Chapter 3
Strategic Information Systems
for
Competitive Advantage
1
Case: Rosenbluth International


Rosenbluth Int. - a global player in the travel agency industry
They responded with 2 strategies


Withdrawal from the leisure travel business
Implementation of web-based travel technology






DACODA (Discount Analysis Containing Optimal Decision Algorithms)
Electronic Messaging ServicesE-Ticket Tracking Solution
Res-Monitor
A Globalization Network
Customer-Res
IntelliCenters
NOC (Network Operations Center)
Lessons from the Case







Need for exchange business models and strategies
Importance of web-based IT
Global competition over service is key
Large investment over time
Importance of networked infrastructure for global systems
Web-based applications for superior customer service
Need to patent innovative systems
Strategic Advantage and IT

Strategic Information System (SIS)

Definition


Competitive Advantage



An advantage over competitors in some measure such as cost, quality, or
speed
A difference in the Value Chain Data
Improving Core Competency



Systems that support or shape a business unit’s competitive
strategy
Employee productivity
Operational efficiency
Approach



Outwardly - Aiming at direct competition
Inwardly - Focused on enhancing the competitive position of the
firm
Strategic alliance
Strategic Information Systems (SISs)
Any information system--EIS, OIS, TPS, KMS--that changes the goals,
processes, products, or environmental relationships to help an organization gain
a competitive advantage or reduce a competitive disadvantage.
SISs provide strategic solutions to the 5 Business Pressures
strategic management

Strategic management


the way an organization maps or crafts the strategy of
its future operations
3 Elements

Long-range planning

Response management

Proactive innovation
Strategic Evaluation & Development
Strategy Evaluation & Development
Mental Map
A
High
Needs
Analysis
D
G1 G2 G3 G4 G5 G6
Low
C
High
Low
Preference
Demand
Strengths
Weaknesses
Opportunities
Threats
B
Management
Competitive
Advantage
Market growth rate
?
ce
la
G
Strategy Statement
Relative market share



SWOT Analysis
Product Life Cycle
Quality Preference
6
M
7
T
8
W
T
F
S
2
3
4
5
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
H
Performance
p
ri c
e
January 2002
S
1
Implement
Time
&
Stars
Action
Technology Adoption Process
Cash
Cows
p
C
Time
Late
Laggards
Majority
"The
Chasm"
Exit
Strategy
ct
Early
Majority
u
Decline
Stage
Total
Market
Sales
Early
Adopters
d
Y&
T
N
AI
T
R
GE
CE
N
N
A
U
H
Competition
Maturity
Stage
n
Strategy
Scope, Goals,
Competitive
Advantage,
Logic
Life Cycle, Market
Structure, Behavior,
Barriers to Entry
Growth
Stage
tio
Innovators
Introductory
Stage
o
F
m
Competitors
ro
Value Chain
Competitive
Niche
Oligopoly
Dominant
Monopoly
target
market
Company
ARC,
Coordination,
Incentives,
Explorer-Exploiter
Creation/Capture,
PIE, Supplier,
Buyer
ro
Differentiation,
Substitutions
SCOPE
p
Position,
Capabilities, CostQuality Curve,
Sustainability
Product
p
E
$
The role of IT in Strategic Management








Innovative applications - Create innovative applications that
provide direct strategic advantage to organizations
Competitive weapons - IS(s) themselves are recognized as a
competitive weapon
Changes in processes - IT supports changes in business processes
that translate to strategic advantage
Links with business partners - IT links a company with its
business partners effectively and efficiently
Cost reductions - IT enables companies to reduce costs
Relationships with suppliers and customers -IT can be used
to lock in suppliers and customers, or to build in switching costs
New products -A firm can leverage its investment in IT to create
new products that are in demand in the marketplace
Competitive intelligence - by collecting and analyzing information
about products, markets, competitors, and environmental changes
Competitive Intelligence (cont.)

Overview

One of the most important aspects in developing a competitive
advantage is to acquire information on the activities and actions of
competitors


Collect information about market, technologies, and government’s
actions
Analyze and interpret the information
Many
companies
monitor the
activities of
competitors
Such activities drive
business performance by
 Increasing market
knowledge
 Improving internal
relationships
 Raising the quality of
strategic planning
The Internet
is central to
supporting
competitive
intelligence
Competitive Advantage in the Web Economy
Competitive
Strategy
Competitive
Advantage
Sustainable
Strategic
Advantage
Search for a
competitive
advantage in an
industry, which
leads to control
of the market.
Look for a
competitive
necessity, which
will help your
company keep up
with the
competitors.
Maintain
profitable &
sustainable
position against
the forces that
determine
industry
competition.
Internet & Competitive Intelligence
Porter’s Competitive Forces Model

The model recognizes five major forces that could
endanger a company’s position in a given industry

5 major forces






External
Competitive
Forces
The threat of entry of new competitors
The bargaining power of suppliers
The bargaining power of customers (buyers)
The threat of substitute products or services
The rivalry among existing firms in the industry
Use of the model




List players in each competitive force
Relate the major determinants of each competitive force
Devise a strategy
Look for supportive IT
Porter’s 5 Forces Model
The analysis

First Competitive Force - Competitor Analysis





Second Competitive Force - Entry Barriers





If nothing slows entry of competitors competition will become intense.
Incumbent Reaction?
What Actions are required to build market share?
Production Process?
Third Competitive Force - Substitute Products




What Drives them?
What are they Doing and can do?
What are their strengths & weaknesses?
Is Competition intense?
Products or services from another industry enter the market
Customers becoming acclimated to using substitutes
Is the substitute market growing?
Fourth & Fifth Competitive Force – Supply Chain


