Download - Strategic Uses of IT
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Strategic Uses of IT
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Challenge: One of the first challenges managers faceis understanding how they can use IT to support
business activities.
How IT Supports Business Activities
Porter & Millars concept of the value chain
(introduced in 1985) helps explain which business
activities can be analyzed and transformed through
the use of IT.
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Value Chain: Value chain is a chain of activities.
Products pass through all activities of the chain in orderand at each activity the product gains some value.
Value activities
Support activitiesPrimary activities
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Organization
Human resources
Technology
Procurement
Inbound Operations Outbound Marketing Services
Logistics Logistics & Sales
Primary activities
Support activities
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Primary activities
Inbound logistics : Include delivery and handlingof incoming materials.
Operations : include manufacturing related
functions Eg. parts assembly and qualityassurance..
Outbound logistics : Order processing and
shipping goods.
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Marketing and Sales: Include advertising,promotion and sales force management.
Marketing must make sure that the product is
targeted towards the correct customer group.
Services: This may come in the form of after salestraining, guarantees and warranties.
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The support activities assist the primary activities
Organization: Every organization needs to ensure thattheir management structure works efficiently.
Technology: The use of technology to obtain acompetitive advantage within the organization.
Technology can be used in production to reduce cost and
add value.
Support Activities
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Human resource management: The organization willhave to recruit, train and develop the correct people forthe organization if they are to succeed in their
objectives.
Procurement: This department must source rawmaterials for the organization.
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Value chain is a
system of
interdependent
linkages
Porters viewEg. Investments in a more
expensive product design and
superior material may reduceafter sale service cost
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Supplier Firm Channel Buyer
Value chain value chain value chain value chain
ValueSystem: includes the value chains of supplier,of the firm, of the channels through which the firm
distributes its products and services and of the
ultimate buyer.
Eg. A link between the automakers and steel maker's
inventory systems can provide information on
delivery dates.
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Supplier channel value chain Buyer
Manufacturer dealership Automobile buyer
IT can provide a more effective interface between
the buyer and channel.
eg. Buick dealers use EPIC system
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Interorganizational Systems: information systemsthat links
Suppliers-Buyers
Manufacturers-Distributors
Distributors-Buyers
These systems benefit both participants.
Eg. Drug distributerJ.C. Penney
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Value Activity
PhysicalComponent
Encompasses thephysical tasks needed
to perform the activity
Information ProcessingComponent
Includes the steps involvedin capturing, manipulating
and channeling the data
necessary to carry out the
activity.
Eg. Wal-mart inventory management activity
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How IT Support Value Activities
Value Activity Use of IT
Inbound logistics Just-in-time Delivery
Eg. Wal-mart
Operations Process control
systems
Eg. Oil-refinement,paints, cookies,
paper
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Outbound Logistics On-line link to order-
entry system of
supplier
Order processingMarketing & sales Laptops for direct
sales
After-sale services Electronic dispatch oftechnical support
Eg. Otis Elevators
Otisline System
Value Activity Use of IT
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How IT Supports Secondary Activities
Secondary Activity Use of IT
Organization Corporate E-mail
HR On-line access topersonnel files with a skills
database
Technology Computer aided design &
manufacturing
Procurement On-line access tosuppliers inventory files.
Eg. American Hospital
Supply
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How IT Supports 3-levelFramework
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Levels
Industry level
Firm Level
Strategy Level
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Effectof IT on
Products & ServicesAlter product development cycle
Book publishing
Production Economics
Food marketer
Markets
ATM, Credit Cards payment
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Firm Level Effect
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Buyers: IT to reduce power of buyers.American Hospital Supply
Supplier: IT to reduce power of suppliers
High priced labor
Quality control
Consumers can gain power over suppliers
Substitute Products
There are five competitive forces that influencethe profitability of an industry
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Strategy Level
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New Business opportunities:
Tele conferencing: effects Hotel and Airline Industry
Databasesfor
maintenanceUpgrades
Improve Customer ServiceAirlines
Retail stores
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