Chapter 2.
Strategic Use of Information
Resources
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258
chen@gonzaga.edu
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
What is the
“Competitive Advantage”?
• A competitive advantage is a benefit
derived from something a company does or
has that its customers want and its
competitors cannot (or choose not to)
match.
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Sustainable Competitive
Advantages
• However, firms may create/improve their
competitive advantages only if they:
– have capacity to learn.
– employ revenue management approach.
• With the service economy accounting for over 70
percent of GDP in OECD (Organization for Economic
Co-operation and Development) countries, service
firms are becoming increasingly competitive with
revenue management (RM) and pricing becoming
central in their focus for sustaining long term
profitability (and competitive advantage).
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Learning Objectives
• List the identifying factors of the eras of information
usage.
• Know what makes an information resource valuable.
• Explain how information resources are used
strategically in context of the 5-forces model.
• Understand how information resources can be used to
alter the value chain.
• Explain the importance of strategic alliances.
• Know the risks of information resources.
Copyright 2010 John Wiley & Sons, Inc.
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Real World Examples
• The Spanish manufacturer Zara has a simple business
model that provides a significant strategic advantage.
• Their system links demand to manufacturing and
manufacturing to distribution.
• Customers visit up to 17 times per year to check on
new items that may have arrived.
• Since products are limited customers will
immediately purchase products they like.
• Loyal and satisfied customer base.
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Real World Examples (cont.)
• Zara aligns its information system strategy with its
business strategy.
• The POS system sends daily updates to Zara’s
headquarters.
• Managers report to designers what sold and what
customers wanted but couldn’t find.
• The information is used to determine what to keep
and what to discontinue or change.
• New designs can be ordered twice a week.
• The entire process is automated so that new designs
and products can be created quickly.
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What is Business Model?
• A business model is a set of planned
activities (sometimes referred to as
business processes) designed to result in a
profit in a marketplace.
• The business model is at the center of the
business plan.
• An e-commerce business model aims to
use and leverage the unique qualities of the
Internet and the www.
Source: E-Commerce: business, technology, society, Laudon and Traver, A/W
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Why New Models?
• We need some new models
– for how we go about exploring IT for
competitive advantage,
– for IT infrastructure how we create it and
manage it
– for how we acquire, manage and deploy the
skills that are needed to run that infrastructure
– Profitability (making money)
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Essentials for a Successful Enterprise
competition
structure/
culture
Value propositions
1. Business model
Business landscape
Internal/
External
fulfill
2. Core competencies
Strategic intent
Analysis
(Porter, SWOT)
3. Execution
Technology
H/R
Management
Process
Finance
…
future positioning
Strategy
Positioning
Corporate strategy
•Positioning on product/market
Business strategy
•Differentiation/choice of
competitive advantage
Functional strategy
IT Role?
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•Competitive posture
Industry characteristics，
Market growth，
Demand characteristics，
Barrier of entry，etc.
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Business Model vs.
Revenue Model
• Business model is the architectural
configuration of the components of
transactions designed to exploit business
opportunities.
• Revenue model refers to “the specific
ways in which a business model enables
revenue generation.”
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Business vs. Revenue Model
Business Model
Value creation
It describes the way in
which a company
enables transactions
that create value for
all participants,
including partners,
suppliers and
customers.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Revenue Model
Value appropriation
It can be realized through a
combination of
- subscription fees,
- advertising fees,
- transactional income (e.g.,
fixed transactional fees,
referral fees, fixed/variable
commissions, etc)
Four Important Entities for a
Successful Enterprise
• Capital
• Technical
• Human
（资本）
（技术）
（人才）
• Information
（信息）
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EVOLUTION OF INFORMATION
RESOURCES
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Information Resources
• Over the past decades the use of information resources
has changed.
• Organizations have moved from an “efficiency model”
of the 1960’s to a “value creation model” of the
2000’s.
• Companies seek to utilize those technologies that give
them competitive advantage.
• Maximizing the effectiveness of the firm’s business
strategy requires the general manager to identify and
use information resources.
• Figure 2.1 shows this change.
