Management Information Systemslibvolume6.xyz/mechanical/btech/semester8/... · Strategy and...

Use w ith Management Information Systems 1e

By Effy Oz & Andy Jones ISBN 9781844807581

© 2008 Cengage Learning

Management Information SystemsBy Effy Oz & Andy Jones

www.cengage.co.uk/oz

Chapter 2: Strategic Uses of

Information Systems




Objectives

• Explain what business strategy and strategic

moves are

• Illustrate how information systems can give

businesses a competitive advantage

• Identify basic initiatives for gaining a

competitive advantage

• Explain what makes an information system a

strategic information system




Objectives (continued)

• Identify fundamental requirements for

developing strategic information systems

• Explain circumstances and initiatives that

make one IT strategy succeed and another fail




Strategy and Strategic Moves

• Strategy: plan to gain advantage over enemy

• Business strategy is plan to outperform competitors

– Done by creating new opportunities, not

beating rivals

• Strategic Information System: Information system

that create and seize opportunities

• Strategic Advantage: Using strategy to maximize

company strengths




Porter’s Five Forces Model




Achieving a Competitive Advantage

• Many initiatives used to gain competitive

advantage

• Strategies aim to maximize competitive

advantage

• Strategic moves often consist of combination

of two or more initiatives

• Essence of strategy is innovation




Achieving a Competitive Advantage

(continued)




Initiative 1: Reduce Costs

• Customers want to pay little for service

• Reduce costs to lower price

• Automation greatly reduces costs

• Web can automate customer service




Initiative 2: Raise Barriers to Market

Entrants

• Less competition is better for company

• Raise barriers to entrants to lower competition

• Techniques include obtaining copyrights and

patents on inventions, techniques, and services

• Building unmatchable information systems

blocks entrants




Initiative 3: Establish High Switching

Costs

• Switching costs: incurred when customer

stops buying from company and starts buying

from another company

– Explicit: charge customer for switching

– Implicit: indirect costs over period of time

• High switching costs locks in customers




Initiative 4: Create New Products or

Services

• Having unique product or service gives

competitive advantage

• First mover: organisation that is first to offer a

new product or service

– Superior brand name, better technology, more

experience

• Critical mass: body of clients that is large

enough to attract other clients




Initiative 5: Differentiate Products or

Services

• Product differentiation: persuading

customers that product is better than

competitors’

– Achieved through advertising

– Exemplified by brand name success

– Promotes brand name




Initiative 6: Enhance Products or

Services

• Enhance existing products or services to

increase value to consumer

• Many products and services have been

enhanced by the Web




Initiative 7: Establish Alliances

• Alliance: two companies combining services

– Makes product more attractive

– Reduces costs

– Provides one-stop shopping

• Affiliate program: linking to other companies

and rewarding the linker for click-throughs




Initiative 7: Establish Alliances

(continued)




Initiative 8: Lock in Suppliers or

Buyers

• Accomplished by achieving bargaining power

• Bargaining power: leverage to influence buyers

and suppliers

– Achieved by being major competitor or

eliminating competitors

– Uses purchase volume as leverage

• Lock in clients by creating high standards




Creating and Maintaining Strategic

Information Systems

• Many opportunities to accomplish competitive edge

with information technology

• Innovative software establishes competitive advantage

• Strategic information systems created from scratch or

modified from previous system

– Must serve organisation goal

– Must collaborate with other functional units of

company




Creating an SIS

• Strategic information system must be part of

the overall organisational strategic plan

• Precisely measuring financial output of SIS is

difficult




Creating an SIS (continued)




Reengineering and organisational

Change

• To implement SIS, organisations must rethink

way of operation

• Reengineering: Eliminating and rebuilding

operations from the ground up

– Involves new machinery and elimination of

management layers

– Achieves huge efficiency improvements

• New SIS requires businesses to revamp processes




Competitive Advantage as a Moving

Target

• Competitive advantage is often short-lived

• organisations imitating leader diminishes

advantage

• SIS has become expected business practice

• Company must modify and enhance technology to

sustain competitive advantage




JetBlue: A Success Story

• JetBlue: US airline company that entered a

formerly hurting market with great success

– Ticketless travel

– Automation with IT

– Reduced costs

– Improved service




Massive Automation

• JetBlue used Open Skies software to automate

ticket handling

– Greatly reduced travel agent fees

• Maintenance information system logs airplane

parts and time cycles

• Flight planning automated with application

• Training management system eliminates need

for paper records




Away from Tradition

• JetBlue used innovative technique for routing

airplanes

– Take most profitable route between cities

• Keeping flight manuals on laptop computers

allows for paperless cockpits

– Saves time associated with calculating weight

of plane




Enhanced Service

• JetBlue offers better service

– Leather seats

– Real-time television

– Fewest mishandled bags

– Better security




Impressive Performance

• Most important metric in airline industry is

cost per available seat-mile

– Measures how much it costs to fly a passenger

one mile

• JetBlue has lowest or second lowest CASM

– (Cost per Airline Mile Seat)

– Less than 7 cents




Late Mover Advantage

• Late mover: enters the market later than other

competitors

– Can be viewed as advantage

– Implements latest available technologies

– Not burdened with legacy systems

• JetBlue used 40% beta software




Ford on the Web: A Failure Story

• Some strategic moves end up being colossal

failures

• May fail because of lack of attention to details

• Unable to predict customer or business partner

response

• Jacque Nasser, CEO of Ford: ideas failed




The Ideas

• Nasser eager to push company to Web

• Install devices in vehicles to enable drivers and

passengers to access Web

• Establish Web site to market parts with

auctions

• Push vehicle sales to Web




Hitting the Wall

• Customers not interested in Web access in

vehicles

• Other car companies learned to use online part

auctioning

• Franchising laws do not allow car companies

to bypass dealers

• Online sales initiative failed




The Retreat

• Ford abandoned plan to sell directly online

• Web site was used instead to select proper

model only

• Site sold cars but not enough to save Nasser’s

job




The Bleeding Edge

• Ford case shows being first mover is risky

• Pioneers can be burned even with careful

planning

• Bleeding edge: failure occurring because of

company trying to be on leading edge

– Implementation costs are greater than

anticipated

– Technology ends up losing money for company




The Bleeding Edge (continued)

• Due to bleeding edge, companies wait before

implementing newer technologies

• Microsoft’s approach is to seize existing idea,

improve, and promote with marketing power

– Also known as competing by emulating and

improving




Summary

• Some information systems have become strategic

tools as a result of strategic planning

• Strategic information systems help companies

gain strategic advantage

• Company achieves strategic advantage by using

strategy to maximize its strength




Summary (continued)

• Various initiatives to establishing advantage

– Cost reduction, raising barriers to competitors,

establishing high switching costs, new

products, differentiating products, enhancing

products, alliances, and locking suppliers

• Creating standards establishes strategic

advantage in software industry




Summary (continued)

• Reengineering is process of designing a

business process from scratch to accommodate

new information systems

• Strategic advances from information systems

are short lived and new opportunities must

always be searched for

• Bleeding edge is the undesirable result of a

failed innovation effort

Management Information Systemslibvolume6.xyz/mechanical/btech/semester8/... · Strategy and...

Documents

Transcript of Management Information Systemslibvolume6.xyz/mechanical/btech/semester8/... · Strategy and...