session#2; competing with information systems

1 N.Karami, MIS-Spring 2012

Management Information Systems

Competing with Information Systems

Graduate School of

Management & Economics

Competing with

Information Systems




Graduate School of


Learning Objectives

• Describe the various types of information

systems by breadth of support.

• Identify the major information systems that

support each organizational level.

• Describe strategic information systems (SISs),

and explain their advantages.

• Describe porter’s competitive forces model and his value chain model, and explain how IT helps companies improve their competitive positions.

• Describe five strategies that companies can use to achieve competitive advantage in their industries.




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Opening Case

Upstream activities:

exploration and production

Downstream activities:

refining, marketing,

transportation, sales




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• It is sometimes necessary to completely Change

business models and strategies to succeed in the digital

economy.

• Web-based IT enables companies to gain competitive

advantage in the face of serious corporate threat.

• Extensive networked computing infrastructure is

necessary to support a large global system.

• It is necessary to patent innovative systems to assure

competitive advantage.

How to use IS to compete in

todays environments




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Information Systems Inside Your

Organization




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Information Technology Outside

Your Organization




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Information Systems Support for

Organization Employees

• Office automation systems (OAS)

• Functional area information systems (FAIS)

• Business intelligence systems (BI)

• Expert Systems

• Dashboards




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The Four Major Types of

Information Systems




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1. Transaction Processing Systems (TPS)

2. Management Information Systems (MIS)

3. Decision-Support Systems (DSS)

4. Executive-Support Systems (ESS)

Four Major Types of Systems




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A Symbolic Representation for a

Payroll TPS




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MIS & TPS




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Voyage-estimating Decision

Support System




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Model of a Typical Executive

Support System




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Interrelationships Among Systems




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Competitive Advantage &

Strategic Information Systems

• Competitive strategy

– statement of goals, plans and policies to reach

that goals to be competitive

• Competitive Advantage

• Strategic Information Systems (SIS)

– Systems that support or shape a business unit’s

competitive strategy




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IS Strategy

• The plan an organization uses in providing information

services.

• IS allows business to implement its business strategy.

• IS helps determine the company’s capabilities.

• IS strategy supports the competitive position and

strategies of a business enterprise.

• IS strategy uses IT to help an organization gain

competitive advantages, reduce competitive

disadvantages.




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Porter’s Competitive Forces

Model (1)

• The best-known framework for analyzing

competitiveness is Michael Porter’s

competitive forces model (Porter, 1985).

• * Model is used to develop strategies to

increase their competitive edge.

• * Demonstrates how IT can make a company

more competitive.

– Five competitive forces shape fate of firm




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In Porter’s competitive forces model, the strategic position of the firm and its

strategies are determined not only by competition with its traditional direct

competitors but also by four forces in the industry’s environment: new market

entrants, substitute products, customers, and suppliers.


Model (2)




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1. Traditional competitors

• Competitors in market space continuously devise new

products, new efficiencies, switching costs

2. New market entrants

• Some industries have low barriers to entry

• E.g. food industry vs. microchip industry

• Newer companies may have advantages

• Newer equipment, younger workforce, etc.


Model (3)




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3. Substitute products and services

• Substitutes customers can purchase if your prices too high

• E.g. Internet music service vs. CDs

4. Customers

• Can customers easily switch to competitor’s products?

• Can customers force firm and competitors to compete on

price alone (transparent marketplace)

5. Suppliers

• The more suppliers a firm has, the greater control it can

exercise over suppliers


Model (4)




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Fundamentals of Strategic

Advantage

Cost Leadership

Product

Differentiation

Innovation

Strengthen

customer &

supplier intimacy

Focus on market

niche

Other strategies




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IS Strategies for Dealing with

Competitive Forces (1)

• Low-cost leadership– Use information systems to achieve the lowest operational

costs and the lowest prices

• Reduce inventory (JIT)

• Reduce manpower costs per sale

• Help suppliers or customers reduce costs

• Increase costs of competitors

• Reduce manufacturing costs (process control)

– E.g. Wal-Mart

• Inventory replenishment system sends orders to suppliers

when purchase recorded at cash register

• Minimizes inventory at warehouses, operating costs

• Efficient customer response system

http://www.walmart.com/

http://www.walmart.com/




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Wal-Mart’s continuous

inventory replenishment

system uses sales data

captured at the checkout

counter to transmit orders to

restock merchandise

directly to its suppliers. The

system enables Wal-Mart to

keep costs low while fine-

tuning its merchandise to

meet customer demands.


