Using M I S: Tenth Edition

Using MIS
Tenth Edition
Chapter 3
Strategy and Information
Systems
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Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
“We Can’t Be Everything to Everybody.”
• Known for providing security monitoring.
• Current focus on security contracts.
• Mateo wants to focus on law enforcement agencies,
search & rescue, federal government.
• Good money in agricultural surveying, industrial
inspection, real estate videos, and wedding videos too.
Learning Objectives
3.1 How does organizational strategy determine information systems
structure?
3.2 What five forces determine industry structure?
3.3 How does analysis of industry structure determine competitive
strategy?
3.4 How does competitive strategy determine value chain structure?
3.5 How do business processes generate value?
3.6 How does competitive strategy determine business processes and
the structure of information systems?
3.7 How do information systems provide competitive advantages?
3.8 2027?
Learning Objective 3.1
• How Does Organizational Strategy Determine Information
Systems Structure?
Strategy Determines Information Systems
Figure 3-1 Organizational Strategy Determines Information Systems
• What Five Forces Determine Industry Structure?
Five Forces Determine Industry Structure
• Competitive Forces
– Competition from vendors who manufacture
substitutes.
– Competition from new competitors.
– Competition from existing rivals.
• Bargaining Power Forces
– Bargaining power of suppliers.
– Bargaining power of customers.
Use Five-Forces Model to Identify Sources
of Strong Competition
Figure 3-3 Examples of Five Forces
Force Example of Strong Force Example of Weak Force
Toyota’s purchase of auto paint (because Your power over the
Bargaining power of
Toyota is a huge customer that will procedures and policies of your
customers
purchase paint in large volume) university
Threat of Patients using the only drug
Frequent traveler’s choice of auto rental
substitutions effective for their type of cancer
New car dealers (because they control Grain farmers in a surplus year
Bargaining power of what the “true price” of a vehicle is and (an oversupply makes the
suppliers the customer cannot reliably verify the product less valuable and less
accuracy of that price) profitable)
Professional football team
Threat of new Corner latte stand (because it is an easy
(because the number of teams
entrants business to replicate)
is tightly controlled by the N FL)
Google or Bing (expensive to
Used car dealers (because there are
Rivalry develop and market a search
many to choose from)
engine)
Assessing the Five Forces at Falcon Security
Figure 3-4 Five Forces at Falcon Security
Force
Force Falcon Security Example Strength Falcon Security's Response
Bargaining power of A large account wants more Lower prices, or diversify into
Strong
customers services at a lower price other markets
Offer differentiating services,
Threat of Replace drones with wireless I P
Medium like LiDAR, that cameras can't
substitutions Web cameras
provide
Bargaining power of We're increasing the cost of the
Weak We'll make our own drones
suppliers drones we sell
Amazon begins offering
Threat of new Offer differentiating services
package delivery and Medium
entrants and enter other markets
surveillance via drones
Offer additional features like
A new drone company expands
Rivalry Weak direct streaming video to the
its operations into the state
customer
• How Does Analysis of Industry Structure Determine
Competitive Strategy?
• https://s3.amazonaws.com/he-assets-prod/interactives/07
4_link_between_econ_profit/Launch.html
Figure 3-5 Porter’s Four Generic Competitive
Strategies
• How Does Competitive Strategy Determine Value Chain
Structure?
• https://s3.amazonaws.com/he-assets-prod/interactives/07
8_value_chain/Launch.html
Figure 3-6 Drone Manufacturer’s Value Chain
Figure 3-7 Task Descriptions for Primary
Activities of the Value Chain
Primary Activity Description
Inbound Logistics Receiving, storing, and disseminating inputs to
the products
Operations/Manufacturing Transforming inputs into the final products
Outbound Logistics Collecting, storing, and physically distributing the
products to buyers
Sales and Marketing Inducing buyers to purchase the products and
providing
a means for them to do so
Customer Service Assisting customers’ use of the products and thus
maintaining and enhancing the products’ value
Source: Based on Michael E. Porter, Competitive Advantage: Creating and Sustaining

