Competing with IT

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Competing with IT

• Management Information Systems
• BUS 391
• Lecture 2
• Professor Barry Floyd

2
Agenda

• Objectives
• Porters Five Forces Framework
• Generic Methods of Competing
• Value Chain Analysis
• Summary
• Things to do

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Objectives

• Understand how organizations compete
• Understand role of IT in achieving organizational
  objectives
• Apply concepts to your business

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Competitive Advantage

• A company gains a competitive advantage by
  providing a product or service in a way that
  customers value more than what the competition is
  able to do.
• IT doesnt necessarily offer a competitive
  advantage (well talk more about this)
• Ideally companies would like a sustainable
  competitive advantage (vs. a temporary advantage)

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Consider your business idea

• Who are your competitors?
• How will you compete against them?
• Is the industry that you chose an attractive
  one?

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Porters Five Forces Frameworkfor viewing the
attractiveness of an industry
New entrants
Industry Competitors Intensity of rivalry
Buyers
Suppliers
Substitutes
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Generic Strategies for Competing

• Cost leadership
• Differentiation
• Focused

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Competing on Cost

• Analyze activities to assess where costs can be
  diminished
• COST DRIVERS
• gtgtScale gtgtLearning
• gtgtCapacity utilization gtgtInterrelationships with
  other firms
• gtgtTiming gtgtDiscretionary policies
• gtgtLocation gtgtInstitutional factors
• gtgt Material gtgtOperations
• Control cost drivers

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How can you use technology to compete on cost?

• Thoughts?
• How do ERP systems influence cost?
• How can they help with determining credit
  availability?
• How can they help with product profit analysis?

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Competing on DifferentiationValue Chain Analysis

• The series of interdependent activities that
  brings a product or a service to the customer.
• Organizing framework for viewing the activities
  of the firm in providing products and services to
  customers.
• gt Use to assess where value is added to the
  product.
• Useful in identifying IT opportunities

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The Firms Value Chain
Management, Accounting, Finance Legal Human
Resource Management Research and
development Purchasing
Receive and store rawmaterials
Make the product or service
Deliver the product or service
Market/sell the product or service
Service after the sale
MARGIN
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GOAL OF VALUE CHAIN ANALYSIS

• GOAL OF THE ANALYST... Search for ways to use
  information technology to decrease costs or
  increase product differentiation, increasing
  VALUE
• IN GENERAL ...Developing the value chain and
  analyzing value activities in detail provide
• An understanding of how an organization performs
  its activities.
• How activities interact.
• What the relative importance of each activity is
  to the customer
• Consider both value enhancing and value
  reducing processes.

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The Customers Value Chain
Purchase
Assure Fit
Use
Maintain
make products easy to learn about make product
easy to purchase
make user training easier make the product easy
to use assure effective use
match to requirements customize the product
make product easy to maintain provide maintenance
help provide maintenance info
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Value Chain Articles to review

• http//www.marketingteacher.com/Lessons/lesson_val
  ue_chain.htmhttp//www.netmba.com/strategy/value-
  chain/http//www.mindtools.com/pages/article/newT
  MC_10.htm

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Measuring the Success of Strategic Initiatives

• Efficiency do things right
• Throughput, speed availability, accuracy, web
  traffic, response time
• Effectiveness do the right things
• Usability, Customer satisfaction, conversion
  rates, financial

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Some questions ...

• Can IT build barriers to entry?
• Can IT build in switching costs?
• Can IT change the balance of power in supplier
  relationships?
• Can IT generate new products?

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Summary

• Organizations must find a way to compete in the
  market place.
• The use of IT can be an effective way to
  accomplish the goal of carrying out the
  competitive strategy
• To do so, requires an understanding of current
  technologies and the vision to see how these
  technologies (and future ones) can be
  successfully applied.

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Things to do for next class

• Read Chapter 3 on Strategic Initiatives for
  Implementing Competitive Advantages and Chapter
  12 for a more complete understanding of ERP
• Review the material on competitive analysis.
• Develop a competitive strategy for your company.
• Identify where you think IT can be used to effect
  your strategy.