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Questions and Answers
What is a key first step in aligning IT with business objectives?
What is a key first step in aligning IT with business objectives?
Which of the following is a key aspect of low-cost leadership?
Which of the following is a key aspect of low-cost leadership?
Product differentiation primarily involves using information systems to do which of the below?
Product differentiation primarily involves using information systems to do which of the below?
What is a key strategy for focusing on a market niche using information systems?
What is a key strategy for focusing on a market niche using information systems?
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Which statement best describes the role of information systems in strengthening customer and supplier intimacy?
Which statement best describes the role of information systems in strengthening customer and supplier intimacy?
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According to Porter's competitive forces model, what factor influences a firm's fate?
According to Porter's competitive forces model, what factor influences a firm's fate?
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Which of the following is NOT one of Porter's five competitive forces?
Which of the following is NOT one of Porter's five competitive forces?
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What role do information systems play in Walmart's supercenter strategy?
What role do information systems play in Walmart's supercenter strategy?
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How do information systems contribute to a business's competitive strategy, as illustrated by Walmart's case?
How do information systems contribute to a business's competitive strategy, as illustrated by Walmart's case?
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Which of these is a way that Walmart's supercenter systems DON'T use Information Systems to compete?
Which of these is a way that Walmart's supercenter systems DON'T use Information Systems to compete?
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What is the primary benefit of strong linkages between a company and its customers and suppliers?
What is the primary benefit of strong linkages between a company and its customers and suppliers?
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How does Toyota utilize information systems to improve its supply chain?
How does Toyota utilize information systems to improve its supply chain?
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How does Amazon use information systems to enhance customer experience?
How does Amazon use information systems to enhance customer experience?
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What effect has the internet had on the balance of power between customers and suppliers?
What effect has the internet had on the balance of power between customers and suppliers?
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Which of the following is NOT a typical impact of the internet on competitive advantage?
Which of the following is NOT a typical impact of the internet on competitive advantage?
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According to the business value chain model, where are information systems likely to have the greatest strategic impact?
According to the business value chain model, where are information systems likely to have the greatest strategic impact?
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What does the concept of a 'value web' primarily emphasize?
What does the concept of a 'value web' primarily emphasize?
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What is the primary purpose of benchmarking in the context of business strategy?
What is the primary purpose of benchmarking in the context of business strategy?
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What is the primary function of a value web?
What is the primary function of a value web?
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How do information systems contribute to synergies within a large corporation?
How do information systems contribute to synergies within a large corporation?
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Which of these best describes a core competency of a firm?
Which of these best describes a core competency of a firm?
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What is a key characteristic of a virtual company?
What is a key characteristic of a virtual company?
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How are network effects beneficial to firms?
How are network effects beneficial to firms?
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How does an information system promote the development of core competencies within business units?
How does an information system promote the development of core competencies within business units?
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What is a typical outcome of successful synergy between two firms or business units?
What is a typical outcome of successful synergy between two firms or business units?
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Study Notes
Chapter 3: Achieving Competitive Advantage with Information Systems
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Learning Objectives:
- Demonstrate how Porter's competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage.
- Describe how information systems help businesses compete globally.
- Describe how information systems help businesses compete using quality and design.
- Explain the role of business process management (BPM) in enhancing competitiveness.
- Understand how MIS can help your career.
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Video Case: Celonis Tops $11 Billion Valuation with New Round of Funding
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Walmart's Supercenter Strategy:
- Problem: Opportunities from new technology, large geographic footprint, powerful competition, and high costs
- Information System: Supercenter Systems, expedite ordering and shipping, provide new in-store services, warehousing for third-party sellers, targeted brand online ads
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Walmart's Supercenter Strategy (continued):
- Increases revenue and service
- Illustrates how information systems help businesses compete
- Demonstrates IT's role in helping organizations strengthen their competitive strategies by using new technologies
Porter's Competitive Forces Model
- Five competitive forces shape a firm's fate
- Traditional competitors
- New market entrants
- Substitute products and services
- Customers
- Suppliers
Information System Strategies for Dealing with Competitive Forces
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Basic strategy: Align IT with business objectives
- Identify business goals and strategies
- Break strategic goals into concrete activities and processes
- Identify metrics for measuring progress
- Determine how IT can help achieve business goals
- Measure actual performance
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Low-cost leadership: Use information systems to achieve the lowest operational costs and the lowest prices
- Example (Walmart): Inventory replenishment system, minimizes inventory at warehouses, efficient customer response system
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Product differentiation: Use information systems to enable new products and services, or to greatly change customer convenience in using existing products and services
- Example (Baume): Customized watches, Google's innovations, Apple's iPhone
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Focus on market niche: Use information systems to enable specific market focus and serve narrow target market better than competitors
- Example (Charlotte Hornets): Analyzes customer buying habits, preferences for advertising, maintains records on fans
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Strengthen customer and supplier intimacy: Strong linkages to customers and suppliers increase switching costs and loyalty
- Example (Toyota): facilitates direct access from suppliers to production schedules, permits suppliers to decide how and when to ship supplies, allowing more lead time in producing goods, Amazon: tracks user preferences
Spotlight on People: Customer Experience Management
- What is customer experience management? How can it contribute to competitive advantage?
