Scribd Logo
Upload

Welcome to Scribd!

  • Cam Scanner

    Uploaded by

    Anonymous Girl
    12 views15 pages
    notes

    Original Title

    CamScanner

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    notes

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    Download as pdf
    12 views15 pages

    Cam Scanner

    Uploaded by

    Anonymous Girl
    notes

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    Download as pdf
    of 15
    » Chapter 2. Strategic and Competitive Opportunities B ¥ J Introduction a Le There ave many examples of ways that organizations have used and are using inf, Toa technology in creative ways to give themselves a competitive advantage, A compas gains a competitive advantage by providing a product or service in way thay a aaa re value more than what the competition is able to do. We'll give yor some exe vreains moment Fist, is important for you to get the right perspective sour i, Pe he technology that gives a company a competitive advantage; i's the ay that pe. ple nse the technology that makes the cilference. For example, lets assume tha theres, Po avache Boxster § parked outside and there are two people available to drive i, trained professional race car driver and a senior citizen who usually drives a six-year Buick, as shown in Figure 2.1. Although both people would have access to the sang technology, there’s probably no question in your mind that the professional race gy driver would do a better job of wtlizing the technology embodied in the Boxster In a way, it’s the same with information technology. With the widespread availily and ever-decreasing cost of computers, telecommunications, and the Internet, the sang technology is available to just about everyone. The real difference comes in the way tx different people use the technology. Those that are well trained, proficient, and create inits use are going to be able to get the most out of it and give their organizations a con petitive advantage. These people are the knowledge workers we discussed in Chapter Designing an information system that gives a competitive advantage requires at les wo things [Fistlit requires an understanding of the business problem you're trying solve or the business situation in which you're trying to get a competitive advantage Se dnd]it requires an understanding of available technologies to know which ones oui Aesigning a creative solution for the business situation. This is why studying mange ment information systems (MIS) is so important. MIS emphasizes both busines processes and technical solutions. If you're building a house, it’s important to design it before you start to build Otherwise, there’s no telling what you might end up with. Most people hire an architet for the job. It’s similar with information systems. As we discuss in Chapters 6 and it’s important to design a system before you build it. As a matter of fact, application architects are what we call information technology professionals who can design ative technology-based business solutions, working hand-in-hand with their busine management counterparts from marketing, manufacturing, accounting, and human sources, for example. Skilled application architects are in short supply. They are am™'S the most sought-after of knowledge workers. re 2.1 can Get the Most f the Boxster S? Competitive Advantage Examples B >> EE — Competitive Advantage Examples Srcng competitive advantage inaction is pethaps the best way for you to learn how to plement it in your oTgar : vou to some “best business practices” jon. As we look at the following examples, we'll introd aswell. \/FEDERAL EXPRESS reused tobe that you wanted to track a package you'd shipped somewhere via FedEx vaio to call an 800 number and listen to some music for awhile until a customer ser 20% representative came on the line, Then you had to give him or her the tracking num tes fom the receipt you got when you shipped the package. The customer service rep eentative would enter the tracking number into a computer system that would access 2 Jubase containing up-to-date information on the location of your package. You could fd out whether or not it had been delivered and, ifso, when it had been delivered and who signed for it. ‘Someone at FedEx got the idea that with today's technology, life could be much eas- jer for the customer. So, FedEx designed a system that lets you access that same database through your Internet connection and Web browser. Nowall you have to do is go to the FedEx Web site, find your way to the tracking screen, and key in your tracking number. ‘The system will respond by giving you the same information you used to get from a cus- tomer service representative (sce Figure 2.2). Figure 2.2 FedEx Package Tracking Screen fg i Enter your tracking number(s) here. Then click here. That's all there is to it. 74 Chapter 2 Strategic and Competitive Opportunities 1s that benefit