Strategic Information Systems

1. INFORMATION SYSTEMS STRATEGY & GOVERNANCE
Strategic Information Systems
for
Competitive Advantage
1

2. STRATEGIC INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE
 Strategic Information System (SIS)
 Definition
 Systems that support or shape a business unit’s competitive
strategy
 Competitive Advantage
 An advantage over competitors in some measure such as
cost, quality, or speed
 A difference in the Value Chain Data
 Improving Core Competency
 Employee productivity
 Operational efficiency
 Approach
 Outwardly - Aiming at direct competition
 Inwardly - Focused on enhancing the competitive position of
the firm
 Strategic alliance

3. STRATEGIC INFORMATION SYSTEMS (SISS)
SISs provide strategic solutions to the 5 Business Pressures
Any information system--EIS, OIS, TPS, KMS--that changes the goals,
processes, products, or environmental relationships to help an organization gain
a competitive advantage or reduce a competitive disadvantage.

4. DEFINITIONS
 An executive information system (EIS), also known as
an executive support system (ESS), is a type of
management support system that facilitates and supports
senior executive information and decision-making needs.
 An office information system, or OIS, is an information
system that uses hardware, software and networks to
enhance work flow and facilitate communications among
employees.

5. DEFINITIONS
 A transaction process system (TPS) is an
information processing system for business
transactions involving the collection, modification
and retrieval of all transaction data. Characteristics
of a TPS include performance, reliability and
consistency
 Knowledge management systems refer to any
kind of IT system that stores and retrieves
knowledge, improves collaboration, locates
knowledge sources, mines repositories for hidden
knowledge, captures and uses knowledge, or in
some other way enhances the KM process

6. STRATEGIC MANAGEMENT
 Strategic management
 the way an organization maps or crafts the
strategy of its future operations
 3 Elements
 Long-range planning
 Response management
 Proactive innovation

7. STRATEGIC EVALUATION & DEVELOPMENT
 SWOT Analysis
 Product Life Cycle
 Quality Preference
Competitive
Advantage
Position,
Capabilities, Cost-
Quality Curve,
Sustainability Company
ARC,
Coordination,
Incentives,
Explorer-Exploiter
Value Chain
Creation/Capture,
PIE, Supplier,
Buyer
Performance
Product
Differentiation,
Substitutions
Competition
Life Cycle, Market
Structure, Behavior,
Barriers to Entry
Strategy
Scope, Goals,
Competitive
Advantage,
Logic
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline
Stage
Total
Market
Sales
Time
Laggards
Late
Majority
Early
Majority
Early
Adopters
Innovators
"The
Chasm"
Technology Adoption Process
Weaknesses
Opportunities Threats
Strengths
p
r
i
c
e
product
p
l
a
c
e
promotion
target
market
Mental Map
SCOPE
Exit
Strategy
Cash
Cows
Stars
Market
growth
rate
Relative market share
?
Time
&
Action
Oligopoly
Dominant
Monopoly
Niche
Competitive
$
Low
High
High
Low
Preference
UNC
E
RTA
INTY&
C
HA
NG
E
January 2002
S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31
Implement
G1 G2 G3 G4 G5 G6
Demand
Needs
Analysis
Strategy Evaluation & Development
Competitors
Management
Strategy Statement
A
B
C
D
E
F
G H

8. THE ROLE OF IT IN STRATEGIC MANAGEMENT
• Innovative applications - Create innovative applications that
provide direct strategic advantage to organizations
• Competitive weapons - IS(s) themselves are recognized as a
competitive weapon
• Changes in processes - IT supports changes in business
processes that translate to strategic advantage
• Links with business partners - IT links a company with its
business partners effectively and efficiently
• Cost reductions - IT enables companies to reduce costs
• Relationships with suppliers and customers -IT can be
used to lock in suppliers and customers, or to build in switching
costs
• New products -A firm can leverage its investment in IT to
create new products that are in demand in the marketplace
• Competitive intelligence - by collecting and analyzing
information about products, markets, competitors, and
environmental changes

