BSIE_IIS - LECTURE 02.pdf
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Transcript of BSIE_IIS - LECTURE 02.pdf
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INDUSTRIAL INFORMATION SYSTEMS
COMPETING WITH
INFORMATION TECHNOLOGY
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Learning Objectives
Identify several basic competitive strategies and explain how they can use information technologies to confront
the competitive forces faced by a business.
Identify several strategic uses of information technology for electronic business and commerce, and
give examples of how they give competitive advantages
to business.
Give examples of how business process reengineering frequently involves the strategic use of e-business
technologies.
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 advantages.
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The Competitive Environment
Threat of New
Entrants
Rivalry Among Existing
Competitors
Bargaining Power of Customers
Bargaining Power of Suppliers
Threat of Substitutes
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The Competitive Environment
A firm can survive in the long run if it successfully develops strategies to confront five generic competitive forces that operate in the firm's relevant environment. As illustrated on the slide these forces include:
Threat of New Entrants. Many threats to long run survival come from companies that do not yet exist or have a presence in a given industry or market. The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.
Bargaining Power of Suppliers. Suppliers with access to key or limited resources, or who dominate their industries, may exert undue influence on the firm. Many firms seek to reduce their dependence on a single firm to limit the suppliers' bargaining power.
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The Competitive Environment
Rivalry Among Existing Firms. In mature industries, existing competitors are not much of the threat: typically each firm has found its "niche". However, changes in management, ownership, or "the rules of the game" can give rise to serious threats to long term survival from existing firms.
Bargaining Power of Customers. Customers can grow large and powerful as a result of their market share. For example, Wal-Mart is the largest customer for consumer package goods and often dictates terms to the makers of those goods -- even a giant like Procter & Gamble.
Threat of Substitutes. To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.
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Fundamental Competitive Strategies
Differentiation Strategies
Innovation Strategies
Growth Strategies
Alliance Strategies
Cost Leadership Strategies
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Fundamental Competitive Strategies
Competitive Advantage is created or maintained with the company succeeds in performing some activity of value to customers significantly better than does its competition. According to Porter, competitive advantage can be developed by following one or more of these strategies:
Cost Strategies. Becoming a low-cost producer in the industry allows the company to lower prices to customers. Competitors with higher costs cannot afford to compete with the low-cost leader on price.
Differentiation Strategies. Some companies create competitive advantage by distinguishing their products on one or more features important to their customers. Unique features or benefits may justify price differences and/or stimulate demand.
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Fundamental Competitive Strategies
Innovation Strategies. Unique products or services or changes in business processes can cause fundamental changes in the way an industry does business.
Growth Strategies. Significantly expanding production capacity, entering new global markets, diversifying into new areas, or integrating related products or services can all be a springboard to strong company growth.
Alliance Strategies. Establishing new business linkages and alliances with customers, suppliers, former competitors, consultants, and others can create competitive advantage
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Strategic Uses of Information Technology
Improving
Business Process
Promote
Business Innovation
Locking in
Customers and Suppliers
Use IT to
reduce costs
of doing
business
Use IT to improve quality
Use IT to link business to
customers and
suppliers
Use IT to
create new
products or
services
Enhance
Efficiency
Create New
Business
Opportunities
Maintain Valuable
Customers and
Relationships
Strategy
IT Role
Outcome
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The Value Chain
Administrative Coordination & Support Services
Human Resource Management
Technology Development
Procurement of Resources
Inbound Logistics
Operations Outbound Logistics
Marketing and
Sales
Customer Service
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The Value Chain
The Value Chain Concept developed by Michael Porter views a firm as a series of basic activities (the "chain") that add value to its products and services that support a profit margin for the firm. In the value chain concept, some business activities are primary activities and others support activities. For each activity, the role of strategic information systems (SIS) can contribute significantly to that activity's contribution to the value chain:
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The Value Chain
Support Activities. Support activities create the internal infrastructure that provides direction to and support for the specialized work of primary activities:
Management and Administrative Services. The key role of SIS here is in automated office systems.
Human Resources Management. SIS role: Employee Skills Database.
Technology Development. SIS role: Computer-Aided Design.
Procurement of Resources. SIS role: EDI with suppliers.
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The Value Chain Primary Activities. These activities directly contribute to the
transformation process of the organization.