both the custom, The 1, and similar syste ; ray a win-win systems. The FedEx tracking system i beer the customer because it’s easier and faster. Custot ers no longer have to spent time yt ing in “voice mail jail” I's better for FedEx because it’s cheaper. FedEx TOESHC need aly a8 many eustomer service representatives to handle the incoming calls, py gets a competitive advantage by deli ing superior customer service, at least ung jt competition develops similar system ofits own, as UPS and FedEx’s other competing JE tracking syst re often calle soon concluded they had to do. ‘This illustrates an important point about petitive advantage. A competitive advantage you a out to be temporary because the competition soon figures out that they have to offer , lar ystem to ther customers or risk losing them to you. Even a temporary advanuy can make a difference, however, because the first mover usually makes some gains ae expense of the competition. A temporary advantage simply means that whatever yy do, sooner or later the competition duplicates what you've done, or even leap-frogs you with an even better system, Despite this, the first mover, the company who is fry to market with a new IT-based product or service, may well capture new customers never gives up, and it often gains additional benefits by being viewed as an innovative market leader, ng information technology for con hieve for your company usually tn CHARLES SCHWAB Charles Schwab was a pioneer in the discount brokerage business. The company bean operations more than 25 years ago serving investors who were comfortable in making their own trades and did not need the advice and counsel provided by full service br kers who charged a higher commission. Over the years, the company evolved into on that offers services to independent investors as well as investors who prefer to have more in the way of professional guidance. Schwab was a frst mover in offering stock trad over the Internet, along with other online brokers such as E*Trade. Using the latstin Internet and telephone technologies, Schwab offers its customers around-the-clock pe sonal services. Its $ million online customers manage more than $250 billion in ass and trade more than $11 billion in securities over www.schwab.com each week. Schwab is not only the largest, i’s perceived as being the best. Gomez (www.gomer.com) is highly regarded company in the Internet Quality Measurement (IQM) business, 2 Schwab appears at the top of their list of 29 discount brokers.? The willingness of Schwab's management to embrace the Internet early on as a way of serving the cot pany’s customers more efficiently and effectively has made Schwab the largest otlité broker, and one of world’s most successful e-businesses. V DELL COMPUTER Del computer has a direct sell model that gives the company a huge advantage ove") competitor still using a traditional model of selling through retailers. The traditional "* that PC manufacturers get their product to customers is to build a bunch of PCS ship them to wholesalers, distributors, or maybe directly to retailers, The PCs sito" LOOKING FOR OPPORTUNITIES CLOSE TO HOME ; vou don't have to be a part of 2 traditional for-profit might try by taking the customers perspective (yours) : vewanization in order to get into the habit of looking asa point of departure, Other candidates could be your ; cays to use IT for competitive advantage. Not-for- state o local government, How complicated ist to get profs and governmental agencies con get benefits your driver’ license renewed? How difficult is it to get en as well For example, most universities are con- information on various governmental services? How vrjered to be not for profit. See if you can come up could information access be improved with the creative ‘tath ways that your college or university could get a use of IT systems? competitive advantage from the way it uses IT. You retailers’ shelves or in a warehouse until you come in and buy one. If you looked ata typ- seal distribution chain you would see that there are a lot of PCs in inventory. (A distri- ution chain is simply the path followed from the originator of a product or service to the end consumer.) In a typical distribution chain you'd find inventory at the manufac- turer's warchouse, at the wholesalers, at the distributors, and at the retailers. Holding on to all of this inventory costs money, because whoever owns the inventory has to pay for itas well as pay for the operation of the warehouses or stores while waiting for someone to buy it. Dells model is different.? It sells computers directly from its Web site. The company makes it easy for you to log on and configure a computer just the way you want it. Once you've done that and given Dell your credit card number, you click to order, and your computer arrives in a few days. Shortly after you click to order, Dell has your money! Then it gets busy