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  • For Internet technologies to be used strategically applications must be correctly positioned. The strategic positioning matrix shown can be used to help a company optimize the strategic impact of Internet Technologies. The matrix recognizes two major drivers: Internal Drivers . The amount of connectivity, collaboration and use of IT within a firm. External Drivers . The amount of connectivity, collaboration and use of IT by customers, suppliers, business partners, and competitors. Cost and Efficiency Improvements . When there is a low amount of connectivity, collaboration and use of IT within the company and by customers and competitors, a firm should focus on improving efficiency and lowering costs by using Internet technologies to enhance communications between the company and its customers and suppliers. Performance Improvement in Business Effectiveness . When there is a high amount of internal connectivity, but external connectivity by customers and competitors is still low, a firm should focus on using Internet technologies like intranets and extranets to make major improvements in business effectiveness. Global Market Penetration . When there is a high degree of connectivity by customers and competitors and low internal connectivity, a firm should focus on developing Internet-based applications to optimize interactions with customers and build market share. Product and Service Transformation . When a company and its customers, suppliers, and competitors are extensively networked, Internet technologies should be used to develop and deploy products and services that strategically reposition it in the marketplace. Teaching Tips This slide corresponds to Figure 2.8 on p. 48 and relates to material on pp. 48-49.
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    1. 1. Competing with Information Technology Dr Sherif Kamel Department of Management School of Business, Economics and Communication
    2. 2. Outline <ul><li>Strategic uses of information technology </li></ul><ul><li>Competitive strategy concepts and forces </li></ul><ul><li>Firm and Internet value chains </li></ul><ul><li>eBusiness strategies </li></ul><ul><li>Virtual organizations and knowledge management </li></ul><ul><li>Cases </li></ul><ul><ul><li>Capital One Financial Corp: Using Information Technology for Competitive Advantage </li></ul></ul><ul><ul><li>GM, Fidelity Investments and Staples: Expanding Strategic Web-based Alliances </li></ul></ul><ul><ul><li>Dell Computer: Benefits and Challenges of B2B eCommerce Strategies </li></ul></ul>
    3. 3. Strategic uses of information technology <ul><li>Technology is no longer an afterthought in forming business strategy, but the actual driver and cause </li></ul><ul><li>It is perceived as a platform to re-engineer organizational development and growth </li></ul>Raise Barriers to Entry Build a Strategic IT Platform Build a Strategic Information Base Increase amount of investment or complexity of IT needed to compete Use IT to provide information to support firm’s competitive strategy Leverage investment in IS resources from operat- ional uses to strategic uses Increase Market Share Create New Business Opportunities Enhance Organizational Collaboration Strategy IT Role Outcome
    4. 4. Competitive strategy concepts <ul><li>The strategic role of information systems involves using information technology to develop products, services and capabilities to provide advantages over competitors </li></ul><ul><li>Strategic information systems (SIS) supports and shapes the competitive position and strategies of an eBusiness enterprise </li></ul><ul><li>What are the competitive forces and competitive strategies? </li></ul>
    5. 5. Competitive forces Rivalry of competitors within its industry Bargaining of power of customers Threat of new entrants Bargaining of power of suppliers Threat of substitutes
    6. 6. Competitive strategies <ul><li>Competitive strategies are developed to counter and meet competitive forces </li></ul><ul><li>The strategies include: </li></ul><ul><ul><li>Cost leadership strategy </li></ul></ul><ul><ul><ul><li>Low-cost producer of products and services </li></ul></ul></ul><ul><ul><ul><li>Reducing the cost for both suppliers and consumers </li></ul></ul></ul><ul><ul><ul><li>Attempting to increase the cost of competitors </li></ul></ul></ul><ul><ul><li>Differentiation strategy </li></ul></ul><ul><ul><ul><li>Developing ways to differentiate a firm’s products and services from its competitors </li></ul></ul></ul><ul><ul><ul><li>Attempting to reduce the competitive differentiation of competitors </li></ul></ul></ul><ul><ul><ul><li>Establishing and focusing on niches of products and services </li></ul></ul></ul><ul><ul><li>Innovation strategy </li></ul></ul><ul><ul><ul><li>Developing new different and innovative ways to do business </li></ul></ul></ul><ul><ul><ul><li>Developing new products and services </li></ul></ul></ul><ul><ul><ul><li>Introducing changes to the business processes </li></ul></ul></ul>
