Strategic IS for Competitive Advantage Dr Sherif Kamel Department of Management School of Business,...

Strategic IS for Competitive Advantage

Dr Sherif KamelDepartment of Management

School of Business, Economics and Communication

Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe

Outline

Strategic information systems Strategic management and the role of IT Competitive intelligence Porter’s competitive model The value system Web-based strategic information systems Cases SIS implementation Managerial issues Lessons learnt


Strategic Information Systems (SIS)


Elements of Strategic Management

Long Range Planning Response Management Proactive Innovation

o Information Technology


Role of Information Technology

IT creates applications that provide strategic advantages to companies

IT is a competitive weapon IT supports strategic change (re-engineering) IT networks with business partners IT provides cost reduction IT provides competitive business intelligence


Competitive Intelligence

The Internet is central to supporting competitiveintelligence

Activities drive business performance by

Increasing market

knowledge Improving internal

relationships Raising the quality

of strategic planning

Many companies monitor the activities of competitors


Competitive Advantage in the Web Economy

Competitive Advantage

Look for a competitive

necessity, which will help your company

keep up with the competitors

Competitive Strategy

Search for a competitive

advantage in an industry, which

leads to control of the market

Sustainable Strategic

Advantage

Maintain profitable and sustainable position against the forces that

determine industry competition


Porter’s Competitive Model

Threat of entry of new competitors Bargaining power of suppliers Bargaining power of customers (buyers) Threat of substitute products or services Rivalry among existing firms in the industry


Response Strategies

FOCUS

Selecting a niche market and achieving

cost leadership and/or

differentiation

DIFFERENTATION

Being unique in the industry

COST LEADERSHIP

Providing products and/or services at the lowest cost in

the industry


Response Strategies

INNOVATIONDeveloping new products and services

GROWTH

Increasing market share, acquiring more customers or selling more products

IMPROVE INTERNAL EFFICIENCY

To improve employee and customer satisfaction

ALLIANCESWorking with business partners to create synergy and provide opportunities for growth

CRMCustomer-oriented approaches, e.g. the customer is king (queen)


Case: Daimler Chrysler

Problemo In 1999, the company lost 2.6 Billion US dollarso Chrysler’s program with part suppliers was failing

Solutiono Suppliers began using Lotus noteso Measurement reports to static HTML web pageso eProcurement exchange online

Resultso Chrysler saves billions


Value System

A firm’s value chain is part of a larger stream of activities, which Porter calls a Value Systemo Includes the suppliers that provide the

necessary inputs and their value chainso Applies to both products and services, for any

organization, public or privateo Is the basis for the Supply Chain Management

(SCM)


Case: Frito Lay uses IT and the Value Chain

World’s largest snack food producer and owner of Pepsi products

SIS Systemo Integrates marketing, sales, manufacturing, logistics, financeo Provides managers with information about suppliers, customers

and competitorso Enables employees to access valuable information

Frito Lay’s use of IT allows for an optimal functioning of the value chain


Value Chain Model

Evaluate a company’s process and competencies Investigate whether adding IT supports the value chain Enable managers to assess the information intensity and

the role of IT


Web-based Strategic Information Systems

Many of the SIS of the 70s and 90s were based on privately owned networks, or organizational information systems (OIS)

EDI-based systems are of key importance SIS are changing the nature of competition


Case: Mobile Oil Moves to Web-based System

Problemo Largest marketer of lubricants in the USAo In 1995, introduced EDI system

Used to place orders, submit invoices and exchange business documents

It was too expensive, too complex to use

Solutiono In 1997, moved to web-based extranet-supported B2B system

Resultso Reduced transaction cost from $45/order to $1.25o Fewer shortages, better customer serviceo Decline in distributor administration costs


Examples of EDI/Internet-based SIS

(for individual companies) Electronic Auctions Electronic Biddings Buyer-Driven Commerce Single Company Exchange Direct Sales

(for group of companies) Industry Consortiums Horizontal Consortiums Web-based Call Centers Web-based Tracking Systems Web-based Intelligent Agents Web-based Cross Selling Accessing knowledge via

Intranets


Who is using SIS?

Otis Elevatoro Centralized call center, self diagnosing elevators’ malfunctions and

maintenance analysis

American Airlines

o Computerized reservation system (SABRE)


Case: Port of Singapore

Problemo Port of Singapore, the world’s largest international port, faced

increased global competition

Solutiono Implementation of Intelligent Systems

Resultso Reduction in Cycle Time

4 hours versus 16 - 20 hours in neighboring ports

o Reduction in uploading/ loading time 30 sec. versus 4-5 min./ truck in neighboring ports


Case: Volvo Speed Cars

Problemo In comparison to global competitors, Volvo’s cars were too

expensive, with a slow delivery time

Solutiono Creation of global ISDN-based network

Resulto Reduction in delivery time from 12 - 16 weeks to 4 - 6 weeks for

customized carso Reduction in cost of doing business, along with the price of the car


SIS implementation

Justificationo Justifying SIS may be difficult due to the intengible nature of their

benefits

Risks and failureso The magnitude, complexity, continuous changes in technology and

business environment may result in failures

Finding appropriate SISo Identifying appropriate SIS is not a simple task


Sustaining SIS and strategic advantage

A Major problem that companies face is how to sustain their SIS competitive advantage

3 Major approaches…o Create systems which are not visible to competitorso Provide a comprehensive, innovative and expensive system that is

difficult to duplicateo Combine SIS with structural changes including business

processes, reengineering and organizational transformation


Managerial Issues

Implementing SIS can be riskyo Investment involved in implementing strategic information systems

(SIS) is high

Strategic information systems requires planningo Planning for an SIS is a major concern of organizations

Sustaining competitive advantage is Challengingo As companies become larger and more sophisticated, they develop

resources to duplicate the systems of their competitors quickly Ethical issues

o Gaining competitive advantage through the use of IT may involve unethical or even illegal actions

o Companies can use IT to monitor the activities of other companies and may invade the privacy of individuals working there


Lessons Learnt

Need for exchange business models and strategies Importance of web-based IT Global competition over service is key Large investment over time Importance of networked infrastructure for global systems Web-based applications for superior customer service Need to patent innovative systems

Strategic IS for Competitive Advantage Dr Sherif Kamel Department of Management School of Business,...

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