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@jepson.gonzaga.edu
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File name on your group work
• Please name your group files as follows:
• mbus626-G1-Swimming in the VCPool with
PlentyofFish (.pptx or .docx)
• Other group, please change G1 to your
designated group#.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Real World Example
information system strategy
• Zara aligns its __________________
business strategy.
with its _________
• The system links demand to manufacturing
and distribution.
• Customers visit up to 17 times per year to
check on new items that may have arrived.
• Limited products lead customers to
immediately purchase products they like.
• Zara’s business strategy leads to a loyal and
satisfied customer base.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Real World Example (Cont.)
• The POS system sends daily updates to Zara’s
headquarters.
• Managers report to designers what sold and what
customers wanted but couldn’t find.
information is used to determine inventory
• The ___________
management.
• New designs can be ordered twice a week.
• The entire process is automated so that new
designs and products can be created quickly.
information resources to sustain its
• Zara uses its ___________
advantages over competitors
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Discussion Questions
• Q4
• It has been said that there are no sustainable
competitive advantages can be gained from IT
other than the capability of the IT organization
itself. Do you agree or disagree? Defend your
position.
• As the chapter discusses, sustainable advantage
is hard to come by. Just about any advantage
gained by a company seems to be copied by
another at some point in the future.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Discussion Questions - Answer
• Those who agree (i.e., IT does not provide S.A.) with
this statement might argue that even the capability of the
IT organization is not a sustainable advantage because
people come and go, they can be bought by another
organization as a move to create the capability
elsewhere, and their skills and knowledge atrophy over
time, when new capabilities arise. Witness IT
organizations who excelled at managing mainframe
applications, who are now struggling to keep up with
web-based applications.
• Those who disagree (i.e., IT provides S.A.) with this
statement might argue that the key to sustaining any
advantage comes from the way all business resources
are organized and used, and ultimately that comes down
to how the managers and the people are able to perform.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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.
• If a company can sustain its competitive advantage,
the company will succeed in its industry – how?
• Two types of people lead a company to succeed
– Those know how to innovate the enterprise
– Those know how to execute their strategy onto the
enterprise using IS/IT.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Sustainable Competitive Advantages
• Any sustainable competitive advantages?
• How can an organization sustain its competitive
advantage?
• Firms may create/improve their competitive advantages
only if they:
capacity to learn,
– have ________
revenue management
– employ ________
_________ 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 9
advantage).
– learning to learn and learning to change (life-long
learning environment)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Co-Creating IT and Business Strategy
• Information is increasingly a core component of the
product or service offered by the firm.
business strategy – they cannot be
• IT strategy is ________
created without each other.
• Some company’s main product is information
(financial services).
• Q: Is FedEx is a package delivering company?
– Y/N (and Why?)
IT even though
– FedEx can not function without ____
they are primarily a package delivering company.
• Other companies such as Walmart, UPS, or Zipcar
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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.
specific ways in
• Revenue model refers to “the _______
which a business model enables revenue
generation
___________.”
• Revenue mechanism is a key component of the
business model because it provides a sustainable
financial source for the business’ effort of innovation
(Afuah, 2004).
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Business vs. Revenue Model
Business Model
creation
Value _________
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
appropriation
Value ____________
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)
Revenue Management
• If you are interested in
the issues of RM
• International Journal of
Revenue Management
• http://www.inderscience.
com/ijrm
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
EVOLUTION OF INFORMATION
RESOURCES
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Evolution Of Information Resources
• IS strategy from the 1960s to the 1990s was
driven by internal organizational needs
– Lower existing transaction costs
– Provide support for managers by collecting and distributing
information
– Redesign business processes
• In the 2010 era IS strategy was driven by
social IT platforms and new capabilities
______
– A new evolution of applications, processes, and strategic
opportunities
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Information Resources
• The term information resources is defined as the
available data, technology, people, and processes
available to perform business processes and tasks.