Inbound Logistics. SIS role: Automated Warehousing, JIT.
Operations. SIS role: Computer-Aided Manufacturing.
Outbound Logistics. SIS role: Online Data Entry.
Marketing and Sales. SIS role: Market Analysis.
Service. SIS role: Diagnostic Expert System.
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The Internet Value Chain
Marketing and
Product Research
Sales and
Distribution
Support and
Customer Feedback
Data for
market
research,
establishes
consumer
responses
Access to customer com-
ments online
Immediate re-sponse to
customer
problems
Low cost distribution
Reaches new
customers
Multiplies contact points
Increase
Market Share
Lower
Cost Margins
Enhanced
Customers
Satisfaction
Internet
Capability
Benefits
to
Company
Opportunity
for
Advantage
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Strategic Positioning of Internet Technologies
Global Market
Penetration
E-Commerce Website
Value-added IT Services
Product and Services
Transformation
E-Business; Extensive
Intranets and Extranets
Cost and
Efficiency
Improvements
E-Mail, Chat Systems
Performance
Improvements in
Business
Effectiveness
Intranets and Extranets
Strategy
Solution
Low
High
High E-Business Processes Connectivity
Internal Drivers
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Strategic Positioning of Internet Technologies
For Internet technologies to be used strategically applications must be correctly positioned. The
strategic positioning matrix shown can be used to
help a company optimize the strategic impact of
Internet Technologies.
The matrix recognizes two major drivers:
Internal Drivers. The amount of connectivity, collaboration and use of IT within a firm.
External Drivers. The amount of connectivity, collaboration and use of IT by customers,
suppliers, business partners, and competitors.
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Strategic Positioning of Internet Technologies
Cost and Efficiency Improvements. When there is a low amount of connectivity, collaboration and use of IT within
the company and by customers and competitors, a firm
should focus on improving efficiency and lowering costs by
using Internet technologies to enhance communications
between the company and its customers and suppliers.
Performance Improvement in Business Effectiveness. When there is a high amount of internal connectivity, but
external connectivity by customers and competitors is still
low, a firm should focus on using Internet technologies like
intranets and extranets to make major improvements in
business effectiveness.
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Strategic Positioning of Internet Technologies
Global Market Penetration. When there is a high degree of connectivity by customers and
competitors and low internal connectivity, a firm
should focus on developing Internet-based
applications to optimize interactions with
customers and build market share.
Product and Service Transformation. When a company and its customers, suppliers, and
competitors are extensively networked, Internet
technologies should be used to develop and
deploy products and services that strategically
reposition it in the marketplace.
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Customer-Focused e-Business
Let customers place orders thru distribution partners
Transaction
Database
Link Employees and distribution partners
Let customers check order history and delivery status
Let customers place orders directly
Customer
Database
Build a community of customers, employees, and partners
Give all employees a complete view of customers
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Customer-Focused e-Business
There are other key strategies enabled by IT that can be used to enable a business to become successful and to
maintain their success.
A key strategy for becoming a successful e-business is to maximize customer value. This strategic focus on
customer value recognizes that quality rather than price
becomes the primary determinant in a customers perception of value. A Customer-Focused e-business,
then, is one that uses Internet technologies to keep
customer loyal by anticipating their future needs,
responding to concerns, and providing top quality
customer service.
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Customer-Focused e-Business
Such technologies like intranets, the Internet, and extranet websites create new channels for interactive communications
within a company, with customers, and with suppliers, business
partners, and others in the external business environment.
Thereby, encouraging cross-functional collaboration with
customers in product development, marketing, delivery, service
and technical support.
A successful Customer-Focused e-business attempts to own the customer's total business experience through such approaches as:
Letting the customer place orders directly, and through distribution partners
Building a customer database that captures customers' preferences and profitability, and allowing all employees access to
a complete view of each customer.
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The Customer- Focused Agile Competitor
Leverage the
Impact of
People and
IS Resources
Anticipation of
future needs
Customization
Conformance Give Customers
Solutions
to Problems
Cooperate with
Business Partners
and Competitors
Organize to
Master
Change
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The Customer- Focused Agile Competitor
Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually
fragmenting global markets for high-quality, high-
performance, customer-configured products and services.
