Week 4
Monday, February 13
Business Networks
Leveraging IT
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
1
Inputs
Processes
Outputs
What does it take to get
groceries into a home?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
2
Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
3
From Last Week…
Networks for Competitive Advantage
• Low number of suppliers means they have higher
bargaining power
• New entrants due to market potential with a quick ROI
• High cost of IT capital (barrier to entry)
• Rivalry high in industry
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
4
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
5
How should a business invest in IT?
Long-term vs. ‘Low-Hanging Fruit’
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
6
IT Value Framework
Value-sustaining IT
applications
Strategic differentiation and proprietary
advantage that can be measured in terms of
increased market share, improved brand
value, increased market capitalization
Value-creating
IT applications
Value-enabling infrastructure
Profitable growth through further cost
reductions and revenue generation
Lower costs, improve asset
efficiency, and create strategic
options for future growth
Initiatives
How will the business achieve this?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
7
IT Application Framework
IT to differentiate the organization from others
Strategic
Application of
IT
Basic IT to remain competitive in industry
Reengineering
Business
Processes
Basic IT to do business
IT
Infrastructure
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
8
Leveraging the IT Infrastructure
• Two key infrastructure components:
– IT operations (data center, network, call centers, etc.)
– Supporting enterprise processes (procurement,
enterprise resource planning, finance, human
resources)
• Flexibility and efficiency in the IT infrastructure to drive
down costs, and increase IT asset productivity and
future options values
Business process
IT
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
9
Global IT Infrastructure
• Shared common infrastructure
– IBM’s Business On Demand
• Exploits immediate cost savings and asset
productivity
• An on demand enterprise leverages standardsbased, componentized technology to support
integrated and flexible business processes
– Opens a range of business opportunities
• Supports collaboration among business partners
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
10
Leveraging IT and Reengineering Processes
• Cost reductions
• Revenue generation: Introduction of new services
through product development
• Proprietary advantage
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
11
IT Infrastructure and Processes
Reengineering: Reengineering to Leverage IT
Structure
Vision and
direction
Strategy
Organization and coordination
Planning and control
Management
Processes
Individuals
and Roles
Information
Technology
Technology
Human resources
Dynamic Equilibrium: Any change to a component requires an
adjustment to the others
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
12
In a Nutshell…
Business
IT
Alignment
Vision
Strategy Business networks
Strategy
(Competitive Advantage)
Process Reengineering
(Control, enhancing, leveraging)
Capabilities
Capabilities IT infrastructure
Alignment
Value
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
13
Aloha Airlines
• One of two major inter-island airlines in Hawaii
– Smaller of the two
• In December 2004, filed for Chapter 11 reorganization
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
14
e-Commerce
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
15
Receives direct non-stop flights from US mainland
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
16
Threat: Hawaiian Airlines
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
17
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
18
Online Reservations
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
19
Customer Loyalty Programs
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
20
Leveraging IT
Business
IT
Alignment
Vision
Strategy Business networks
Strategy
(Competitive Advantage)
Process Reengineering
(Control, enhancing, leveraging)
Capabilities
Capabilities IT infrastructure
Alignment
Value
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
21
Porter’s Five Forces Model
Forces that Shape Strategy

How will the business
Potential
react to threats (and
Entrants
opportunities)?
Threat of new entrants
Industry
Competitors
Bargaining power of
suppliers
Customers and
Buyers
Suppliers



Bargaining power of buyers
Rivalry among
existing firms
Substitutes
R. Ching, Ph.D. • MIS Area • California State University, Sacramento

Threat of substitute products or
services
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