Competitive Forces (1): Example




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• Product differentiation

– Use information systems to enable new products and services, or

greatly change the customer convenience in using your existing

products and services (E.g. Google’s continuous innovations,

Apple’s iPhone)

– Create a positive difference between your products/services &

the competition.

– May allow you to reduce a competitor’s differentiation advantage.

– Use information systems to customize, personalize products to fit

specifications of individual consumers (E.g. Dell, Land’s End’s

mass customization )



http://www.southwest.com/

http://www.southwest.com/

http://www.dell.com/

http://www.dell.com/




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On the Dell Inc. Web site,

customers can select the

options they want and order

their computer custom built

to these specifications.

Dell’s assemble-to-order

system is a major source of

competitive advantage.


Competitive Forces (2): Example




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• Innovation– Citibank

– New ways of doing business

• Unique products or services

• New ways to better serve customers

• Reduce time to market

• New distribution models



http://www.citi.com/

http://www.citi.com/




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• Focus on market niche

– Use information systems to enable specific market focus,

and serve narrow target market better than competitors

• Analyzes customer buying habits, preferences

• Advertising pitches to smaller and smaller target

markets

– E.g. Hilton Hotel’s OnQ System

• Analyzes data collected on guests to determine

preferences and guest’s profitability



http://www.google.com/imgres?imgurl=http://www1.hilton.com/ts/en_US/hotels/content/YOWOVHF/media/images/YOWOVHF_Hilton_Lac-Leamy_home_right.jpg&imgrefurl=http://www1.hilton.com/en_US/hi/hotel/YOWOVHF-Hilton-Lac-Leamy-Quebec/index.do&usg=__gIrES8saVmpmHAj07XcX02lOPyI=&h=218&w=340&sz=8&hl=en&start=10&sig2=4YmAWCj7DJTRj-vwvwqSyA&zoom=1&tbnid=LMOfFFVqoHxHwM:&tbnh=76&tbnw=119&ei=-H9CTuWCFsuG-waV35TACQ&prev=/search?q=.+Hilton+Hotels&hl=en&sa=X&rls=com.microsoft:en-us&tbm=isch&prmd=ivns&itbs=1

http://www.google.com/imgres?imgurl=http://www1.hilton.com/ts/en_US/hotels/content/YOWOVHF/media/images/YOWOVHF_Hilton_Lac-Leamy_home_right.jpg&imgrefurl=http://www1.hilton.com/en_US/hi/hotel/YOWOVHF-Hilton-Lac-Leamy-Quebec/index.do&usg=__gIrES8saVmpmHAj07XcX02lOPyI=&h=218&w=340&sz=8&hl=en&start=10&sig2=4YmAWCj7DJTRj-vwvwqSyA&zoom=1&tbnid=LMOfFFVqoHxHwM:&tbnh=76&tbnw=119&ei=-H9CTuWCFsuG-waV35TACQ&prev=/search?q=.+Hilton+Hotels&hl=en&sa=X&rls=com.microsoft:en-us&tbm=isch&prmd=ivns&itbs=1




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• Strengthen customer and supplier intimacy

– Strong linkages to customers and suppliers increase

switching costs and loyalty

– Chrysler: Uses IS to facilitate direct access from

suppliers to production schedules

• Permits suppliers to decide how and when to ship suppliers

to Chrysler factories, allowing more lead time in producing

goods.

– Amazon: Keeps track of user preferences for

purchases, and recommends titles purchased by

others



http://www.amazon.com/

http://www.amazon.com/

http://www.google.com/imgres?imgurl=http://www.thetruthaboutcars.com/wp-content/uploads/2009/06/chrysler_logo.jpg&imgrefurl=http://www.thetruthaboutcars.com/2009/06/chrysler-rip-2/&usg=__BTeg_k0BiNvc5w5qsybYyPDsoaI=&h=320&w=320&sz=9&hl=en&start=6&sig2=AB9tM6WFkyNo5kk0N4oqJQ&zoom=1&tbnid=WcI8kLZJ4AoyEM:&tbnh=118&tbnw=118&ei=p39CTrfZCMT0-ga_8ZWoCQ&prev=/search?q=Chrysler&hl=en&sa=X&rls=com.microsoft:en-us&tbm=isch&prmd=ivns&itbs=1

