6-1 chapter 2 information systems for competitive advantage robert riordan, carleton university

6-1

Chapter 2

Information Systems

For Competitive Advantage

www.pearsoned.ca/jessup

Robert Riordan, Carleton University

6-2Information Systems Today, 2/C/e ©2008 Pearson Education Canada

Business Strategy

Business Strategy

Streamline Business Processes

Solidify Business Relationships/

Improve Customer Service

Maximize Technology

Benefits

Improve Profitability & Reduce Costs

Reach Global Markets


Strategy and Competitive Advantage

Sources of Competitive Advantage• Having the best-made product on the market• Delivering superior customer service• Achieving lower cost than rivals• Having proprietary manufacturing technology• Having shorter lead-times in developing and testing new

products• Having a well-known brand name and reputation• Giving customers more value for their money

Achieving StrategyProviding support in a way that enables the firm to gain or sustain competitive advantage over rivals

Achieving StrategyProviding support in a way that enables the firm to gain or sustain competitive advantage over rivals


The roadmap for e-business strategy implementation addresses nine interrelated issues

What are the customer segment(s) to target and what is our value proposition to each segment?

What is the vision for our company?Vision1

Objectives What are the objectives of our e-business strategy?2

Value creation What value do we want to offer through our e-business strategy?3

Target segment(s)4

What organisational model should we apply?Organisational model7

External partners Should we implement our e-business strategy alone or with external partners?

6

Strategy alignment How is our e-strategy aligned with our physical strategy?

Revenue and cost model What is our cost and revenue model?8

Privacy, ethical and legal issues

What kind of privacy concerns, ethical and legal issues do we need to consider?

5

9

Developing a Competitive Business Strategy


• Three generic strategies

1. Cost leadership

2. Differentiation

3. Focused strategy



• Business process - a standardized set of activities that accomplishes a specific task, such as processing a customer’s order.

• Value chain - views the organization as a chain – or series – of processes, each of which adds value to the product or service for the customer.



• Use the value chain to:– Plan for a better way of meeting customer

demands.– Identifying processes that add value.– Identifying processes that reduce value.



How does a business optimize its value process?



Differentiator – adding value to the process



• Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it.

• Supply chain - consists of the paths reaching out to all of a company’s suppliers of parts and services.

• Collaborative planning, forecasting, and replenishment (CPFR) - a concept that encourages and facilitates collaborative processes between members of a supply chain.



• Three capabilities made possible by the Internet are:

1. Mass customization and personalization

2. Disintermediation

3. Global reach

Key E-Commerce Strategies


• Mass customization - a business gives its customers the opportunity to tailor its product or service to the customer’s specifications.

• Personalization - a Web site can know enough about your likes and dislikes that it can fashion offers that are more likely to appeal to you.

• Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics.



Key E-Commerce Strategies – Mass Customization


Key E-Commerce Strategies - Personalization


Key E-Commerce Strategies – Collaborative Filtering


• Disintermediation – using the Internet as a delivery vehicle, intermediate players in a distribution channel can be bypassed.



Suppliers ManufacturerChannelPartners

ResellersVARS

Customers

“Infomediary”

Middlemania: The emergence of the “Infomediary”



• Global reach - the ability to extend reach to customers anywhere there is an Internet connection, and at a much lower cost.



The U.S. Airline Industry

• The airlines really began using IT in a significant way when American Airlines and United Airlines introduced the first airline reservations systems.– SABRE– APPOLO


• Frequent flyer programs are a great example of using IT to alter Porter’s five forces. – They reduced buyer power by making it less

likely a traveler would choose another airline.– They reduced the threat of substitute products

or services by increasing switching costs.– They erected entry barriers by making a

frequent flyer program a practical necessity for any airline to compete effectively.



• Yield management systems are designed to maximize the amount of revenue that an airline generates on each flight.

• Yield management systems are the reason that an airfare you’re quoted over the phone can be $100 higher when you call back an hour later.



• Expert surveys have estimated that the number of travel agents in the U.S. will be sharply reduced as a result of disintermediation.



Recurring/Non-Recurring and Tangible/Intangible

Recurring vs. Non-Recurring• Recurring - Ongoing costs or benefits identified in

a business case (IT staff to support system)• Non-Recurring - One-time costs or benefits

identified in a business case (software purchase)

Tangible vs. Intangible• Tangible - Cost and benefits that are easily

identified (e.g. headcount or labour cost)• Intangible - Cost and benefits that are not easily

identified (i.e. increased customer service)

Business cases typically include both Recurring/Non-recurring and Tangible/Intangible costs and benefits


Sources of differentiation

Tangible sources

Speed of delivery

Convenience

Customisation

Intangible sources

Reputation

Brand

Productrange

Quality

Tangible and intangible sources of differentiation

Developing a Competitive E-Business Strategy


Tangible and Intangible Benefits

Tangible benefits Intangible benefits

• Increased sales from new sales leads giving rise to increased revenue from:

• new customers, new markets• existing customers (repeat-selling)• existing customers (cross-selling).

• Marketing cost reductions from:• reduced time in customer service• online sales• reduced printing and distribution

costs of marketing communications.

• Supply-chain cost reductions from:• reduced levels of inventory• increased competition from

suppliers• shorter cycle time in ordering.

• Administrative cost reductions from more efficient routine business processes such as recruitment, invoice payment and holiday authorization.

• Corporate image communication• Enhancement of brand• More rapid, more responsive marketing

communications including PR

• Faster product development lifecycle enabling faster response to market needs

• Improved customer service• Learning for the future• Meeting customer expectations to have

a web site• Identifying new partners, supporting

existing partners better• Better management of marketing

information and customer information• Feedback from customers on products


CompanyCompanyInternal infrastructureInternal infrastructure

Supplier Supplier networknetwork Customer networkCustomer network

The business value chain impacts three broad areas of organization activity

Source: PricewaterhouseCoopers, Gartner Group

Value Chain Integration


Supplier Supplier networknetwork Customer networkCustomer network

Develop products Perform

marketing

Superior customer serviceConfigure and manufacture to order

Capacity optimisation

Real time matching of supplyand demand

Data visibility

Perform sales

Production

Customer service

Manage logistics

Procurement

Value Chain Systems Applications Opportunities



ProcurementPerform

marketing

Production

Customer service

Perform sales

Manage logistics Develop products

“The Virtual Value Network”

Supplier networkSupplier network Customer networkCustomer network


6-1 chapter 2 information systems for competitive advantage robert riordan, carleton university

Documents

information systems

focused strategy

strategy alignment

physical strategy

pearson education canada

business relationships

value chain

value proposition