Introduction to MIS 1

Copyright © 1998-2002 by Jerry Post

Introduction to MIS

Chapter 10

Strategic Analysis

Introduction to MIS 2

Strategy

Connections to suppliers and customers.

Become the best firm in the industry. Block the competitors by keeping your customers happy.

Competition

Introduction to MIS 3

Outline The Competitive Environment External Agents IS Techniques to Gain Competitive Advantage The Search for Innovation

Research Engineering and Design Manufacturing Logistics and Supply Marketing Sales and Order Management Service Management

Costs and Dangers of Strategies Operations, Tactics, Strategy E-Commerce Failures Cases: Travel Industry Appendix: Solving Business Problems and Cases

Introduction to MIS 4

Competition is increasing in many industries, but it is particularly intense in the restaurant and fast food industry. Competition encourages firms to hold down costs, provide more variety, and provide new and better service to customers.

Competition

Introduction to MIS 5

Rivalry AmongExisting Competitors

Bargaining Powerof Buyers

Bargaining Powerof Suppliers

Threat ofNew Entrants

Threat of SubstituteProducts or Services

Porter’s Five Forces Model

Introduction to MIS 7

partssupplier

partssupplier

partssupplier

warehouse warehouse

suppliersuppliersupplier

toolmanufacturer

Manufacturerworkers

wholesalerwholesaler

distributordistributordistributor

retail storeretail storeretail storeretail store

Consumers

ProductionChain

Introduction to MIS 8

BarrierTo Entry

Firm Rival

Supplier SupplierSupplier

Consumer

Consumer

Consumer

Consumer Consumer

Consumer

Consumer

DecreasedCosts

ImprovedQuality

Ties ToCustomers

IncreasedSwitching Costs

Wholesale

Ties ToSuppliers

Control OfDistribution

Innovation andDifferentiation

Methods to Gain Competitive

Advantage

Introduction to MIS 9

Barriers to Entry Economies of Scale (size) Economies of Scope (breadth) Product Differentiation Capital requirements Cost Disadvantages (independent of size) Distribution Channel Access Government Policy

Introduction to MIS 10

Competitive Advantage Barriers to Entry

Additional costs of creating an information system. People’s Express

Distribution Channels Prevent others from entering

the industry. Napster Switching Costs

Consumers incur learning and data transfer costs. Baxter Healthcare

Lower Production Costs IS to cut costs. Wal-Mart

Product Differentiation Add new features or create

new products with IT. Federal Express & Merrill Lynch

Quality Management Monitoring production lines

and analyzing data. Digital Equipment Corp.

Value Chain Expanding forward or back

the value chain to find greater profits. Boeing Information Systems

Introduction to MIS 11

Firm Infrastructure

Human Resources Management

Technology Development

Procurement

Inbound Logistics

Operations Outbound Logistics

Marketing & Sales

Service

Margin

Margin

Value Chain

Introduction to MIS 12

Manufacturing

Engineeringand Design

Marketing

Research

CustomerService

Management

Sales andOrder

Management

Logistics/Supply

Suppliers

Customers

Production

Process Innovation

Introduction to MIS 13

Market Measures- Market share- Concentration- Growth- Profitability

monitorrivals

Business Operations & Rules

Existing Data and IS

Performance Measures- ROA - ROI- EPS - Growth- Subjective

Corporate Strategy Development

• expectations• goals• rivalry

• strengths• weaknesses• opportunities• critical success factors

Business Strategiesand Priorities

Process ChangesData NeedsIS Changes

SystemDevelopment

& Implementation

- Cost leadership- Differentiation- Innovation- Linkages

- Re-engineering- Organization- Decentralization

Developing Strategies

Introduction to MIS 14

Search for Innovation Research

Analysis & modeling, project management, work group support, databases, decision support.

Engineering & Design CAD/CAM, testing, networks,

work group support.

Manufacturing Mass customization, links to

customers & suppliers, quality monitoring, expert systems for maintenance, production databases, business integration.

Logistics & Supply Just-in-time linkages,

forecasts, models, links for design, transaction processing.

Introduction to MIS 15

Search for Innovation Marketing

Frequent buyer database, target market & media analysis, survey design and analysis, multimedia promotion design, links to customers and designers.

Sales & Orders Portable computers for

sales, ES for order customization, work group tools for customer support.

Service Phone support, GIS locators,

scheduling, ES diagnostics, databases.

Management EIS, e-mail, bulletin boards,

decision support systems, personal productivity tools, work group support

Links to service providers Accountants Consultants Lawyers, . . .

