Chapter 2 MAJOR BUSINESS INITIATIVES Gaining Competitive Advantage

Chapter 2 MAJOR BUSINESS INITIATIVES Gaining Competitive Advantage with IT

STUDENT LEARNING OUTCOMES 1. Describe SCM systems, their competitive advantages, challenges to their use, and IT support 2. Describe CRM systems, their competitive advantages, challenges to their use, and IT support 3. Describe BI systems, their competitive advantages, challenges to their use, and IT support 2 -2

STUDENT LEARNING OUTCOMES 4. Describe ICE systems, their competitive advantages, challenges to their use, and IT support 5. Describe how individual systems work together to give airline companies a competitive advantage 2 -3

INTRODUCTION • Important IT applications businesses are using today – Supply chain management (SCM) – Customer relationship management (CRM) – Business intelligence (BI) – Integrated collaboration environments (ICE) 2 -4

SUPPLY CHAIN MANAGEMENT • Distribution chain – the path followed from the originator of a product/service to the end consumer 2 -5

What are Supply Chain Management Systems? • Supply chain management (SCM) - tracks inventory and information among business processes and across companies • Supply chain management (SCM) system an IT system that supports supply chain management activities by automating the tracking of inventory and information among business processes and across companies 2 -6

What are Supply Chain Management Systems? • Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it • Logistics - the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers 2 -7

Strategic and Competitive Opportunities with SCM • A well-designed supply chain management system helps by optimizing: – Fulfillment – Logistics – Production – Revenue and profit – Spend 2 -8

IT Support for Supply Chain Management • Specialized SCM software and ERP software suites • Application service provider (ASP) supplies software applications (and often related services) over the Internet that would otherwise reside on its customers’ in-house computers. 2 -9

What are Customer Relationship Management Systems? • Customer relationship management (CRM) system - uses information about customers to gain insights into needs, wants, and behaviors in order to serve them better • Sales force automation (SFA) system automatically tracks all the steps in the sales process 2 -10

IT Support for Customer Relationship Management • Front office systems – the primary interface to customers and sales channels • Back office systems - used to fulfill and support customer orders 2 -11

BUSINESS INTELLIGENCE • How Fiber. Mark benefits from business intelligence (BI) – They used to print 1, 000 page reports for each salesperson – Now salespeople get the information they want from Fiber. Mark’s intranet – Fiber. Mark’s BI system paid for itself in 9 months 2 -12

What are Business Intelligence Systems? • Business intelligence (BI) – knowledge about your customers, your competitors, your business partners, your competitive environment, and your own internal operations – that gives you the ability to make effective, important, and often strategic business decisions. 2 -13

What are Business Intelligence Systems? • Business intelligence (BI) systems – the IT applications and tools that support the business intelligence function within an organization • Competitive intelligence - business intelligence focused on the external competitive environment 2 -14

What are Business Intelligence Systems? • Data warehouse– a logical collection of information - gathered from many different operational databases – used to create business intelligence that supports business analysis activities and decision-making tasks • Data mart - a subset of the data warehouse in which only a focused portion of the data warehouse information is kept 2 -15

What are Business Intelligence Systems? • Other technical components of business intelligence include such tools as – Data mining – Automatic exception detection with proactive alerting and automatic recipient determination – Automatic learning • Data-mining tool - a software tool you use to query information in a data warehouse 2 -16

IT Support for Business Intelligence • There are many software companies in the BI field • Digital dashboard - displays key information gathered from several sources on a computer screen in a format tailored to the needs and wants of an individual knowledge worker 2 -17

IT Support for Business Intelligence 2 -18

What are Integrated Collaboration Environments? • Integrated collaboration environment (ICE) - the environment in which virtual teams do their work • Virtual team - a team whose members are located in varied geographic locations and whose work is supported by specialized ICE software or by more basic collaboration systems 2 -19

What are Integrated Collaboration Environments? • Collaboration system - software that is designed specifically to improve the performance of teams by supporting the sharing and flow of information • Alliance partner – a company your company does business with on a regular basis in a collaborative fashion, usually facilitated by IT systems 2 -20

What are Integrated Collaboration Environments? • Workflow - defines all of the steps or business rules, from beginning to end, required for a business process • Workflow system - facilitates the automation and management of business processes 2 -21

What are Integrated Collaboration Environments? • Document management system - manages a document through all the stages of its processing • Knowledge management (KM) system – an IT system that supports the capturing, organization, and dissemination of knowledge (i. e. , know-how) throughout an organization 2 -22

What are Integrated Collaboration Environments? • Social network system - an IT system that links you to people you know and, from there, to people your contacts know – Build your network – Find the people you need – Make a trusted contact 2 -23

Challenges to Success with Integrated Collaboration Environments • Acceptance of knowledge management systems has been particularly difficult – People don’t submit their knowledge to the knowledge repository – People are reluctant to share what they know with others – People say they don’t have the time to submit information. IT can help with techniques to capture knowledge automatically 2 -24

A VIEW OF THE INTEGRATED ENTERPRISE 2 -25

Airline Reservation Systems • SABRE and APOLLO were very profitable for American and United • American and United had access to BI on their own as well as on their competitors’ flights • Competitors had to wait to get BI and also had to pay for it 2 -26

Frequent Flyer Programs • Frequent flyer programs are a great example of CRM • Air travelers concentrate their travel with a single airline to get “perks” • Finnair is using BI to increase loyalty • Most information needed for frequent flyer programs is obtained from reservation systems 2 -27

Airline Maintenance Systems • Airlines use SCM systems to be sure maintenance parts are available when needed • Integrating SCM and BI helps airlines predict where and when spare parts will be needed 2 -28

Yield Management Systems • Yield management system - specialized kind of decision support system designed to maximize the amount of revenue an airline generates on each flight • Fares change over time for a specific flight based on number of seats sold • Objective: highest average cost per seat 2 -29

Yield Management Systems 2 -30

Integrated Collaboration Environments • Many airlines are global businesses with employees located all over the world • Airline employees often work in virtual teams • ICEs let them avoid travel even though it’s free • ICEs are an interesting competitive threat to airlines 2 -31

CAN YOU… 1. Describe SCM systems, their competitive advantages, challenges to their use, and IT support 2. Describe CRM systems, their competitive advantages, challenges to their use, and IT support 3. Describe BI systems, their competitive advantages, challenges to their use, and IT support 2 -32

CAN YOU… 4. Describe ICE systems, their competitive advantages, challenges to their use, and IT support 5. Describe how individual systems work together to give airline companies a competitive advantage 2 -33

CHAPTER 2 End of Chapter 2