Strategic Role of Information Systems Strategy: is a plan to help organization outperform its competitors - Doing things differently - Provide value at lower cost ‘‘A strategic information system is (one) that supports the competitive strategy of the organisation, e.g. ���� To improve customer/supplier links ���� Facilitate product design ���� Improve productivity Levels of strategy Business Functional Strategic Role of IS Business led Links to and supports the business strategy. Demand orientated. Responds to business needs.. Designed to offer competitive advantage, new products and services, to further business aims. Customer Focused Approach Integrated & Interoperable Flexible & Adaptive Knowledge Analytical & Predictive Situation Aware Competitive Strategy Concepts Strategic Use of IS involves using IT to 1. develop products 2. services 3. capabilities strategic advantages over the competitive forces in the global marketplace Strategic Information Systems support of competitive position and strategies of an enterprise Strategic Uses of IT Business Process Reengineering (BPR) Rethinking & redesign of business processes Combines innovation and process improvement Improve business quality Total Quality Management (TQM) Quality from customer’s perspective Meeting or exceeding customer expectations Commitment to: Higher quality Quicker response Greater flexibility Lower cost Becoming agile Four basic strategies Customers’ perception of product/service as solution to individual problem Cooperate with customers, suppliers, other companies (including competitors) Thrive on change and uncertainty Leverage impact of people and people’s knowledge The virtual company Uses IT to link people, assets, and ideas Forms virtual workgroups and alliances with business partners Inter-organizational information systems Share infrastructure & risk with alliance partners Link complementary core competencies Reduce concept-to-cash time through sharing Corporate Strategic Plan Link business and IT strategy Performance Evaluation Assess business impact Check that goals have been met Decide compensation Business Unit Strategic Plans Formulate IT strategic plans and goals Ensure alignment with business units plans Business Unit Operating Plans Corporate Operating Plans Identify corporate or cross-business unit projects Prioritize and finalize list of project Determine IT budget Identify project ideas Develop business cases Prioritize Projects Reconcile proposed funding levels with business unit budget targets SWOT Analysis Internal Environment Strengths World class product Financial resources Know-how Weaknesses Technical support Internal processes Channels network External Environment Opportunities Water & Energy crises Environment awareness Productivity improvement Threats Competitors market share INR X Dollar Technology development Competitive Forces (Porter) Competitive Strategies Differentiation Cost Innovation Growth Leadership Threat of Substitutes Alliance Other Strategies Competitive Forces Threat of New Entrants Rivalry of Competitors Bargaining Power of Suppliers Bargaining Power of Customers 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. Cost Leadership - Become a low cost producer of product and services in the industry - Also, find ways to help its suppliers or customers reduce their cost or to increase the cost of their competitor Innovation New ways of doing business Unique products or services New ways to better serve customers Reduce time to market New distribution models Growth Expand production capacity Expand into global markets Diversify Integrate into related products and services. Alliance Broaden your base of support New linkages Mergers, acquisitions, joint ventures, “virtual companies” Marketing, manufacturing, or distribution agreements. Competitive business strategy Business-Level Strategies Are intended to create differences between the firm’s position relative to those of its rivals To position itself, the firm must decide whether it intends to: Perform activities differently or Perform different activities as compared to its rivals Breaking Business Barriers Time Barriers Geographic Barriers Breaking Business Barriers with IT Cost Barriers Structural Barriers Types of Potential Competitive Advantage Achieving lower overall costs than rivals Performing activities differently (cheaper process) Possessing the capability to differentiate the firm’s product or service and command a premium price Performing different (valuable) activities Various Strategies Raising barriers to entry: to delay or discourage competitors to enter a market Breaking time barriers: Producers who deliver their products and services in real time relative to their competitors will have a strategic advantage Breaking geographic barriers: Companies operate from several locations and do business at regional, national and global markets Strategies (continued) The Virtual Company Increase facilities and market coverage Gain access to new markets and share market or customer loyalty Migrate from selling products to selling solutions Five Forces Analysis Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. These are: Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, they are often able to dictate terms to you. Five Forces Analysis Competitive Rivalry: What is important here is the number and capability of your competitors – if you have many competitors, and they offer equally attractive products and services, then you’ll most likely have little power in the situation. If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.