9. COMPETITIVE INTELLIGENCE
• Overview
– One of the most important aspects in developing a competitive
advantage is to acquire information on the activities and actions of
competitors
• Collect information about market, technologies, and
government’s actions
• Analyze and interpret the information
The Internet
is central to
supporting
competitive
intelligence
Such activities drive
business performance by
 Increasing market
knowledge
 Improving internal
relationships
 Raising the quality of
strategic planning
Many
companies
monitor the
activities of
competitors

10. COMPETITIVE ADVANTAGE IN THE WEB ECONOMY
Competitive
Advantage
Look for a
competitive
necessity, which
will help your
company keep up
with the
competitors.
Competitive
Strategy
Search for a
competitive
advantage in an
industry, which
leads to control
of the market.
Sustainable
Strategic
Advantage
Maintain
profitable &
sustainable
position against
the forces that
determine
industry
competition.

11. INTERNET & COMPETITIVE INTELLIGENCE

12. PORTER’S COMPETITIVE FORCES MODEL
• The model recognizes five major forces that could
endanger a company’s position in a given industry
– 5 major forces
• The threat of entry of new competitors
• The bargaining power of suppliers
• The bargaining power of customers (buyers)
• The threat of substitute products or services
• The rivalry among existing firms in the industry
• Use of the model
– List players in each competitive force
– Relate the major determinants of each competitive force
– Devise a strategy
– Look for supportive IT
External
Competitive
Forces

13. PORTER’S 5 FORCES MODEL

14. THE ANALYSIS
• First Competitive Force - Competitor Analysis
– What Drives them?
– What are they Doing and can do?
– What are their strengths & weaknesses?
– Is Competition intense?
• Second Competitive Force - Entry Barriers
– If nothing slows entry of competitors competition will become intense.
– Incumbent Reaction?
– What Actions are required to build market share?
– Production Process?
• Third Competitive Force - Substitute Products
– Products or services from another industry enter the market
– Customers becoming acclimated to using substitutes
– Is the substitute market growing?
• Fourth & Fifth Competitive Force – Supply Chain
– Suppliers/Buyers? Who controls the transaction?
– Each element adds value – question who captures it?

15. CASE STUDY: PORTER’S MODEL FOR WAL-
MART

16. IMPACT OF COMPETITIVE FORCES & ROLE OF IT
Key force Business implications Potential IT effects
Threat of
new entrants
Additional capacity
Reduced prices
New basis for competition
Provide entry barriers/reduce access by:
exploiting existing economies of scale
differentiate product and service
control distribution channels
segment markets
Buyer power
high
Force price down
Demand higher quality
Require service flexibility
Encourage competition
Differentiate product and service
 Improve price/performance
Increase switching costs of buyer
Facilitate buyer product selection
Supplier
power high
Raise prices/costs
Reduced quality of supply
Reduced availability
Supplier sourcing system.
Extended quality control into supplier
Forward planning with supplier
Substitute
products
threatened
Limits potential market &
profit
Price ceilings
Improve price/performance
Redefine product and service to increase value
Redefine market segments
Intense
competition
from rivals
Price competition
Product development
Distribution and service
critical
Customer loyalty required
Improve price/performance
Differentiate product and service in
distribution channel and to consumer
Get closer to end customer

17. STRATEGIES FOR COMPETITIVE ADVANTAGE
Niche/Focus
Select a narrow-scope segment (niche
market) and be the best in quality,
speed, or cost in that market
Differentation
Being unique in the
industry
Cost leadership
Provide products and/or
services at the lowest cost in
the industry
Growth
Increase market share,
acquire more customers
or selling more products
Improve internal efficiency
To improve employee &
customer satisfaction
CRM
Customer-oriented approaches
(the customer is king)
Alliances
Working with business partners
to create synergy & provide
opportunities for growth
Innovation
Developing new
products & services
Time
Treat time as a resource,
then manage it and use it
to the firm’s advantage
Lock in customers/suppliers
Encourage customers/suppliers to
stay with you rather than going to
competitors
Entry-barriers
Developing new
products &
services
Increase switching cost
Discourage
customers/suppliers from
going to competitors for
economic reasons

18. PORTER’S VALUE CHAIN MODEL
The initial purpose of the value chain model was to analyze the internal operations of a corporation,
in order to increase its efficiency, effectiveness, and competitiveness. We can extend that company
analysis, by systematically evaluating a company’s key processes and core competencies to
eliminate any activities that do not add value to the product.

