IS Theory and Practices

IS321
University of Benghazi
Faculty of information technology
Instructor : Mr. SAMI BENAMER
 Achieving Competitive
Advantage With Information
Systems

Ref. Essentials of Management Information Systems Fifteenth Edition Kenneth C. Laudon New York University Jane P.
Laudon Azimuth Information Systems Carol Guercio Traver Azimuth Interactive, Inc.
 OBJECTIVES OUTLINE

• 3-1 Demonstrate how Porter’s competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for competitive
advantage.
• 3-2 Describe how information systems help businesses compete globally.
• 3-3 Describe how information systems help businesses compete using quality and design.
• 3-4 Explain the role of business process management (BPM) in enhancing competitiveness.
 PORTER’S COMPETITIVE
FORCES MODEL
In Porter’s competitive forces
model, the strategic position of
the firm and its strategies are
determined not only by
competition with its traditional,
direct competitors but also by
four forces in the industry’s
environment: new market
entrants, substitute products
and services, customers, and
suppliers.
 PORTER’S COMPETITIVE
FORCES MODEL
Traditional Competitors
• Firms compete with other firms that offer similar products and services by
developing new, more efficient ways to produce their products, by
introducing new products and services, and by developing their brands to
attract customers and impose switching costs on their customers.
New Market Entrants
• In a free economy with mobile labor and financial resources, new
companies are
always entering the marketplace.
• In some industries, there are very low barriers to entry, whereas in other
industries, entry is very difficult.
 PORTER’S COMPETITIVE
FORCES MODEL
Substitute Products and Services
• In just about every industry, there are substitutes that your customers might
use if your prices become too high. New technologies create new substitutes
all the time.
Customers
• A profitable company depends in large measure on its ability to attract and
retain customers (while denying this ability to competitors) and charge high
prices. The power of customers grows if they can easily switch to a
competitor’s products and services or if they can force a business and its
competitors to compete on price alone in a transparent marketplace, where
there is little product differentiation, and all prices are known instantly
(such as on the Internet).
 PORTER’S COMPETITIVE
FORCES MODEL
Suppliers
• The market power of suppliers can have a significant impact on firm profits,
especially when the firm cannot raise prices as quickly as suppliers can. The
more suppliers a firm has, the greater the control it can exercise over those
suppliers in terms of price, quality, and delivery schedules.
 INFORMATION SYSTEM
STRATEGIES FOR DEALING WITH
COMPETITIVE FORCES

Basic Strategy 101: Align the IT with the Business Objectives

• The basic principle of IT strategy for a business is to ensure that the technology
serves the business and not the other way around.
• Research on IT and business performance has found that firms that successfully
align their IT with business goals tend to be more profitable.
• However, instead of taking an active role in shaping IT to the enterprise, many
businesses ignore IT, claim not to understand IT, and tolerate failure in the IT area
as just a nuisance to work around.
 INFORMATION SYSTEM
STRATEGIES FOR DEALING WITH
COMPETITIVE FORCES
Low-Cost Leadership
• Use information systems to achieve the lowest operational costs and the
lowest prices.
• The classic example is Walmart. By keeping prices low and shelves well
stocked using a legendary inventory replenishment system, Walmart became
the leading retail business in the United States. Point-of-sale terminals
record the bar code of each item passing the checkout counter and send a
purchase transaction directly to a central computer at Walmart headquarters.
• The computer collects the orders from all Walmart stores and transmits the
orders to suppliers. Suppliers can also access Walmart’s sales and inventory
data by using web technology.
 INFORMATION SYSTEM
STRATEGIES FOR DEALING WITH
COMPETITIVE FORCES
Focus on Market Niche
• Use information systems to enable a specific market focus and to serve
this narrow target market better than competitors do.
• Information systems support this strategy by producing and analyzing
data for finely tuned sales and marketing techniques.
• Information systems enable companies to analyze customer buying
patterns, tastes, and preferences closely so that they can efficiently
pitch advertising and marketing campaigns to smaller and smaller
target markets.
 INFORMATION SYSTEM
STRATEGIES FOR DEALING WITH
COMPETITIVE FORCES

