strategic information systemsis
DESCRIPTION
all about information systemTRANSCRIPT
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Strategic Information Systems
Infsy 540Dr. R. Ocker
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Foundations of Information Systems
Vladimir ZwassVladimir Zwass
Chapter 3: Competing with Information Systems
Irwin/McGraw-Hill
First EditionFirst Edition
© The McGraw-Hill Companies, Inc.., 1998
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Business challenges of an Information Society Global competition
– rapid product and process innovation Increases in amount of knowledge that
affect your business– need organizational knowledge
management supported by IS faster base of business events
– time-based competition
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How role of IS has evolved
1. Operational support 2. Support of management and
knowledge work 3. Support of business transformation
and competition 4. Ubiquitous computing
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©The McGraw-Hill Companies, Inc., 1998
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Irwin/McGraw-Hill
Era I of Organizational Computing: Operational Support
Era I of Organizational Computing: Operational Support
Support ofOperations
LargeCompany
Units
SingleDP/IS
DepartmentEfficiency
PrimaryObjective
Justification
Primary“Clients”
Source
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Era 1 operational support
1950s-1970s Single data processing department which developed all applications end users - no direct access to
computer technology large backlog
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©The McGraw-Hill Companies, Inc., 1998
3- 4
Irwin/McGraw-Hill
Era II of Organizational Computing: Support of Management & Knowledge Work
Era II of Organizational Computing: Support of Management & Knowledge Work
ManagementSupport
IndividualManagers
andProfessionals
InformationSystems Units
and EndUsers
ManagementEffectiveness
PrimaryObjective
Justification
Primary“Clients”
Source
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Era II support management & knowledge work Began late 1970s Apple II PC 1977 end-user software beginning of end user computing
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©The McGraw-Hill Companies, Inc., 1998
3- 3
Irwin/McGraw-Hill
Era III of Organizational Computing: Supportof Business Transformation & Competition
Era III of Organizational Computing: Supportof Business Transformation & Competition
EntrancedCompetitive
Position
Line ofBusiness
Units
CoordinatedOrganizational
End UserComputing
Market Shareand
Profitability
PrimaryObjective
Justification
Primary“Clients”
Source
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Era III Support Business Transformation & Competition Mid 1980s - orgs. heavy reliance on
computers strategic information systems became
prominent systems support line-of-business units,
e.g. development and marketing of a product
line-of-business units control their own systems
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©The McGraw-Hill Companies, Inc., 1998
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Irwin/McGraw-Hill
Era IV of Organizational Computing: Ubiquitous
Era IV of Organizational Computing: Ubiquitous
ElectronicIntegration
CollaboratingTeams
Owned andOutsourcedComputing
Infrastructure
Organiza-tional
Effectiveness
PrimaryObjective
Justification
Primary“Clients”
Source
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Era IV Ubiquitous computing
Cannot pursue competitive advantage based on single system
Competing with information systems must be based on a broad and continually enhanced technology platform linked to corporate strategy
networks & client/server architecture electronic integration of entire
organization
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Strategic Information Systems (SIS) A strategic system alters the way an
organization does business some systems - offer a company a clear
competitive advantage - higher profits or increased market share
most strategic systems - enable a company to be an effective competitor
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Strategic Information Systems
rapid diffusion of technological change makes it difficult to maintain a competitive advantage
so strategic development of IS– dynamic capability of an org.– not a static attribute
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What are Strategic Systems? An information system designed to give
the owner organization a strategic competitive advantage.
A strategic system supports or shapes a business unit's competitive strategy.
outward looking: customers, competitors, environments
inward looking: employees, systems, procedures
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Characteristics of Strategic Information Systems:
significantly change business performance
contribute to attaining a strategic goal fundamentally change the way a
company does business, or the way it competes, or the way it deals with its customers or
suppliers.