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1960s
1970s
1980s
1990s
2000+
Value creation
Create collaborative
partnerships
Primary
Role of IT
Efficiency
Effectiveness
Strategic
Strategic
Automate
existing paperbased processes
Solve problems and
create opportunities
Increase individual
and group
effectiveness
Transform
industry/organizatio
n
Justify IT
expenditure
ROI
Increasing
productivity and
decision making
Competitive
position
Competitive
position
Adding
Value
Target of
systems
Organization
Individual manager/
Group
Business
processes
Business processes
ecosystem
Customer,
supplier,
ecosystem
Information
model
Application
specific
Data-driven
User-driven
Business-driven
Knowledgedriven
Dominant
technology
Mainframebased
Minicomputerbased
Microcomputer
“decentralized
intelligence”
Client-Server
“distribution
intelligence”
Internet “ubiquitous
intelligence”
Basis of Value
Scarcity
Scarcity
Scarcity
Plentitude
Plentitude
Underlying
economics
Economic of
information
bundled w/
economics of
things
Economic of
information bundled
w/ economics of
things
Economic of
information bundled
w/ economics of
things
Economic of
information
separated f/
economics of
things
Economic of
information
separated f/
economics of things
w/ (with)
f/ (from)
Figure 2.1 Eras of information usage in organizations (Eras Model)
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Network Externalities
• Definition - The phenomenon whereby a service becomes
more valuable as more people use it, thereby encouraging
ever-increasing numbers of adopters.
– Network effects
• While the word-of-mouth method is often more influential
in the beginning, analysis may play a significant role later
in the cycle. In other words, you may adopt a service
initially because someone you know uses it; later, you may
adopt a service because "everyone" uses.
– IT Role?
– Network Externality offers a reason for value derived from
plentitude (Era IV & V)
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INFORMATION RESOURCES
AS STRATEGIC TOOLS
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Information Resources
• The term information resources is defined as the
available data, technology, people, and processes
available to perform business processes and tasks.
• Information resources can be either assets or
capabilities.
– IT asset is anything, tangible or intangible, that can be used
by a firm in its processes for creating, producing and/or
offering its products (IT infrastructure is an asset).
– IT capability is something that is learned or developed over
time in order for the firm to create, produce or offer it
products.
Copyright 2010 John Wiley & Sons, Inc.
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• IS infrastructure:
IT Assets
– It includes data, technology, people, and processes.
– The infrastructure provides the foundation for the delivery
of a firm’s products or services.
• Information repository.
– Logically-related data that is captured, organized and
retrievable by the firm.
• Web 2.0 assets now include resources used but not
owned by the firm (eBay, Facebook, etc.).
Copyright 2010 John Wiley & Sons, Inc.
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IT Capabilities
• Three major categories of IT capabilities:
– Technical skills - applied to designing, developing and
implementing information systems.
– IT management skills - critical for managing the IT
function and IT projects.
– Relationship skills - can either be externallyfocused or spanning across departments.
Copyright 2010 John Wiley & Sons, Inc.
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Type of Information Resource
IT Asset
Definition
Example
Anything that can be used by a firm in its processes for creating, producing and/or offering its
products (goods or services)
IS infrastructure
Information repository
IT Capability
Base foundation of the IT portfolio
shared through the firm3
Hardware, software, network, data components,
proprietary technology, web-based services
Data that is logically related and
Critical information about customers that can be used
organized in a structured form
to gain strategic advantage. Much of this information
accessible and able for decision making is increasingly available on the web.
purposes.”
Something that is learned or developed over time in order for the firm to create, produce or
offer it products using IT assets
Technical skill
Ability applied to designing, developing Proficiency in systems analysis and design;
and implementing information systems programming skills
IT management skills
Ability to managing IT function and IT
projects
Being knowledgeable about business processes and
managing systems to support them; evaluating
technology options; envisioning creative IS solutions
to business problems
Relationship skills
Ability of IS specialists to work with
parties outside the IS department.
Spanning: having a good relationship between IT and
business managers
Externally-forced: have a good relationship with an
outsourcing vendor
Figure 2.2 Information Resources
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Advantages of Information Resources –
What General Managers want are …
•
General managers evaluating an information
resource for competitive advantage needs to ask:
– What makes the information resource valuable?
– Who appropriates the value created by the information
resource?
– Is the information resource equally distributed across
firms?
– Is the information resource highly mobile?
– How quickly does the information resource become
obsolete?
– When, where and …
What tools are available to help shape their strategic use?
What are the risks of using information resource to gain strategic advantag
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Using Information resources to
create strategic advantage
• Strategic advantage must be crafted by
combining all of the firm’s resources
including:
– production resources,
– human resources, and
– Information resources
• Information resources include not only data,
but also technology, people and processes.