efficiency model” of
• Organizations have moved from an “_______
value creation and ______
social business
the 1960’s to a “______
model” of the 2010’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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Era I
1960s
Era II
1970s
Era III
1980s
Era IV
1990s
Era V
2000+
Efficiency
Automate
existing
paper-based
processes
Effectiveness
Solve problems
and create
opportunities
Strategic
Increase
individual
and group
effectiveness
Strategic
Transform
industry/
organization
Value creation Value creation
___________
Create
collaborative
partnerships
____________
Increasing
productivity
and better
decision quality
Organization/
group
Competitive
position
Competitive
position
Adding value
Creating
relationships
Individual
manager/
group
Business
processes
ecosystem
Customer/
supplier
ecosystem
Information Application
specific
models
Data driven
User driven
Business driven
Knowledge
driven
Customer/
employee
supplier
ecosystem
People driven (or
relationship
driven)
Dominate
technology
Mainframe,
“centralized
intelligence”
Minicomputer,
Mostly
“centralized
intelligence”
Microcomputer,
“decentralized
intelligence”
Client Server,
“distributed
intelligence”
Internet, global
“ubiquitous
intelligence”
Social platforms,
Social networks,
mobile, cloud
Basis of
value
Underlying
economics
Scarcity
Scarcity
Scarcity
Plentitude
Plentitude
Plentitude
Economics of
information
bundled with
economics of
things
Economics of
information
bundled with
economics of
things
Economics of
information
bundled with
economics of
things
Economics of
information
separated
from
economics of
things
Economics of
information
separated
from
economics of
things
Economics of
relationships
bundled with
economics of
information
Primary
role of IT
ROI
Justify IT
expenditures
Target of
systems
Organization
Era VI
2010+
Community
and social
business
Figure 2.1 – Mission statements of computer companies
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Figure 2.2 Information Resources
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
Base foundation of the IT portfolio
shared through the firm
Hardware, software, network, data components,
proprietary technology, web-based services
- Information repository
Data that is logically related and
organized in a structured form
accessible and able for decision
making purposes.
Critical information about customers that can be
used to gain strategic advantage. Much of this
information is increasingly available on the
web.
IT Capability
_________
- Technical skill
- IT management skills
- Relationship skills
Something that is learned or developed over time in order for the firm to
create, produce or offer it products in IT assets
Ability applied to designing,
developing and implementing
information systems
Ability to managing IT function and
IT projects
Proficiency in systems analysis and design;
programming skills
Being knowledgeable about business processes
and managing systems to support them;
evaluating technology options; envisioning
creative IS solutions to business problems
Ability of IS specialists to work with Spanning: having a good relationship between
parties outside the IS department.
IT and business managers
Externally-forced: have a good relationship
with an outsourcing vendor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Advantages of Information Resource
• Information resource appropriation:
– Determining where a resource’s value lies and how it can be
improved in a firm’s favor.
– The attributes of information resources that impact the value
make it possible to create and sustain competitive advantage
(i.e. Zara).
• Information resource distribution across firms:
– Early adopters may experience a competitive advantage from
First Mover
using an information resource. (______________Advantage)
– The experience gained may lead to inequities between firms.
– Different experiences with a resource creates value, and a
create strategic advantage.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Advantages of Information Resource (Cont.)
• Mobility of Information resource:
– Reliance on the individual skills of IT professional
– Risky as key individuals will leave the firm, taking their
experience with them.
– Development of unique knowledge-sharing processes, and
creation of an organizational memory.
• Then
– Q: How and what do we need to sustain organization’s
competitive advantage in terms of using information
resource (software)?