Strengthen Customer and Supplier Intimacy

• Use information systems to tighten linkages with suppliers and to
develop intimacy with customers.
• Toyota, Ford, and other automobile manufacturers have information
systems that give their suppliers direct access to their production
schedules, enabling suppliers to decide how and when to ship supplies
to the plants where cars are assembled.
• This allows suppliers more lead time in producing goods.
 THE INTERNET’S IMPACT ON
COMPETITIVE ADVANTAGE
Competitive Force Impact of the Internet
Substitute products or Enables new substitutes to emerge with new approaches to meeting needs and
services performing functions
Customers’ bargaining Shifts bargaining power to customers because of the availability of global price and
power product information
Tends to raise bargaining power over suppliers in procuring product and services;
Suppliers’ bargaining however, suppliers can benefit from reduced barriers to entry and from the
power elimination of distributors and other intermediaries standing between them and
their users
Reduces barriers to entry such as the need for a sales force, access to channels, an
Threat of new entrants physical assets; provides a technology for driving business processes that makes
other things easier to do
Positioning and rivalry Widens the geographic market, increasing the number of competitors and reducing
among existing differences among competitors; makes it more difficult to sustain operational
competitors advantages; puts pressure on businesses to compete on price
 THE BUSINESS VALUE CHAIN
MODEL
• The value chain model highlights specific activities in the business
where competitive strategies can best be applied (Porter, 1985) and
where information systems are most likely to have a strategic impact.
• This model identifies specific, critical advantage points at which a
firm can use information technology most effectively to enhance its
competitive position.
• The value chain model views the firm as a series or chain of basic
activities that add a margin of value to a firm’s products or services.
• These activities can be categorized as either primary activities or
support activities.
THE BUSINESS VALUE CHAIN
MODEL
 THE BUSINESS VALUE CHAIN
MODEL
Primary activities
• Primary activities are most directly related to the production and
distribution of a firm’s products and services, which create value for the
customer.
• Primary activities include inbound logistics, operations, outbound logistics,
sales and marketing, and service.
• Inbound logistics includes receiving and storing materials for distribution
to production.
• Operations transforms inputs into finished products.
• Outbound logistics entails storing and distributing finished products. Sales
and marketing includes promoting and selling the firm’s products.
• The service activity includes maintenance and repair of the firm’s goods and
services.
 THE BUSINESS VALUE CHAIN
MODEL
Support activities

• Support activities make the delivery of the primary activities possible

and consist of organization infrastructure (administration and
management), human resources (employee recruiting, hiring, and
training), technology (improving products and the production process),
and procurement (purchasing input).
 THE BUSINESS VALUE CHAIN
MODEL
The Value Web
• The value web is a
networked system that
can synchronize the
value chains of business
partners within an
industry to respond
rapidly to changes in
supply and demand.
 DESCRIBE HOW INFORMATION
SYSTEMS HELP BUSINESSES
COMPETE GLOBALLY.
1. THE INTERNET AND GLOBALIZATION
• The emergence of the Internet into a full-blown international
communications system has drastically reduced the costs of operating
on a global scale, expanding the possibilities for large companies and
simultaneously creating many opportunities for small and medium-
sized firms.
• The global Internet, along with internal information systems, puts
manufacturing firms in nearly instant contact with their suppliers.
 DESCRIBE HOW INFORMATION
SYSTEMS HELP BUSINESSES
COMPETE GLOBALLY.
2. GLOBAL BUSINESS AND SYSTEM
STRATEGIES
• There are four main ways of organizing businesses
internationally: domestic exporter, multinational, franchiser,
and transnational, each with different patterns of organizational
structure or governance.
• In each type of global business organization, business functions
may be centralized (in the home country), decentralized (to local
foreign units), and coordinated (all units participate as equals).
 DESCRIBE HOW INFORMATION
SYSTEMS HELP BUSINESSES
COMPETE GLOBALLY.
• The domestic exporter strategy is characterized by heavy centralization of
corporate activities in the home country of origin.
• Production, finance/accounting, sales/marketing, human resources, and
strategic management are set up to optimize resources in the home
country.
• A multinational strategy concentrates financial management and control
out of a central home base while decentralizing production, sales, and
marketing operations to units in other countries.
• The products and services available in different countries are adapted to
suit local market conditions.
 DESCRIBE HOW INFORMATION
SYSTEMS HELP BUSINESSES
COMPETE GLOBALLY.
• Franchisers have the product created, designed, financed, and initially
produced in the home country but rely heavily on foreign personnel for
further production, marketing, and human resources.
• In a transnational strategy, nearly all the value-adding activities are
managed from a global perspective without reference to national borders,
optimizing sources of supply and demand wherever they appear and taking
advantage of any local competitive advantages.
• Such firms have common global business processes. There is a strong
central management core of decision making but considerable dispersal
of power and financial muscle throughout the global divisions.
 DESCRIBE HOW INFORMATION
SYSTEMS HELP BUSINESSES
COMPETE GLOBALLY.
3. GLOBAL SYSTEM CONFIGURATION
• There are four types of systems configurations for global business
organizations.
• Centralized systems are those in which systems development and
operation occur totally at the domestic home base.
• Duplicated systems are those in which development occurs at the
home base, but operations are handed over to autonomous units in
foreign locations.
• Decentralized systems are those in which each foreign unit designs
its own, unique solutions and systems.
• Networked systems are those in which systems development and
operations occur in an integrated and coordinated fashion across all
units.