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Figure I.9 System Hierarchy
Oversee
Develop
System’s
Architecture
Design
Requirements
Management
and
Strategies
Structure
Information System
Infrastructure
People
Technology
Information
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Process
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Examples of information resources
available to a firm:
•
•
•
•
•
•
IS infrastructure
Information and knowledge
Proprietary technology
Technical skills of the IT staff
End users of the IS
Relationship between IT and business
managers
• Business processes
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HOW CAN INFORMATION
RESOURCES BE USED
STRATEGICALLY?
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The Strategic Landscape
• Managers confront elements that influence the
competitive environment.
• Slim tolerance for error requires managers take
multiple view of the strategic landscape, such as:
– First view - Porter’s five competitive forces model.
– Second view - Porter’s value chain.
– Third view – focuses on the types of IS resources
needed (Resource Based View).
Copyright 2010 John Wiley & Sons, Inc.
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Striving for Competitive Advantage
• Firm level: Industry & Competitive Analysis
– Competitive Forces Model
– Competitive Strategy
– D’Aveni’s Hypercompetition Model (7-Ss)
• Business level
– Value-Chain Analysis
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Porter’s Five Forces Model and
Value Chain
• According to Porter, there are five competitive
forces in any industry, and the attractiveness of the
industry depends on the strength of each force.
• Under the perspective of market structure, Porter’s
competitive forces model has been broadly adopted
as the underpinning for investigating the effect of
information technology on the relationships
between suppliers, customers, and other potential
threats.
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Figure 2.3 - Five (5) Competitive Forces with Potential
Strategic Use of Information Resources (Porter)
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PORTER’S FIVE COMPETITIVE
FORCES MODEL
NEW
MARKET
ENTRANTS
•Switching cost
•Access to
distribution channels
•Economies of scale
INDUSTRY
COMPETITORS
THE FIRM
•Selection of suppler
•Threat of backward
integration
SUPPLIERS
SUBSTITUTE
PRODUCTS
& SERVICES
Threats
•Cost-effectiveness
•Market access
•Differentiation of
product or service
Bargaining power
John WileyDr.
& Sons,
Dr. Chen,
Information
Theory and Practices
Chen,Inc.
The&Trends
of the
InformationSystems
Systems–Technology
•Redefine products
and services
•Improve
price/performance
•Buyer selection
•Switching costs
•Differentiation
CUSTOMERS
31 N
TM -31
Figure 2.3 - Five (5) Competitive Forces with Potential
Strategic Use of Information Resources (Porter)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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PORTER’S FIVE COMPETITIVE
FORCES MODEL
NEW
MARKET
ENTRANTS
Internal Forces:
1.customer focus
2.communication,
3.core competencies
4.complexity
5.Quality
SUBSTITUTE
PRODUCTS
& SERVICES
Threats
INDUSTRY
COMPETITORS
THE FIRM
Other forces should
be considered in the
e-Age:
1. Digitalization
2. Globalization
3. Deregulation
•Cost-effectiveness
•Market access
•Differentiation of
product or service
SUPPLIERS
Bargaining power
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& Sons,
Dr. Chen,
Information
Theory and Practices
Chen,Inc.
The&Trends
of the
InformationSystems
Systems–Technology
CUSTOMERS
33 N
TM -33
The Five Forces Model and IS
• The Five Forces Model provides a way to think
about how information resources can create
competitive advantage.
• Using Porter’s Model, General Managers can:
– Identify key sources of competition they
face.
– Recognize uses of information resources to
enhance their competitive position against
competitive threats
– Consider likely changes in competitive
threats over time
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Porter’s Value Chain Model
• The value chain model highlights specific
activities (i.e. create, deliver, and support a
company’s product or service) in the business
where competitive strategies can be best
applied and where information systems are
most likely to have a strategic impact.
• Therefore, the value chain model can be
employed to identify specific, critical leverage
points where a firm can use IT most
effectively to enhance its competitive position.
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Figure 2.6 Process View of the Firm: The Value Chain
(Value)
Two broad categories:
Primary activities – relate directly to the value created in a product or service.
Support activities – make it possible for the primary activities to exist and remain coordinated
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Using Information Resources to Alter the
Value Chain
• The Value Chain model suggest that competition
can come from two sources:
– Lowering the cost to perform an activity and
– Adding value to a product or service so buyers
will be willing to pay more.
• Lowering costs only achieves competitive
advantage if the firm possesses information on the
competitors’ cost structure
• Adding value is a strategic advantage if a firm
possesses accurate information regarding its
customer such as: which products are valued?
Where can improvements be made? When to …
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The Value System (Fig 2.5)
• The value chain model can be extended by
linking many value chains into a value
system.