Business Intelligence (e.g.,
Knowledge Management Systems)
– A: _________________________________
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Network Externalities
• Definition - The phenomenon whereby a service
more people use it, thereby
becomes more valuable as ______
encouraging ever-increasing numbers of adopters.
effects
– Network _______
• 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 (Eras IV, V & VI)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Virtual Companies (Portable Computing)
A Virtual Company is an Organization composed
of several Business Partners that Uses
Technology to ___________
Link/Share People,
Information ___________
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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Characteristics of Virtual Companies
Excellence
Borderless
Adaptability
Six
Characteristics
of Virtual
Companies
Opportunism
Trust-Based
Technology
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HOW CAN INFORMATION
RESOURCES BE USED
STRATEGICALLY?
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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
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Porter’s Five Forces Model
• 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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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
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Figure 2.4 Application of five competitive forces model for Zara.
Competitive Force
IT Influence on Competitive Force
Threat of New
Entrants
Zara’s IT supports its tightly-knit group of designers, market specialists, production managers
and production planners. New entrants are unlikely to provide IT to support relationships that
have been built over time. Further it has a rich information repository about customers that
would be hard to replicate.
Bargaining
Power of Buyers
With its constant infusion of new products, buyers are drawn to Zara stores. Zara boasts more than 11,000
new designs a year, whereas competitors typically offer only 2,000 – 4,000. Further, because of the low
inventory that the Zara stores stock, the regulars buy products they like when they see them because they are
likely to be gone the next time they visit the store. More recently Zara has employed laser technology to
measure 10,000 women volunteers so that it can add the measurements of ‘real’ customers into its
information repositories. This means that the new products will be more likely to fit Zara customers.
Bargaining
Power of
Suppliers
Its computer-controlled cutting machine cuts up to 1000 layers at a time. It then sends the cut materials to
suppliers who sew the pieces together. The suppliers’ work is relatively simple and many suppliers can do
the sewing. Thus, the pool of suppliers is expanded and Zara has greater flexibility in choosing the sewing
companies. Further, because Zara dyes 50% of the fabric in its plant, it is less dependent on suppliers and can
respond more quickly to mid-season changes in customer color preferences.
Threat of
Substitute
Products
Industry competitors long marketed the desire of durable, classic lines. Zara forces on meeting customer
preferences for trendy, low-cost fashion. It has the highest sales per square foot of any of its competitors. It
does so with virtually no advertising and only 10% of stock is unsold. It keeps its inventory levels very low
and offers new products at an amazing pace for the industry (i.e., 15 days from idea to shelves). Zara has
extremely efficient manufacturing and distribution operations.
Industrial
Competitors
Zara offers extremely fashionable lines that are only expected to last for approximately 10
wears. It offers trendy, appealing apparel at a hard-to-beat price.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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
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
•Cost-effectiveness
•Market access
•Differentiation of
product or service
SUPPLIERS
Bargaining power
John WileyDr.
& Sons,
& Trends
Dr. Chen,
Information
Systems
– Theory
and Practices
Chen,Inc.
The
of the
Information
Systems
Technology
Other forces should
be considered in the
e-Age:
1. Digitalization
2. Globalization
3. Deregulation/
liberalization
CUSTOMERS
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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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Figure 2.5 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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The Value System (Fig 2.6)
• Value chain analysis can be extended beyond
the company to include other firms in the
industry, such as suppliers and customers, in a
“value system” analysis.
• 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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Figure 2.6: The Value System:
Interconnecting relationships between organizations
Upstream
value
Firm
value
Downstream
value
N
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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.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
BUSINESS FOCUS
E-BUSINESS
•SCM
•CRM
•BPR
•ERP
Customer
centric
Who are the customers?
______
_______are
the customers?
Where
purchasing habits.
Their __________
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Demands
Products
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
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?)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
CUSTOMER RELATIONSHIP
MANAGEMENT’S EXPLOSIVE GROWTH
CRM Business Drivers
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BASICS OF SUPPLY CHAIN
• Organizations must embrace technologies that can
effectively manage supply chains
Involvement
(integration)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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
Information Resources Strategy:
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 (ResourceBased View).
