Chapter 3

Strategic Information Systems for Competitive Advantage

A Good Strategy?

Why Have a Strategy?

Does a business/organization need a strategy?

What makes a good strategy? Does IT affect a strategy?

If so, how?

Elements of Strategic Management Long Range Planning

Outside scope of this course Response Management Proactive Innovation

Information Technologies Our focus

Where Does a Strategy Come From?

Mission

Goals

Organizational strategy

Functional strategies

Finance Marketing Operations

Tactics Tactics Tactics

Finance operations

Marketingoperations

Operationsoperations

What is a Mission?

Mission: The reason for existence of an organization

Mission Statement: A statement of purpose that serves as a guide for strategy and decision making

Should answer: What business are we in? Where should we be in 10

years? Who are our customers? What are our basic beliefs? How do we measure success?

IBM Mission Statement

We create, develop and manufacture the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We have two fundamental missions: We strive to lead in the creation, development, and

manufacture of the most advanced information technologies. (Performance objective & Business definition)

We translate advanced technologies into value for our customers as the world’s largest information services company. Our professionals worldwide provide expertise within specific industries, consulting services, systems integration, and solution development and technical support. (Business definition, customers)

Goals

Goal: Provides substance to the overall mission. More specific

Example: 3M Mission: “To solve unsolved problems innovatively

…” Possible Goal: Our corporate goal is to have 30%

of sales come from new products.

Distinctive Competencies

Distinctive Competencies: Special attributes or abilities possessed by an organization that give it a competitive edge

OR

Unique resources and strength of an organization that reflect the collective learning of an organization

Examples of Distinctive CompetenciesPrice Low Cost Half.com, Wal-Mart

Quality High Performance Design

Amazon

Time Rapid Delivery

On-Time Delivery

Office Max, Staples

Flexibility Variety, Volume Amazon

Service Superior Customer Service

Dell

Location Convenience BestBuy, McDonald’s, 7-Eleven

The Role of IT

IT creates applications that provide strategic advantages to companies

IT is a competitive weapon IT supports strategic change, e.g.

reengineering IT networks with business partners IT provides cost reduction IT provides competitive business intelligence

Competitive Advantage in the Web Economy

Competitive Strategy

Search for a competitive

advantage in an industry, which leads to control of the market

Competitive Advantage

Look for a competitive

necessity, which will help your

company keep up with the

competitors

Sustainable Strategic

Advantage

Maintain profitable and sustainable

position against the forces that

determine industry

competition

Analyzing Competitiveness

Well-known framework is Porter’s competitive forces model (1985) Used to develop strategies for companies to

increase their competitive edge Demonstrates how IT can enhance

competitiveness of corporations Recognizes 5 major forces that could endanger a

company’s position in a given industry

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

Competitive Forces Diagram

Porter’s Model in Action

Step 1: The players in each force are listed Step 2: An analysis is made which relates

Porter’s determining factors Step 3: A strategy is devised to defend

against these factors Step 4: Support information technologies are

employed

Porter’s Model in Action, cont’d.

Case: DaimlerChrysler

Problem: In 1993, Chrysler lost $2.6 billion because its

program with parts suppliers was failing Solution:

Suppliers began using Lotus Notes/Domino Measurement reports to static HTML pages E-Procurement exchange at Covisint

Results Chrysler saved millions of $

Porter’s Value Chain Analysis Model Primary Activities

Inbound logistics (inputs) Operations (manufacturing and testing) Outbound logistics (storage and distribution) Marketing and Sales Service

These 5 activities constitute a supply chain

Value Chain Model, cont’d.

Support Activities Firm infrastructure Human resources management Technology development Procurement

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

Functional Departments and the Value Chain

Value Chain Model, cont’d.

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 role of IT