ structural changes When SIS are combined w/ structural changes

in org => could provide sustainable SCA.in org => could provide sustainable SCA.• How?How?

Inward vs Outward systemsInward vs Outward systems