TOPICS COVERED
- Introduction
- IS support competitive strategy and can create competitive advantages + helps organizations analyze their industry, select a competitive strategy, and develop business processes
- Q3-1: How does organizational strategy determine information systems structure?
- Competitive strategy determines the organization's goals & strategies
- Also determines the structure, features, and functions of every IS
- Figure 3-1: Organizational strategy determines IS
- Industry structure > Competitive strategy > Value chains > Business processes > IS
- Examine structure of industry & determine competitive strategy > determines value chains to determine business processes > design of support IS
- Q3-2: What five forces determine industry structure?
- Porter's Five Forces Model - used to assess industry structure and characteristic; determines industry profitability
- Bargaining power of customers
- Threat of substitutions
- Bargaining power of suppliers
- Threat of new entrants
- Rivalry
- Competitive Forces: vendors manufacturing substitutes, new competitors, and existing rivals
- Bargaining Power Forces: suppliers and customers
- Intensity of each determine how profitable that industry is and how sustainable that profitability is
- Q3-3: How does analysis of industry structure determine competitive strategy?
- Porter's Five Forces + four competitive strategies
- Can focus on being cost leader / differentiating products or services from competition
- Can employ cost/differentiation across an industry / focus on particular industry segment
- (Industry-wide & Focus x Cost & Differentiation) four-square matrix table
- To be effective > organization's goals, objectives, culture, and activities must be consistent with organization's strategy
- Q3-4: How does competitive strategy determine value chain structure?
- Value - amount of money customer willing to pay for a resource, product, or service
- Margin - difference between value an activity generates and cost of the activity
- Differentiation - will add cost to activity, as long as have positive margin
- Value Chain - network of value-creating activities
- Consists of : 5 Primary Activities and 4 Support Activities
- A. Primary Activities
- Inbound Logistics - Receiving, storing, and disseminating inputs to products
- Operations/Manufacturing - Transforming inputs into final products
- Outbound Logistics - Collecting, storing, and physically distributing products to buyers
- Sales and Marketing - Inducing buyers to purchase products and providing a way to do so
- Customer Service - Assisting customers' use of products > maintaining and enhancing the products' value
- B. Support Activities
- Contribute indirectly to the production, sale, and service of the product
- Procurement - process of finding vendors, setting up contractual arrangements, and negotiating prices
- Human resources - recruiting, compensating, evaluating, and training full-time and part-time employees
- Infrastructure - general management, finance, accounting, legal, and gov't affairs
- Value Chain Linkages - interactions across value activities
- Q3-5: How do business processes generate value?
- Business process - Generating value of network activities by transforming inputs into outputs
- Inbound logistics > Manufacturing > Outbound Logistics > Sales and Marketing > Customer Service
- Cost - cost of inputs + costs of the activities
- Activity - business function > receives inputs and produces outputs
- Repository - collection of something; e.g. a database is a repository of data
- Business Process Management - method that a company chooses to execute their steps; vary in cost and effectiveness
- Q3-6: How does competitive strategy determine business processes and the structure of information systems?
- Bike rental example to students vs. executives
- Value generating activity: Greet customer > Determine needs > Rent Bike > Return Bike & Pay
- For student straight forward, low cost
- For business executive offer options
- Q3-7: How do information systems provide competitive advantages?
- A. Competitive Advantage via Products
- Creating new products or services
- Enhancing existing products or services
- Differentiating products and services from their competitors
- B. Competitive Advantage via Business Processes
- High switching costs - lock in customers, make it difficult or expensive to switch to another product
- Lock in suppliers, make difficult to switch to another organization / make it easy to connect & work with organization
- Creating entry barriers - expensive & difficult for new competition to enter market
- Establish alliances - with other organizations
- Establish standards, promote product awareness and needs, develop market size, reduce purchasing costs, and provide other benefits
- Reducing costs - reduce prices and/or increase profitability
- Decreasing costs and errors to increase profit margins
- C. How does an actual company use IS to create competitive advantage?
- ABC EXAMPLE Page 98
- Maintains customer account data > IS collects info for ABC (adds value) > IS saves customers time by automatically filling in form online (adds value for customer)
- Package and information delivery > IS helps customers select delivery address and generate shipping labels
- Q3-8: 2026?
- The pace of change is likely to have a big change. Technology is changing at a rapid pace, creating opportunities to take advantage of. To fully realize they opportunities one must continue to evolve and adapt as time passes and take advantage of opportunities that new products create.
- Augmented reality devices will change competitive landscape
- Introduction of self-driving cars, drones, 3D printing