    7. 7. Competitive strategies <ul><ul><li>Growth strategy </li></ul></ul><ul><ul><ul><li>Expanding the firm’s capacity to produce products and services </li></ul></ul></ul><ul><ul><ul><li>Expanding in local, regional and international markets </li></ul></ul></ul><ul><ul><ul><li>Diversifying into additional and new products and services </li></ul></ul></ul><ul><ul><li>Alliance strategy </li></ul></ul><ul><ul><ul><li>Establishing new business partnerships and alliances with various types of counter parts: </li></ul></ul></ul><ul><ul><ul><ul><li>Customers </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Suppliers </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Consultants </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Competitors </li></ul></ul></ul></ul><ul><ul><ul><li>Engaging in mergers, acquisitions, joint ventures, etc…. </li></ul></ul></ul><ul><li>Other competitive strategies that capitalize on the use of information technology and include… </li></ul><ul><ul><li>Locking in customers or suppliers </li></ul></ul><ul><ul><li>Raising barriers to entry </li></ul></ul><ul><ul><li>Leveraging investment in information technology </li></ul></ul>
    8. 8. Competitive forces and strategies Differentiation Customer Competitor New Entrant Cost Innovation Growth Alliance Other Strategies Competitive Forces Substitute Supplier Competitive Strategies Bargaining Power Bargaining Power Threat of Rivalry of Threat of
    9. 9. Value chain and strategic IS <ul><li>The value-chain concept was developed by Michael Porter </li></ul><ul><li>It views the organization as a series, chain or network of basic activities that adds values to its products and services and respectively add a margin of value to the firm </li></ul><ul><li>Value chain have primary and support processes that are vital for the proper flow of activities within the firm </li></ul><ul><ul><li>Primary activities relate to production and distribution of products and services </li></ul></ul><ul><ul><li>Support activities related to the organization infrastructure as well as employees and management </li></ul></ul>
    10. 10. Firm value chain Administrative Coordination and Support Services SIS – Collaborative Work Systems Human Resources Management SIS – Employee Skills Database Systems Technology Development SIS – Computer-Aided Engineering and Design Procurement of Resources SIS – Electronic Data Interchange with Suppliers Inbound Logistics SIS Automated JIT Warehousing Operations SIS Computer Aided Flexible Manufacturing Outbound Logistics SIS Online Point Of Sale And order Processing Marketing And Sales SIS Interactive Targeting Marketing Competitive Advantage Customer Service SIS Help Desk Expert Systems
    11. 11. Internet Value-Chain Marketing and product research Sales and distribution Support and customer feedback Increased market share Lower cost margins Enhanced customer satisfaction Data for market research Establishes consumer Response to new products Environmental scanning Reaches new customers Low-cost distributed method Electronic catalogs Multiplies contact points at no incremental cost Access to customer comments online More staff in contact with customers Immediate response to customer problems Impact capability Benefits to company Opportunities for advantage
    12. 12. Identifying eBusiness/eCommerce strategies <ul><li>eBusiness and eCommerce applications and Internet technology can be used strategically for creating a competitive advantage </li></ul><ul><li>It is important to continuously assess the strategic valuation of different applications </li></ul><ul><li>Firms should know how and when to use Internet-related technology </li></ul>
    13. 13. Strategic positioning matrix of Internet technology Global Market Penetration eCommerce websites Value-added IT Services Customer Relationship Management Product and Services Transformation eBusiness, Intranets and Extranets Cost and Efficiency Improvements eMail, Chat Systems, WWW, discussion groups Performance Improvements in Business Effectiveness Intranets and Extranets Strategy Solution Low High High Customer Competition Connectivity eBusiness Processes Connectivity Internal Drivers External Drivers
    14. 14. Building customer-focused business <ul><li>The driving force behind world economic growth has changed from manufacturing volume to improving customer value </li></ul><ul><ul><li>Moving from product-base to service-base </li></ul></ul><ul><li>As a result, the key success factor for many firms is maximizing customer value </li></ul><ul><li>It is vital to emphasize for customer value that quality rather than prices has become the primary determinant in a customer’s perception of value </li></ul><ul><ul><li>Build a community of customers, employees, and partners </li></ul></ul><ul><ul><li>Let customers place orders directly </li></ul></ul><ul><ul><li>Let customers place orders thru distribution partners </li></ul></ul><ul><ul><li>Let customers check order history and delivery status </li></ul></ul><ul><ul><li>Give all employees a complete view of customers </li></ul></ul><ul><ul><li>Link Employees and distribution partners </li></ul></ul>
