Information Systems for
Strategic Advantage
ISYS 363
Strategic Advantage and Strategic
Necessity
• Strategic advantage refers to obtaining a
sustainable competitive edge over
competitors. The ability to obtain a greater
than normal return on investment.
• A strategic necessity is a system that must
be installed to remain competitive and stay
in business.
Auction sites
• Yahoo, Ebay
• Necessity:
– Ability to search and view items, view seller
info and bid history, place a bid, online
payment.
• Advantage:
– Ebay
• Ebay store
• Pay Pal
• SkyPe
Being the First
• Internet Search Engines:
– Yahoo, Google
– Teoma
– Mooter
• Desktop Search
– Google Desktop
– Copernic Desktop Search
Being the First
• Advantages:
–
–
–
–
–
higher market share
Higher price
Custom loyalty
Retention through switching costs
Enhanced reputation from being a leader
• Disadvantages
– Product demand is not known
– Higher development costs
– Free rider effects by followers
• Information system can be copied.
– The basis for competition changes
• Firms tend to stay with their way of doing things
• Competitors are busy finding ways to change the market place
New Way of Doing Business
• Digital Photo Printing
– SnapFish
• DVD rental
– NetFlix
– http://www.dvdrental101.com/
• Online music store
– iTunes
• E-Learning
– Demo: ForestGIS
PayPal
• PayPal is how individuals and businesses
send and receive money online.
• Micropayments are means for
transferring money, in situations where
collecting money with the usual payment
systems is impractical, or very expensive,
in terms of the amount of money being
collected.
IT Doesn’t Matter – Nicholas Carr
• The basis for a sustainable competitive
advantage is not ubiquity but scarcity.
• The core functions of IT have become
available to all.
• Computer programs today are industry
specific, most “right out of box””. That is
they are commodities.
• Costs of doing business – paid by all but
provide distinction to none.
Carr’s Rules for Firms
• Spend less
• Follow, don’t lead
• Focus on the risks of IT, not the
opportunities
Competitive forces model by
Michael Porter
Threat of
New Entrants
Bargaining Power
of Suppliers
Rivalry among
Existing Competitors
Threat of Substitute
Products
Bargaining Power
of Customers
Competitive Strategies
• Cost leadership strategy.
• Product differentiation strategy.
• Innovation strategy: Finding new way of doing
business.
• Alliance strategy: Establish alliances with
customer, suppliers, competitors, other
company.
• Growth strategy: expanding, diversifying,
integrating.
Strategic Roles for Information
Systems
• Improving business operations
• Promoting business innovation
• Locking in customers and suppliers
– Interorganizational IS, EDI, automatic inventory
replenishment system
• Creating switching costs
– make customers dependent on the continued use of
innovative IS.
• Raising barriers to entry
– discourage competitors from entering a market
The Value Chain and Strategic
IS
• It views a firm as a series, or chain, or network
of basic activities that add value to its
products and services, and thus add a margin
of value to the firm.
– Margin is the value of the firm’s products and
services less their costs, as perceived by the firm’s
customers.
• Support activities:
– Administration, human resource management ,etc.
• Primary activities:
– Inbound logistics, operations, outbound logistics,
marketing, etc.
The Value Chain
Administrative Coordination & Support Services
Human Resource Management
Technology Development
Procurement of Resources
Inbound
Outbound
Operations
Logistics
Logistics
Marketing
Customer
and
Service
Sales
Business Process Reengineering
(BPR)
• Often used to react to systems that can
no longer function adequately in the
current business environment of the firm
• BPR is the fundamental rethinking and
radical redesign of business process to
achieve dramatic improvements, such
as cost, quality, service, and speed.
• Example: Ford Motor Accounts Payable
E-Commerce
• B2C
– Virtual storefront, catalog, ordering processing
– Online customer support, secure payment
• B2B
– Whole sale and supply
– Integrating a company’s internal systems with
those of its suppliers, partners, and
customers.
Interorganizational System (IOS)
• These link two or more firms so that they
function as a single system to accomplish
a common goal
• Generate internal efficiency in addition to
interorganizational efficiency
• Provides customers with unique product
features, reduced search-related costs,
and raises the customer’s switching costs
Electronic Data Interchange (EDI)
Adheres to Standard Formats
Purchase order
Suppliers
The
Firm
CRM (customer relationship
management)
• CRM (customer relationship management) is an
information industry term for methodologies,
software, and usually Internet capabilities that
help an enterprise manage customer
relationships in an organized way.
– For example, an enterprise might build a database
about its customers that described relationships in
sufficient detail so that management, salespeople,
people providing service, and perhaps the customer
directly could access information, match customer
needs with product plans and offerings, remind
customers of service requirements, know what other
products a customer had purchased, and so forth.
Major Functions of CRM
• Helping an enterprise to enable its marketing
departments to identify and target their best customers,
manage marketing campaigns with clear goals and
objectives, and generate quality leads for the sales team.
• Allowing the formation of individualized relationships with
customers, with the aim of improving customer
satisfaction and maximizing profits; identifying the most
profitable customers and providing them the highest
level of service.
• Providing employees with the information and processes
necessary to know their customers, understand their
needs, and effectively build relationships between the
company, its customer base, and distribution partners.
Targeted Marketing
• Community: People in specific
communities
– Online chat, Blogging, special interest groups
• Content: Advertising banner placed on
web pages.
• Context: Advertising appears only in web
pages that are relevant to the product.
• Demographic
• Online behaviors: cookies
Push/Pull
• Internet push marketing:
– Email marketing
– Web page personalization
• Internet pull marketing
– Product web page
ERP (enterprise resource planning)
• ERP is an integrated system that helps a
manufacturer or other business manage the
important parts of its business, including product
planning, parts purchasing, maintaining
inventories, interacting with suppliers, providing
customer service, and tracking orders. ERP can
also include application modules for the finance
and human resources aspects of a business.
Typically, an ERP system uses or is integrated
with a relational database system.
– An integrated system