1 first canadian edition james a. o’brienali montazemi 1 management information systems managing...
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First Canadian Edition
James A. O’Brien Ali Montazemi
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Management Information Systems
Managing Information Technology in the Business Enterprise
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McGraw-Hill Ryerson Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
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Chapter 2
Competing with Information Technology
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Objectives
Identify basic competitive strategies and explain how IT may be used to gain competitive advantage.
Identify strategic uses of information technology.
How does business process engineering frequently use e-business technologies for strategic purposes?
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(Objectives – continued)
Identify the business value of using e-business technologies for total quality management, to become an agile competitor, or to form a virtual company.
Explain how knowledge management systems can help a business gain strategic advantage.
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Section I
Fundamentals of Strategic Advantage
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Fundamentals of Strategic Advantage
Competitive Forces (Porter)Bargaining power of customersBargaining power of suppliersRivalry of competitorsThreat of new entrantsThreat of substitutes
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Competitive Strategies & the Role of IT
Cost Leadership (low cost producer)DifferentiationInnovationGrowthAllianceOther Competitive Strategies
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Cost Leadership (low cost producer)
Reduce inventory (JIT)Reduce manpower costs per sale Help suppliers or customers reduce costsIncrease costs of competitorsReduce manufacturing costs (process control)
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Differentiation
Create a positive difference between your products/services & the competition.
May allow you to reduce a competitor’s differentiation advantage.
May allow you to serve a niche market.
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Innovation
New ways of doing businessUnique products or services that include ITNew ways to better serve customersImprove quality or efficiencyReduce time to marketNew distribution models
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Growth
Expand production capacityExpand into global marketsDiversifyIntegrate into related products and services.
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Alliance
Broaden your base of support with new linkages and alliances with customers, suppliers, competitors, and consultants
Mergers, acquisitions, joint ventures, virtual companies
Marketing, manufacturing, or distribution agreements.
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Other Competitive Strategies
Locking in customers or suppliersBuild value into your relationship
Creating switching costsExtranetsProprietary software applications
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Other Competitive Strategies (continued)
Raising barriers to entryImprove operations or promote innovation
Leveraging investment in ITAllows the business to take advantage of
strategic opportunities
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The Value Chain
Views a firm as a series, chain, or network of activities that add value to its products and services.Improved administrative coordinationTrainingJoint design of products and processesImproved procurement processesJIT inventoryOrder processing systems
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Value Chain (continued)
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Section II
Using Information Technology for Strategic Advantage
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Strategic Uses Of Information Technology
Develop a focus on the customerBusiness Process Reengineering (BPR)Improve business qualityBecome agileThe virtual companyBuild learning organizations
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Develop a Focus on the Customer
Customer valueBest valueUnderstand customer preferencesTrack market trendsSupply products, services, & information
anytime, anywhereTailored customer service
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Business Process Reengineering (BPR)
Rethinking & redesign of business processesCombines innovation and process improvementThere are risks involved.Success factors
Organizational redesignProcess teams and case managersInformation technology
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Improve Business Quality
Total Quality Management (TQM)Quality from customer’s perspectiveMeeting or exceeding customer expectationsCommitment to:
Higher qualityQuicker responseGreater flexibilityLower cost
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Become Agile
Four basic strategiesCustomers’ perception of product/service as
solution to individual problemCooperate with customers, suppliers, other
companies (including competitors)Thrive on change and uncertaintyLeverage impact of people and people’s
knowledge
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The Virtual Company
Uses IT to link people, assets, and ideasForms virtual workgroups and alliances with
business partnersInterorganizational information systems with
Internet, extranets, and intranets
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The Virtual Company (continued)
StrategiesShare infrastructure & risk with alliance
partnersLink complementary core competenciesReduce concept-to-cash time through sharing
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The Virtual Company (continued)
Strategies (continued)Increase facilities and market coverageGain access to new markets and share market
or customer loyaltyMigrate from selling products to selling
solutions
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Build Learning Organizations
Create, disseminate, and incorporate knowledge into products
Exploit two kinds of knowledgeExplicit documented knowledgeTacit internal knowledge
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Build Learning Organizations (continued)
Knowledge Management
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Build Learning Organizations (continued)
Knowledge management systemsHelp create, organize, and share business
knowledge wherever and whenever needed within the organization
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Summary
Information technology has strategic valueCustomer focused e-Business is key strategyRe-engineer business processes radicallyImprove quality from customer viewpointAgile companies capitalize on changeVirtual companies combine talents of othersKnowledge creation and incorporation are major
competitive strategies
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Discussion Questions
You have been asked to develop e-business & e-commerce applications to gain competitive advantage. What reservations might you have about doing so?
How could a business use IT to increase switching costs and lock in its customers and suppliers?
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Discussion Questions (continued)
How could a business leverage its investment in IT to build strategic IT capabilities that serve as a barrier to entry by new entrants into its markets?
What strategic role can information technology play in business process reengineering and total quality management?
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Discussion Questions (continued)
How can Internet technologies help a business form strategic alliances with its customers, suppliers, and others?
How could a business use Internet technologies to form a virtual company or become an agile competitor?
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Discussion Questions (continued)
IT can’t really give a company a strategic advantage, because most competitive advantages don’t last more than a few years & soon become strategic necessities that just raise the stakes of the game. Discuss.
MIS author & consultant Peter Keen says: “We have learned that it is not technology that creates a competitive edge, but the management process that exploits technology.” What does he mean?
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Real World Case 1 - Royal Bank Financial
Which of the strategic uses of information technology does RBFG use?
Is IT a strategic advantage or a strategic necessity for financial firms like RBFG?
What additional IT support do you suggest for RBFG’s customer service?
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Real World Case 2 – WESCO International, Inc.
Business-to-Business
Describe WESCO’s original system.
Describe WESCO’s new system.
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Real World Case 2 (continued)
What are the business benefits to WESCO and its suppliers of its new e-procurement system?
Is WESCO’s new system a strategic use of IT?
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Real World Case 2 (continued)
Does WESCO’s new system give the company a competitive advantage?
What other strategic moves could WESCO implement to gain competitive advantage?
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Real World Case 3 – Staples, Inc.
What is the strategic business value to Staples and their large business clients of the new web-based procurement system?
What is the strategic business value to Staples and the value proposition to their customers of their new bricks-and-clicks capabilities?
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Real World Case 3 (continued)
Is an integrated bricks-and-clicks strategy the Internet strategy that most businesses, large and small, should adopt?
What competitive strategies is Staples pursuing?
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Real World Case 3 (continued)
What other e-business or e-commerce strategy would you recommend to Staples to help them gain a competitive advantage in their industry?
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Real World Case – Ford, Dow Chemical, IBM, et al.
What is Six Sigma?
What do critics of Six Sigma see as its shortcomings?
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Real World Case (continued)
Is Six Sigma “an enterprise-wide business strategy?”
What role does information technology play in Six Sigma business initiatives?
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Real World Case (continued)
What are the benefits and limitations of Six Sigma as a business strategy?
Can Six Sigma make up for poor management and faulty vision?
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