19. THE AIRLINE INDUSTRY VALUE CHAIN

20. VALUE SYSTEM
• A firm’s value chain is part of a larger stream of activities,
which Porter calls a “Value System”.
– Includes the suppliers that provide the necessary inputs
AND their value chains
– Applies to both products & services, for any organization,
PUBLIC or PRIVATE
– Is the basis for the Supply Chain Management
– Many of these alliances and business partnerships are
based on Internet connectivity are called
interorganizational information systems (IOSs)
– Used to
• Evaluate a company’s process and competencies
• Investigate whether adding IT supports the value chain
• Enable managers to assess the information intensity and the role of IT

21. VALUE SYSTEM CONT’D
 These Internet-based EDI systems offer strategic
benefits
 Faster business cycle (PO to Receiving)
 Automation of business procedures (Automated
Replenishment)
 Reduced operational costs
 Greater advantage in a fierce competitive
environment
 Consortia – Horizontal vs. Vertical

22. GLOBAL COMPETITION
• Growth of Companies Operating in a Global Environment
– Fully Global or Multinational Corporations
– Companies that export or import
– Companies facing competitions of low labor cost and high
natural resources
– Companies with low cost production facilities abroad
– Small companies that can now use EC to buy/sell
internationally
• Global dimensions along which management can globalize
– Product
– Markets & Placement
– Promotion
– Where value is added to the product
– Competitive strategy
– Use of non-home-country personnel - labor
– Multi-domestic Strategy: Zero standardization along the
global dimensions. Global Strategy: Complete
standardization along the seven global dimensions.

23. GLOBAL BUSINESS DRIVERS FRAMEWORK

24. SISS: EXAMPLES
• Cases
– Wiring the “customer supply chain” at 1-800-Flowers
– Increasing Tax Collection Efforts at the Wisconsin Department
of Revenue
– Time-based Competitive Advantage at Cannondale
– Southwest Airlines Flies high with SWIFT
– Using ERP to Meet Strategic Challenges at Turner Industries
– The Port of Singapore exports its intelligent systems over its
enterprise portal
• Problem - The Port of Singapore, the world’s largest international port,
faced increased global competition.
• Solution - Implementation of Intelligent Systems
• Results
– Reduction in Cycle Time: 4 hours versus 16 - 20 hours in neighboring ports
– Reduction in uploading/ loading time: 30 sec. versus 4-5 min./ truck in neighboring
ports

25. SIS IMPLEMENTATION & SUSTAINING SIS
 Major Issues in SIS Implementation
 Justification
 Justifying SIS may be difficult due to the intengible nature of their benefits
 Risks & Failures
 The magnitude, complexity, continuous changes in technology and
business environment may result in failures
 Finding appropriate SIS
 Identifying appropriate SIS is not a simple task

26. SIS IMPLEMENTATION & SUSTAINING SIS
• Sustaining SIS & Strategic Advantage
– A Major problem that companies face is how to sustain
their SIS competitive advantage.
– 3 Major approaches
• Create inward systems which are not visible to competitors
• Provide a comprehensive, innovative & expensive system that is
difficult to duplicate
• Combine SIS with structural changes. This would include business
processes, reengineering & organizational transformation

27. MANAGERIAL ISSUES
• Implementing SIS Can Be Risky
– The investment involved in implementing SIS is high
• Strategic Information Systems Requires Planning
– Planning for an SIS is a major concern of organizations
• Sustaining Competitive Advantage Is Challenging.
– As companies become larger and more sophisticated, they
develop resources to duplicate the systems of their competitors
quickly.
• Ethical Issues
– Gaining competitive advantage through the use of IT may
involve unethical or even illegal actions
– Companies can use IT to monitor the activities of other
companies and may invade the privacy of individuals working
there.