Management Information Systems Chapter 3

Strategy for information system

1.) Industry structure 2.) Competitive Strategy 3.) Value Chains 4.) Business processes 5.) Information systems

Five Forces Model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry. Competitive Forces Threat of Substitutions Threat of New Entrants Competition from existing rivals Bargaining Power Forces Bargaining power of Suppliers Bargaining power of Customers

customer service

Assisting customer's use of the product and thus maintaining and enhancing the product's value; While neither three business processes involve _________________ activity, __________________ plays a role in other business processes

Operations

Automation Employee Collaboration Analytics

Focus + Differentiation

Better product / service within an industry segment

Industry Wide + Differentiation

Better product/service across the industry

Five Forces Determining Industry Structure

Competitive Forces Competition from vendors who manufacture substitutes. Competition from new competitors. Competition from existing rivals. Bargaining Power Forces Bargaining power of suppliers. Bargaining power of customers.

Process Design

Configuring inputs and resources in a way that provides value, enhances quality, and is productive; requires people to work in new ways and to follow different procedures

Threat of new entrants (strong force)

Corner latte stand (because it is an easy business to replicate)

Generic Competitive Advantage Via Product Implementation

Create/Enhance/Differentiate a new product/service

New Digital Businesses

Engineering traditionally designs the product but when IS is the business......

Threat of substitutions (strong force)

Frequent traveler's choice of auto rental

Strategies, Priorities

Goals lead to________________ that lead to ______________.

rivalry (weak force)

Google or Bing (expensive to develop and market a search engine)

Bargaining power of suppliers (weak force)

Grain farmers in a surplus year (an oversupply makes the product less valuable and less profitable)

enter data just once reduce errors reduce costs any barriers to entry

How can systems create a competitive advantage?

System maintains customer account data

IT collects information for ABC Company (adds value) IT saves customers time by automatically filling in part of form (adds value for customer, saves them time)

Package and information delivery systems

IT helps customer to select delivery address and generate a shipping label IT tracks and notifies all parties involved on package status

support activities

In Porter's value chain model, the activities that contribute indirectly to value creation: procurement, technology, human resources, and the firm's infrastructure.

Hacking Smart Things

Internet of Things (IoT) Unintended risks associated with incorporating this capability into things.

Internet of Things (IoT)

Internet-enabled devices. Is outfitting every object with Internet access hazardous, even dangerous, proposition

barriers to entry

Is this the new table stakes for the industry?

Generic Competitive Advantage Via Business Processes

Lock in customers/suppliers aka 'switching costs' or 'being sticky' Raise barriers to entry Establish Alliances Reduce Costs

Industry-wide + cost

Lowest cost across the industry

Focus + Cost

Lowest cost within an industry segment

lock in suppliers

Make it easy to connect to and work with your organization or making it difficult to switch to another organization

Three processes of manufacturing business

Materials ordering process, manufacturing process, sales process

Bargaining power of suppliers (strong force)

New car dealers (because they control what the "true price" of a vehicle is and the customer cannot reliably verify the accuracy of that price)

Threat of substitutions (weak force)

Patients using the only drug effective for their type of cancer

Threat of new entrants (weak force)

Professional football team (because the number of teams is tightly controlled by the NFL)

increased profitability

Reduction in production cost results in ________. Results in greater shareholder value, more cash,

customer experience

Sales/Marketing Customer Service

Information Systems

Strategy determines ___________________.

IT and competitive advantage

System maintains customer account data Package and information delivery systems

manufacturing process

The transformation of raw material into finished goods; involves inbound logistics, manufacturing, and outbound logistics

operations, marketing and sales, and service activities

The value of a service company is generated by ____________________.

Bargaining power of customers (strong force)

Toyota's purchase of auto paint (because Toyota is a huge customer that will purchase paint in large volume)

rivalry (strong force)

Used car dealers (because there are many to choose from)

Generic Competitive Advantage

Via Product Implementation Via Business Processes

business, business

We've realized that if we don't transform the way we do________________, we're going to die. It's not about changing the way we do technology but changing the way we do _________________.

Internet of Threats

What about securing data stored on Internet-enabled smart devices? How to protect 10, 20, or 30 different Internet-enabled devices in your home? Could hacker hijack webcam in your living room, or actually hijack your car? What businesses and government agencies could benefit? What are some benefits or risks for businesses adopting new Internet-enabled devices? How about supply chain, customer service? What else?

cash

What can fund further infrastructure development for even greater competitive advantage?

inbound logistics, manufacturing, outbound logistics

Which of the primary activities in the value chain is in the manufacturing process?

Inbound Logistics (1)

Which of the primary activities in the value chain is in the materials ordering process?

outbound logistics, sales and marketing, customer service

Which of the primary activities in the value chain is in the sales process?