- How does information technology support customer experience management? Give examples
- How did information technology and customer experience management change operations and decision making at the organizations described in this case?
The Internet's Impact on Competitive Advantage
- Impacts include
- Enabling new products and services, changes to balance of power of customers and suppliers, reduction of barriers to entry, transformation of some industries, creation of opportunities for new markets, building brands and customer bases.
The Business Value Chain Model
- Highlights specific activities in a business where competitive strategies can best be applied, showcasing the strategic impact of information systems' roles.
- Primary activities
- Support activities
- Benchmarking
- Best practices
Figure 3.2 The Value Chain Model
The Value Web
- A firm's value chain is linked to the value chains of its suppliers, distributors, and customers.
- Value web is a collection of independent firms that use information technology to coordinate their value chains and produce a product collectively, adaptable to supply and demand changes
Figure 3.3 The Value Web
Synergies, Core Competencies, and Network-Based Strategies
- Large corporations comprise of business units; financial returns depend on business unit performance.
- Information systems improve businesses unit performance by promoting communication, synergies, and core competencies
Synergies
- Outputs from some business units can be used as inputs into other units
- Pooling markets and expertise (example: Amazon's acquisition of MGM)
- Lower costs and generate profits
Core Competencies
- Activities for which a firm is a world-class leader; e.g. specialized miniature parts design, delivery service
- Relies on experience and knowledge research.
- Systems encouraging knowledge sharing across business units enhance competency
- Example (Procter & Gamble): Sharing ideas on similar problems among employees
Network-Based Strategies
- **Virtual company:** Uses networks to link people, resources, and ally with other companies to create and distribute products without traditional organizational boundaries or physical locations, e.g. Li & Fung
- **Network economics:** Marginal costs of adding another participant to the network are near zero, while the marginal gain is large, e.g. eBay
Business Ecosystems and Platforms
- Business ecosystem (industry sets): Loosely coupled interdependent networks of suppliers, distributors, outsourcing firms, transportation firms, tech manufacturers
- IT plays an important role in these networks
- Platforms: Keystone firms dominate the ecosystem and let other firms use their resources and services (e.g. Microsoft, Apple, Facebook)
Disruptive Technologies
- Technologies with disruptive impact on industries and businesses, rendering existing products, services, and business models obsolete
- Personal computers
- World Wide Web
- Internet music, video, TV services
- First movers may fail to take advantage while fast followers can reap rewards
The Internet and Globalization
- Prior to the internet, global competition limited to large firms with factories, warehouses, and distribution centres
- Internet reduces costs of operating globally, delivering benefits like scale economies, resource cost reduction, higher utilization rates, lower per-unit costs, and faster time to market
Figure 3.4 Apple iPhone's Global Supply Chain
Global Business and System Strategies
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Four main ways of organizing internationally:
- Domestic exporter strategy (e.g., Caterpillar Inc.)
- Multinational strategy (e.g., Ford Motor Company)
- Franchiser (e.g., McDonald's)
- Transnational strategy (e.g., Nestle S.A.)
Global System Configuration
- Four main system strategies & configurations: Centralized systems, duplicated systems, decentralized systems, networked systems
Figure 3.5 Global Business Organization Systems Configurations
What is Quality?
- Producer Perspective: Conformity to specifications and absence of variation from specs.
- Customer Perspective: Broader than producer's, including physical quality (reliability), quality of service, and psychological quality.
- Total Quality Management (TQM): Quality control is an end in itself, everyone is responsible.
- Six Sigma: Quality measure: 3.4 defects/million opportunities.
How Information Systems Improve Quality
- Reduce cycle time and simplify production: Example: ArcScam.
- Benchmark: Example: L.L. Bean.
- Use customer demands to improve products and services: Example: Delta Airlines.
- Improve design quality and precision (CAD): E.g, 3-D printing.
- Improve production precision and tighten production tolerances.
What is Business Process Management (BPM)?
- Technology alone often isn't enough to improve business.
- Organizational changes are necessary; May involve minor or major changes to processes.
- Aims to continuously improve business processes.
- Use of tools and methodologies to understand existing processes
- Designed and optimize new processes
Steps in BPM
- Identify processes for change.
- Analyze existing processes.
- Design new processes.
- Implement new processes.
- Continuously measure performance.
Figure 3.6 As-Is Business Process for Purchasing a Book from a Physical Bookstore
Figure 3.7 Redesigned Process for Purchasing a Book Online
Business Process Reengineering
- A radical form of far-reaching change, eliminating old processes and implementing new ones
- Can yield dramatic gains in productivity and efficiency, but may create organizational resistance
Spotlight on Organizations: Signet Jewelers
- Class discussion on Signet's traditional vs. digital business strategies and processes.
- Comparison between in-store and virtual sales processes.
- Addressing people, organizational, and technology issues.
- Advantages and disadvantages of selling high-end jewelry virtually.
How MIS Can Help Your Career
- Company example: SuperiorCRM.com
- Position description, job requirements, interview questions, author tips
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Description
This quiz explores the integration of information systems with business strategies, highlighting concepts from Porter's competitive forces model and the strategies of companies like Walmart and Toyota. Test your knowledge on how information systems can enhance competitive advantage and customer relationships.
