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CHAPTER 2Organizational Strategy, Competitive Advantage, & Information Systems

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1. Business Pressures, Organizational Responses, and Information Technology Support

2. Competitive Advantage and Strategic Information Systems

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>>>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.

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OPENING >• GrubHub Seamless

Look ahead in this chapter. Which one of Porter’s strategies for competitive advantage is GrubHub Seamless pursuing? Explain your answer.

Propose additional applications that GS could develop to gain a competitive advantage in the marketplace.

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Business Pressures, Organizational Responses, and IT Support

2.1

• Competitive Advantage• Business Environment• Business Pressures• Organizational Responses

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Business Pressures

• Market Pressures• Technology Pressures• Societal/Political/Legal Pressures

Figure 2.1: Business Pressures, Organizational Performance & Responses, and IT Support

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Market Pressures

• GlobalizationCompetition from afar

• Powerful CustomersInformedConnected and “united”Freer/easier to switch

• Changing Nature of the WorkforceDiversityWork mode

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Stages of Globalization

• Thomas Friedman – The World is FlatGlobalization 1.0 (from 1492 to 1800)Globalization 2.0 (from 1800 to 2000)Globalization 3.0 (from 2000 to the

present)

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Thomas Freidman: Ten Flatteners1. Fall of the Berlin Wall on 11/9/1989 2. Netscape goes public on 8/9/19953. Development of workflow software4. Uploading5. Outsourcing6. Offshoring7. Supply chaining8. Insourcing9. Informing10.The Steroids

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Flattener #1: Fall of the Berlin Wall

November 9, 1989. Walls between the two “camps” collapsed No barriers against trade, exchange of personnel, flow of info

HR “poured in” from “the other world”

Markets open up in “the other world”

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Flattener #2: Netscape Goes Public – Aug 9, 1995

Marc Andreessen [then at U Illinois] (wrote Mosaic browser and later Netscape browser)

“Prehistoric time”: Gopher (U Minnesota)

April 22,

1993

Explosion of online consumer population

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Flattener #4: Uploading

What can we say about

the manner of info flow with uploading?

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Flattener #7: Supply Chaining

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Flattener #9: Informing

It’s not just

• Informing is to individuals what outsourcing, offshoring, and in-sourcing is to companies

• Individuals have access to massive amounts of information – Q: more than just the amount?

And the result of all this?

See the Power of Technology

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Market PressuresThe Global Economy and Strong Competition

The Changing Nature of the Workforce

Powerful Customers

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Technology Pressures

• Technological Innovation and Obsolescence

• Information Overload

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’S ABOUT BUSINESS 2.1

• “Bring Your Own Device” Can Cause Problems What are the advantages of allowing

employees to use any mobile device to connect to the corporate network? The disadvantages?

Why is it necessary to be able to erase corporate data when a mobile device is lost or stolen?

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Societal/Political/Legal Pressures

• Social Responsibility• Compliance with Government

Regulations• Protection Against Terrorist Attacks• Ethical Issues

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Social Responsibility

• IT Assists “Go Green” Efforts in Three Areas:1. Facilities design and management2. Carbon management3. International and U.S. environmental

laws

• Digital Divide

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Organizational Responses

• Strategic Systems• Customer Focus• Make-to-Order and Mass

Customization• E-Business and E-Commerce

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’S ABOUT BUSINESS 2.3

• The Weather Channel Identify several reasons (not discussed in the

case) why accurate weather predictions are so important. Can an accurate weather prediction be considered a competitive advantage for an organization that receives this information? Why or why not? Support your answer with specific examples.

Will Dark Sky, Sky Motion, and WeatherSphere have a lasting competitive advantage over The Weather Channel? Why or why not? Support your answer.

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Competitive Advantage and Strategic IS’s

2.2

• Porter’s Competitive Forces Model• Porter’s Value Chain Model• Strategies for Competitive

Advantage• Business – Information Technology

Alignment

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Porter’s Five Forces Model

1. The threat of new competitors2. The bargaining power of suppliers3. The bargaining power of customers

(buyers)4. The threat of substitute products or

services5. The rivalry among existing firms in

the industry

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Figure 2.2: Porter’s Competitive Forces Model

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Competitive Forces (Graphical representation developed by Yüe Zhang)

Company

Competitors

Suppliers Customers Substitutes

New entrantsFigure © 1997-2016, Yüe “Jeff” Zhang

Internet Age competition (Model proposed by Yüe Zhang)

Company

Competitors

Customer Attention Substitutes

New entrants © 2016, Yüe “Jeff” Zhang

Internet Age competition – “From the Cloud” (Model proposed by Yüe Zhang)

CompetitorsCustomer Attention Substitutes

© 2016, Yüe “Jeff” Zhang

Porter’s Value Chain Model

• Value Chain• Two Categories of Organization

Activities in the Value ChainPrimary ActivitiesSupport Activities

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Primary Activities

• Inbound logistics• Operations• Outbound logistics• Marketing and sales• Services

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Figure 2.3: Porter’s Value Chain Model

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Porter’s Value Chain

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Support Activities

• The Firm’s Infrastructure• Human Resources Management• Product and Technology

Development• Procurement

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Strategies for Competitive Advantage

1. Cost leadership strategy2. Differentiation strategy3. Innovation strategy4. Organizational effectiveness

strategy5. Customer orientation strategy

Figure 2.4: Strategies for Competitive Advantage

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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 distribution, and service

ERP reduce cost, act quickly; Web service

Customer power reduced price, increased qual, demand for more services

CRM serve better; CAD/CAM improved quality

Supplier power Price raised, reduced quality Net closer ties; relate w new suppliers far away

New entrants increased cap, reduced price, decreased market share

Web reach, differentiate product; inv ctrl sys lower costs

Substitutes Returns; decreased market share; losing customers

DSS & customer purchase DB trends & needs; CAD redefine products

CAD – computer-aided design; CAM - com-aid manufacturing; DB - database

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Strategies for Competitive Advantage (Think about your own examples)

• Cost Leadership

• Differentiation

• Innovation

• Operational Effectiveness

• Customer-orientation36

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Priceline.com: “Name your own price”

Panera Bread – what approach?

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Business-Information Technology Alignment

• Business–Information Technology Alignment

• Six Characteristics of Excellent Business-IT Alignment:

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Six Characteristics of Excellent Business-IT Alignment

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.

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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.

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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.

Efficiency and effectiveness metrics to measure the impact of IT

1. Speed2. Throughput

3. Performance 【 Suggest: reliability】

4. Scalability

5. Net Present Value (NPV)6. Return on Investment (ROI)7. Total Cost of Ownership (TCO)

Indicators;

measures

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IT as enabler of businessEnabler: Making it possible to take a business endeavor/initiative 1. that would not have been possible without the

IT support or facilitation2. E-commerce3. Online banking4. Envelope-free check deposit5. Wireless applications6. Real-time flight info updates7. …Read: IT Should be an Enabler to the Business http://www.information-management.com/blogs/IT_business-10015571-1.html

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