Management Information Systems Chapter 2 2 Strategic Uses of Information by fionan

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									    Chapter 2
2   Strategic Uses of
    Information Systems

    Management Information Systems, Second Edition
    Effy Oz
          Learning Objectives

     When you finish this chapter, you will

       Understand business strategy and strategic

2       moves.

       Recognize how information systems can
        give business a competitive advantage.

       Understand basic initiatives for gaining a
        competitive advantage.
                                                     2
        Learning Objectives
     Know what makes an information system a
      strategic information system.



2    Understand the fundamental requirements
      for developing strategic information
      systems.

     Recognize circumstances and initiatives
      that make one SIS succeed and another
      fail.
                                                3
    Strategy and Strategic Moves

     Strategy
       A plan designed to help an organization
        outperform its competitors.

2    Strategic Information Systems
       Information systems that help seize
        opportunities.

       Can be developed from scratch, or they
        can evolve from existing ISs.
                                                  4
             Achieving a
         Competitive Advantage
     Profits increase significantly through
      increased market share.


2    The essence of strategy is innovation, so
      competitive advantage often occurs when an
      organization tries a strategy that no one has
      tried before.

     Dell was the first PC manufacturer to use the
      Web to take customer orders.
                                                      5
        Achieving a
    Competitive Advantage



2                    Figure 2.1
                     Eight basic ways
                     to gain advantage




                                  6
           Achieving a
       Competitive Advantage



2
    Figure 2.2 Many strategic moves can work together to
    achieve a competitive advantage
                                                           7
            Achieving a
        Competitive Advantage
     Initiative #1: Reduce Costs


2       Lower Costs

        Lower Price

        Bigger Market Share



                                    8
           Achieving a
       Competitive Advantage
     Initiative #2: Raise Barriers to
      Entrants

2       Patenting

        High expense of entering industry
           State Street, Inc. (Pension fund management
            business)


                                                          9
           Achieving a
       Competitive Advantage

     Initiative #3: Establish High Switching
      Costs

2       Explicit Switching Costs
           Fixed and nonrecurring


        Implicit Switching Costs
           Indirect costs in time and money of adjusting to
            a new product

                                                               10
           Achieving a
       Competitive Advantage

     Initiative #4: Create New Products and
      Services

2      Dynamic
          The advantage lasts only until other
           organizations in the industry start offering an
           identical or similar product or service for a
           comparable or lower price.


                                                             11
           Achieving a
       Competitive Advantage
     Initiative #5: Differentiate Products
      and Services


2       Product differentiation

        Brand recognition

        Examples of brand name success
           Levi’s jeans
           Chanel perfumes
           Calvin Klein clothing             12
           Achieving a
       Competitive Advantage
     Initiative #6: Enhance Products and
      Services


2      Examples
          Auto manufacturers enticing customers with a
           longer warranty
          Real estate agents providing useful financing
           information to potential buyers
          Charles Schwab moving stock trading services
           on-line before Merrill Lynch

                                                           13
           Achieving a
       Competitive Advantage
     Initiative #7: Establish Alliances


2       Combined service may attract customers
           Lower cost
           Convenience

        Examples
           Travel industry
           HP and FedEx

                                                  14
           Achieving a
       Competitive Advantage



2
    Figure 2.3 Strategic alliances combine services to create   15
    synergies
            Achieving a
        Competitive Advantage
     Initiative #8: Lock in Suppliers or
      Buyers


2       Bargaining Power

        Purchase volume

        Strengthen perception as a leader

        Create a standard                   16
     Strategic Information as a
        Competitive Weapon
     Strategic Information Systems (SIS)
       Any IS that can help an organization achieve a
        long-term competitive advantage

2      SIS embodies two types of ideas
           Potentially-winning business move
           How to harness IT to implement that move


       Two conditions for SIS
           IS must be serving an organizational goal
           IS unit must be working with the managers of the
            other functional units
                                                               17
      Strategic Information as a
         Competitive Weapon
     Creating an SIS

       Top management must be involved from
2       initial consideration through development
        and implementation.

       SIS must be a part of the overall
        organizational strategic plan.


