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Strategic Information

Systems for Competitive

Advantage

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Learning Objectives Describe strategic information systems (SIS) and explain

their advantages.

Describe Porter’s competitive forces model & how IT helps companies improve their competitive positions.

Describe Porter’s value chain model and its relationship to information technology.

Describe several other frameworks that show how IT supports the attainment of competitive advantage.

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Learning Objectives (cont.)

Describe and understand the role of web-based SIS and the nature of competition in the digital age.

Describe global competition and its SIS framework.

Describe representative strategic information systems and the advantage they provide to organizations.

Discuss implementation issues including possible failures of SIS.

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Strategic Information Systems (SISs)

SIS Characterized by its ability to significantly change

the manner in which business is done.

It can also change the goal, processes, products, or environmental relationships to to help an organization gain a competitive advantage.

An organization competitive strategy is the search of a competitive advantage in an industry.

Cost, quality, or speed.

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Strategic Information Systems (SISs)

SIS Definition Systems that organizations totally depends on

Systems that has very impact on organization business processes, operation, and the bottom line.

Internally focused or externally focused

Can be applied within the organization or across the organization

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Strategic Information Systems (SISs)

Sustaining Strategic Advantage This systems are design from the

beginning to facilitate competitive advantage.

Today it is more difficult to sustain a competitive advantage with the use of IT for a long period of time.

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The Role of IT IT creates applications that provide strategic advantages to companies

E.g. Federal Express was the first to company to use the tracking system

IT is a competitive weapon

IT supports strategic change, e.g, re-engineering Cycle time reduction,streamlining, CASE, etc.

IT networks with business partners B2B

IT provides cost reduction

IT provides competitive business intelligence

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Porter’s 5 Competitive 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.

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Porter’s Model in Action

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Response Strategies (Porter, 1985)

FOCUS

Selecting a niche market and achieving

cost leadership and/or

differentation.

DIFFERENTATION

Being unique in the industry

COST LEADERSHIP

Providing products and/or services at the lowest cost in

the industry.

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Response Strategies (added by Porter and others)

INNOVATIONDeveloping new products & services

GROWTH

Increasing market share, acquiring more customers or selling more products

IMPROVE INTERNAL EFFICIENCY

To improve employee and customer satisfaction

ALLIANCESWorking with business partners to create synergy & provide opportunities for growth

CRMCustomer-oriented approaches, e.g. the customer is king (queen)

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The Value Chain

Supportactivities

Primary activitiesInbound logistics Materials receiving, storing, and distribution to manufacturing premisesOperations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,

financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing processProcurement Purchasing input

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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.

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The Value Chain Model The Value System Model is

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.

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Strategic Information Systems Frameworks A framework for SIS is a descriptive

structure that helps us understand and clarify the relationships among strategic management and IT. E.g.

Bakos and Treacy Framework McFarlan Application Portfolio Analysis

Framework

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Bakos & Treacy Framework

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McFarlan’s Portfolion Framework (1984)

For Analyzing Existing, Planned & Potential Information SystemsStrategic

e-procurement electronic ticketing

Agents’ management

High Potential Intelligent data mining

e-mail direct marketing

Key Operational Scheduling online

Online parts ordering Maintenance online

Support Frequent flyer account tracking

Online credit union Training online

Wireless SMS information

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Categories of Strategic Relevance and Impact

Factory

Support

Strategic

Turnaround

Strategic Impact of existing IT system

Low

Low

High

High

A contingency appropriate to IT management.

Strategic Impact of IT applications under development

Totally depending on it

Not absolutely depending on totally uninterrupted, fast response-time.

IT are important but theyare not fundamental to thefirms ability to compete.

Strategic Impact of ITon operations and futurestrategy is low.

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SIS Implementation Major Issues to be Considered:

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.

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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.

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Managerial Issues Implementing SIS Can Be

Risky.

The investment involved in implementing Strategic Information Systems (SIS) is high.

Strategic Information Systems Requires Planning.

Planning for an SIS is a major concern of organizations.

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Managerial Issues (cont.) 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.