Management Information System one or two chapter By Amjad Ali Depar MBA Student

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McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
2
Competing
with
Information Technology

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Objectives
Identify basic competitive strategies and
explain how IT may be used to gain
competitive advantage.
Identify strategic uses of information
technology.
How does business process engineering
frequently use e-business technologies for
strategic purposes?

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(Objectives – continued)
Identify the business value of using e-business
technologies for total quality management, to
become an agile competitor, or to form a
virtual company.
Explain how knowledge management systems
can help a business gain strategic advantage.

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Section I
Fundamentals of Strategic Advantage

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Fundamentals of Strategic Advantage
Competitive Forces (Porter)
Bargaining power of customers
Bargaining power of suppliers
Rivalry of competitors
Threat of new entrants
Threat of substitutes

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Competitive Strategies & the Role of IT
Cost Leadership (low cost producer)
Reduce inventory (JIT)
Reduce manpower costs per sale (see Real
World Case 1)
Help suppliers or customers reduce costs
Increase costs of competitors
Reduce manufacturing costs (process
control)

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Competitive Strategies & the Role of IT (continued)
Differentiation
Create a positive difference between your
products/services & the competition.
May allow you to reduce a competitor’s
differentiation advantage.
May allow you to serve a niche market.

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Competitive Strategies & the Role of IT (continued)
Innovation
New ways of doing business
Unique products or services
New ways to better serve customers
Reduce time to market
New distribution models

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Competitive Strategies & the Role of IT (continued)
Growth
Expand production capacity
Expand into global markets
Diversify
Integrate into related products and services.

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Competitive Strategies & the Role of IT (continued)
Alliance
Broaden your base of support
New linkages
Mergers, acquisitions, joint ventures,
“virtual companies”
Marketing, manufacturing, or distribution
agreements.

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Competitive Strategies & the Role of IT (continued)
Other Competitive Strategies
Locking in customers or suppliers
Build value into your relationship
Creating switching costs
Extranets
Proprietary software applications

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Competitive Strategies & the Role of IT (continued)
Other Competitive Strategies (continued)
Raising barriers to entry
Improve operations or promote
innovation
Leveraging investment in IT
Allows the business to take advantage of
strategic opportunities

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The Value Chain
Views a firm as a series, chain, or network of
activities that add value to its products and
services.
Improved administrative coordination
Training
Joint design of products and processes
Improved procurement processes
JIT inventory
Order processing systems

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Value Chain (continued)

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Section II
Using Information Technology
for Strategic Advantage

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Strategic Uses Of Information Technology
Major competitive differentiator
Develop a focus on the customer
Customer value
Best value
Understand customer preferences
Track market trends
Supply products, services, & information
anytime, anywhere
Tailored customer service

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Strategic Uses of IT (continued)
Business Process Reengineering (BPR)
Rethinking & redesign of business processes
Combines innovation and process
improvement
There are risks involved.
Success factors
Organizational redesign
Process teams and case managers
Information technology

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Strategic Uses of IT (continued)
Improve business quality
Total Quality Management (TQM)
Quality from customer’s perspective
Meeting or exceeding customer
expectations
Commitment to:
Higher quality
Quicker response
Greater flexibility
Lower cost

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Strategic Uses of IT (continued)
Becoming agile
Four basic strategies
Customers’ perception of product/service
as solution to individual problem
Cooperate with customers, suppliers,
other companies (including competitors)
Thrive on change and uncertainty
Leverage impact of people and people’s
knowledge

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Strategic Uses of IT (continued)
The virtual company
Uses IT to link people, assets, and ideas
Forms virtual workgroups and alliances
with business partners
Interorganizational information systems

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The Virtual Company (continued)
Strategies
Share infrastructure & risk with alliance
partners
Link complementary core competencies
Reduce concept-to-cash time through
sharing

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The Virtual Company (continued)
Strategies (continued)
Increase facilities and market coverage
Gain access to new markets and share
market or customer loyalty
Migrate from selling products to selling
solutions

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Learning Organizations
Exploit two kinds of knowledge
Explicit
Tacit

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Learning Organizations (continued)
Knowledge Management

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Learning Organizations (continued)
Knowledge management systems
Help create, organize, and share business
knowledge wherever and whenever needed
within the organization

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Discussion Questions
You have been asked to develop e-business &
e-commerce applications to gain competitive
advantage. What reservations might you have
about doing so?
How could a business use IT to increase
switching costs and lock in its customers and
suppliers?

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Discussion Questions (continued)
How could a business leverage its investment
in IT to build strategic IT capabilities that
serve as a barrier to entry by new entrants
into its markets?
What strategic role can information
technology play in business process
reengineering and total quality management?

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Discussion Questions (continued)
How can Internet technologies help a business
form strategic alliances with its customers,
suppliers, and others?
How could a business use Internet
technologies to form a virtual company or
become an agile competitor?

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Discussion Questions (continued)
IT can’t really give a company a strategic
advantage, because most competitive
advantages don’t last more than a few years &
soon become strategic necessities that just
raise the stakes of the game. Discuss.
MIS author & consultant Peter Keen says:
“We have learned that it is not technology that
creates a competitive edge, but the
management process that exploits
technology.” What does he mean?

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Real World Case 1 – WESCO International, Inc.
Business-to-Business
Describe WESCO’s original system.
Describe WESCO’s new system.

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Real World Case 1 (continued)
What are the business benefits to WESCO and
its suppliers of its new e-procurement system?
Is WESCO’s new system a strategic use of IT?

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Real World Case 1 (continued)
Does WESCO’s new system give the company
a competitive advantage?
What other strategic moves could WESCO
implement to gain competitive advantage?

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Real World Case 2 – Staples, Inc.
What is the strategic business value to Staples
and their large business clients of the new
web-based procurement system?
What is the strategic business value to Staples
and the value proposition to their customers of
their new clicks and bricks capabilities?

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Real World Case 2 (continued)
Is an integrated clicks and bricks strategy the
Internet strategy that most businesses, large
and small, should adopt?
What competitive strategies is Staples
pursuing?

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Real World Case 2 (continued)
What other e-business or e-commerce strategy
would you recommend to Staples to help them
gain a competitive advantage in their
industry?

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Real World Case 3 – Enron Corp.
What mistakes did Enron make in the use or
management of IT?
Did those mistakes play a part in the failure of
Enron?

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Real World Case 3 (continued)
“Is it time to go back to the days when IT
supported the business rather than became the
business?” Explain your position.
What are the major lessons for the future use
of IT in business that you gained from this
case?

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Real World Case 3 (continued)
How would you apply one of the lessons from
this case in your present job or in your future
business career?

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Real World Case 4 – Delta Technology & FirstHealth Group
What are Delta Technology’s new
requirements for IT investments?
What is the business value of Delta’s new
requirements?

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Real World Case 4 (continued)
Explain FirstHealth’s “return on opportunity”
guidelines.
Is FirstHealth’s “return on opportunity”
guideline for IT investments a good way to
evaluate investments in IT?

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Real World Case 4 (continued)
What should be the role of ROI in IT decision-
making?
Are the IT investment guidelines of Delta and
FirstHealth applicable to other companies,
including small businesses?

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Real World Case 5 – Ford, Dow Chemical, IBM, et al.
What is Six Sigma?
What do critics of Six Sigma see as its
shortcomings?

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Real World Case 5 (continued)
Is Six Sigma “an enterprise-wide business
strategy?”
What role does information technology play in
Six Sigma business initiatives?

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Real World Case 5 (continued)
What are the benefits and limitations of Six
Sigma as a business strategy?
Can Six Sigma make up for poor management
and faulty vision?