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Strategic systems
External focus– changes way firm competes
innovative use of IT high degree of project risk
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Strategies, Forces, and Tactics in Competitive Markets
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Competitive Strategies
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Uncovering Strategic Use of Systems
1. Analyze competitive forces 2. Study the value chain
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1. Competitive Forces Model
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1. Competitive Forces model
used to describe the interaction of external influences -- threats and opportunities -- that affect an organization’s strategy and ability to compete
competitive advantage - can be achieved by enhancing the firm’s ability to deal with customers, suppliers, substitute products and services, and new entrants to its market
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1. Competitive Forces model
Objective - use this model to identify potential areas where IT can be used to gain a competitive advantage
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Competitive Strategies for competing in marketplace businesses can use four basic
competitive strategies to deal with these competitive forces:
1. Product Differentiation 2. Cost leadership 3. Focused differentiation 4. Cost Focus
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©The McGraw-Hill Companies, Inc., 1998
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Irwin/McGraw-Hill
Competitive StrategiesCompetitive Strategies
Competitive AdvantageCompetitive Advantage
Competitive Competitive ScopeScope
Lower Cost Differentiation
BroadTarget
NarrowTarget
CostLeadership
CostFocus
Differentiation
FocusedDifferentiation
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1. Differentiation
competitive strategy for creating brand loyalty
Develop products & services which are different from what the competition offers
. superior attributes . distinguishing features
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2. Cost leadership
to prevent new competitors from entering their markets, businesses produce goods/services at lower price than competition
based on efficient operations based on effective operations economies of scale
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3. Focused differentiation
develop new market niche for specialized products or services
so that business can compete in target market better than its competitors
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4. Cost Focus
Company serves narrow market segment with product/service
which it offers at a significantly lower cost than competitors
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Competitive Forces
Use competitive strategy to combat 5 competitive forces in marketplace
1. threat of new competitors 2. bargaining power of suppliers 3. bargaining power of customers 4. substitute products 5. rivalry within the industry
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Competitive Forces
Use IT to enact or counteract these forces with respect to – customers– existing & potential competitors– suppliers
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Threat of new competitors
Erect barriers to entry: use IT to slow down new firms entering
market– SABRE– ASAP
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Intensify rivalry among competitors Change basis of competition
– novel IS can perhaps change the basis of competition - help offer product/service with new features
– e.g. delivery service allows customer to track progress of package
– you are now differentiated from competition– no longer compete just on price basis
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Pressures from potential substitute products Deliver products with better value identify and track a market niche with IS
that you can serve better than others try to prevent substitution
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Bargaining power of customers
Introduce switching costs– cost of switching to competitor– deters customers from switching– e.g. due to training and contracts, travel
agents unlikely to switch to different airline reservation system
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Bargaining power of suppliers
Develop Alternatives use IS to maintain information on
available alternative sources of supply
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Tactical Moves in Pursuing a Strategy Firm can use any of several tactics to
change its products or processes through use of SIS– Internal innovation - generate new
knowledge– internal growth - economies of scale– Mergers & acquisitions– Strategic alliances - partnerships with other
companies
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IOS & Strategic Alliances
strategic alliances:– information partnership - cooperative
alliance formed between two firms Advantages
– share information systems– reciprocity of competencies– economy of time and money
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©The McGraw-Hill Companies, Inc., 1998
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Irwin/McGraw-Hill
The Strategic CubeThe Strategic Cube
CustomerPower
SupplierPower
PresentCompetitors
PotentialCompetitors
SubstituteProducts
COMPETITIVECOMPETITIVEFORCES TOFORCES TO
CONTEND WITHCONTEND WITH
STRATEGIESSTRATEGIES
TACTICSTACTICS
StrategicAlliance
Merger orAcquisition
Internal Growth
InternalInnovation
Diff
eren
tiatio
nC
ost L
eade
rship
Focu
sed
Diff
eren
tiatio
nC
ost F
ocus
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3. Value Chain
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Value Chain
Tool to use to discover where a company can apply IS to gain a competitive advantage
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Value Chain Analysis of Strategic Opportunities value chain model highlights the primary or support
activities that add a margin of value to a firm’s
products or services where information systems can best be
applied to achieve a competitive advantage
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Value Chain Analysis of Strategic Opportunities Value chain consists of the major
activities that have been added to the product during its creation,development or sale.
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Activities in the value chain Activities in the creation of product or service
– inbound logistics - obtain raw materials– Operations - transformation of inputs to
finished goods– Outbound logistics - storing products and
delivering them– Marketing/sales - establishing a customer
need– Service activities - after-sale service and
maintenance each of these activities adds value to final
product
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©The McGraw-Hill Companies, Inc., 1998
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Value Chain with Typical Strategic IS Mapped onto it
Value Chain with Typical Strategic IS Mapped onto it
EDI-BasedPurchasingSystem
Computer-IntegratedMftg.
AutomatedOrderingSystem
ExpertSystems forSalespeople
TelemaintenanceExpertSystems
InboundLogistics Operations
OutboundLogistics
Marketingand Sales Service
Downstream Chains of Customers
Upstream Chainsof Suppliers
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Value Chain
besides determining discrete steps in chain - also need to analyze linkages between steps in value chain
Use value-chain analysis to identify strategic information systems
to use IS strategically, must identify potentially info.-related aspects of each activity in value chain and linkages between them.
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Virtual Value Chain
Mirrors with information the physical value chain
possible to integrate the systems mapped onto the physical value chain (fig. 3.14) to produce the virtual V.C.
can also link V.C. to that of suppliers and customers to form an integrated supply chain
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point of analysis
identify stages and links where highest-impact potential is available and creatively use IS to bring about that potential.
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Organizational Requirements for Successful SIS
Active support of Senior management - not just MIS management
Integrated Planning - for strategic use of IS into overall company strategic planning process
Readiness: successful use of MIS already, org. experience with tech. innovation
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Sustainability of a competitive advantage depends on: 1. lead time will allow the achievement
of competitive advantage 2. Copy cats may fail because of
Uniqueness 3. If copied: Your organization will still
have preempted the marketplace
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©The McGraw-Hill Companies, Inc., 1998
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Irwin/McGraw-Hill
Key Terms in Chapter 3Key Terms in Chapter 3
Information SocietyBusiness GlobalizationProduct InnovationProcess InnovationKnowledge ManagementStrategic Information SystemCompetitive Forces ModelDifferentiationCost LeadershipFocused DifferentiationCost FocusValue Chain
Information SocietyBusiness GlobalizationProduct InnovationProcess InnovationKnowledge ManagementStrategic Information SystemCompetitive Forces ModelDifferentiationCost LeadershipFocused DifferentiationCost FocusValue Chain