Session#2; competing with information systems

Management Information Systems
Competing with Information Systems
Graduate School of
Management & Economics
Competing with
Information Systems
1 N.Karami, MIS-Spring 2012

Graduate School of
Learning Objectives
• Describe the various types of information
systems by breadth of support.
• Identify the major information systems that
support each organizational level.
• Describe strategic information systems (SISs),
and explain their advantages.
• Describe porter’s competitive forces model and
his value chain model, and explain how IT helps
companies improve their competitive positions.
• Describe five strategies that companies can use
to achieve competitive advantage in their
industries.

Graduate School of
Opening Case
Upstream activities:
exploration and production
Downstream activities:
refining, marketing,
transportation, sales

Graduate School of
How to use IS to compete in
todays environments
• It is sometimes necessary to completely Change
business models and strategies to succeed in the digital
economy.
• Web-based IT enables companies to gain competitive
advantage in the face of serious corporate threat.
• Extensive networked computing infrastructure is
necessary to support a large global system.
• It is necessary to patent innovative systems to assure
competitive advantage.

Graduate School of
Information Systems Inside Your
Organization

Graduate School of
Information Technology Outside
Your Organization

Graduate School of
Information Systems Support for
Organization Employees
• Office automation systems (OAS)
• Functional area information systems (FAIS)
• Business intelligence systems (BI)
• Expert Systems
• Dashboards

Graduate School of
The Four Major Types of
Information Systems

Graduate School of
Four Major Types of Systems
1. Transaction Processing Systems (TPS)
2. Management Information Systems (MIS)
3. Decision-Support Systems (DSS)
4. Executive-Support Systems (ESS)

Graduate School of
A Symbolic Representation for a
Payroll TPS

Graduate School of
MIS & TPS

Graduate School of
Voyage-estimating Decision
Support System

Graduate School of
Model of a Typical Executive
Support System

Graduate School of
Interrelationships Among Systems

Graduate School of
Competitive Advantage &
Strategic Information Systems
• Competitive strategy
– statement of goals, plans and policies to reach
that goals to be competitive
• Competitive Advantage
• Strategic Information Systems (SIS)
– Systems that support or shape a business unit’s
competitive strategy

Graduate School of
IS Strategy
• The plan an organization uses in providing information
services.
• IS allows business to implement its business strategy.
• IS helps determine the company’s capabilities.
• IS strategy supports the competitive position and
strategies of a business enterprise.
• IS strategy uses IT to help an organization gain
competitive advantages, reduce competitive
disadvantages.

Graduate School of
Porter’s Competitive Forces
Model (1)
• The best-known framework for analyzing
competitiveness is Michael Porter’s
competitive forces model (Porter, 1985).
• * Model is used to develop strategies to
increase their competitive edge.
• * Demonstrates how IT can make a company
more competitive.
– Five competitive forces shape fate of firm

Graduate School of
Model (2)
In Porter’s competitive forces model, the strategic position of the firm and its
strategies are determined not only by competition with its traditional direct
competitors but also by four forces in the industry’s environment: new market
entrants, substitute products, customers, and suppliers.

Graduate School of
Model (3)
1. Traditional competitors
• Competitors in market space continuously devise new
products, new efficiencies, switching costs
2. New market entrants
• Some industries have low barriers to entry
• E.g. food industry vs. microchip industry
• Newer companies may have advantages
• Newer equipment, younger workforce, etc.

Graduate School of
Model (4)
3. Substitute products and services
• Substitutes customers can purchase if your prices too high
• E.g. Internet music service vs. CDs
4. Customers
• Can customers easily switch to competitor’s products?
• Can customers force firm and competitors to compete on
price alone (transparent marketplace)
5. Suppliers
• The more suppliers a firm has, the greater control it can
exercise over suppliers

Graduate School of
Fundamentals of Strategic
Advantage
Cost Leadership
Product
Differentiation
Innovation
Strengthen
customer &
supplier intimacy
Focus on market
niche
Other strategies

Graduate School of
IS Strategies for Dealing with
Competitive Forces (1)
• Low-cost leadership
– Use information systems to achieve the lowest operational
costs and the lowest prices
• Reduce inventory (JIT)
• Reduce manpower costs per sale
• Help suppliers or customers reduce costs
• Increase costs of competitors
• Reduce manufacturing costs (process control)
– E.g. Wal-Mart
• Inventory replenishment system sends orders to suppliers
when purchase recorded at cash register
• Minimizes inventory at warehouses, operating costs
• Efficient customer response system

Graduate School of
Competitive Forces (1): Example
Wal-Mart’s continuous
inventory replenishment
system uses sales data
captured at the checkout
counter to transmit orders to
restock merchandise
directly to its suppliers. The
system enables Wal-Mart to
keep costs low while fine-tuning
its merchandise to
meet customer demands.

