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Strategic Strategic Information Information

SystemsSystemsfor Competitive for Competitive

AdvantageAdvantage

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The IS Pyramid

TPS

MIS

EIS/SISQuestions: EIS? MIS? TPS? DSS?

• Functionality• Whom to support?• What IT to adopt?

DSS

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Data Warehouses , Data Marts & Data Mining

Transactional/Operational Systems

Analytical Processing Systems

TPS

MIS

EIS

Databases

Enterprise Data

Warehouses

Manufacturing

Marketing

Extraction,Transformation

Sales

Data Marts

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Data Warehouses

A data warehouse is a relational and or multidimensional database management system designed to support management decision making.

The data in the “warehouse” is stored in a single, agreed-upon format even when underlying operational databases store the data differently.

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Data Warehouses

Data Warehouse Advantages It removes barriers among functional areas by

offering a way to reconcile views from multiple sources, thus providing a look at activities that cross functional lines.

It reports on trends across multidivisional and/or multinational operating units, including trends or relationships in areas such as merchandising, production planning, and so forth.

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Multidimensional Database Model can be the core of data warehouses data are stored in arrays consists of at least three dimensions dimensions are the edges of the cube, and

represent the primary “views” of the business data the data are intimately related and can be viewed

and analyzed from different perspectives, which are called dimensions

allows for the effective, efficient, and convenient storage and retrieval of large volumes of data

8Figure 5.13 Relational databases

9Figure 5.14 Multidimensional databases

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Data Marts a scaled-down version of a data warehouse that

focuses on a particular function area usually designed to support the unique business

requirements of a specific department or business process. Example : Marketing data mart

takes less time to build, costs less, and less complex the indiscriminate introduction of multiple data marts

with no linkage to each other, or to an enterprise data warehouse, will cause problems

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Data Mining provides a means of extracting previously

unknown, predictive information from the base of accessible data in data warehouses

discovers hidden patterns, correlations, and relationships among organizational data

predicts future trends and behaviors, allowing businesses to make proactive, knowledge-driven decisions

functions of data mining classification » clustering » association sequencing » forecasting

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EIS or SIS

Executive Information Systems / Strategic Information Systems

To address “competition”To assist in determining:• Strategic decisions• Planning horizon• Competitive forces• Value-added activities• Information technology

TPS

MIS

EIS

CompetitiveAdvantages:

Cost,Quality, and

Velocity

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The Role of IT & SIS in The Role of IT & SIS in Strategic ManagementStrategic Management

Competitive tools (speed, service, innovation, cost and quality)

Reengineering business processes Inter-organizational linkage (networking,

telecommunications, EAI, e-commerce, supply chain optimization, etc.)

Knowledge management – competitive (business) intelligence (products, customers, competitors, markets, environments, regulation, technology, etc.)

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Porter’s Competitive Forces Porter’s Competitive Forces ModelModel

Existing competitors New competitors The bargaining power of suppliers The bargaining power of

customers/buyers Substitutes

                                      

ResponseStrategies?

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1. Threat of New Entrants

The ease with which firms can enter into a new market or industry is a critical variable in the strategic management process.

1. AMD vs. Intel1. AMD began producing chips that could compete with Intel

products

2. Word vs. WordPerfect1. WordPerfect dominated word processing in the 1980’s but

Microsoft introduced a competing product and kept chipping away at WordPerfect domination. Today Word Dominates.

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1. Threat of new entrants Implications for firm

Increased capacity in the industry Reduced prices Decreased market share

Potential Use of IS to Combat Competitive Force Better web site to reach customers and

differentiate product Inventory control system to lower costs and

better manage excess capacity

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2. Bargaining Power of Suppliers

Powerful Suppliers can exert considerable influence on the buyers (e.g. dictating terms, controlling prices).

Examples: MICROSOFT was so powerful with Windows it

insisted that Windows Explorer be the default Web browser. - It took government intervention to reduce that power

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2. Bargaining power of suppliers Implications for firm

Reduced quality Prices raised

Potential Use of IS to Combat Competitive Force Use internet to establish closer electronic ties

with suppliers and to create relationships with new suppliers located far away

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3. Bargaining Power of Buyers

A powerful buyer may often dictate terms to suppliers which has a strong impact on the way they do business

Example: Dell Computer: Dell’s JIT delivery demands

forced suppliers to build facilities near Dell.

