Chapter 3 Organizational Strategy Information Systems and Competitive

Chapter 3 Organizational Strategy, Information Systems, and Competitive Advantage

Study Questions Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -2

Q 1: How Does Organizational Strategy Determine Information Systems Structure? Organizations examine structure of their industry and determine a competitive strategy. Competitive strategy determines value chains determine business processes. Structure of business processes determine design of supporting information systems. Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -3

Q 2: What Five Forces Determine Industry Structure? Porter’s five competitive forces 2 1 Figure 3 -2 4 Copyright 2012 Pearson Education, Inc. for Prentice Hall 5 3 -4

Five Forces and Flex. Time Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -5

Five Forces and Flex. Time (cont’d) Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -6

Q 3: What Is Competitive Strategy? Porter’s Four Competitive Strategies Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -7

What Is Competitive Strategy? (cont’d) To be effective, an organization’s: • Goals, objectives, culture, and activities must be consistent with its strategy • Information systems must facilitate its competitive strategy Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -8

Q 4: How Does Competitive Strategy Determine Value Chain Structure? Competitive strategy implemented by creating value • Value—amount of money a customer is willing to pay for a resource, product, or service • Margin—difference between value an activity generates and cost of activity • Value chain—a network of value-creating primary and support activities Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -9

Bicycle Maker’s Value Chain Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -10

Summary of Value Chain Primary Activities Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -11

Support Activities in the Value Chain Support Activity Description Technology R & D, New Techniques, Methods, Procedures Procurement Raw Materials Human Resources Training, Recruiting, Compensation Firm Infrastructure General Management, Finance, Accounting, Legal, Government Affairs Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -12

Value Chain Linkages • • Interactions across value activities readily supported by information systems Manufacturing systems use linkages to reduce costs Sales forecasts used to plan production Material needs used to schedule purchases Production plan used to determine raw materials needs Reduced inventory sizes and costs Just-in-time inventory Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -13

Business Process Design Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -14

Q 5: How Do Value Chains Determine Business Processes and Information Systems? Support activities contribute indirectly to production, sales, and customer service, and Produce margin that is often difficult to calculate (intangible costs and benefits) Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -15

Value Chain for Bicycle Rental Company Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -16

Value Chain for Bicycle Rental Company (cont’d) Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -17

Group Assignment 2 a. Compare and contrast the operations value chains of these two businesses as they pertain to management of bicycles. b. Describe a business process for maintaining bicycles for both businesses. c. Describe a business process for acquiring bicycles for both businesses. d. Describe a business process for disposing of bicycles for both businesses. e. What roles do you see for information systems in your answers to the earlier questions? The information systems can be those you develop within your company or they can be those developed by others, such as craigslist. Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -18

Q 6: How Do Information Systems Provide Competitive Advantages? Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -19

Competitive Advantage via Products Creating new products or services • Enhancing existing products or services • Differentiating • By cost • By quality Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -20

Competitive Advantage via Business Processes Copyright 2012 Pearson Education, Inc. for Prentice Hall 3 -21

ABC Web Page to Select Recipient from Customer’s Records Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -22

ABC Web Page to Select a Contact from Customer’s Records Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -23

ABC Web Page to Specify Email Notification Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -24

ABC Web Page to Print Shipping Label Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -25

How Does an Actual Company Use IS to Create Competitive Advantages? • Maintains customer account data – IS collects information for ABC (adds value) – IS saves customers time by automatically filling in part of form (adds value for customer) • Package & information delivery system – IS helps customer to select delivery address and generate shipping labels – What value does shipper get? Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -26

How Does This System Create a Competitive Advantage? • • • Enhances existing products Differentiates products Locks in customers Raises barriers to market entry Increases profit margins by decreasing costs and decreasing errors Copyright 2014 Pearson Education, Inc. for Prentice. Education, Inc. Publishing as Prentice Hall Copyright © 2012 Pearson Hall 3 -27