Superior Performance (The Free Press, a Division of Simon & Schuster Adult Publishing
Group). Copyright © 1985, 1998 by Michael E. Porter.
Cost Component Analysis
• https://s3.amazonaws.com/he-assets-prod/interactives/078_value_chain/Launch.html
Relative Cost Analysis
• How Do Business Processes Generate Value?
Figure 3-8 Three Examples of Business
Processes for Material Ordering Process
Figure 3-9 Improved Material Ordering
Process Using Integrated Databases
• How Does Competitive Strategy Determine Business
Processes and the Structure of Information Systems?
Low-Cost Rental Operations Value Chain
Figure 3-10 Operations Value Chains for Bicycle Rental Companies
High-Service Rental Value Chain
Figure 3-10 Operations Value Chains for Bicycle Rental Companies
• How Do Information Systems Provide Competitive
Advantages?
Figure 3-11 Business Process and Information
Systems for High-Service Bike Rental
Figure 3-12 Principles of Competitive
Advantage
How Do Information Systems Provide
Competitive Advantages?
Strategy Description Example
Low-cost leadership Use IS to produce products and Walmart

services at a lower price than
competitors while enhancing
quality and level of service
Product differentiation Use IS to differentiate products Uber, Nike, Apple, Starbucks
and provide new services and How I Made A SNEAKER With
products NIKE - YouTube
Focus on market niche Use IS to enable a focused Hilton Hotels,

strategy on a single market Harrah’s
niche; specialize OnQ. New hotel check-in softwa
re training - YouTube
Customer and supplier Use IS to develop strong ties Toyota Corporation,
intimacy and loyalty with customers and Amazon
suppliers
Buy a book in bookstore
Buy a booking via online platform
The Autonomous Race (1 of 2)
So What?
• Nearly all major automakers are investing in and have
already been testing their own self-driving cars.
• Nearly 93 percent of crashes have been attributed to
operator error being the “definite or probable” cause.
• Identify some implications of driverless vehicles.
• What legal obstacles face producers of driverless
vehicles?
The Autonomous Race (2 of 2)
• What vulnerabilities could be exploited by equipping self-
driving vehicles with Internet access?
• What are some logistical issues that could arise from a
delivery vehicle without a human operator?
• What impact will the widespread use of driverless
vehicles have on other industries related to the
automotive industry?
Using IS to Create Competitive
Advantages (1 of 2)
• Enhances existing products.
• Differentiates products.
• Locks in customers.
• Raises barriers to market entry.
• Increases profit margins by decreasing costs and
decreasing errors.
Using IS to Create Competitive
Advantages (2 of 2)
• 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?
Figure 3-13 Two Roles for Information
Systems Regarding Products
Web Page to Select a Contact from the
Customer’s Records
Figure 3-14 ABC, Inc., Web Page to Select a Recipient from the
Customer's Records
Figure 3-15 ABC Web Page to Select a
Contact from Customer’s Records
Web Page to Specify Email Notification
Figure 3-16 ABC, Inc., Web Page to Specify Email Notification
Web Page to Print Shipping Label
Figure 3-17 ABC, Inc., Web Page to Print a Shipping Label
• 2027?
Strategy and Information Systems in 2027
• Pace of change and integration of new technology fast
and increasing.
• Augmented reality devices, like Google Glass and
Microsoft's HoloLens, will change competitive landscape.
• New businesses based on advances in self-driving cars,
drones, 3D printing.
• New products constructed in someone’s garage.
Figure 3-18 Innovations by Technology
Companies
Market Self-
Company Cap. In Search Smartphone AI Smartwatch AR/VR Drones driving
Billions Car
iPhone Siri Apple Watch ? ?
Apple $539 blank blank
(2007) (2011) (2015) (dev.) (dev.)
Daydream
VR & Self-
Google Nexus Now Wear (os) Wing
Alphabet $480 Magic Leap driving
(1998) (2013) (2012) (2014) (dev.)
Car (dev.)
(dev.)
Bing Lumia Cortana Band Hololens
Microsoft $395 blank blank
(2009) (2011) (2014) (2014) (2016)
Facebook FAIR Oculus Rift Ascenta blank
Facebook $306 blank blank
(2004) (dev.) (2016) (dev.)
Galaxy S S Voice Gear S2 Gear VR
Samsung $162 blank blank blank
(2010) (2012) (2013) (2015)
Hacking Smart Things
Security Guide
• Internet of Things (IoT)
– Internet-enabled devices.
– Outfitting every object with Internet access
hazardous, even dangerous, proposition.
• Unintended risks associated with incorporating this
capability into things.
Internet of Threats (1 of 2)
• What about securing data stored on Internet-enabled
smart devices?
– How to protect 10, 20, or 30 different Internet-enabled
devices in your home?
– Could hacker hijack webcam in your living room, or
actually hijack your car?
– What businesses and government agencies could
benefit?
Internet of Threats (2 of 2)
• What are some benefits or risks for businesses adopting
new Internet-enabled devices?
• How about supply chain, customer service? What else?
Director of Architecture
Career Guide
Gabe Chino in Financial Services