• Much of the advantage of supply chain
management comes from understanding
how information is used within each value
chain of the system.
• This can lead to the formation of entire new
businesses designed to change the
information component of value-added
activities.
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The Value System:
Interconnecting relationships between organizations
Upstream
value
Firm
value
Downstream
value
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BUSINESS FOCUS
E-BUSINESS
•SCM
•CRM
•BPR
•ERP
Customer
centric
Who are the customers?
Where are the customers?
Their purchasing habits
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Demands
Products
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
CRM and the Value Chain
• Customer Relationship Management (CRM) is a
natural extension of applying the value chain
model to customers.
• CRM includes management activities performed
to obtain, enhance relationships with, and retain
customers.
• CRM is a coordinated set of activities.
• CRM can lead to better customer service, which
leads to competitive advantage for the business.
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Activity
Zara’s Value Chain
PRIMARY ACTIVITIES
Inbound Logistics
Operations
Outbound Logistics
Marketing and Sales
Service
IT-enabled Just-in-Time (JIT) strategy results in inventory being received when needed. Most dyes are
purchased from its own subsidiaries to better support JIT strategy and reduce costs.
Information systems support decisions about the fabric, cut and price points. Cloth is ironed and products
are packed on hangers so they don’t need ironing when they arrive at stores. Price tags are already on the
products. Zara produces 60% of its merchandise in-house. Fabric is cut and dyed by robots in 23 highly
automated Spanish factories.
Clothes move on miles of automated conveyor belts at distribution centers and reach stores within 48
hours.
Limited inventory allows low percentage of unsold inventory (10%); POS at stores linked to headquarters
to track how items are selling; Customers ask for what they want and this information is transmitted daily
from stores to designers over handheld computers.
No focus on service on products
SUPPORT ACTIVITIES
Organization
IT supports tightly-knit collaboration among designers, store managers, market specialists, production
managers and production planners.
Human Resources
Technology
Purchasing
Technology is integrated to support all primary activities. Zara’s IT staff works with vendor to develop
automated conveyor to support distribution activities.
Vertical integration reduces amount of purchasing needed.
Figure 2.7 Application of Value Chain Model
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Figure 2.7(b) Application of Value Chain Model
Activity
Grocery Chain’s Value Chain
Supplier’ Value Chain
Primary Activities
Inbound Logistics Analysis of buying patterns
Operations
Outbound logistics
Marketing and
Sales
Service
Analysis of buying patterns can
suggest items should be stocked
aid grocery chains in better
at local stores, including amounts determining demand, leading to
and optimum delivery times
better forecasting for both chain
and supplier
Analysis of buying patterns can
Automated checkout can speed
checkout operations; may lead to reduce ‘last-minute’ orders and
improve suppliers processing of
reduced staffing of registers/
orders
lower operating costs
Sharing analysis of buying
patterns by grocery chain can
aid supplier in scheduling
Analysis of b. patterns can aid
Suppliers may be able to offer
development of promotional
economies of scale in its
strategies/ highlight customer
purchases
preference
Automated checkout lanes
shorten
waiting times
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Systems –customer
Theory and Practices
Sharing analysis of b. patterns
allows better supplier service
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Figure 2.7 (b) Application of Value Chain Model (cont.)
Grocery Chain’s Value Chain
Activity
Supplier’ Value Chain
Secondary (Support) Activities
Organization
Human Resources
Staffing needs for cash
registers may be reduces
with automated checkout
Technology
Shopping card can
provide data for market
research
Purchasing
Grocery chain may be
able to capture more
discounts for volume
purchases
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Grocery chain can
provide information to
help supplier’s
marketing research
Supplier chain may be
able to capture more
discounts for volume
purchases
44
WHY CRM?
• In this competitive age when product
differentiation is difficult, CRM is one of the
most valuable assets a company can acquire.
• The sooner a company embraces CRM the
better off it will be and the harder it will be
for competitors to steal loyal and devoted
customers.
• CRM is more than just “Marketing” (what
else?)
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CUSTOMER RELATIONSHIP
MANAGEMENT’S EXPLOSIVE GROWTH
CRM Business Drivers
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New Forces in Today’s Economy
• Overcapacity and hypercompetition.
– Overcapacity is 25% pharmaceuticals, 30% chemicals,
35% automobiles
– Leads to falling prices and margins, mergers, and
company failures
• Ascendant power of customers.
– Customer shortage
– Price transparency
• Ascendant power of distributors over
manufacturers.