sending electronic orders to other companies—their alliance part- ners—who assemble and ship your computer. An alliance partner is a company you do business with on a regular business in a cooperative fashion, usually facilitated by IT sys- tems, Dell pays its alliance partners for their efforts a bit later, Arrangements such as this are also called information partnerships. An information partnership (supported by interorganizational systems, which we introduced in Chapter 1) lets two or more com- panies cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer. To learn more about information partnerships, visit the Web site that supports this text at www.mhhe.comhaag, “This is a win-win-win situation, You win because you get a computer made expressly for you, which arrives in good shape in a couple of days. Dell wins because all this oc~ curred without the sale having to tie up a lot of money in inventory in the distribution chain, Dell's alliance partners win because they get a lot of business from Dell. The dif ferences between Dell’s “sell, source, and ship” model and the traditional “buy, hold, and sell” model are illustrated in Figure 2.3 on the following page. 76 PC Retaitor Buys trom BUY Hanutacturer Figure 2.3 buy Hold Sell versus Sell-Source-Ship Chapter 2. Strategic and Competitive Opportunities Seu Perens Corey Alliance eee a chapter 2. Strategic and Competitive Opportunities hapt 8 agement of the customer orderin e fi Hiance wit} TOee, formed a software alliance with Arif over te to cess even more. As you in {uetivity of the customer ordering process even more. AS you might aoe ners are pleased with the results, & arst ! -ostaen themselves, pect, both Cise and its eu Mitel Pores fameworks have lng been accepted a8 useful on ito use whet thinking about business strategy. Several of his coll Warren McFarland among them, showed how they also could be used sof how information technology could be used to create a compen i he power af the Imereti a recent article Professor siemet provides eter opportinities for companies to est asnes statis than previous generations of information technology 1ter's three frameworks are] 5 for bys AES, Pr din comin, 1. The five forces model 2. The three generic strategies 3. The value chain THE FIVE FORCES MODEL ‘The fite forces model was developed to determine the relative attractiveness of an in dusty: Porter's intention was that it be used asa tool for business managers to use whe Forter's intention was a i y should enter a particular ind erations if they were already in it As less attractive to enter. Figure 2.4 The Five Forces Model Developing a Strategy for the Internet Age 79 THREAT OF SUBSTITUTE PRODUCTS OR SERVICES If there are very few alterna- Hp usng the product or service the threat of substitute products or services is low, fie cisan advantage to thes plier. Or if there are svitehing cost and sere, it isan aang the well. Switching costs are costs pt store eluctant co switch wo aoe scluct or service. that a cide to keep your virws protection, soli ssociated with the ‘or example, even if a slightly better one be- se ale bean yo ow tant 0 He he time and money to install and learn the new package: qareaT OF NEW ENTRANTS The threat of new entrants i high when itis easy for Heriot cer dhe market, Fits easy thas not ment a co competitrs goingafer your customers Git’ difficult for others to enter the mar- der jars good news for those who are already there. rewhen the ALRY AMONG EXISTING COMPETITORS. An industry is less attract aay among existing competiforsis high and more atractve when itis low. Compe- sree more intense in some industries than in others. The intensity of competition in the industry is another factor that you should consider before entering an industry. THE THREE GENERIC STRATEGIES Porter says that a business should adopt only one of i igs: cost lead- ership, differentiation, or a focused strategy. As illustrated in Figure 2.5,a focused strat egy can focus on either cost leadership or differentiation. According to Porter, trying to follow more than one 0 egies at the same time is almost always uns 1g examples from U.S. retailers, Wal-Mart follows a broa lly targeted cost leader- ship strategy. Nordstrom with its emphasis on superior customer service and in-store ex- perience follows a broadly targeted differentiation strategy- Walgreen’s pursues a cost Ieadership strategy, but is focused on drugstore items. USING THE FIVE FORCES MODEL Warren MeFarlan had the idea that a company could use information technology to alter one ot more ofthe five forces in thet favor, or to reinforce one of the three generic strate- des. When he shared this idea with business people, they quickly found that it worked. Some good examples of where it worked are provided next. Competitive Advantage Lower Cost Differentiation Broad (REECE Praca uy Target Competitive Scope Narrow fore Dea Target irre) Figure 2.5 ‘The Three Generic Strategies? 