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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The Resource-Based View
• The Resource-Based View (RBV) looks at gaining
competitive advantage through the use of information
resources.
value .
– Determining whether a firm’s strategy has created _____
• Two subsets of information resources have been
identified:
attain competitive advantage
– Those that enable firms to ______
(initially rare and valuable resources were the communities
many companies implemented using social IT. )
– Those that enable firms to ______
sustain competitive advantage
over the long-term (resources must be difficult to transfer or
relatively immobile and need to continue to innovate and to
protect against resource imitation, substitution, or transfer.)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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.
Focus (what
adds value to
the firm)
Firm’s activities
Maintains that CA
comes from the
information and other
resources at the firm
Resources
_________ that firm
can manage and create
value
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Social Capital Theory
• Social capital
– is the sum of the actual and potential resources embedded within,
available through, and derived from the network of relationships
possessed by an individual or social unit.
– The focus on the theory is not on managing individuals, but rather
managing relationships.
• The value from networks may be derived in one of three
interrelated ways
– structural: pattern of relationships in the network (who is connected
to whom)
– relational: nature of relationships among members in the network
(how do connected people interact)
– cognitive: the way people think about things in the network (how do
the connected people think).
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• More to be discussed on the topic of
“Strategic IT Resources”
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STRATEGIC ALLIANCES
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49
Strategic Alliances
• An interorganizational relationship that affords one or
more companies in the relationship a strategic
advantage.
– E.g., the alliance between Zynga and Facebook helped Zynga
benefit from the revenue resulting from its gamers on
Facebook community.
• IS can be the platform upon which a strategic alliance
functions.
– E.g., The alliance between Delta and e-Travel helped Delta
reduce agency reservation fees and offered e-Travel new
corporate leads.
• Linking value chains through SCM is another way
firms build an IT-facilitated strategic alliance.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Wiseman’s theory of strategic thrusts
and strategic option generator
I. Major options to secure a
competitive advantage
Suppliers Customers
Differentiation
II. Option Generator
1. What is our strategic target?
Competitors 2. What strategic thrust can be
used against the target?
3. What strategic mode can be
used?
Cost
Innovation
 offensive or defensive
4. What direction of thrust can be
used?
 usage or provision
Results in nine possible major options 5. What IS skills can we use?
to secure a competitive advantage.
 processing/storage/transmission
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Types of Strategic Alliances
Co-opetition a new strategy whereby companies
• ____________:
cooperate and compete at the same time with companies
in their value net.
– Co-opetition is the strategy for creating the best possible
outcome for a business by optimally combining competition
and cooperation.
– e.g, Covisint and General Motors, Ford, and DaimlerChrysler.
• Value net includes a company and its competitors and
complementors, as well as its customers and suppliers,
and the interactions among all of them.
– Complementor is a company whose product or service is
used in conjunction with a particular product or service to
make a more useful set for the customer.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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Social Capital Theory
• Social capital
– is the sum of the actual and potential resources embedded within,
available through, and derived from the network of relationships
possessed by an individual or social unit.
– The focus on the theory is not on managing individuals, but
rather managing _____________
relationships .
• The value from networks may be derived in one of
three interrelated ways
structural pattern of relationships in the network (who is
– _________:
connected to whom)
relational nature of relationships among members in the
– _________:
network (how do connected people interact)
cognitive the way people think about things in the network (how
– ________:
do the connected people think).
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Co-Creating IT and Business Strategy
• Information is increasingly a core component of the
product or service offered by the firm.
business strategy – they cannot be
• IT strategy is ________
created without each other.
• Some company’s main product is information
(financial services).
• Is FedEx is a package delivering company?
– Y/N (and Why?)
IT even though
– FedEx can not function without ____
they are primarily a package delivering company.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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)
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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
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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RISKS
Copyright 2010 John Wiley & Sons, Inc.
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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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 if the IS results in the violation of laws or regulations.
N
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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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