EBusiness Week 3

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E-Business Week 3

• Strategic Information Systems
• Turban 3rd Edition
• Chapter 3 - Page 80

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Learning Objectives

• Explain what business strategy and strategic
  moves are
• Illustrate how information systems can give
  businesses a competitive advantage
• Identify basic initiatives for gaining a
  competitive advantage
• Explain what makes an information system a
  strategic information system
• Identify fundamental requirements for developing
  strategic information systems

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A Definition of Strategy Strategy is the
direction and scope of an organisation over the
long term which achieves advantage for the
organisation through its configuration of
resources within a changing environment to meet
the needs of markets and to fulfill stakeholder
expectations.
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The Formulation of a Strategy
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Characteristics of Strategic Decisions

• Long-term direction of an organisation
• Achieving advantage
• Scope of an organisations activities
• Matching the activities of an organisation to the
  environment
• Building on or stretching resources and
  competences
• Major resource changes
• Affect operational decisions
• Affected by the values and expectations of those
  in power

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Strategy / Tactical / Operational Planning
Schedule
Year 1
Year 2
Q 1
Year 3
Year 4
Year 5
Operational
Strategic
Tactical
Year 2
Year 3
Q 1
Year 4
Year 5
Year 6
Operational
Strategic
Tactical
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Competitive Strategy IT

• Strategy is the creation of a unique and valuable
  position, involving a set of activities different
  than what rivals do
• IT creates competitive advantage by giving
  companies new ways to outperform their rivals
• Create new applications
• Enable reengineering of business processes
• Enable innovation
• Provide competitive intelligence

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Strategy and Strategic Moves

• Strategy
• A plan designed to help an organization
  outperform its competitors
• Strategic Information Systems
• Information systems that help seize opportunities
• Can be developed from scratch, or they can evolve
  from existing ISs

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Strategy and Strategic Moves (Cont.)

• Strategic advantage
• Using a strategy to maximize strength
• Competitive advantage
• The result of the use of a strategic advantage

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Achieving a Competitive Advantage

• Increase profits through increased market share
• Innovation results in advantage
• Strategies that no one has tried before
• Example Dell using the Web to take customer
  orders

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Achieving a Competitive Advantage (Cont.)
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Achieving a Competitive Advantage
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Success and Failure on the Web

• Being first is not enough for success
• Business ideas must be sound
• An organisation must carefully define what buyers
  want
• Establishing a recognisable brand name is
  important but does not guarantee success
  satisfying needs is more important
• E.g.. Airlines successful, Car Dealers
  unsuccessful

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TYPES OF INFORMATION SYSTEMS
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Strategic Information Systems (SIS)

• An IS that helps achieve long-term competitive
  advantage
• SIS embodies two types of ideas
• Potentially-winning business move
• How to harness IT to implement that move
• Two conditions for SIS
• Serve an organizational goal
• Work with the managers of the other functional
  units

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Strategic Information Systems

• Are systems that support or shape an
  organizations competitive strategy
• Systems that may significantly change the way the
  business operates
• Make substantial contribution toward achieving
  strategic goals
• May increase performance and productivity
  significantly

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Strategic Information Systems

• Outward focus aimed at direct competition in an
  industry. Easy to copy or duplicate, Why?
• Inward focus enhance the competitive position of
  the firm through
• Increasing employee productivity
• Improving teamwork
• Enhancing communication
• Not as easy to copy or duplicate, Why?
• Strategic Alliances - two or more companies share
  an inter-organizational system for mutual benefit

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Creating an SIS

• Top management involvement
• From initial consideration through development
  and implementation
• Must be a part of the overall organisational
  strategic plan

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Steps for Considering a new SIS
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Steps to Take in an SIS Idea-Generated Meeting
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Re-engineering and Organisational Change

• To implement an SIS and achieve a competitive
  advantage, organisation must rethink entire
  operation
• Goal of re-engineering
• Achieve efficiency leaps of 100 or higher

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Competitive Advantage as Moving Target

• SISs developed as strategic advantages quickly
  become standard business
• Banking industry (ATMs, banking by phone and
  Internet Banking)
• Continuous search for new ways of utilising
  information technology to their advantage
• SABRE, American Airlines reservation system

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Sustaining a Competitive Advantage

• Early examples of SIS were difficult to sustain
• Outward systems will probably eventually be
  duplicated by competition
• Combining SISs with structural changes in the
  organisation can provide a sustainable strategic
  advantage
• Inward systems can be kept secret
• Install a comprehensive, complex, innovative, and
  expensive system that cannot easily be duplicated

