In this chapter you will learn: How can you use information technology to improve your organization and make it better than your competitors? How competitive is your world? What are the main factors affecting a firm’s competitive advantage? Where do you begin looking for an edge?,...
Introduction to MIS Chapter 10 Strategic Analysis Copyright © 1998-2002 by Jerry Post Introduction to MIS Strategy Connections to suppliers and customers Competition Become the best firm in the industry Block the competitors by keeping your customers happy Introduction to MIS Outline The Competitive Environment External Agents IS Techniques to Gain Competitive Advantage The Search for Innovation Research Engineering and Design Manufacturing Logistics and Supply Marketing Sales and Order Management Service Management Costs and Dangers of Strategies Operations, Tactics, Strategy E-Commerce Failures Cases: Travel Industry Appendix: Solving Business Problems and Cases Introduction to MIS Competition Competition is increasing in many industries, but it is particularly intense in the restaurant and fast food industry Competition encourages firms to hold down costs, provide more variety, and provide new and better service to customers Introduction to MIS Porter’s Five Forces Model Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products or Services Introduction to MIS Harvard Strategy Formulation (Deciding what to do.) Implementation (Achieving results.) Org structure & relation Identification of opportunity and risk Corporate Strategy Material, technical, financial, & human resources Pattern of purposes and policies defining the company and its business Personal values and aspirations Introduction to MIS Org processes & behavior Standards and measurement Motivation & incentive systems Control systems Recruit & develop managers Top leadership Strategic Organizational Personal Noneconomic responsibility to society Division of work Coord divided responsib Information systems parts supplier parts supplier warehouse supplier supplier tool manufacturer Manufacturer wholesaler wholesaler distributor Production Chain warehouse supplier workers retail store parts supplier distributor retail store distributor retail store retail store Consumers Introduction to MIS Methods to Gain Competitive Advantage Barrier To Entry Supplier Supplier Ties To Suppliers Decreased Costs Firm Control Of Distribution Improved Quality Consumer Introduction to MIS Innovation and Differentiation Consumer Consumer Consumer Increased Switching Costs Consumer Rival Wholesale Ties To Customers Supplier Consumer Consumer Barriers to Entry Economies of Scale (size) Economies of Scope (breadth) Product Differentiation Capital requirements Cost Disadvantages (independent of size) Distribution Channel Access Government Policy Introduction to MIS Competitive Advantage Barriers to Entry Consumers incur learning and data transfer costs Baxter Healthcare Introduction to MIS Monitoring production lines and analyzing data Digital Equipment Corp Value Chain Add new features or create new products with IT Federal Express & Merrill Lynch Quality Management IS to cut costs Wal-Mart Product Differentiation Prevent others from entering the industry Napster Switching Costs Lower Production Costs Distribution Channels Additional costs of creating an information system People’s Express Expanding forward or back the value chain to find greater profits Boeing Information Systems 10 Management Executive Information Systems Simulation (and rivalry games) Links to external partners (accounting, law, ) Electronic conferencing Work group communication, e-mail Standardization, Modularization, Franchises Knowledge Workers Client-server instead of hierarchical computing Introduction to MIS 23 Strategy Analysis Product Differentiation Skills & Resources Strong marketing Product engineering Basic research Distribution channel cooperation Skills & Resources Internal coordination Incentives for innovation Resources to attract skills Risks Cost Leadership Organization Requirements Competitors imitate Customers not accept Cost is too high Introduction to MIS Continued capital investment Process engineering Continuous quality improvement Tight supervision of costs Products designed for low cost Low cost distribution Organization Requirements Tight cost controls Frequent control reports Highly structured org Incentives based on qualitative measures 24 Strategy Analysis Cost Leadership Risks Customer-Supplier Links Competitors imitate Technology changes Lose production or distribution advantage Skills & Resources Organization Requirements Introduction to MIS Flexibility to respond to customers Service culture Ability to adapt to emergencies Risks Influence with partners Communication channels Standards or agreements Security threats Changing standards Competitors copy with more/better links 25 Dangers: Capital Cost Money for research Money for information technology Introduction to MIS 26 Competition Follows IS Costs You Time Transaction Processing Network & link sales people Experimental technology & global links IS Costs Rival Time Network & DSS Introduction to MIS Link to suppliers & customers 27 Changing Industry & Government Intervention New technology New services Customer Customer Customer Industry (expands into industry 2) Customer Customer Customer Introduction to MIS Industry (new competitor) Same technology Customer Customer 28 Need to control access Need to worry about network interceptions and hackers Security Production Firm reje c Security firewall ted Hackers or competitors Data we wish to share Data we want to protect Introduction to MIS Customer 29 E-Commerce Failures Hundreds of dot-com firms failed in 2001 and 2002 Most relied on pure Internet revenue Outsourcing production and shipping Most relied on advertising revenue—often revenue from other dot-com firms Many believed in the importance of being first to market and becoming the biggest, best-known firm in a niche industry Many believed that it was not necessary to make a profit on sales Money from advertising and stock sales would be sufficient to keep the firm alive until the world changed Most were wrong Introduction to MIS 30 Cases: Travel Industry Introduction to MIS 31 Cases: The Sabre Group American Express www.sabre.com www.americanexpress.com What is the company’s current status? What is the Internet strategy? How does the company use information technology? What are the prospects for the industry? Introduction to MIS 32 Appendix: Solving Problems Solve the right problem Choose the right tools Divide the system Make decisions Consider consequences Test the system Plan implementation Introduction to MIS Cause Feasibility Input Process Output Customer response Employee response Detail Organization Schedule 33 Appendix: Evaluating Projects Does the project fit with business goals and management style? Does the project improve the competitive position of the firm? How long will any competitive advantage last? What value or reward is created by the system? What level of technology is needed to create the system? What is the probability of technical success? What is the probability of commercial success? What are the costs involved in creating the system? experimental leading edge established old-hat Monetary Time Additional capital, marketing and management Introduction to MIS 34 Appendix: Good Business Analysis Identify the root causes of problems Solid grasp of strategic components Identify the critical success factors Evaluate the financial implications Thorough discussion of implementation Realistic analysis of expected results Effect on future growth and continued development Effect on human resources Understanding of target markets Introduction to MIS 35 Solving Business Problems & Cases Solve the right problem Choose the right tools Divide the system Make decisions Consider the consequences Test the system Plan implementation Case hints Introduction to MIS 36 Appendix: Organization of Analysis Problem description Plan Describe the new system Implementation plan Contingency plan Advantages Identify most important problems Identify causes of problems Show how your plan solves the problems Explain additional benefits or opportunities Introduction to MIS 37 ... Sales and Order Management Service Management Costs and Dangers of Strategies Operations, Tactics, Strategy E-Commerce Failures Cases: Travel Industry Appendix: Solving Business Problems and Cases... creating an information system People’s Express Expanding forward or back the value chain to find greater profits Boeing Information Systems 10 Value Chain Firm Infrastructure Human Resources Management. .. research Money for information technology Introduction to MIS 26 Competition Follows IS Costs You Time Transaction Processing Network & link sales people Experimental technology & global links