CHAPTER 2 Organizational Strategy Competitive Advantage Information Systems

CHAPTER 2 Organizational Strategy, Competitive Advantage, & Information Systems 1

1. Business Pressures, Organizational Responses, and Information Technology Support 2. Competitive Advantage and Strategic Information Systems ts r a p ll a m to s s e p k l a e h m t S I s : u r j e t t t o n be / s ss r e e e o t n d s e a v i f S I t i s t g s e Usin busine e comp e d as i e s r c in in 2

>>> 1. Identify effective IT responses to different kinds of business pressures. 2. Describe the strategies that organizations typically adopt to counter Porter’s five competitive forces. 3

2. 1 • • Business Pressures, Organizational Responses, and IT Support Competitive Advantage Business Environment Business Pressures Organizational Responses 4

Business Pressures 1. Market Pressures 2. Technology Pressures 3. Societal/Political/Legal Pressures 5

Figure 2. 1: Business Pressures, Organizational Performance & Responses, and IT Support 6

Market Pressures • Globalization v. Competition from afar • Powerful Customers v. Informed v. Connected and “united” v. Freer/easier to switch • Changing Nature of the Workforce v. Diversity v. Work mode 7

Globalization Stages of Globalization • Thomas Friedman – The World is Flat v. Globalization 1. 0 (from 1492 to 1800) v. Globalization 2. 0 (from 1800 to 2000) v. Globalization 3. 0 (from 2000 to the present) 8

Globalization Thomas Freidman: Ten Flatteners 1. Fall of the Berlin Wall on 11/9/1989 2. Netscape goes public on 8/9/1995 3. Development of workflow software 4. Uploading 5. Outsourcing 6. Offshoring 7. Supply chaining 8. Insourcing 9. Informing 10. The Steroids 9

Globalization Flattener #1: Fall of the Berlin Wall HR “poured in” from “the other world” Markets open up in “the other world” November 9, 1989. Walls between the two “camps” collapsed No barriers against trade, exchange of personnel, flow of info 10

Globalization Flattener #2: Netscape Goes Public – Aug 9, 1995 , 2 2 l i Apr 3 199 Explosion of online consumer population “Prehistoric time”: Gopher (U Minnesota) Marc Andreessen [then at U Illinois] (wrote Mosaic browser and later Netscape browser) 11

Globalization Flattener #4: Uploading the t u ? o g b n i a d y a a o s l p e u w h t n i a w tc w a o l h f W o f n i f o r e n n a m 12

Globalization Flattener #7: Supply Chaining 1 -13

Globalization Flattener #9: Informing It’s not just • Individuals have access to massive amounts of information • – Q: more than just the amount? 14

And the result of all this? See the Power of Technology 16

Market Pressures The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers 17

Technology Pressures • Technological Innovation and Obsolescence • Information Overload 17

’S ABOUT BUSINESS 2. 1 • “Bring Your Own Device” Can Cause Problems v What are the advantages of allowing employees to use any mobile device to connect to the corporate network? The disadvantages? v Why is it necessary to be able to erase corporate data when a mobile device is lost or stolen? 18

Societal/Political/Legal Pressures • Social Responsibility v • Compliance with Government Regulations v. EPA; Sarbanes-Oxley; HIPAA; … • Protection Against Terrorist Attacks • Ethical Issues v. Privacy; Intellectual property rights; … 19

Social Responsibility • IT Assists “Go Green” Efforts in Three Areas: 1. Facilities design and management 2. Carbon management 3. International and U. S. environmental laws • Digital Divide To deal with all the above 20

Organizational Responses • Strategic Systems v. What are them? • Customer Focus • Make-to-Order and Mass Customization • E-Business and E-Commerce 21

IT enables business strategy • Ten IT-enabled business trends for the decade ahead | Mc. Kinsey v 1. Joining the social matrix v 2. Competing with ‘big data’ and advanced analytics v 3. Deploying the Internet of All Things (IOT) Ø https: //www. youtube. com/watch? v=mzy 84 Vb_Gxk (@ 5’ 45” & 8’) Ø Li-Fi, 100 X Faster than Wi-Fi https: //www. youtube. com/watch? v=wq. H 9 KX 9 o 0 vg Ø Li-Fi, What Is It and How Does It Work https: //www. youtube. com/watch? v=g-Gy 8 g 5 j. D 3 w v 7. Charting experiences where digital meets physical Ø https: //www. oculus. com/ Ø https: //www. youtube. com/watch? v=H 9 ZOp. Qzjuk. Y (@ 7’ 30”) 22

