it strategy

IT Strategy

http://www.apiit.edu.my/

PGMIT StrategyCE52801-2 Information Systems Organizations and Management

Today

• Three eras of IT/IS revolution

• Strategic Information Systems

• The role of IT/IS in competition

• Porter’s 5 competitive forces

• Porter’s value chain

• Some other academic views

• Cases

• Managerial issues




Three eras of I.T. evolution

• Mainframe Era– (1950’s-1970’s)

• Microcomputer Era– (late 1970’s to 1980’s)

• Network Era– (late 1980’s to present)

• Ubiquitous computing (wireless)




Strategic Information Systems (SISs)

SISs provide strategic solutions to the 5 Business Pressures:




The Role of IT in Business Innovation

• IT creates applications that provide strategic advantages to companies

• IT is a competitive weapon

• IT supports strategic change, e.g, re-engineering

• IT networks with business partners

• IT provides cost reduction

• IT provides competitive business intelligence




Competitive Intelligence

The Internet is central to supporting competitiveintelligence

Such activities drive business

performance by:

•Increasing market knowledge

•Improving internal relationships

•Raising the quality of strategic planning

Many companies monitor the activities of competitors




• It changes industry structure and alters the rules of competition...– by increasing the power of buyers, – raising barriers to entry and – influencing the threat of substitution

• It creates competitive advantage by giving companies new ways to out-perform their rivals...– lowering costs, – enhancing differentiation and – changing competitive scope

HOW IT/IS AFFECTS THE NATURE OF COMPETITION




• It spawns whole new businesses, often from within a company's own operations... by making

– new businesses technologically feasible

– creating derived demand for new products and

– creating new businesses within old ones.

HOW IT/IS AFFECTS THE NATURE OF COMPETITION




Technology versus Management of technology

• I.T. is so accessible today that organisations cannot compete on technology alone.

• The competitive advantage is derived from how the technology is used.

• Today the management of technology has become a critical issue in competing more effectively.

• The issue is not whether to invest in I.T. but where and how.




• What can help us:

– think and

– analyse situations




•Porter’s 5 Competitive Forces (1985)

• 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.




Porter’s 5 Competitive Forces (1985)




Porter’s Model in Action




Response Strategies (Porter, 1985)

FOCUS

Selecting a niche market

and achieving cost leadership

and/or differentation.

DIFFERENTATION

Being unique in the industry

COST LEADERSHIP

Providing products and/or services at the

lowest cost in the industry.




More Response Strategies (added by Porter and others)

INNOVATIONDeveloping new products & services

GROWTHIncreasing market share, acquiring more customers or selling more products

IMPROVE INTERNAL EFFICIENCY

To improve employee and customer satisfaction

ALLIANCESWorking with business partners to create synergy & provide opportunities for growth

CRMCustomer-oriented approaches, e.g. the customer is king (queen)




Firm Infrastructure

Human Resources Management

Technology Department

Procurement

Inbound Logistics

Operations

Outbound Logistics

Sales and

Mkting

Service

Porter’s Value Chain Model - Graphically




Porter’s Value Chain Model (1985)

PRIMARY ACTIVITIES • Inbound logistics (inputs)• Operations (manufacturing & testing)• Outbound logistics (storage & distribution)• Marketing & sales• Service

Supply Chain




Porter’s Value Chain Model

SUPPORT ACTIVITIES • Firm Infrastructure• Human Resources Management • Technology Development• Procurement




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

• The basis for the Supply Chain Management

• Think about UPSTREAM and DOWNSTREAM




Integrated Value System




The Value Chain Model

• The Value System Model is used to:

• 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




McFarlan’s Portfolion Framework (1984)

Key OperationalApplications upon

which the organisation currently depends for

success

StrategicApplications that are

critical for future business strategy

SupportApplications that are

currently valuable and desirable but not critical

for future business success

High PotentialApplications that may be

important in achieving future business success

High

Current

LowLow HighFuture




McFarlan’s Portfolion Framework (1984)

Key OperationalScheduling on-lineOnline parts orderingMaintenance online

Strategice-procurementElectronic ticketingAgent’s management

Supportfrequent flyer account trackingTraining on-lineWireless SMS info

High PotentialIntelligent data mininge-mail direct marketing

High

Current

LowLow HighFuture




CASE: Mobile Oil Moves to Web-based System

• Problem: • Largest marketer of lubricants in the USA• In 1995, introduced EDI system

• Used to place orders, submit invoices & exchange business documents

• It was too expensive, too complex to use• Solution:• In 1997, moved to web-based extranet-supported B2B

system• Results:• Reduced transaction cost from $45/order to $1.25• Fewer shortages, better customer service• decline in distributor administration costs




Examples of EDI/Internet-based SIS (for individual Companies)

• Electronic Auctions

• Electronic Biddings

• Buyer-Driven Commerce

• Single Company Exchange

• Direct Sales




CASE: Total Quality Management at FPL• Florida Power & Light largest US utility company

• Leader in implementing total quality management

• Several successful SIS programs:• Generation Equipment Management System (GEMS)

• Tracks electrical generators, saving $5 million/ yr.

• 20 different quality control applications• Reduced customer complaints by 50%

• Trouble Call Management System• Reduced black out time from 70 to 48 min.




CASE: Geisinger Implements an Intranet

• Problem:• As a result of mergers & acquisitions, Geisinger (a

health maintenance organization) had 40 different IT legacy systems in need of an upgrade & integration.

• Solution:• In 1993, Geisinger implemented an innovative

Intranet: with the following features:• “Tel-a-Nurse”• Clinical Management System• Human Resource Management

• Results:• Geisinger reduced costs and unnecessary medical

work.




CASE: Caltex Corporation

• Major multinational company selling gasoline & petrol products.

• In 2000, created a centralized e-purchasing corporate exchange (www.caltex.com)

• Suppliers build electronic catalogues with Ariba’s software. • Many benefits to buyers and suppliers, particularly in Asia,

Africa & the Middle East.• System enables Caltex to successfully handle complex

multinational business environments.




CASE : Port of Singapore

• 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




SIS Implementation

• Major Issues to be Considered:• Justification

• Justifying SIS may be difficult due to the intengible nature of their benefits.

• Risks & Failures• The magnitude, complexity, continuous changes in

technology and business environment may result in failures.

• Finding appropriate SIS• Identifying appropriate SIS is not a simple task.




Managerial Issues (cont.)

Sustaining Competitive Advantage Is Challenging

• 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




Suggested Reading

• Information Technology for Management• Old Book

• Chapter 3 – Information Systems for Competitive Advantage pp 80 to 119

• New Book• Chapter 12 – Information Systems for

Competitive Advantage pp 505 to 518

• Computing Press – read it




Q & A



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