80 iti ities Chapter 2 Strategie and Competitive opportuni many hotels competing forthe business troveler, Because there are n 5 st Soe ested choices, and therefore hold power over the suppliers op in yuyers have man} othe su rns oy te ie this, most hotel chains have created Loyalty Progra dh saeco fen be cashed in for free hotel stays at one of thes res give points for each stay whic si hotels, for example, or for other rewards. Such programs, supported by state-of-the, tems, have the effect of increasing the likelih art ood that a traveler stay ata single chain. the best ways to decrease supplier power isto locate ale. varketplaces on the Internet can have the effec of doing this. A B2B marketplace isan Internet-based service which ngs together many buyers and sellers. One example is the cooperative Internet purchasing venture est, shed by the automotive industry, Covisint. It uses Internet technology to “speed the flow of material through the supply chain, increase response to consumer demand, ang deliver new products to market faster than ever before.”* | ; ‘Another way of reducing supplier power is to find a way to put more information in the hands of the buyer. The Internet has played a huge role in this in many industries, Probably the best example is the retail automobile industry. It used to be that when you wanted to buy a new car you really put yourself at the mercy of the dealer. The new car salesperson knew what the car cost the dealer, knew how much your trade-in was r- ally worth, and knew how much money the dealership could make on optional equip- ment, extended warranties, and financing. Now, all of the information that only the dealer had is freely available on the Internet. The new car buyer can thus begit n negotia- tions having roughly the same amount of information the dealer has. Supplier power is effectively reduced. SUPPLIER POWER One of | native sources of supply. The B2B m THREAT OF SUBSTITUTE PRODUCTS OR SERVICES Many professionals find that their normal way of making a living is threatened by the introduction of new information technology-enabled products or services. One example is that of a local Certified Pub: lic Accountant who made a good portion of her living by doing tax returns for individy- als. Her income from tax return preparation was reduced substantially after inexpensive and easy-to-use tax return software packages such as TurboTax hit the market. One of the challenges for professionals is to find a way to counter I'Ebased threats to thet lve! hoods. Can you think of other professionals who might b: ; technology-based alternatives? (0 might be threatened by information ee EVEN NATIONS CAN GAIN A COMPETITIVE ADVANTAG? wit sing IT for competitive advantage is not restricted to companies. Singapore is a well-known example that a tration can use IT for competitive advantage as well. ‘as a small island nation with few natural resources, singapore concluded that its most valuable resource ‘was its people. The government decided that the wave dof the future was IT, and that it should invest in train- ing a cadre of IT workers and focus on becoming what they called the “Intelligent Island.” Singapore subse- quently became renowned for the way T te speed up the flow of goods throu by replacing cumbersome pa e-commerce techniques. As stated on its national Web site, “Singapore will continue to reinvent itself and add value to businesses here as it develops into a vibrant and robust knowledge- driven global economy.”* RIVALRY AMONG EXISTING COMPETITORS There are many ways that informa- tion technology can make one company better prepared than its rivals in an intensely re setting. For example, many re 5 compete on the basis of price, particu- larly with products that are commoditylike in nature. It probably doesn’t matter where you buya six-pack of Diet Pepsi, ata convenience store or at a discount chain. The Pepsi ‘will uste the same. What will likely be different is the price you paid for that six-pack. Probably it will be q abit cheaper at the discount chain store than at the convenience store, The reason it’s cheaper at the discount chain store is because of the way that the chain store uses inform on systems to make itself more efficient. Having information systems that let a retailer be more efficient and lower its costs so that it can offer lower prices to its customers is a definite competitive advantage. *BRIDGING THE GAP BETWEEN BUSINESS PEOPLE AND TECHNICAL PEOPLE ‘Think of a company where the technical people are all computer science majors and the business people all have degrees in marketing or accounting, with litte training in MIS. “Then, let's say that the biggest business problem for the company is to increase the num- ber of repeat buyers on its B2C Web site. Ifwe turned this problem over to a computer scientist, he might not know (or care) enough about