Suppliers/Buyers? Who controls the transaction?
Each element adds value – question who captures it?
Porter’s model for Wal-Mart
Impact of competitive forces & role of IT
Key force
Business implications
Threat of
Additional capacity
new entrants Reduced prices
New basis for competition
Potential IT effects
Provide entry barriers/reduce access by:
Buyer power
high

Supplier
power high
Substitute
products
threatened
Intense
competition
from rivals
Force price down
Demand higher quality
Require service flexibility
Encourage competition
Raise prices/costs
Reduced quality of supply
Reduced availability
Limits potential market &
profit
Price ceilings
Price competition
Product development
Distribution and service
critical
Customer loyalty required

exploiting existing economies of scale
differentiate product and service
control distribution channels
segment markets

Differentiate product and service
 Improve price/performance
Increase switching costs of buyer
Facilitate buyer product selection
Supplier sourcing sys.
Extended quality control into supplier
Forward planning with supplier
Improve price/performance
Redefine product and service to increase value
Redefine market segments

Improve price/performance
Differentiate product and service in
distribution channel and to consumer
Get closer to end customer

Strategies for Competitive Advantage
Cost leadership
Provide products and/or
services at the lowest cost in
the industry
Growth
Increase market share,
acquire more customers
or selling more products
Differentation
Being unique in the
industry
Niche/Focus
Select a narrow-scope segment (niche
market) and be the best in quality,
speed, or cost in that market
Improve internal efficiency
To improve employee &
customer satisfaction
Alliances
Working with business partners
to create synergy & provide
opportunities for growth
Lock in customers/suppliers
Encourage customers/suppliers to
stay with you rather than going to
competitors
Innovation
Developing new
products & services
Entry-barriers
Developing new
products &
services
CRM
Customer-oriented approaches
(the customer is king)
Time
Treat time as a resource,
then manage it and use it
to the firm’s advantage
Increase switching cost
Discourage
customers/suppliers from
going to competitors for
economic reasons
Porter’s value chain model
The initial purpose of the value chain model was to analyze the internal operations of a corporation,
in order to increase its efficiency, effectiveness, and competitiveness. We can extend that company
analysis, by systematically evaluating a company’s key processes and core competencies to
eliminate any activities that do not add value to the product.
The airline industry value chain
VALUE SYSTEM

A firm’s value chain is part of a larger stream of activities, which Porter calls a
“Value System”.





Includes the suppliers that provide the necessary inputs AND their value chains
Applies to both products & services, for any organization, PUBLIC or PRIVATE
Is the basis for the Supply Chain Management
Many of these alliances and business partnerships are based on Internet connectivity are
called interorganizational information systems (IOSs)
Used to




These Internet-based EDI systems offer strategic benefits





Evaluate a company’s process and competencies
Investigate whether adding IT supports the value chain
Enable managers to assess the information intensity and the role of IT
Faster business cycle (PO to Receiving)
Automation of business procedures (Automated Replenishment)
Reduced operational costs
Greater advantage in a fierce competitive environment
Consortia – Horizontal vs. Vertical
Global Competition

Growth of Companies Operating in a Global Environment






Fully Global or Multinational Corporations
Companies that export or import
Companies facing competitions of low labor cost and high natural
resources
Companies with low cost production facilities abroad
Small companies that can now use EC to buy/sell internationally
Global dimensions along which management can globalize







Product
Markets & Placement
Promotion
Where value is added to the product
Competitive strategy
Use of non-home-country personnel - labor
Multidomestic Strategy: Zero standardization along the global
dimensions. Global Strategy: Complete standardization along the
seven global dimensions.
Global business drivers framework
SISs: Examples

Cases






Wiring the “customer supply chain” at 1-800-Flowers
Increasing Tax Collection Efforts at the Wisconsin Department of
Revenue
Time-based Competitive Advantage at Cannondale
Southwest Airlines Flies high with SWIFT
Using ERP to Meet Strategic Challenges at Turner Industries
The Port of Singapore exports its intelligent systems over its enterprise
portal



Problem - The Port of Singapore, the world’s largest international port,
faced increased global competition.
Solution - Implementation of Intelligent Systems
Results



Reduction in Cycle Time: 4 hours versus 16 - 20 hours in neighboring ports
Reduction in uploading/ loading time: 30 sec. versus 4-5 min./ truck in neighboring ports
The Summary – Table 3.2 (p. 115)
SIS Implementation & Sustaining SIS

Major Issues in SIS Implementation

Justification


Risks & Failures


The magnitude, complexity, continuous changes in technology and business
environment may result in failures
Finding appropriate SIS


Justifying SIS may be difficult due to the intengible nature of their benefits
Identifying appropriate SIS is not a simple task
Sustaining SIS & Strategic Advantage


A Major problem that companies face is how to sustain their SIS competitive
advantage.
3 Major approaches



Create inward systems which are not visible to competitors
Provide a comprehensive, innovative & expensive system that is difficult to
duplicate
Combine SIS with structural changes. This would include business processes,
reengineering & organizational transformation
Managerial Issues

Implementing SIS Can Be Risky


Strategic Information Systems Requires Planning


Planning for an SIS is a major concern of organizations
Sustaining Competitive Advantage Is Challenging.


The investment involved in implementing SIS is high
As companies become larger and more sophisticated, they
develop resources to duplicate the systems of their competitors
quickly.
Ethical Issues


Gaining competitive advantage through the use of IT may involve
unethical or even illegal actions
Companies can use IT to monitor the activities of other
companies and may invade the privacy of individuals working
there.