    15. 15. Internet and eBusiness-eCommerce Customers Websites Intranets Extranets The Internet Competitive Environment New-Business Product Potential Technology Developments Internet Capabilities Business Partners Competitors Global Markets Vendors Supplier Constraints Cost Containment Price Competition Corporate Communications Human Resources Information Management Marketing Sales Product Distribution Core Business Function Customer Support Product Development Research Systems
    16. 16. Reengineering business processes <ul><li>Reengineering reflects the need to rethinking and radically redesigning business processes to achieve dramatic improvements in… </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Speed </li></ul></ul><ul><ul><li>Service </li></ul></ul><ul><li>Using IT for organizational restructuring </li></ul><ul><li>Job re-design </li></ul><ul><li>Smart-sizing </li></ul>
    17. 17. Becoming an Agile company <ul><li>Moving from a competitive environment in which mass-market products and services were… </li></ul><ul><ul><li>Standardized </li></ul></ul><ul><ul><li>Long-lived </li></ul></ul><ul><ul><li>Information poor </li></ul></ul><ul><ul><li>Exchanged in one-time transaction </li></ul></ul><ul><li>…to an environment that competes globally with niche market of products and services that are… </li></ul><ul><ul><li>Individualized </li></ul></ul><ul><ul><li>Short-lived </li></ul></ul><ul><ul><li>Information rich </li></ul></ul><ul><ul><li>Exchanged on an ongoing basis with customers </li></ul></ul>
    18. 18. Strategies for an agile competitor <ul><li>Enrich customers with solutions to their problems </li></ul><ul><li>Cooperate to enhance competitiveness </li></ul><ul><li>Organize to master change and uncertainty </li></ul><ul><li>Leverage the impact of people and information </li></ul>
    19. 19. Creating a virtual organization (VO) <ul><li>VO is helping executives and staff globally to collaborate without face2face interaction </li></ul><ul><li>A virtual organization uses information technology to link people, assets and ideas </li></ul>
    20. 20. Free-Perfect-Now business model Perfect Now Free Accessibility Delivery Time Customers’ Time to market Anticipation of future needs Customization Conformance Cost of Transaction Cost of Value-added Service Cooperate with Business Partners and Competitors Leverage the Impact of People and IS Resources Give Customers Solutions to Problems Organize to Master Change
    21. 21. Model for a Virtual Organization Alliance with small suppliers Extranets Intranets Alliance with a major supplier Cross-functional teams Engineering teams Alliance with a major customer Manufacturing teams Customer response and order-fulfillment teams Boundary of firm Alliance with subcontractors Alliance with a competitor who provides services that are complementary
    22. 22. Characteristics of virtual organizations <ul><li>Adaptability </li></ul><ul><li>Borderless </li></ul><ul><li>Excellence </li></ul><ul><li>Technology </li></ul><ul><li>Opportunism </li></ul><ul><li>Trust-based </li></ul>
    23. 23. Knowledge management definition <ul><li>Knowledge management creates technologies and rewards for getting employees to share what they know and to make better use of accumulated workplace knowledge </li></ul><ul><ul><li>Knowledge management systems (KMS) help manage the knowledge created within the firm using advanced information and communication technology </li></ul></ul><ul><ul><li>KMS leads to the formulation of processes, formulas, best practices, and help facilitate organizational learning and multiply knowledge creation </li></ul></ul>
    24. 24. Building a knowledge creating company <ul><li>Knowledge is becoming the primary factor for organizational growth and development with a focus on innovation – also called learning organizations </li></ul><ul><ul><li>Explicit knowledge </li></ul></ul><ul><ul><li>Tacit knowledge </li></ul></ul>
    25. 25. Case 1 Capital One Financial Corp.: Using Information Technology for Competitive Advantage
    26. 26. Capital One Financial Corp <ul><li>Capital One Financial Corporation is the most profitable credit card company in the United States </li></ul><ul><li>Uses IT as a strategic foundation for their business strategies and practices </li></ul><ul><li>Leading the credit cards market using cutting edge IT </li></ul><ul><li>Internet and customer relationship management solutions to create over a 100,000 unique customers and credit card products </li></ul>