                                                    18
    Strategic Information as a
       Competitive Weapon



2
    Figure 2.4 Steps for considering a new SIS   19
    Strategic Information as a
       Competitive Weapon



2
    Figure 2.5 Steps to take in an SIS idea-generating
    meeting
                                                         20
      Strategic Information as a
         Competitive Weapon
     Re-engineering and Organizational
      Change

2      To implement an SIS and achieve a
        competitive advantage, organization must
        rethink the entire way in which it operates.

       Goal of re-engineering is to achieve
        efficiency leaps of 100 percent or even
        higher.
                                                       21
      Strategic Information as a
         Competitive Weapon
     Competitive Advantage as Moving
      Target


2      SISs developed as strategic advantages quickly
        become standard business.
           Banking industry (ATMs and banking by phone)


       Companies must continuously contemplate new
        ways of utilizing information technology to their
        advantage.
           SABRE, American Airlines’ reservation system
                                                            22
     Strategic Information as a
        Competitive Weapon
     Sources of Strategic Information
      Systems

2     
      
          Existing System
          New Service
         New Technology
         Excess Information
         Vertical Information

                                         23
    Strategic Information as a
       Competitive Weapon
     From Automation to SIS

        An organization can gain a competitive

2        advantage through automation of a manual
         process.

        American Hospital Supply automated manual
         orders and improved services, resulting in a 17
         percent compound annual growth rate in sales.



                                                           24
    Strategic Information as a
       Competitive Weapon
     SIS from a New Service

        A company may gain competitive advantage by

2        providing a new service using IT.

        Merrill Lynch was the first to use IT to provide
         a cash-on-demand service for their investors
         and captured a lion’s share of the market.




                                                            25
    Strategic Information as a
       Competitive Weapon

     SIS from New Technology


2       A company that figures out how to use a new
         technology can gain a competitive advantage.

        American Express used new scanning
         technology to process credit charges and saved
         millions of dollars in reduced labor costs.



                                                          26
    Strategic Information as a
       Competitive Weapon

     SISs from Excess Information



2       An organization can gain an advantage by
         putting excess information toward a new
         product or service.

        Sears Roebuck and Company uses its customer
         record database to provide target information
         to its subsidiaries in insurance and real estate.



                                                             27
    Strategic Information as a
       Competitive Weapon

     SISs from Vertical Information



2       Organizations use ISs to augment their
         businesses vertically by offering related
         services.

        Realtors offer financing and relocation
         information in addition to information about
         houses for sale.



                                                        28
    Strategic Information as a
       Competitive Weapon
     Good SIS ideas must be carefully executed
      if a company is to seize opportunities.


2       McKesson Drugs, Inc., automated its operations
         and gained a competitive advantage.
              Enhanced existing services
              Provided new services
              Cut costs
              Created high switching costs for clients



                                                          29
      Strategic Information as a
         Competitive Weapon
     How one IS Failed


2      Citicorp tried to use an SIS to implement a
        15-minute mortgage approval plan called
        MortgagePower Plus, but the program
        failed.
          Failed strategically due to unwise business
           shortcuts.
          Failed operationally due to poor technical
           implementation .
                                                         30
     Strategic Information as a
        Competitive Weapon
     Success and Failure on the Web

       Just being first on the Web is not enough
2       to be successful: business ideas must be
        sound.

          An organization must carefully define what
           buyers want.
          Establishing a recognizable brand name is
           important but does not guarantee success:
           satisfying needs is more important.
                                                        31
           The Bleeding Edge
     Business owners must develop new
      features to keep the system on the
      leading edge.

2    Adopting a new technology involves
      great risk.

       No experience from which to learn

       No guarantee technology will work or customers
        and employees will welcome it                    32
             The Bleeding Edge
     The bleeding edge: failure in an
      organization’s effort to be on the
      technological leading edge.


2    Some organizations let competitors assume
      the risk associated with being on the leading
      edge.

        Risk losing initial rewards.

        Can quickly adopt and even improve pioneer
         organization’s successful technology.        33
     Ethical and Societal Issues
              The Power of Information
     The U.S. Department of Justice, the Attorneys
      General of several states, and Sun
      Microsystems filed suit against Microsoft


2     claiming the company violated fair trade
      practices in establishing itself as a monopoly.

        Started with DOS on every PC; continued with
         Windows.

        Bundled Internet Explorer with Windows.

        Modified Java to run only on Windows.
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