Module 1 - MBA 703 (Sadhya)

How can IS be used for competitive advantages?

1. Business Process Management Systems (integration of business processes with information) 2.Electronic Data Interchange 3. Collaborative systems 4. Decision Support Systems (work best when the decision makers are having to make semi-structured decisions)

A strategic information system attempts to do one or more of the following

1. Deliver a product or a service at a lower cost; 2. Deliver a product or service that is differentiated; 3. Help an organization focus on a specific market segment; 4. Enable innovation.

4 secondary components of the value chain

1. Firm infrastructure—functions that support the whole firm, including general management, planning, IS, and finance 2. Human resource management—recruiting, hiring, training, and development 3. Technology / research and development—new product and process design 4. Procurement—sourcing and purchasing functions

5 major components of IS

1. Hardware 2. Software 3. Data 4. People 5. Processes

Why is investing in IT lead to a competitive advantage?

1. IT has sharpened differences among companies instead of reducing them 2. Good management matters 3. The competitive shakeup brought on by IT is not nearly complete, even in the IT-intensive US economy Information systems can be used for competitive advantage, but they must be used strategically

Sources of Competitive Advantage

1. Imitation resistant value chain 2. brand 3. scale 4. switching costs and data 5. differentiation 6. network effects 7. distribution channels 8. patents

5 primary components of the value chain

1. Inbound logistics—getting needed materials and other inputs into the firm from suppliers 2. Operations—turning inputs into products or services 3. Outbound logistics—delivering products or services to consumers, distribution centers, retailers, or other partners 4. Marketing and sales—customer engagement, pricing, promotion, and transaction 5. Support—service, maintenance, and customer support

What are the key stages in computer development in business

1. Mainframe Era - large, single organization, computing, Manufacturing Resources Planning (MRP) 2. PC Revolution - minicomputer 3. Client-server (LAN, email, ERP) 4. Internet, World Wide Web, E-Commerce (digital communication and increase security threats) 5. Web 2.0 (interactive website development, blogging, social media, disintermediation) 6. Post-PC world

Two main categories of software

1. Operating system software = makes the hardware for usable (ex: Microsoft Windows and Google's Android) 2. Application software = which does something useful for ex: Microsoft excel or Angry birds (apps)

Porter's Five Forces

1. competitive rivalry 2. threat of entry 3. threat of substitutes 4. supplier power 5. buyer power

Two primary methods for obtaining competitive advantage

1. cost advantage 2. differentiation advantage

Which 3 of the 5 major components of IS are considered technology?

1. hardware 2. Software 3. data

2 important components of in IS?

1. the components that make up an information system and 2. the role those components play in an organization

imitation-resistant value chain

A way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role.

network effects

Also known as Metcalfe's Law, or network externalities. When the value of a product or service increases as its number of users expands.

Information system definition

An information system (IS) can be defined technically as a set of interrelated components that collect, process, store, and distribute information to support decision making and control in an organization Information systems are combinations of hardware, software, and telecommunications networks that people build and use to collect, create, and distribute useful data, typically in organizational settings Information systems are interrelated components working together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization

Operations

Any part of a business that converts the raw materials into a final product or service

What is the role of IS in a business?

Components collect, store, organize, and distribute data throughout the organization. IS takes data and turn it into information, and then transform that information into organizational knowledge

Switching Costs and Data

Costs consumer incur by switching providers

Secondary (support) value chain activities

Functions in an organization that support all of the primary activities; indirect costs to the organization 1. Firm infrastructure 2. HR Management 3. Technology research and development 4. Procurement

Outbound logistics

Functions required to get the product out to the customer.

Primary Value Chain Activities

Functions that directly impact the creation of a product or service. Goal of a primary activity is to add value that is greater than the cost of that activity 1. inbound logistics 2. operations 3. outbound logistics 4. marketing and sales 5. service

Hardware and software in the World Wide Web Era

Hardware: IBM PC "clone" on a Novell Network. Software: Microsoft Office, Internet Explorer

Hardware and software in the Client-Server Era

Hardware: IBM PC "clone" on a Novell Network. Software: Microsoft Word, Microsoft Excel, LAN, ERP

Hardware and software in the PC Revolution

Hardware: IBM PC or compatible. Sometimes connected to mainframe computer via network interface card. Software: WordPerfect, Lotus 1-2-3

Hardware and software in the Web 2.0 Era

Hardware: Laptop connected to company Wi-Fi. Software: Microsoft Office

Hardware and software in the Post-PC Era

Hardware: Smartphones Software: Mobile-friendly websites, mobile apps

Hardware and software in the Mainframe Era

Hardware: Terminals connected to mainframe computer Software: Custom-written MRP software

Resource-based view of competitive advantage (4 resource attributes)

If a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have four critical characteristics: 1. valuable, 2. rare, 3. imperfectly imitable (tough to imitate), 4. and non-substitutable

What is a potential 6th component of IS?