Graduate School of
• Product differentiation
– Use information systems to enable new products and services, or
greatly change the customer convenience in using your existing
products and services (E.g. Google’s continuous innovations,
Apple’s iPhone)
– Create a positive difference between your products/services &
the competition.
– May allow you to reduce a competitor’s differentiation advantage.
– Use information systems to customize, personalize products to fit
specifications of individual consumers (E.g. Dell, Land’s End’s
mass customization )

Graduate School of
Competitive Forces (2): Example
On the Dell Inc. Web site,
customers can select the
options they want and order
their computer custom built
to these specifications.
Dell’s assemble-to-order
system is a major source of
competitive advantage.

Graduate School of
• Innovation
– Citibank
– New ways of doing business
• Unique products or services
• New ways to better serve customers
• Reduce time to market
• New distribution models

Graduate School of
• Focus on market niche
– Use information systems to enable specific market focus,
and serve narrow target market better than competitors
• Analyzes customer buying habits, preferences
• Advertising pitches to smaller and smaller target
markets
– E.g. Hilton Hotel’s OnQ System
• Analyzes data collected on guests to determine
preferences and guest’s profitability

Graduate School of
• Strengthen customer and supplier intimacy
– Strong linkages to customers and suppliers increase
switching costs and loyalty
– Chrysler: Uses IS to facilitate direct access from
suppliers to production schedules
• Permits suppliers to decide how and when to ship suppliers
to Chrysler factories, allowing more lead time in producing
goods.
– Amazon: Keeps track of user preferences for
purchases, and recommends titles purchased by
others

Graduate School of
• Some companies pursue several strategies at same
time
– Dell emphasizes low cost plus customization of products
– Parker Hannifin offers products with unique features but
competes on price
• Creating switching costs
• Leveraging investment in IT
– Allows the business to take advantage of strategic opportunities
• Raising barriers to entry
– Improve operations or promote innovation

Graduate School of
The Value Chain
• Highlights specific activities in a business
where competitive strategies can best be
applied and where information systems are
likely to have a strategic impact
• Porter’s Value Chain Model
– This model identifies specific activities where
organizations can use competitive strategies for
greatest impact.
• Primary activities
• Support activities

Graduate School of
The Value Chain Model
This figure provides examples of systems for both primary and support activities of a firm and of its
value partners that would add a margin of value to a firm’s products or services.

Graduate School of
Airline Industry Value Chain
Model

Graduate School of
Extending the Value Chain
The Value Web:
• A firm’s value chain is linked to the value chains of
its suppliers, distributors, and customers
• A value web is a collection of independent firms
that use information technology to coordinate their
value chains to produce a product collectively
• Value webs are flexible and adapt to changes in
supply and demand

Graduate School of
The value web is a networked
system that can synchronize
the value chains of business
partners within an industry to
respond rapidly to changes in
supply and demand.
The Value Web

Graduate School of
Strategic Information Systems
Frameworks
• Porter and Millar’s framework
• Wiseman and MacMillan framework
• Bakos and Treacy framework
• Customer resource life cycle framework

Graduate School of
Porter and Millar Framework
• Industry structure has changed
• Rules of competition have changed
• Organizations have outperformed competition
using IT

Graduate School of
Porter and Millar
Five-Step Process
• Access information intensity
• Determine the role of IT in the industry
structure
• Identify and rank the ways in which IT can
create competitive advantage
• Investigate how IT might spawn new
businesses
• Develop a plan for taking advantage of IT

Graduate School of
Wiseman and MacMillan Framework
• Based on Porter’s strategies (Cost;
Differentiation)
• Innovation
• Growth
• Alliance
• Time

Graduate School of
Wiseman's Strategic Option
Generator

Graduate School of
Bakos and Treacy Framework
• Bargaining power and comparative efficiency
• Search related costs
• Unique product features
• Switching costs
• Internal efficiency
• Interorganizational efficiency

Graduate School of
A Casual Model of Competitive
Advantage

Graduate School of
Customer Resource Life Cycle
Framework
• Ives and Learmouth, 1984
• Customer relationship key to strategic
advantage?
• Thirteen fundamental stages of the customer
relationship

Graduate School of
Customer Resource Lifecycle
(CRLC)

Graduate School of
Why are IS Important to
Organizations & Society
• IT will reduce the number of middle
managers.
• IT will change the manager’s job.
• IT provides quality-of-life improvements.

Graduate School of
The Robot Revolution(1)
See Invasion of the Humanoid Robots

Graduate School of
The Robot Revolution (continued)
See video of Big
Dog robot in
action

Graduate School of
DeLaval Voluntary Milking System

Graduate School of
Improvements in Health Care

Graduate School of
Improvements in Health Care
(continued)
The Pill Cam: Wireless endoscopy

Graduate School of
The daVinci Surgical Robot
The robot
The surgeon’s console

Graduate School of
The daVinci Surgical Robot (continued)
The daVinci robot in use

Graduate School of
Medical Simulation
Two physicians
perform a
procedure on a
simulated human
(mannequin)

Session#2; competing with information systems

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Session#2; competing with information systems