http://www.google.com/imgres?imgurl=http://www.thetruthaboutcars.com/wp-content/uploads/2009/06/chrysler_logo.jpg&imgrefurl=http://www.thetruthaboutcars.com/2009/06/chrysler-rip-2/&usg=__BTeg_k0BiNvc5w5qsybYyPDsoaI=&h=320&w=320&sz=9&hl=en&start=6&sig2=AB9tM6WFkyNo5kk0N4oqJQ&zoom=1&tbnid=WcI8kLZJ4AoyEM:&tbnh=118&tbnw=118&ei=p39CTrfZCMT0-ga_8ZWoCQ&prev=/search?q=Chrysler&hl=en&sa=X&rls=com.microsoft:en-us&tbm=isch&prmd=ivns&itbs=1




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• Some companies pursue several strategies at same

time– Dell emphasizes low cost plus customization of products

– Parker Hannifin offers products with unique features but

competes on price

• Creating switching costs

• Leveraging investment in IT– Allows the business to take advantage of strategic opportunities

• Raising barriers to entry– Improve operations or promote innovation






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The Value Chain

• Highlights specific activities in a business

where competitive strategies can best be

applied and where information systems are

likely to have a strategic impact

• Porter’s Value Chain Model

– This model identifies specific activities where

organizations can use competitive strategies for

greatest impact.

• Primary activities

• Support activities




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This figure provides examples of systems for both primary and support activities of a firm and of its

value partners that would add a margin of value to a firm’s products or services.

The Value Chain Model




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Airline Industry Value Chain

Model




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• A firm’s value chain is linked to the value chains of

its suppliers, distributors, and customers

• A value web is a collection of independent firms

that use information technology to coordinate their

value chains to produce a product collectively

• Value webs are flexible and adapt to changes in

supply and demand

Extending the Value Chain

The Value Web:




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The value web is a networked

system that can synchronize

the value chains of business

partners within an industry to

respond rapidly to changes in

supply and demand.

The Value Web




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Strategic Information Systems

Frameworks

• Porter and Millar’s framework

• Wiseman and MacMillan framework

• Bakos and Treacy framework

• Customer resource life cycle framework




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Porter and Millar Framework

• Industry structure has changed

• Rules of competition have changed

• Organizations have outperformed competition

using IT




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Porter and Millar

Five-Step Process

• Access information intensity

• Determine the role of IT in the industry

structure

• Identify and rank the ways in which IT can

create competitive advantage

• Investigate how IT might spawn new

businesses

• Develop a plan for taking advantage of IT




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Wiseman and MacMillan Framework

• Based on Porter’s strategies (Cost;

Differentiation)

• Innovation

• Growth

• Alliance

• Time




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Wiseman's Strategic Option

Generator




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Bakos and Treacy Framework

• Bargaining power and comparative efficiency

• Search related costs

• Unique product features

• Switching costs

• Internal efficiency

• Interorganizational efficiency




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A Casual Model of Competitive

Advantage




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Customer Resource Life Cycle

Framework• Ives and Learmouth, 1984

• Customer relationship key to strategic

advantage?

• Thirteen fundamental stages of the customer

relationship




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Customer Resource Lifecycle

(CRLC)




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Why are IS Important to

Organizations & Society

• IT will reduce the number of middle

managers.

• IT will change the manager’s job.

• IT provides quality-of-life improvements.




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The Robot Revolution(1)

See Invasion of the Humanoid Robots

http://images.businessweek.com/ss/05/06/robots/source/1.htm




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See video of Big

Dog robot in

action

The Robot Revolution (continued)

BigDog.wmv




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DeLaval Voluntary Milking System




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Improvements in Health Care




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Improvements in Health Care (continued)

The Pill Cam: Wireless endoscopy




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The daVinci Surgical Robot

The robot

The surgeon’s console




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The daVinci Surgical Robot (continued)

The daVinci robot in use




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Medical Simulation

Two physicians

perform a

procedure on a

simulated human

(mannequin)

session#2; competing with information systems

Documents