Introduction to MIS 16

Research Analysis and models Statistical analysis of data Project management and budgeting Work-group collaboration and communication

Introduction to MIS 17

Engineering and Design CAD/CAM Integrated design database Production databases and model testing Expert Systems for manufacturability Work group communication

Introduction to MIS 18

Manufacturing Links to customers Links to suppliers Mass customization Robotics Diagnostic Expert Systems Quality monitoring and control

Introduction to MIS 19

Logistics and Supply Just-In-Time Inventory and EDI Configuration and design Searching for availability, pricing, . . . networks

Introduction to MIS 20

Marketing Frequent buyer databases Point-of-Sale and trends Statistical analysis of data Geographic Information Systems Links to external marketing agencies Multimedia development of promotions Internet

Introduction to MIS 21

Sales and Orders Sales force automation, hand-held computers Customer Internet access Expert Systems for product and option selection Expert Systems for configuration and shipping Front-line support: ES, e-mail, work groups

Introduction to MIS 22

Service Portable computers for service anywhere Databases (e.g., customer service) Location monitoring of service personnel Product internal, automatic diagnostics Expert System diagnostic tools

Introduction to MIS 23

Management Executive Information Systems Simulation (and rivalry games) Links to external partners (accounting, law, . . .) Electronic conferencing Work group communication, e-mail Standardization, Modularization, Franchises Knowledge Workers Client-server instead of hierarchical computing

Introduction to MIS 24

Strategy Analysis Product Differentiation

Skills & Resources Strong marketing. Product engineering. Basic research. Distribution channel

cooperation. Organization Requirements

Internal coordination. Incentives for innovation. Resources to attract skills.

Risks Competitors imitate. Customers do not accept. Cost is too high.

Cost Leadership Skills & Resources

Continued capital investment.

Process engineering. Continuous quality

improvement. Tight supervision of costs. Products designed for low

cost. Low cost distribution.

Organization Requirements Tight cost controls. Frequent control reports. Highly structured org. Incentives based on

qualitative measures.

Introduction to MIS 25

Strategy Analysis Cost Leadership

Risks Competitors imitate. Technology changes. Lose production or

distribution advantage.

Customer-Supplier Links Skills & Resources

Influence with partners Communication channels Standards or agreements.

Organization Requirements Flexibility to respond to

customers. Service culture. Ability to adapt to

emergencies. Risks

Security threats. Changing standards. Competitors copy with

more/better links.

Introduction to MIS 26

Money for research

Money for information technology

Dangers:Capital Cost

Introduction to MIS 27

You

Rival

Time

IS Costs

Time

IS Costs

TransactionProcessing

Network & DSS

Network & linksales people

Link to suppliers& customers

Experimentaltechnology& global links

CompetitionFollows

Introduction to MIS 28

Industry 1(expands into

industry 2)

Industry 2(new

competitor)

Customer

Customer

Customer

Customer

Customer

Customer

Customer

Customer

New technologyNew services

Same technology

Changing Industry & Government Intervention

Introduction to MIS 29

Security

Production Firm

Customer

Data we wish to share.

Data we want to protect.

Need to control access.Need to worry about networkinterceptions and hackers.

Securityfirewall

Hackersor competitorsrejected

Introduction to MIS 30

E-Commerce Failures Hundreds of dot-com firms failed in 2001 and 2002 Most relied on pure Internet revenue. Outsourcing

production and shipping. Most relied on advertising revenue—often revenue

from other dot-com firms. Many believed in the importance of being first to

market and becoming the biggest, best-known firm in a niche industry.

Many believed that it was not necessary to make a profit on sales. Money from advertising and stock sales would be sufficient to keep the firm alive until the world changed.

Most were wrong.

Introduction to MIS 31

Cases: Travel Industry

Introduction to MIS 32

Cases: The Sabre GroupAmerican Express

What is the company’s current status?

What is the Internet strategy?

How does the company use information technology?

What are the prospects for the industry?

www.sabre.com

www.americanexpress.com

Introduction to MIS 33

Appendix: Solving ProblemsSolve the right problem

Choose the right tools

Divide the system

Make decisions

Consider consequences

Test the system

Plan implementation

DetailOrganization

Schedule

Customer responseEmployee response

InputProcessOutput

CauseFeasibility

Introduction to MIS 34

Appendix: Evaluating Projects Does the project fit with business goals and management style? Does the project improve the competitive position of the firm? How long will any competitive advantage last? What value or reward is created by the system? What level of technology is needed to create the system?

experimental leading edge established old-hat

What is the probability of technical success? What is the probability of commercial success? What are the costs involved in creating the system?

Monetary Time Additional capital, marketing and management

Introduction to MIS 35

Appendix: Good Business Analysis Identify the root causes of problems. Solid grasp of strategic components. Identify the critical success factors. Evaluate the financial implications. Thorough discussion of implementation. Realistic analysis of expected results. Effect on future growth and continued development. Effect on human resources. Understanding of target markets.

Introduction to MIS 36

Solving Business Problems & Cases Solve the right problem Choose the right tools Divide the system Make decisions Consider the consequences Test the system Plan implementation Case hints

Introduction to MIS 37

Appendix: Organization of Analysis Problem description

Identify most important problems Identify causes of problems

Plan Describe the new system Implementation plan Contingency plan

Advantages Show how your plan solves the problems Explain additional benefits or opportunities