2. 2 Competitive Advantage and Strategic IS’s • Porter’s Competitive Forces Model • Porter’s Value Chain Model • Strategies for Competitive Advantage • Business – Information Technology Alignment 23

Porter’s Five Forces Model 1. The threat of new competitors 2. The bargaining power of suppliers 3. The bargaining power of customers (buyers) 4. The threat of substitute products or services 5. The rivalry among existing firms in the industry 24

Figure 2. 2: Porter’s Competitive Forces Model Zhang’s graphical model showing logical relationship 2525

Competitive Forces (Graphical representation developed by Yüe Zhang) Company Suppliers Customers Substitutes Competitors New entrants Figure © 1997 -2018, Yüe “Jeff” Zhang

Internet Age competition (Model proposed by Yüe Zhang) Company Customer Attention Substitutes Competitors New entrants © 2016 -2018, Yüe “Jeff” Zhang

Internet Age competition – “From the Cloud” (Model proposed by Yüe Zhang) Competitors Customer Attention Substitutes © 2016 -2017, Yüe “Jeff” Zhang

Porter’s Value Chain Model • Value Chain • Two Categories of Organization Activities in the Value Chain v. Primary Activities v. Support Activities 21

Primary Activities • • • Inbound logistics Operations Outbound logistics Marketing and sales Services 30

Figure 2. 3: Porter’s Value Chain Model 31

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Porter’s Value Chain 31

Support Activities • The Firm’s Infrastructure • Human Resources Management • Product and Technology Development • Procurement 33

Strategies for Competitive Advantage 1. Cost leadership strategy 2. Differentiation strategy 3. Innovation strategy 4. Operational effectiveness strategy 5. Customer orientation strategy 34

Figure 2. 4: Strategies for Competitive Advantage 33

IS Impact on Competitive forces (compiled by Zhang) (Think about your own examples) Comp Forces Implication for Firm Use of IS to combat force Traditional rivals Comp in price, product ERP reduce cost, act distribution, and quickly; Web service Customer power reduced price, increased qual, demand for more services CRM serve better; CAD/CAM improved quality Supplier power New entrants Price raised, reduced quality Net closer ties; relate w new suppliers far away increased cap, reduced Web reach, price, differentiate product; inv ctrl sys lower costs decreased market CAD – computer-aided design; CAM - com-aid manufacturing; DB - database share 2 -36

2 3 4 5 2 -37 35 6 Strategic approaches to cope w competitive forces [Nickerson] 1

Strategies for Competitive Advantage (Think about your own examples) • Cost Leadership • Differentiation • Innovation • Operational Effectiveness • Customer-orientation 36

Priceline. com: “Name your own price” 2 -39

Panera Bread – what approach? 40

Touch Table at Keyes Woodland Hills Hyundai 41

42

Olive Garden’s mobile kiosk 43

44

Business-Information Technology Alignment • Business–Information Technology Alignment • Six Characteristics of Excellent Business-IT Alignment: 45

Six Characteristics of Excellent Business-IT Alignment er l b na E 1. Organizations view IT as an engine of innovation that continually transforms the business, often creating new revenue streams. 2. Organizations view their internal & external customers & their customer service function as supremely important. 46

Six Characteristics of Excellent Business-IT Alignment (continued) 3. Organizations rotate business & IT professionals across departments and job functions. 4. Organizations provide overarching goals that are completely clear to each IT and business employee. Goals cascade: Slide 51 47

Six Characteristics of Excellent Business-IT Alignment (continued) 5. Organizations ensure that IT employees understand how the company makes (or loses) money. 6. Organizations create a vibrant and inclusive company culture. 48

Efficiency and effectiveness metrics to measure the impact of IT 1. Speed 2. Throughput 3. Performance 【Suggest: reliability 】 4. Scalability Indicators; measures 5. Net Present Value (NPV) 6. Return on Investment (ROI) 7. Total Cost of Ownership (TCO) 44

IT as enabler of business Enabler: Making it possible to take a business endeavor/initiative 1. that would not have been possible without the IT support or facilitation 2. E-commerce 3. Online banking 4. Envelope-free check deposit 5. Wireless applications 6. Real-time flight info updates 7. … 【Scan address plate to find out LBS】 Read: IT Should be an Enabler to the Business http: //www. information- management. com/blogs/IT_business-10015571 -1. html 45

COBIT 5’s Goals Cascade 51