Q. What attracted you to this field?
A. “I have always been interested in how technology can
enhance our lives. After getting some exposure to programming
in college, I was hooked. I realize there is no end to innovation
and creativity in this field, so I am never bored.”
Q. What advice would you give to someone who is considering
working in your field?
A. “My advice would be to always watch where the tech field is
going. If this field is really for you, stay current with the latest I T
trends.”
The Amazon of Innovation (1 of 2)
Case Study 3
Figure 3-19 Innovation at Amazon
Source: Data from Amazon.com:

http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-corporatetimeline, accessed
April 2016. Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
The Amazon of Innovation (2 of 2)
• Amazon’s business lines have three categories:
• Online retailing
– Own inventory
– Associates program
– Consignment
• Order fulfillment
• Cloud services
Fulfillment Fees for Regular-Sized Goods
for a Company Like Falcon Security
F B A costs, super
blank FBA Costs2020.
Order handling (per order) $1.00
Pick & pack (per item) $1.06
Weight handling (per pound) Between $0.50 for less than 1
pound, to $1.95 plus $0.39 per
pound for items over 2 pounds
Storage (cubic foot per month) $0.54 between January and
September and $0.72 from
October to December
Copyright
An analysis of the five forces of the Singing Valley
market. Make and justify any necessary assumptions
about their market.
Force Force Strength Your justification

1.Bargaining power of Why?
Strong/Medium/Weak
customers
2.Threat of Strong/Medium/Weak Why?
substitutions
3.Bargaining power of Strong/Medium/Weak Why?
suppliers
4.Threat of new Strong/Medium/Weak Why?
entrants
Strong/Medium/Weak Why?
5.Rivalry
An analysis of the five forces of the Singing Valley
market. Make and justify any necessary assumptions
about their market.
Force Force Strength Your justification
Bargaining power of Upscale customers will have many
Strong choices.
customers
Many other options are available
Threat of Strong besides Colorado mountain resorts;
substitutions for example, cruises or island resorts.
Bargaining power of Weak Singing Valley will have ample
suppliers supplier options.
The cost of developing similar new
resorts will be steep, but remember
Threat of new Weak that Singing Valley’s customers are
entrants the type of customers who are always
looking for the newest new thin
Upscale resorts will compete strongly

Rivalry Strong for a relatively small market.

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Using MIS

Slides in this presentation contain

Source: Based on Michael E. Porter, Competitive Advantage: Creating and Sustaining

Relative Cost Analysis

Low-cost leadership Use IS to produce products and Walmart

Focus on market niche Use IS to enable a focused Hilton Hotels,

Gabe Chino in Financial Services

Figure 3-19 Innovation at Amazon

Source: Data from Amazon.com:

Force Force Strength Your justification

Upscale resorts will compete strongly

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