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INFSY540Information Resources in Management

Lesson 12 Chapter 11

Strategic Analysis

Operations

Tactics

Strategy

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Outline Operations, Tactics, Strategy and Change The Competitive Environment External Agents

Customers Suppliers Rivals (new entrants. Substitute products) Government Regulations

Methods to Gain Competitive Advantage How IS can help

The Search for Innovation How IS can help

Costs and Dangers of Strategies How IS can hurt

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Lewin’s model for organizational change

•Organizations must be able to change as their environment changes.•Change can happen at any level: Operational, Tactical, Strategic •Change can be incremental (continuous improvement, TQM) or sweeping (business process reengineering)

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Strategies

Competitors

CustomersSuppliers

Barrier to EntryProduct DifferentiationSwitching CostsControl of DistributionQuality ControlCost Advantage

Company

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Rivalry AmongExisting Competitors

Bargaining Powerof Buyers

Bargaining Powerof Suppliers

Threat ofNew Entrants

Threat of SubstituteProducts or Services

Porter’s Five Forces Model

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Methods to Gain Competitive Advantage Barriers to Entry

Additional costs of creating an information system. People’s Express

Distribution Channels Prevent others from entering

the industry. Movie distribution

Switching Costs Consumers incur learning

and data transfer costs. Baxter Healthcare

Lower Production Costs IS to cut costs. Wal-Mart

Product Differentiation Add new features or create

new products with IT. Federal Express & Merrill Lynch

Quality Management Monitoring production lines

and analyzing data. Digital Equipment Corp.

Value Chain Expanding forward or back

the value chain to find greater profits. Boeing Information Systems

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Market Measures- Market share- Concentration- Growth- Profitability

monitorrivals

Business Operations & Rules

Existing Data and IS

Performance Measures- ROA - ROI- EPS - Growth- Subjective

Corporate Strategy Development

• expectations• goals• rivalry

• strengths• weaknesses• opportunities• critical success factors

Business Strategiesand Priorities

Process ChangesData NeedsIS Changes

SystemDevelopment

& Implementation

- Cost leadership- Differentiation- Innovation- Linkages

- Re-engineering- Organization- Decentralization

Developing Strategies

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Search for Innovation Research

Analysis & modeling, project management, work group support, databases, decision support.

Engineering & Design CAD/CAM, testing, networks,

work group support.

Manufacturing Mass customization, links to

customers & suppliers, quality monitoring, expert systems for maintenance, production databases, business integration.

Logistics & Supply Just-in-time linkages,

forecasts, models, links for design, transaction processing.

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Search for Innovation Marketing

Frequent buyer database, target market & media analysis, survey design and analysis, multimedia promotion design, links to customers and designers.

Sales & Orders Portable computers for

sales, ES for order customization, work group tools for customer support.

Service Phone support, GIS locators,

scheduling, ES diagnostics, databases.

Management EIS, e-mail, bulletin boards,

decision support systems, personal productivity tools, work group support

Links to service providers Accountants Consultants Lawyers, . . .

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Dangers

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Conclusions

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Money for research

Money for information technology

Dangers:Capital Cost

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You

Rival

Time

IS Costs

Time

IS Costs

TransactionProcessing

Network & DSS

Network & linksales people

Link to suppliers& customers

Experimentaltechnology& global links

Danger:Competition

Follows

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Industry 1(expands into

industry 2)

Industry 2(new

competitor)

Customer

Customer

Customer

Customer

Customer

Customer

Customer

Customer

New technologyNew services

Same technology

Danger: Changing Industry & Government Intervention

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Danger:Security

Production Firm

Customer

Data we wish to share.

Data we want to protect.

Need to control access.Need to worry about networkinterceptions and hackers.

Securityfirewall

Hackersor competitorsrejected

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Conclusions? IT can help achieve strategic competitive advantage. Use of IS to add value is strongly influenced by

organizational structure, culture and change. Oftentimes, IT is a smokescreen for the action that

provides the real strategic competitive advantage. IS can provide more value than just cost cutting Strategic gains based on IT solutions are often fleeting

and require continual improvements. Others...

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Questions about Strategic Analysis ?

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Questions to Consider How do companies compete? What are the ways to achieve competitive advantage? How can IT be used to help achieve competitive

advantage? What are the costs and risks of using these methods?

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BarrierTo Entry

Firm Rival

Supplier SupplierSupplier

Consumer

Consumer

Consumer

Consumer Consumer

Consumer

Consumer

DecreasedCosts

ImprovedQuality

Ties ToCustomers

IncreasedSwitching Costs

Wholesale

Ties ToSuppliers

Control OfDistribution

Innovation andDifferentiation

Methods to Gain Competitive

Advantage

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Barriers to Entry Economies of Scale (size) Economies of Scope (breadth) Product Differentiation Capital requirements Cost Disadvantages (independent of size) Distribution Channel Access Government Policy

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Firm Infrastructure

Human Resources Management

Technology Development

Procurement

Inbound Logistics

Operations Outbound Logistics

Marketing & Sales

Service

Margin

Margin

Value Chain

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Manufacturing

Engineeringand Design

Marketing

Research

CustomerService

Management

Sales andOrder

Management

Logistics/Supply

Suppliers

Customers

Production

Process Innovation

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Research Analysis and models Statistical analysis of data Project management and budgeting Work-group collaboration and communication

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Engineering and Design CAD/CAM Integrated design database Production databases and model testing Expert Systems for manufacturability Work group communication

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Manufacturing Links to customers Links to suppliers Mass customization Robotics Diagnostic Expert Systems Quality monitoring and control

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Logistics and Supply Just-In-Time Inventory and EDI Configuration and design Searching for availability, pricing, . . . networks

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Marketing Frequent buyer databases Point-of-Sale and trends Statistical analysis of data Geographic Information Systems Links to external marketing agencies Multimedia development of promotions

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Sales and Orders Sales force automation, hand-held computers Customer workstation access Expert Systems for product and option selection Expert Systems for configuration and shipping Front-line support: ES, e-mail, work groups

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Service Portable computers for service anywhere Databases (e.g., customer service) Location monitoring of service personnel Product internal, automatic diagnostics Expert System diagnostic tools

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Management Executive Information Systems Simulation (and rivalry games) Links to external partners (accounting, law, . . .) Electronic conferencing Work group communication, e-mail Standardization, Modularization, Franchises Knowledge Workers Client-server instead of hierarchical computing