Management Information Systems Chapter 3

Achieving Competitive Advantage with Information Systems

• Information systems can be used to achieve competitive advantage by aligning IT with business objectives, identifying business goals and strategies, and measuring progress.

Porter's Competitive Forces Model

• The five competitive forces that shape the fate of a firm are:
  • Traditional competitors
  • New market entrants
  • Substitute products and services
  • Customers
  • Suppliers
• This model helps companies use information systems to deal with competitive forces.

Information System Strategies for Dealing with Competitive Forces

• There are four strategies:
  • Low-cost leadership: use information systems to achieve the lowest operational costs and prices (e.g. Walmart's inventory replenishment system)
  • Product differentiation: use information systems to enable new products and services, or greatly change the customer convenience in using existing products and services (e.g. Google's continuous innovations, Apple's iPhone)
  • Focus on market niche: use information systems to enable specific market focus, and serve narrow target markets better than competitors (e.g. Hilton Hotel's On Q System)
  • Strengthen customer and supplier intimacy: use information systems to increase switching costs and loyalty (e.g. Toyota's use of IS to facilitate direct access from suppliers to production schedules, Amazon's user preference tracking)

The Internet's Impact on Competitive Advantage

• The Internet enables new products and services, encourages substitute products, lowers barriers to entry, changes the balance of power of customers and suppliers, transforms industries, and creates new opportunities for creating new markets, building brands, and large customer bases.

The Business Value Chain Model

• The value chain model highlights specific activities in a business where competitive strategies can best be applied and where information systems are likely to have a strategic impact.
• The model consists of primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (firm infrastructure, human resource management, technology development, procurement).

Synergies, Core Competencies, and Network-Based Strategies

• Synergies occur when the output of some business units can be used as inputs to other units, or when two firms can pool markets and expertise.
• Core competencies are activities for which a firm is a world-class leader, and rely on knowledge gained over years of experience and knowledge research.
• Network-based strategies use networks to link people, resources, and ally with other companies to create and distribute products without traditional organizational boundaries or physical locations.

Disruptive Technologies

• Disruptive technologies are those that have a significant impact on industries and businesses, rendering existing products, services, and business models obsolete.
• Examples of disruptive technologies include personal computers, the World Wide Web, and Internet music services.

The Internet and Globalization

• The Internet has drastically reduced the costs of operating globally, making it possible for small firms to compete with large firms.
• Globalization benefits include scale economies, resource cost reduction, higher utilization rates, and lower costs per unit of production.

Global Business and System Strategies

• There are four global business strategies:
  • Domestic exporters
  • Multinationals
  • Franchisers
  • Transnationals
• There are also four global system configurations:
  • Centralized systems
  • Duplicated systems
  • Decentralized systems
  • Networked systems

What is Quality?

• Quality can be viewed from two perspectives:
  • Producer perspective: conformance to specifications and absence of variation from specs
  • Customer perspective: physical quality, quality of service, and psychological quality
• Total quality management (TQM) is a philosophy that aims to make quality control an end in itself, and involves all people and functions in the organization.
• Six sigma is a measure of quality, with a goal of 3.4 defects per million opportunities.

How Information Systems Improve Quality

• Information systems can improve quality by:
  • Reducing cycle time and simplifying production
  • Benchmarking
  • Using customer demands to improve products and services
  • Improving design quality and precision
  • Improving production precision and tightening production tolerances

Business Process Management (BPM)

• BPM is a methodology that aims to continuously improve business processes, using a variety of tools and methodologies.
• Steps in BPM include:
  1. Identify processes for change
  2. Analyze existing processes
  3. Design new process
  4. Implement new process
  5. Continuous measurement

Business Process Reengineering

• Business process reengineering is a radical form of fast change, involving the elimination of old processes and replacement with new processes in a brief time period.
• It can produce dramatic gains in productivity, but can also produce more organizational resistance to change.