Dr Sherif Kamel
Department of Management
School of Business, Economics and
Communication
Strategic IS for Competitive Advantage
Outline










Strategic information systems
Strategic management and the role of IT
Competitive intelligence
Porter’s competitive model
The value system
Web-based strategic information systems
Cases
SIS implementation
Managerial issues
Lessons learnt
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Strategic Information Systems (SIS)
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Elements of Strategic Management
Long Range Planning
 Response Management
 Proactive Innovation

o
Information Technology
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Role of Information Technology
IT creates applications that provide strategic
advantages to companies
 IT is a competitive weapon
 IT supports strategic change (re-engineering)
 IT networks with business partners
 IT provides cost reduction
 IT provides competitive business intelligence

Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Competitive Intelligence
Many
companies
monitor the
activities of
competitors
Activities drive business
performance by



Increasing market
knowledge
Improving internal
relationships
Raising the quality
of strategic planning
Copyright © 2002 Turban, McLean and Wetherbe
The Internet
is central to
supporting
competitive
intelligence
Copyright © 2005 Sherif Kamel
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
and sustainable
position against
the forces that
determine industry
competition
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Porter’s Competitive Model





Threat of entry of new competitors
Bargaining power of suppliers
Bargaining power of customers (buyers)
Threat of substitute products or services
Rivalry among existing firms in the industry
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Response Strategies
COST
LEADERSHIP
Providing products
and/or services at
the lowest cost in
the industry
DIFFERENTATION
FOCUS
Being unique in
the industry
Selecting a niche
market and
achieving
cost leadership
and/or
differentiation
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Response Strategies
GROWTH
Increasing market share,
acquiring more customers or
selling more products
IMPROVE INTERNAL
EFFICIENCY
To improve employee and
customer satisfaction
ALLIANCES
Working with business
partners to create synergy
and provide opportunities for
growth
CRM
Customer-oriented
approaches, e.g. the
customer is king (queen)
INNOVATION
Developing new products and services
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Case: Daimler Chrysler



Problem
o In 1999, the company lost 2.6 Billion US dollars
o Chrysler’s program with part suppliers was failing
Solution
o Suppliers began using Lotus notes
o Measurement reports to static HTML web pages
o eProcurement exchange online
Results
o Chrysler saves billions
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Value System

A firm’s value chain is part of a larger stream of
activities, which Porter calls a Value System
o Includes the suppliers that provide the
necessary inputs and their value chains
o Applies to both products and services, for any
organization, public or private
o Is the basis for the Supply Chain Management
(SCM)
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Case: Frito Lay uses IT and the Value Chain


World’s largest snack food producer and owner of Pepsi
products
SIS System
o
o
o

Integrates marketing, sales, manufacturing, logistics, finance
Provides managers with information about suppliers, customers
and competitors
Enables employees to access valuable information
Frito Lay’s use of IT allows for an optimal functioning of the
value chain
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Value Chain Model



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
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Web-based Strategic Information Systems



Many of the SIS of the 70s and 90s were based on
privately owned networks, or organizational information
systems (OIS)
EDI-based systems are of key importance
SIS are changing the nature of competition
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Case: Mobile Oil Moves to Web-based System

Problem
o
o
Largest marketer of lubricants in the USA
In 1995, introduced EDI system
-

Solution
o

Used to place orders, submit invoices and exchange business
documents
It was too expensive, too complex to use
In 1997, moved to web-based extranet-supported B2B system
Results
o
o
o
Reduced transaction cost from $45/order to $1.25
Fewer shortages, better customer service
Decline in distributor administration costs
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Examples of EDI/Internet-based SIS
(for individual companies)





Electronic Auctions
Electronic Biddings
Buyer-Driven Commerce
Single Company Exchange
Direct Sales
(for group of companies)







Copyright © 2002 Turban, McLean and Wetherbe
Industry Consortiums
Horizontal Consortiums
Web-based Call Centers
Web-based Tracking Systems
Web-based Intelligent Agents
Web-based Cross Selling
Accessing knowledge via
Intranets
Copyright © 2005 Sherif Kamel
Who is using SIS?

Otis Elevator
o

Centralized call center, self diagnosing elevators’ malfunctions and
maintenance analysis
American Airlines
o
Computerized reservation system (SABRE)
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Case: Port of Singapore

Problem
o

Solution
o

Port of Singapore, the world’s largest international port, faced
increased global competition
Implementation of Intelligent Systems
Results
o
Reduction in Cycle Time
-
o
4 hours versus 16 - 20 hours in neighboring ports
Reduction in uploading/ loading time
-
30 sec. versus 4-5 min./ truck in neighboring ports
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Case: Volvo Speed Cars

Problem
o

Solution
o

In comparison to global competitors, Volvo’s cars were too
expensive, with a slow delivery time
Creation of global ISDN-based network
Result
o
o
Reduction in delivery time from 12 - 16 weeks to 4 - 6 weeks for
customized cars
Reduction in cost of doing business, along with the price of the car
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
SIS implementation

Justification
o

Risks and failures
o

Justifying SIS may be difficult due to the intengible nature of their
benefits
The magnitude, complexity, continuous changes in technology and
business environment may result in failures
Finding appropriate SIS
o
Identifying appropriate SIS is not a simple task
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Sustaining SIS and strategic advantage


A Major problem that companies face is how to sustain
their SIS competitive advantage
3 Major approaches…
o
o
o
Create systems which are not visible to competitors
Provide a comprehensive, innovative and expensive system that is
difficult to duplicate
Combine SIS with structural changes including business processes,
reengineering and organizational transformation
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Managerial Issues

Implementing SIS can be risky
o

Strategic information systems requires planning
o

Planning for an SIS is a major concern of organizations
Sustaining competitive advantage is Challenging
o

Investment involved in implementing strategic information systems
(SIS) is high
As companies become larger and more sophisticated, they develop
resources to duplicate the systems of their competitors quickly
Ethical issues
o
o
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
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel
Lessons Learnt







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
Copyright © 2002 Turban, McLean and Wetherbe
Copyright © 2005 Sherif Kamel