Agile companies depend heavily on information technology
to support and manage business processes. The four
fundamental strategies of agile competition are:
Enrich Customers. Agile companies enrich customers with solutions to their problems. Long term value-added
products and services succeed when they solve problems
based on customer needs. As conditions change, the agile
competitor establishes a relationship based on the ability
and willingness to change to meet new customer problem
situations.
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The Customer- Focused Agile Competitor
Cooperate. Agile companies cooperate to enhance
competitiveness. This means internal cooperation and, where
necessary, cooperation with competitors in order to bring
products and services to market more quickly.
Organize. Agile companies organize to master change and
uncertainty. This is a key component of agile competition
because it seeks development of the anticipation and rapid
response to changing conditions, not an attempt to stifle change
itself.
Leverage People and Information. Agile companies leverage the
impact of people and information by nurturing an
entrepreneurial spirit and providing incentives to employees to
exercise responsibility, adaptability, and innovation.
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The Customer- Focused Agile Competitor
The Free.Perfect.Now model developed by AVNET Marshall
embodies these principles into a succinct model for serving its
customers in the most agile and responsive way.
Free Dimension. Emphasizes that most customers want the lower
cost for value received, but are willing to pay more for a value-
added service.
Perfect Dimension. Emphasizes that products and services should
not only be defect free, but should be enhanced by customization,
added features and should further anticipate future customer
needs.
Now Dimension. Emphasizes that customers want 24x7
accessibility to products and services, short delivery times, and
consideration of the time-to-market for their own products.
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VIRTUAL CORPORATIONS
Borderless
Technology
Excellence
Trust-Based
Adaptability
Opportunism
Six Characteristics
of Virtual Companies
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VIRTUAL COMPANY
A Virtual Company (also called a virtual corporation or virtual organization) is an organization that uses
information technology to link people, assets, and ideas.
People and corporations are forming virtual companies in
order to take advantage of strategic opportunities that
require time, people competencies and information
technologies resources that may not exist within a single
company. By making strategic alliances with other
companies and quickly forming a virtual company of all-
star partners, the virtual company is best able to assemble
the components needed to provide a world-class solution
for customers and capture the opportunity.
To succeed the virtual company must possess six characteristics:
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VIRTUAL COMPANY
Adaptability: Able to adapt to a diverse, fast-changing business environment. Virtual companies must further
reduce concept-to-cash time through sharing.
Opportunism: Created, operated, and dissolved to exploit business opportunities when they appear. They must gain
access to new markets and share market or customer
loyalty, while increasing facilities and market coverage.
Excellence: Possess all-star, world-class excellence in the core competencies that are needed. These
competencies must be seamlessly linked through the use
of Internet technologies.
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VIRTUAL COMPANY
Technology: Provide world-class information technology and other required technologies in all
customer solutions. They must migrate from
selling products to selling solutions.
Borderless: Easily and transparently synthesize the competencies and resources of business
partners into integrated customer solutions.
Trust-Based: Members are trustworthy and display mutual trust in their business
relationships. They must be willing to share
infrastructures and risks.
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Knowledge Management Systems
Solution
Knowledge
Development
Engineers
Technical
Support
Staff
Product
Managers Other
Vendors
Customers
The Internet
Intranet
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Knowledge Management Systems
Knowledge Management has become one of the major strategic uses of information technology.
Knowledge Management Systems (KMS) are
systems that are used to manage organizational
learning and business know-how. The goal of
knowledge management systems is to help
knowledge workers create, organize, and make
available important business knowledge,
whenever, and wherever its needed.
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In Summary
Information systems can play several strategic roles in business.
The Internet, intranets, extranets, and other Internet-based technologies can be used
strategically for e-business and e-commerce
that provide a competitive advantage.
A key strategic use of Internet technologies is to build an e-business which develops its
business value by making customer value its
strategic focus.
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In Summary
IT is a key ingredient in reengineering business operations, by enabling radical
changes to business processes that
dramatically improve their efficiency and
effectiveness.
IT can be strategically used to improve the quality of business performance.
A business can use IT to help it become an agile company, that can respond quickly to
changes in its environment.
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In Summary
Forming virtual companies has become an important competitive strategy in todays
dynamic global market.
Lasting competitive advantages today can only come from innovative use and
management of organizational knowledge
by knowledge creating companies and
learning organizations.
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End of Presentation