Networking communication An information system can exist without the ability to communicate. However, in today's hyper-connected world, it is an extremely rare computer that does not connect to another device or to an e-network

Productivity Paradox

Our inability to unequivocally document any contributions of IT is caused by: 1. Mismeasurement of outputs and inputs 2. Lags due to learning and adjustment 3. Redistribution and dissipation of profits 4. Mismanagement of information technology

Which is "better" according to Michael Porter, Operational effectiveness or strategic positioning?

Strategic positioning

inventory turns

The number of times inventory is sold or used during a specific period (such as a year or quarter). A higher figure means a firm is selling products quickly so it collects money quicker than its rivals do

Software definition

The set of instructions that tell the hardware what to do, intangible (cannot be touched)

Goal of a primary value chain activity

To add value that is greater than the cost of that activity

data definition (for this class)

a collection of facts, intangible Pieces of unrelated data are not very useful. But aggregated, indexed, and organized together into a database, data can become a powerful tool for businesses.

Process definition

a series of steps undertaken to achieve a desired outcome or goal The ultimate goal is to improve processes both internally and externally, enhancing interfaces with suppliers and customers

scale advantages

advantages related to size

Enterprise Resource Planning (ERP)

an application with a centralized database that can be used to run a company's entire business separate modules for accounting, finance, inventory, human resources, and many more,

Human Resource Management

consists of recruiting, hiring, and other services needed to attract and retain employees

In order to win customers away from a rival

ensure that their value added exceeds the incumbent's value plus any perceived customer switching costs

firm infrastucture

finance, accounting, ERP systems (covered in Chapter 9) and quality control

Sales/Marketing

functions that will entice buyers to purchase the products

sustainable competitive advantage

goal of a firm; financial performance that consistently outperforms their industry peers

Service

involves the functions a business performs after the product has been purchased to maintain and enhance the product's value

Sources of Switching Costs

learning costs, information and data, financial commitment, contractual commitments, search costs, loyalty programs

viral marketing

marketing activities that aim to increase brand awareness or sales by consumers passing a message along to other consumers

virtuous adoption cycle

occurs when network effects exist that make a product or service more attractive (increases benefits, reduces costs) as the adopter base grows.

strategic positioning

performing different activities from those of rivals, or the same activities in a different way Technology can be easy to copy, and technology alone rarely offers sustainable advantage.

Operational effectiveness

performing the same tasks better than rivals perform them The danger of operational effectiveness is "sameness" because the efforts can be matched. It is not enough to yield sustainable dominance over the competition.

Inbound logistics

processes that bring in raw materials and other needed inputs

Commodities

products or services that are nearly identically offered from multiple vendors.

Technology development

provides innovation that supports primary activities

a strong brand -------- and ---------

proxies quality and inspires trust

Adding in Porter's analysis of the Internet to his Five Forces

results in the realization that technology has lowered overall profitability

information asymmetry

situation in which one party is more informed than another because of the possession of private information

brand

symbolic embodiment of all the information connected with a product or service, and can also be an exceptionally powerful resource for competitive advantage. used by consumers to lower search costs

dense wave division multiplexing (DWDM)

technology that increases the transmission capacity of fiber optic cable

Procurement

the acquisition of raw materials used in the creation of products.

Technology definition

the application of scientific knowledge for practical purposes

Electronic Data Interchange (EDI)

the computer-to-computer exchange of business documents from a retailer to a vendor and back provides a competitive advantage through integrating the supply chain electronically

price transparency

the ease with which consumers can find out the variety of prices in a market

In markets where commodity products are sold

the internet can increase buyer power by increasing price transparency

The more differentiated and valuable an offering

the more the internet shifts bargaining power to sellers

distribution channels

the path through which products or services get to customers

Disintermediation

the process of technology replacing a middleman in a transaction

Value Chain

the set of interrelated activities that bring products or services to market elements in the value chain work together to create and reinforce competitive advantages that others cannot easily copy

Hardware definition

the tangible, physical portion of an information system Examples: Computers, keyboards, disk drives, and flash drives

economies of scale

when the cost of an investment can be spread across increasing units of production or in serving a growing customer base

fast follower problem exists when competitors:

•Watch a pioneer's efforts. •Learn from their successes and missteps. •Enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate.