Fifth Edition
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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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
C h a p t e r
James A. O’Brien
2Competing
with
Information Technology
Fifth EditionJames A. O’Brien 2M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
• 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
Fifth EditionJames A. O’Brien 3M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
• 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
Fifth EditionJames A. O’Brien 4M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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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Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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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Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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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Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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
Fifth EditionJames A. O’Brien 10M 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
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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
Fifth EditionJames A. O’Brien 11M 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
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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
Fifth EditionJames A. O’Brien 12M 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
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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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Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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
Fifth EditionJames A. O’Brien 14M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
Borderless
Technology
Excellence
Trust-Based
Adaptability
Opportunism
SixCharacteristics
of VirtualCompanies
Virtual Corporations
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Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
Knowledge Management Systems
SolutionKnowledge
DevelopmentEngineers
TechnicalSupportStaff
ProductManagers Other
Vendors
Customers
The Internet
Intranet
Fifth EditionJames A. O’Brien 16M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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
Fifth EditionJames A. O’Brien 17M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
• 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
Fifth EditionJames A. O’Brien 18M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
• 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)
Fifth EditionJames A. O’Brien 19M 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
Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
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.