buyer behavior wo be able to come up with a solution that works. If we turned the problem over to the marketing manager, she might know alot about buyer behavior but not wwe clue about how to make the company’s Web site “sti Usually this problem is solved by forming a project team to come up with a solution that draws the best knowledge of the business problem from the business people and the best technical solution from the technical people. A project team is a team designed to ac- connplish specific one-time goals, which is isbanded once the project is complete. When this process works well, the project team comes up with a great solution. When it doesn't work, companies find that the business people and the technical people simply n't communicate with each other well enough to focus their respective strengths on solving the problem. If you want a better appreciation of what we're talking about, just think about the last time you asked one of your favorite gecks a tech ‘with his answer, See what we sneani? ical question and he tried to snow you a1 Figure 2.6 The Components of a Value Chain pter 2 Strategic and Competitive Opportunities Cha] -aided design tools to help give you an appreciation of what r Your hy ou don't like the model, you should re a ect the deg. "%4 ‘Then, You ie computer tools Took like afier it was built. If ack the architect to make el y 1 the construction ph imilar to the process of des ‘anges until you're absolutely satisfied her your approval to beg We said that this was tems, Ifyou bought an existing ; atiware package, ike one of Siebel Systems’ eBusiness applications or exa Acted that you didu’t like any of the available precodled packay ning and build for isting, house, it would be like buying a precoded tion, ®DDlicg,” ™plethy, applications on vould appoint a project team to d custom system for you similar to they! vould hire an architect to design your house. Ifthe project team cane to you yige inary design, you can be almost certain that it would not give you a competitive sa y 7 tage Worse yo, the system coal be obsolete by the time it was pot int open e “cause in all likelihood the competition was not standing stil. So, in order tog, money's worth fiom your investment, you have every right to send your desn 2 back to the draving board until they come up with a design that delights you, Taya ne that is ikely to give you a competitive advantage. THE VALUE CHAIN Once you havean understanding of how IT can help you develop a business state important that you reinforce this view by ensuring IT support for al important busines processes. A business process isa standardized set of activities that accomplishes 5. cific task, such as processing a customer’s order. One important graphic tool that els you identify those important processes is Michael Porter’s value chain. The value chi views the organization as a chain—or series—of processes, each of which adds vabew the product or service for the customer. Customers patronize your organization becase of the value that it adds to its products and services. If you view your organization 1 value chain, you can identify the important processes in adding value for customersanh thus, identify IT systems that support those processes. Figure 2.6 depicts the components of a value chain. The chain of primary ale processes along the bottom half takes the raw materials and makes, delivers, marketsan sells, and services your organization’s products or services. Processes along the top hi! of the chain, such as management, accounting, finance, legal, human resources, rests and development, and purchasing, support the primary value processes. Your orguv® tion requires these support value processes to ensure the smooth operation of the p* mary value processes. Support Value Processes, Primary Value Processes Developing a Strategy for the Internet Ag’ Allvalue processes process an individual value, However, these processes combined pavea total vale greater than the sun oftheir individual val mite value-added, and i's depicted on the far ight of the va va ueaulded, the more vate customers place on an or We eall this additional larger the product or service. To spe onaniatin. this can mean a competitive advanta i cl often greater profits. Let's reat how af tight use the value chain to identify both value-added and value- realucing processes. I you've ever purchased a necktie, y fou may have heard of the Robert Talbott com- pony of Carmel Valley, California." Talbot isthe premier neck manufacturer in the Trited States. Talbott has always shunned technology; all of its tie orclers, historically, were written on paper forms, “That used to work fine, because Talbott has always ensured added value by utilizing high-quality workmanship, unique designs, and fabrics. However, customer “wants” deve their demands, and those demands are always changing. Today customers want

    You might also like