Bargaining power of customers (weak force)

Your power over the procedures and policies of SJSU

information systems, product, support

_______________ create competitive advantage either as part of a _____________ or by providing ________________ to the product

activity

a business function that receives inputs and produces outputs, which can be physical or data; can be performed by a human, a computer system, or both

benefits, costs

a business might choose to develop more costly processes, but it would do so only if those processes provided ________________ that outweighed their __________________.

business process management

a cyclical process for systematically creating, assessing, and altering business processes

business process design

a discipline whose central idea is that organizations should not automate or improve existing functional systems; rather they should create new, more efficient business processes that integrate the activities of all departments involved in a value chain

Business Process

a network of activities that generate value by transforming inputs into outputs; vary in cost and effectiveness

Value Chain

a network of value-creating activities

Gartner Magic Quadrant

a series published by IT consulting firm Gartner of market research reports that rely on proprietary qualitative data analysis methods to demonstrate market trends, such as direction, maturity and participants

Being "sticky"

a strategy where an organization's customer or supplier will incur a relatively high "switching cost" if going to a substitute

Data Resources, databases

activities get and put __________________ from and to ___________________

primary activities

activities that contribute directly to the production, sale, or service of a product. In Porter's model, they are inbound logistics, operations and manufacturing, outbound logistics, sales and marketing, and customer service.

selecting via drop down menu

allows a system to save customers from having to reenter data for recipients to whom they have shipped in the past, and reduces entry errors

switching costs

business strategy of locking in customers by making it difficult or expensive to change to another product or supplier

outbound logistics

collecting, storing, and physically distributing the products to buyers

repository

collection of something; a database is a _______________ of data and a raw material _______________ is an inventory of raw materials

procurement

consists of the process of finding vendors, setting up contractual arrangements, and negotiating prices

Product Implementations

create a new product or service, enhance products or services, differentiate products or services

Reducing Costs

enable the organization to reduce prices and/or to increase profitability

Establish alliances (gain competitive advantage)

establish standards, promote product awareness and needs, develop market size, reduce purchasing costs, and provide other benefits.

firm infrastructure

general management, finance, accounting, legal, government affairs

Value Chain Analysis

has a direct application in manufacturing businesses, and also in service-oriented companies

Threat of Substitutions

how easy is it for a customer to "switch" to your competitor

Bargaining power of Customers

how easy is it for a customer to influence price

Bargaining power of suppliers

how easy is it for a supplier to raise prices

Threat of new entrants

how easy is it for competitors to join the marketplace

Competition from existing rivals

how intense is the competition from others in the marketplace

low-cost strategy (a) positive margin (b) IS

implements business processes to minimize costs; must ensure that value added will exceed the cost of providing a service to achieve a (a)________________; doesn't require much (b)___________.

Primary activities in the value chain

inbound logistics, operations/manufacturing, outbound logistics, sales and marketing, customer service

maintaining customer account

includes customer's name, billing information, address, and data about people, organizations, and shipping locations

Technology

includes research and development and other activities within the firm for developing new techniques, methods, and procedures

sales and marketing

inducing buyers to purchase the product and providing a means for them to do so

linkages

interactions across value activities; can be used by manufacturing firms to reduce inventory costs

cost leadership strategy

keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market

Process Implementations

lock in customers and buyers, lock in suppliers, raise barriers to market entry, establish alliances, reduce costs

creating entry barriers

make it difficult and expensive for new competition to enter the market

lock in customers

make it difficult or expensive for customers to switch to another product; establishes high switching costs

High-Service Business Bike Rental

makes extensive use of information systems, such as sales tracking database and an inventory database

analyze, analysis, competitive strategy, organize, structure

organizations ________________ the structure of their industry, and, using that _______________, they formulate a _________________. Then they need to ________________ and _______________ the organization to implement that strategy.

Principles of Competitive Advantage

product implementations and process implementations

inbound logistics

receiving, storing, and disseminating inputs to the products

human resources

recruiting, compensation, evaluation, and training of full-time and part-time employees

value, costs, margin

supporting functions add _______________, and they also have ___________ and hence ______________

value

the amount of money that a customer is willing to pay for a resource, product, or service

cost of business process

the cost of the inputs plus the cost of the activities

margin

the difference between the value that an activity generates and the cost of the activity

Digital Transformation

the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle

Competitive Strategy

the strategy an organization chooses as the way it will succeed in its industry; determines organization's goals and objectives, and value chains which determine business processes, which in turn develops information system; formed by examining the structure of an industry; to be effective, the organization's goals, objectives, culture, and activities must be consistent with the organization's strategy; all information systems in the organization must reflect and facilitate the organization's competitive strategy

business processes, competitive advantage

the streamlining of ______________________ is key to _______________________.

margin of business process

the value of the outputs minus the cost

differentiation strategy (a) positive margin

to offer products or services that are of unique and superior value compared with those of competitors but to target a wide market; would not necessarily structure itself around least-cost activities; will add cost to an activity only as long as the activity has a (a)________________.

Operations/Manufacturing

transforming inputs into the final products

Materials Ordering Process

transforms cash into raw materials inventory; includes inbound logistics

sales process

transforms finished goods into cash; involves outbound logistics, sales and marketing, and customer service