• Growth of digitalization and the Internet as major
sources of efficiency and profitability.
• Proliferation of channels and media.
• Globalization and global interdependence.
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Supply Chain Management
• An approach that improves the way a company finds
raw components it needs to make a product or
service, manufactures that product or service, and
delivers it to customers.
• Technology permits supply chains of customer’s and
supplier’s to be linked.
• Requires collaboration and the IT to support the
seamless connection.
• Electronic marketplaces can be used to limit
information sharing.
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BASICS OF SUPPLY CHAIN
• Organizations must embrace technologies that can
effectively manage supply chains
Involvement
(integration)
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FIVE BASIC SUPPLY CHAIN
MANAGEMENT COMPONENTS
Plan
Source
Make
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Deliver
Return
INFORMATION TECHNOLOGY’S
ROLE IN THE SUPPLY CHAIN
• IT’s primary role is to create integrations or tight process and
information linkages between functions within a firm
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
The Resource-Based View
• The Resource-Based View (RBV) looks at gaining
competitive advantage through the use of information
resources.
– Determining whether a firm’s strategy has created value.
• Two subsets of information resources have been
identified:
– Those that enable firms to attain competitive advantage
(rare and valuable resources that are not common place).
– Those that enable firms to sustain competitive advantage
over the long-term (resources must be difficult to transfer
or relatively immobile).
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Porter’s Model vs. Resource-Based View
Porter’s Model/Value
Chain
Resource-Based
View (RBV)
Competitive
Advantage
(CA)
Argues that aspects of the
firm’s industry create
sources of CA.
Maintains that CA
comes from the
information and other
resources at the firm
Focus (what
adds value to
the firm)
Firm’s activities
Resources that firm
can manage
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• More to be discussed on the topic of
“Strategic IT Resources”
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4. Use the resource-based view as described in this chapter to
describe how information technology might be used to provide and
sustain a winning position for each of these businesses: (p.72)
• Ans: The resource based view The Resource-Based View (RBV)
looks at gaining competitive advantage through the use of information
resources. Two subsets of information resources have been identified:
Those that enable firms to attain competitive advantage (rare and
valuable resources that are not common place), and those that enable
firms to sustain competitive advantage (resources must be difficult to
transfer or relatively immobile). The question asks the student to
describe how each of these 5 businesses might use information
resources to add value to the activities of their company.
• Global airline- they could utilize their global relationships to market
strategically to customers through a CRM system that would be
difficult to imitate because of their global reach. They could utilize IT
talent from all parts of the world to create systems that are innovative
and strategic in nature (specialized billing system for example).
• Bank- provide a new service through their ATM machines that takes
advantage of a service that is unique to that bank, and difficult to
emulate.
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4. (cont.)
• Web-based wine retailer – take advantage of its online
presence to offer other services like wine
recommendations, possibly creative cooking recipes, and
other services that would enhance its services.
• Local dry cleaner- a customer preference system could be
set up that markets to customers that have not utilized the
cleaner recently. Perhaps offer coupons to these
customers, etc.
• Appliance Service Firm- similar to the local dry cleaner, an
IS system could be used that tracks repairs of appliances
and determines which appliances seem to have problems
with specific components. They could then use customer
service to get feedback on these appliances and help
customers to select appliances in the future that are more
reliable, thus generating customer loyalty and service.
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STRATEGIC ALLIANCES
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Strategic Alliances
• An interorganizational relationship that affords one or
more companies in the relationship a strategic
advantage.
• IT can help produce the product developed by alliance,
share information resources across the partners’
existing value systems, or facilitate communication and
coordination among the partners.
• E.g., Delta recently formed an alliance with e-Travel
Inc to promote Delta’s inline reservation system.
• This helps reduce Delta’s agency fees while offering eTravel new corporate leads.
• Also, Supply Chain Management (SCM) is another
type of IT-facilitated strategic alliance.
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Aligning IS strategy with Business
Strategy
• Using multiple approaches to evaluating the
strategic landscape is helpful in determining
strategic opportunities.
• Here, we look at three such approaches:
– Porter’s five forces model of the competitive
advantage of firms
– Porter’s value chain model of internal
organizational operations
– Wiseman’s theory of strategic thrusts and
strategic option generator (results in nine possible
major options to secure a competitive advantage)
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Wiseman’s theory of strategic thrusts
and strategic option generator
I. Major options to secure a
competitive advantage
II. Option Generator
Suppliers Customers Competitors 1.