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3. Bargaining power of buyers Implications for firm

Increased quality Reduced prices Demand for more services, quicker delivery, etc.

Potential Use of IS to Combat Competitive Force Implement CRM system to serve customers better Implement CAD/CAM system to improve product

quality

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4. Threat of substitute products and services

The competition engendered by a Threat of Substitute often comes from products outside the industry. Computers destroyed the typewriter industry TV nearly destroyed newspapers Airlines threaten busses & trains Online trading replaces human brokers.

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4. Threat of substitute products and services

Implications for firm Losing customers for life Decreased market share

Potential Use of IS to Combat Competitive Force Use DSS and customer purchase database to

assess trends and customer needs better Use CAD systems to redefine products

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5. Rivalry among existing firms Pure competition among rival firms drives

profits to zero. But firms strive for a comparative advantage over rivals … continuously changing to keep an edge

If you don’t change – you’re DEAD! Wal-mart is a price leader Pharma developed alliances Car Manufacturers rely on improving quality and

innovation

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5. Rivalry among existing firms

Implications for firm Competition in price, product distribution, and

service Potential Use of IS to Combat Competitive

Force Implement information system to reduce costs

and be able to act and react more quickly Implement web site to offer better service to

customers

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Value Chain ModelsModels that highlights the primary and support activities that add a margin of VALUE to a firm’s products and/or services where the information systems can be applied to achieve a competitive advantage.

FactoriesFactories WarehouseWarehouse D.C.D.C.

Delivery Delivery

Cu

sto

mer

sSuppliersSuppliers

Value Chain ModelPrimary Activities

InboundLogistics Operations

OutboundLogistics

MarketingMarketingSalesSales

ServicesServices

Support Activities

FactoriesFactories WarehouseWarehouse D.C.D.C.

Delivery Delivery

Cu

sto

mer

sSuppliersSuppliers

What IT/IS Can Be Applied?

Primary Activities

InboundLogistics Operations

OutboundLogistics

MarketingMarketingSalesSales

ServicesServices

Support ActivitiesAutomated

WarehousingSystems

IntegratedManufacturing Planning &

Control Systems

AutomatedShipment &Scheduling

Systems

Marketing Research

DSS;CRM

Field Service Scheduling Systems;

Equipment Maintenance

Systems

FactoriesFactories WarehouseWarehouse D.C.D.C.

Delivery Delivery

Cu

sto

mer

sSuppliersSuppliers

What IT/IS Can Be Applied?

Primary Activities

InboundLogistics Operations

OutboundLogistics

MarketingMarketingSalesSales

ServicesServices

Support Activities

E-Administration; Office Automation

Workforce Planning Systems

Computer-Aided Design

Computerized

OrderingSystems;

CRM

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DiscussionConflicts in Strategic Business Objectives

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If you were a Chief Marketing Officer…What are your business goals?

Increase market sharesIncrease salesIncrease revenuesHigh customer service level

What to do to achieve these goals? Offer high product availabilityOffer high product variability – mass customization

Impacts?

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If you were a Chief Manufacturing Officer…What are your business goals?

Keep low operating costs

What to do to achieve these goals? Keep long production runs on a few products(mass production)Keep fewer changeoversMaintain high inventories of raw materials andwork-in-process subassemblies

Impacts?

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If you were a Chief Financial Officer…What are your business goals?

Keep investment and costs low

What to do to achieve these goals? Keep long production runs on a few products(mass production)Keep fewer changeoversMaintain low inventories of raw materials andwork-in-process subassemblies

Impacts?

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DiscussionStrategic Decisions Making on Supply Chain Management

PlantsPlants

Dealers Dealers RetailersRetailers

CustomersCustomers

SuppliersSuppliers

DistributorsDistributors

Strategic Supply Chain Decisions

Site Location / Expansion Facility Missions / New Lines / New Processes Product Sourcing / To Make or to Buy? Inventory Deployment Strategy Transportation Strategy Service Territory Alignment

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The Solutions…The Solutions…

Integrated Enterprise Resource Planning and Scheduling System

Supply Chain Optimization & Synchronization