    27. 27. 3 step-approach for an information-based strategy <ul><li>Step 1 </li></ul><ul><ul><li>Create an idea for a new product offering, find a target population and a business case and then change the environment for members of this group to see how they react </li></ul></ul><ul><li>Step 2 </li></ul><ul><ul><li>Gathering data and analyze the results </li></ul></ul><ul><li>Step 3 </li></ul><ul><ul><li>Use the results to implement micro segmentation or to identify which people are most receptive to specific products and services </li></ul></ul>
    28. 28. Actions taken <ul><li>Track visitors’ activities and offer customized promotions on website </li></ul><ul><li>Study which online visitors that have been successfully converted into customers </li></ul><ul><li>Uses information obtained through studies of visitors activities to buy banner ads on other websites whose visitor demographics matching its own customers </li></ul>
    29. 29. Costs of Competition <ul><li>Capital One has spend hundreds of millions of dollars on hardware, software, network, and data management technologies, and the IT professionals who help develop and maintain their information-based strategy driven systems </li></ul>
    30. 30. Results of using the information-based strategy <ul><li>Doubling the company’s goal of opening 1 million new accounts online </li></ul><ul><li>Customer base has grown from 6 million in 1995 to 33 million today </li></ul><ul><li>Adding 25,000 new customers each day </li></ul><ul><li>Serving a more diversified and customer-base and catering for a wider variety of needs </li></ul>
    31. 31. Case 2 GM, Fidelity Investments and Staples: Expanding Strategic Web-based Alliances
    32. 32. Business Alliances <ul><li>GM and Fidelity Investments joined forces to form a wireless system to keep clients informed anytime, anywhere </li></ul><ul><li>Business alliances among not-so obvious allies are skyrocketing </li></ul><ul><li>Reasons given for forming business alliances include: </li></ul><ul><ul><li>Cost reduction in the supply chain </li></ul></ul><ul><ul><li>Access to new markets </li></ul></ul><ul><ul><li>Opportunity to share in another respected company’s reputation </li></ul></ul><ul><li>Customers can manage their accounts virtually anytime and anywhere </li></ul><ul><li>GM gets free content for its in-car information service </li></ul><ul><li>Fidelity wins access to more than 800,000 commuters who spend an average of 90 minutes per day in their cars </li></ul><ul><li>GM offered the distribution channel, Fidelity offered a service that was attractive to the customers </li></ul>
    33. 33. Staples and Partners <ul><li>Staples Strategy </li></ul><ul><ul><li>Major goal of expanding the website was to increase its product offerings with out taking their eyes off their core businesses (1,100 retail stores) </li></ul></ul><ul><li>Establishing partnerships allowed them to integrate with wholesalers and manufacturers to offer more products </li></ul><ul><li>Staples were able to limit its IT investment by acting as a portal to partners’ websites, rather than linking to their order entry systems or creating a shared data center </li></ul><ul><li>www.staples.com partners ensure that their websites can handle the traffic that Staples sends their way </li></ul><ul><li>Partners are responsible for providing their own infrastructure. </li></ul>
    34. 34. Case 3 Dell Computer: Benefits and Challenges of B2B eCommerce Strategies
    35. 35. Dell Computer and the Internet <ul><li>1994 – Started moving the business online www.dell.com </li></ul><ul><li>1997 – Introduced an electronic catalog that allowed corporate customers to purchase Dell machines over the WWW </li></ul><ul><li>2000 – Dell began to implant itself more deeply into its business customers’ electronic business systems </li></ul>
    36. 36. WebMethods: EAI Software <ul><li>B2B integration software </li></ul><ul><li>EAI technology acts as a software translator and creates a kind of hub that, using the WWW, allows instantaneous communication among networked companies’ internal business systems </li></ul><ul><ul><li>Speed the eProcurement process </li></ul></ul><ul><ul><li>Pull rather than push marketing </li></ul></ul><ul><ul><li>Reduces the number of procurement errors </li></ul></ul><ul><ul><li>Lower costs for processing each order </li></ul></ul>
    37. 37. Dell strategy <ul><li>Customization of prospective B2B customers systems can be very expensive </li></ul><ul><li>Providing 24/7 customer relationship management services </li></ul><ul><li>Experimenting with IT concepts such as data warehousing, event tracking, and demand shaping </li></ul><ul><li>Systems integration </li></ul><ul><ul><li>Web-enabled business enterprise automatically reacts to stimuli from hundreds of sources, makes thousands of adjustments in real time, and gets products to customers very quickly </li></ul></ul>