Information

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Chapter 2 Information Systems For Competitive
Advantage www.pearsoned.ca/jessup
Robert Riordan, Carleton University
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• Business Strategy

Business Strategy
Improve Profitability Reduce Costs
Reach Global Markets
Solidify Business Relationships/ Improve Customer
Service
Maximize Technology Benefits
Streamline Business Processes
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Strategy and Competitive Advantage
Achieving Strategy Providing support in a way
that enables the firm to gain or sustain
competitive advantage over rivals

• Sources of Competitive Advantage
• Having the best-made product on the market
• Delivering superior customer service
• Achieving lower cost than rivals
• Having proprietary manufacturing technology
• Having shorter lead-times in developing and
  testing new products
• Having a well-known brand name and reputation
• Giving customers more value for their money

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The roadmap for e-business strategy
implementation addresses nine interrelated issues
Developing a Competitive Business Strategy
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Developing a Competitive Business Strategy
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Developing a Competitive Business Strategy

• Three generic strategies
• Cost leadership
• Differentiation
• Focused strategy

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Developing a Competitive Business Strategy

• Business process - a standardized set of
  activities that accomplishes a specific task,
  such as processing a customers order.
• Value chain - views the organization as a chain
  or series of processes, each of which adds
  value to the product or service for the customer.

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Developing a Competitive Business Strategy
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Developing a Competitive Business Strategy

• Use the value chain to
• Plan for a better way of meeting customer
  demands.
• Identifying processes that add value.
• Identifying processes that reduce value.

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Developing a Competitive Business Strategy
How does a business optimize its value process?
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Developing a Competitive Business Strategy
Differentiator adding value to the process
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Developing a Competitive Business Strategy

• Just-in-time - an approach that produces or
  delivers a product or service just at the time
  the customer wants it.
• Supply chain - consists of the paths reaching out
  to all of a companys suppliers of parts and
  services.
• Collaborative planning, forecasting, and
  replenishment (CPFR) - a concept that encourages
  and facilitates collaborative processes between
  members of a supply chain.

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Key E-Commerce Strategies

• Three capabilities made possible by the Internet
  are
• Mass customization and personalization
• Disintermediation
• Global reach

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Key E-Commerce Strategies

• Mass customization - a business gives its
  customers the opportunity to tailor its product
  or service to the customers specifications.
• Personalization - a Web site can know enough
  about your likes and dislikes that it can fashion
  offers that are more likely to appeal to you.
• Collaborative filtering - a method of placing you
  in an affinity group of people with the same
  characteristics.

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Key E-Commerce Strategies Mass Customization
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Key E-Commerce Strategies - Personalization
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Key E-Commerce Strategies Collaborative
Filtering
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Key E-Commerce Strategies

• Disintermediation using the Internet as a
  delivery vehicle, intermediate players in a
  distribution channel can be bypassed.

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Key E-Commerce Strategies
Channel Partners
Resellers VARS
Suppliers
Manufacturer
Customers
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Key E-Commerce Strategies

• Global reach - the ability to extend reach to
  customers anywhere there is an Internet
  connection, and at a much lower cost.

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The U.S. Airline Industry

• The airlines really began using IT in a
  significant way when American Airlines and United
  Airlines introduced the first airline
  reservations systems.
• SABRE
• APPOLO

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The U.S. Airline Industry

• Frequent flyer programs are a great example of
  using IT to alter Porters five forces.
• They reduced buyer power by making it less likely
  a traveler would choose another airline.
• They reduced the threat of substitute products or
  services by increasing switching costs.
• They erected entry barriers by making a frequent
  flyer program a practical necessity for any
  airline to compete effectively.

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The U.S. Airline Industry

• Yield management systems are designed to maximize
  the amount of revenue that an airline generates
  on each flight.
• Yield management systems are the reason that an
  airfare youre quoted over the phone can be 100
  higher when you call back an hour later.

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The U.S. Airline Industry
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The U.S. Airline Industry

• Expert surveys have estimated that the number of
  travel agents in the U.S. will be sharply reduced
  as a result of disintermediation.

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Recurring/Non-Recurring and Tangible/Intangible
Business cases typically include both
Recurring/Non-recurring and Tangible/Intangible
costs and benefits

• Recurring vs. Non-Recurring
• Recurring - Ongoing costs or benefits identified
  in a business case (IT staff to support system)
• Non-Recurring - One-time costs or benefits
  identified in a business case (software purchase)

• Tangible vs. Intangible
• Tangible - Cost and benefits that are easily
  identified (e.g. headcount or labour cost)
• Intangible - Cost and benefits that are not
  easily identified (i.e. increased customer
  service)

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Tangible and intangible sources of
differentiation
Developing a Competitive E-Business Strategy
Quality
Customisation
Convenience
Tangible sources
Speed of delivery
Sources of differentiation
Product range
Brand
Intangible sources
Reputation
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Tangible and Intangible Benefits
Tangible benefits Intangible benefits
Increased sales from new sales leads giving rise to increased revenue from new customers, new markets existing customers (repeat-selling) existing customers (cross-selling). Marketing cost reductions from reduced time in customer service online sales reduced printing and distribution costs of marketing communications. Supply-chain cost reductions from reduced levels of inventory increased competition from suppliers shorter cycle time in ordering. Administrative cost reductions from more efficient routine business processes such as recruitment, invoice payment and holiday authorization. Corporate image communication Enhancement of brand More rapid, more responsive marketing communications including PR Faster product development lifecycle enabling faster response to market needs Improved customer service Learning for the future Meeting customer expectations to have a web site Identifying new partners, supporting existing partners better Better management of marketing information and customer information Feedback from customers on products
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Value Chain Integration
The business value chain impacts three broad
areas of organization activity
CompanyInternal infrastructure
Supplier network
Customer network
Source PricewaterhouseCoopers, Gartner Group
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• Value Chain Integration

Value Chain Systems Applications Opportunities
Capacity optimisation
Data visibility
Develop products
Perform marketing
Procurement
Supplier network
Manage logistics
Customer network
Production
Perform sales
Customer service
Configure and manufacture to order
Real time matching of supplyand demand
Superior customer service
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• Value Chain Integration

The Virtual Value Network
Perform marketing
Procurement
Manage logistics
Develop products
Supplier network
Customer network
Perform sales
Customer service
Production