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Porters Competitive Forces Model

• Used to develop strategies to increase
  competitive advantage
• 5 Components to the model
• Threat of entry of new competitors
• Rivalry among existing industry firms
• Bargaining power of suppliers
• Bargaining power of customers
• Threat of substitute products/services

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The Value Chain
Support activities
Primary activities
Inbound logistics Materials receiving, storing,
and distribution to manufacturing
premises Operations Transforming inputs into
finished products. Outbound logistics Storing
and distributing products Marketing and
Sales Promotions and sales force Service Servic
e to maintain or enhance product value Corporate
infrastructure Support of entire value chain,
e.g. general management planning, financing,
accounting, legal services, government affairs,
and QM Human resources management Recruiting,
hiring, training, and development Technology
Development Improving product and manufacturing
process Procurement Purchasing input
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Porters Value Chain
Competitive Advantage
Administrative Coordination and Support
Services SIS Collaborative Work Systems
Human Resources Management SIS Employee Skills
Database Systems
Support Processes
Technology Development SIS Computer-Aided
Engineering and Design
Procurement of Resources SIS Electronic Data
Interchange with Suppliers
Inbound Logistics SIS Automated Just-in-Time
Warehousing
Operations SIS Computer-Aided Flexible
Manufac- turing
Outbound Logistics SIS Online Point-of-Sale and
Order Processing
Marketing and Sales SIS Interactive Targeted
Marketing
Customer Service SIS Help Desk Expert System
Primary Business Processes
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Porters Value Chain

• Primary Activities
• Inbound Logistics Inbound activities to
  receive, store and distribute inputs to the
  product, such as material handling, inventory
  control, warehousing and contact with suppliers.
• Operations Production activities to create the
  product such as machining, packaging, printing
  and testing.
• Outbound Logistics Outbound activities to
  store and distribute the product to customers,
  including warehousing, order processing and
  vehicle scheduling.
• Marketing and Sales Activities associated with
  providing a means by which buyers can purchase
  the product and be included to do so
  (advertising, selling, pricing, merchandising and
  promotion).
• Service Activities for providing service or
  maintaining product value, including installation
  and training.

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Porters Value Chain

• Support Activities
• Procurement Purchasing input.
• Technology Development Not just machines and
  processes but also expertise, procedures and
  systems.
• Human Resource Management Activities involved
  in recruiting, training and staff development.
• Infrastructure General management, finance,
  planning and quality assurance. Infrastructure
  supports the whole value chain.

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Porters Value System
SUPPLIER VALUE CHAINS
FIRM VALUE CHAIN
CHANNEL VALUE CHAINS
BUYER VALUE CHAINS
In the value system supplier, firm,
distributor, and buyer value chains overlap. The
suppliers outbound logistics is the firms
inbound logistics. The Distributors inbound
logistics is the firms outbound logistics, etc.
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AMERICAN AIRLINES EXAMPLE
American Airlines
Company
Value Chain
Inbound Logistics

At the start, Americans Sabre was an internal
inventory system installed only at airports and
airline ticket offices and used to track seats,
flights and other operational information.

• receive, store and distribute inputs to the
• product, such as material handling, inventory
• control, warehousing and contact with
• suppliers.

Operations


Production activities to create the product such
as machining, packaging, printing and testing
By the late 1960s, Sabre had become an
operational necessity, not a luxury. It cut
costs by automating the seat reservation fare
calculation process and could perform complex
yield management juggling the price and
availability of empty seats to maximize revenue
By 1998, Sabre had evolved into a global
distribution system for travel information,
reservations, and transactions connecting more
than 30,000travel agents and 3 million online
customers with 400 airlines, 50 car-rental
companies, and 35,000 hotels
Outbound Logistics


store and distribute the product to customers,
including warehousing, order processing and
vehicle scheduling
Marketing and Sales


providing a means by which buyers can purchase
the product and be included to do so
(advertising, selling, pricing, merchandising
and promotion).
Frequent Flyer programs
Service


providing service or maintaining product value,
including installation and training.
Web-only fares Travel agency bookkeeping services
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Role of IT in Strategic Mgmt

• Enabler for change!
• Allows creation of new applications for strategic
  advantage (Fed Ex, SABRE)
• Increases Business Intelligence
• Supports strategic changes (BPR)
• Improved communication
• New product development cycles (jeep liberty)
• Benefit comes from being FIRST, everyone else is
  just keeping up! But - hard to sustain!