Differentiation
Cost
Innovation
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What is our strategic target?
2. What strategic thrust can be
used against the target?
3. What strategic mode can be
used?
4. What direction of thrust can be
used?
5. What IS skills can we use?
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Types of Strategic Alliances
• Supply Chain Management: improves the way a
company finds raw components that it needs to
make a product or service.
– Technology, especially Web-based, allows the supply chain of a
company’s customers and suppliers to be linked through a single
network that optimizes costs and opportunities for all companies in
the supply chain
– Wal-Mart and Proctor & Gamble.
• Virtual Corporations: is a temporary (virtual) network of
suppliers, customer and even rivals linked by IT to share
skills, cost and access to each others’ markets
• Co-opetition: a new strategy whereby companies
cooperate and compete at the same time with companies in
their value net
– Covisint and General Motors, Ford, and DaimlerChrysler.
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Summary of Key Strategy Frameworks
Framework
Key Idea
Usefulness in Information Systems
Discussions
Porter’s generic
strategies
framework
Firms achieve
competitive advantage
through cost leadership,
differentiation, or
focus.
Understanding which strategy is chosen
by a firm is critical to choosing IS to
complement that strategy.
D’Aveni’s
hypercompetition
model
Speed and aggressive
moves and countermoves by a firm
create
competitive advantage.
The 7-S’s give the manager suggestions
on what moves and counter moves to
make and IS are critical to achieve the
speed needed for these moves.
Brandenberg and
Nalebuff’s
co-opetition model
Companies cooperate
and compete at the
same time.
Being cooperative and competitive at the
same time requires IS that can manage
these two roles.
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Virtual Companies (Portable Computing)
A Virtual Company is an Organization composed
of several Business Partners that Uses
Information Technology to Link/Share People,
Assets, Ideas, Costs, and Resources
for the purpose of producing a product or service.
Virtual Companies are Adaptable and OpportunityExploiting Organizations Providing World-Class
Excellence in Their Competencies and
Technologies.
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Characteristics of Virtual Companies
Excellence
Borderless
Adaptability
Six
Characteristics
of Virtual
Companies
Opportunism
Trust-Based
Technology
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RISKS
Copyright 2010 John Wiley & Sons, Inc.
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Potential Risks
There are many potential risks that a firm faces when attempting to
use IT to outpace their competition.
• Awakening a sleeping giant – a large competitor with deeper
pockets may be nudged into implementing IS with even better
features
• Demonstrating bad timing – sometimes customers are not
ready to use the technology designed to gain strategic advantage
• Implementing IS poorly – information systems that fail because
they are poorly implemented
• Failing to deliver what users want – systems that don’t meet
the firm’s target market likely to fail
• Web-based alternative removes advantages – consider risk of
losing any advantage obtained by an information resource that
later becomes available as a service on the web
• Running afoul of the law – Using IS strategically may promote
litigation
N
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Profits relative to competitions (%)
Relationship between profits and time
of market introduction
300
250
200
150
100
50
0
-10
-5
0
5
10
Time of market introduction relative to competition (months)
Figure 7.10 (p.227)
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Keen’s Six-Stage Competitive Advantage
Model
Stimulus for action
First major move
Customer acceptance
Competitor catch-up moves
First-mover expansion moves
Commoditization
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When to Perform Activities
• First Movers
Advantages
Disadvantages
• Build brand recognition
• Newer technology
• Control scarce resources
• Higher development costs
• Establish networks
• Reverse engineering by
competitors
• Early Economies-of-Scale
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The new technology adoption curve
Readiness
Intensification
Impact
Level of
Activity
Which stage is the current
e-Business?
Time
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FOOD FOR THOUGHT:
CO-CREATING IT AND
BUSINESS STRATEGY
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Co-Creating IT and Business Strategy
•
•
•
•
Is FedEx a package delivery company?
What happens if FedEx’s IS goes down?
What is the core of FedEx?
Information is increasingly a core component of the
product or service offered by the firm.
• IT strategy is business strategy – they cannot be
created without each other.
• Some company’s main product is information
(financial services).
• FedEx can not function without IT even though they
are primarily a package delivering company.
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SUMMARY
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Summary
• Using IS for strategic advantage requires more than
just knowing the technology.
• Remember that not just the local competition is a
factor in success but the 5 competitive forces model
reminds us of other issues.
• Value chain analysis show us how IS add value to the
primary activity of a business.
• Know the risks associated with using IS to gain
strategic advantage.
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End of Chapter 2
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