Essentials of Management Information Systems Chapter 3 PDF

Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 3 Achieving Competitive Advantage with Information Systems...

Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 3 Achieving Competitive Advantage with Information Systems Copyright © 2020 Pearson Education Ltd. Learning Objectives 3.1 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage? 3.2 How do information systems help businesses compete globally? 3.3 How do information systems help businesses compete using quality and design? 3.4 What is the role of business process management (BPM) in enhancing competitiveness? 3.5 How will M I S help my career? Copyright © 2020 Pearson Education Ltd. Porter’s Competitive Forces Model Five competitive forces shape fate of firm – Traditional competitors – New market entrants – Substitute products and services – Customers – Suppliers Copyright © 2020 Pearson Education Ltd.  1- The Five Forces Example: https://www.isc.hbs.edu/strategy/business-strategy/Pages/the-five-forces.aspx Copyright © 2020 Pearson Education Ltd. Information System Strategies for Dealing with Competitive Forces (1 of 5) Basic strategy: Align I T 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 Copyright © 2020 Pearson Education Ltd. Information System Strategies for Dealing with Competitive Forces (2 of 5) Low-cost leadership – Use information systems to achieve the lowest operational costs and the lowest prices – E.g. Walmart  Inventory replenishment system sends orders to suppliers when purchase recorded at cash register  Minimizes inventory at warehouses, operating costs  Efficient customer response system Copyright © 2020 Pearson Education Ltd. Information System Strategies for Dealing with Competitive Forces (3 of 5) Product differentiation – Use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services – E.g., Google's continuous innovations, Apple's i Phone – Use information systems to customize, personalize products to fit specifications of individual consumers  E.g., Nike's NIKE iD program for customized sneakers Copyright © 2020 Pearson Education Ltd. Information System Strategies for Dealing with Competitive Forces (4 of 5) Focus on market niche – Use information systems to enable specific market focus, and serve narrow target market better than competitors.  Analyzes customer buying habits, preferences  Advertising pitches to smaller and smaller target markets – E.g., Hilton Hotel’s On Q System  Analyzes data collected on guests to determine preferences and guest's profitability Copyright © 2020 Pearson Education Ltd. Information System Strategies for Dealing with Competitive Forces (5 of 5) Strengthen customer and supplier intimacy. – Strong linkages to customers and suppliers increase switching costs and loyalty – Toyota: uses IS to facilitate direct access from suppliers to production schedules  Permits suppliers to decide how and when to ship supplies to plants, allowing more lead time in producing goods – Amazon: keeps track of user preferences for purchases, and recommends titles purchased by others Copyright © 2020 Pearson Education Ltd.  5-10 Competitive Advantage using VRIO 1. Valuable: Does it provide customer value and competitive advantage? 2. Rareness: Do no other competitors possess it at the same level? 3. Imitability: Do the competitors have the financial ability to imitate? 4. Organization: Is the firm organized to exploit the resource? Copyright © 2020 Pearson Education Ltd. VRIO Analysis Source: https://managementmania.com/en/vrio-analysis Copyright © 2020 Pearson Education Ltd. 5-11 The Internet’s Impact on Competitive Advantage Enables new products and services Encourages substitute products Lowers barrier to entry Changes balance of power of customers and suppliers Transforms some industries Creates new opportunities for creating new markets, building brands, and large customer bases Smart products and the Internet of Things Copyright © 2020 Pearson Education Ltd. Sustaining Competitive Advantage Case Why is Apple so expensive? | CNBC Explains – https://youtu.be/t6VYByDYg7c Questions – What is Apple’s most important competitive advantage? – How did it create this competitive advantage? – What Apple must do to sustain its competitive advantage? Copyright © 2020 Pearson Education Ltd. The Business 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. – Primary activities – Support activities – Benchmarking – Best practices Copyright © 2020 Pearson Education Ltd. Figure 3.2 The Value Chain Model Copyright © 2020 Pearson Education Ltd. Value Chain (continued) Copyright © 2020 Pearson Education Ltd.  10/01/2024 17 Value Chain Case Apple Computers – www.youtube.com/watch?v=PPN-CATyE_M  First five minutes – The iPhone Economy  https://www.nytimes.com/video/business/100000001299945/th e-iphone-economy.html  Until 1:30 Questions – Identify value chain activities for Apple products – What information systems enabled Apple to move production to other countries? – How does this help Apple achieve competitive advantage? Copyright © 2020 Pearson Education Ltd. The Value Web A firm’s value chain is linked to the value chains of its suppliers, distributors, and customers. Value web – Collection of independent firms that use information technology to coordinate their value chains to produce a product collectively – Value webs are flexible and adapt to changes in supply and demand Copyright © 2020 Pearson Education Ltd. Figure 3.3 The Value Web Copyright © 2020 Pearson Education Ltd. Synergies, Core Competencies, and Network-Based Strategies Large corporations comprised of business units – Financial returns overall are tied to performance of business units Information systems improve performance of business units by promoting – Communication – Synergies – Core competencies Copyright © 2020 Pearson Education Ltd. Synergies When output of some business units can be used as inputs to other units When two firms can pool markets and expertise (e.g., recent bank mergers) Lower costs and generate profits Enabled by information systems that ties together disparate units so they act as whole Copyright © 2020 Pearson Education Ltd. Core Competency Activities for which firm is world-class leader – E.g., world’s best miniature parts designer, best package delivery service, etc Relies on knowledge gained over years of experience as well as knowledge research Any information system that encourages the sharing of knowledge across business units enhances competency – E.g., Procter & Gamble uses intranet to help people working on similar problems share ideas and expertise. Copyright © 2020 Pearson Education Ltd. Network-Based Strategies Network economics – Marginal costs of adding another participant are near zero, whereas marginal gain is much larger – E.g., larger number of participants in Internet, greater value to all participants 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 Copyright © 2020 Pearson Education Ltd. 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 services First movers versus fast followers – First movers of disruptive technologies may fail to see potential, allowing second movers to reap rewards (fast followers) Copyright © 2020 Pearson Education Ltd. The Internet and Globalization Prior to the Internet, competing globally was only an option for huge firms able to afford factories, warehouses, and distribution centers abroad. The Internet drastically reduces costs of operating globally. Globalization benefits – Scale economies and resource cost reduction – Higher utilization rates, fixed capital costs, and lower cost per unit of production – Speeding time to market Copyright © 2020 Pearson Education Ltd.