Management Information Systems
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Transcript Management Information Systems
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Strategy
A plan designed to help an organization outperform
its competitors.
Strategic Information Systems
Information systems that changes goals,
operations, products, services, or environmental
relationships to help the firm gain a competitive
advantage
Can be developed from scratch, or they can evolve
from existing ISs.
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Strategies for this type of company involve increasing
profits
Reduce costs
Increase revenue through a larger market share
Do both
The essence of strategy is innovation, so competitive
advantage often occurs when an organization initiates
a strategy that no one has tried before.
Dell’s use of the Web to take customer orders
Citibank’s use of ATMs
Airlines use of computerized reservation systems
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1.
2.
3.
4.
Operational excellence: Wal-Mart
New products, service, or business models: Netflix,
Apple’s iPod and iTunes
Customer and supplier intimacy: effective CRM and SCM
Improved decision making
GIS
Data mining
CRM
Mathematical modeling in DSS applications
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Strategies and Initiatives
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Figure 2.2 Many strategic moves can work together to achieve a competitive
advantage
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Initiative #1: Reduce Costs (1, 3, & 4)
Lower Costs enable you to lower your
prices
Competitors may not be able to follow
your lead; thus you gain market share
Examples:
▪ Dell’s ability to continually lower cost of
PCs through improving their supply
chain and taking orders online
▪ Wal-Mart use of SCM (vendor
replenishment) cuts their operational
costs
▪ On-line services (FAQ, package tracking)
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Initiative #2: Raise Barriers to Entrants (2)
Patenting
▪ Microsoft's programs
▪ Lotus’s 1-2-3
▪ Priceline.com’s reverse auction
▪ Amazon.com’s one-click shopping
▪ Patented features of Apple’s IPod; sell music from
big labels on Apple’s web site
High expense of entering industry
▪ State Street, Inc. (Pension fund management
business); money required to build systems keeps
competitors out of this market; rents its software
to others
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Initiative #3: Establish High Switching Costs (2 or 3)
Explicit switching costs are fixed and nonrecurring
▪ Penalties for canceling cell phone provider
▪ Use of proprietary products (operating
systems;tape formats;DVD formats)
▪ Use of IS/IT in customer loyalty programs (e.g.,
grocery stores, retailers)
Implicit Switching Costs
▪ Indirect costs in time and money of adjusting to a
new product
▪ Changing application software (MS Office to Sun’s
StarOffice)
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Initiative #4: Create New Products and Services
This advantage lasts only until other organizations in
the industry start offering an identical or similar
product or service for a comparable or lower price. (2)
Examples
▪ FedEx’s package tracking
▪ Levi’s “personal pair”
▪ eBay
▪ ATM’s from Citibank
▪ Custom computers from Dell
Fleeting advantage (Netscape and Internet Explorer)
First mover success; critical mass
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Initiative #5: Differentiate Products and Services (2, 3)
Persuade customers that your product is better than your
competitors
▪ Brand recognition such as Levi’s, Chanel, or Calvin
Klein
Use of the Internet to differentiate
▪ Email
▪ Answering questions online
▪ Purchasing advice online
▪ Personalize the Web page (Amazon.com)
▪ Easy to use Web site
IBM’s transformation to a consulting company
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Initiative #6: Enhance Products and Services (similar to
#5) (2 and 3)
Examples
▪ Dell offers a buying guide to differentiate itself from
other online sellers
▪ Charles Schwab moving stock trading services on-line
before Merrill Lynch
▪ Web enables companies to continually enhance
services
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Initiative #7: Establish Alliances that links your IS
with a partner’s IS (3)
Combined service may attract customers
▪ Lower cost
▪ Convenience
Examples
▪ Travel industry
▪ HP and FedEx
▪ Affiliate programs
▪ Amazon’s relationship with Target and other
retailers
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Initiative #8: Lock in Suppliers or Buyers (similar to high
switching costs) (3)
Lock in suppliers
▪ Bargaining power of buyer is determined by
purchase volume (systematic sourcing)
▪ Wal-Mart
Lock in buyers
▪ Create impression of product superiority
▪ High switching costs
▪ Create a standard (software industry)
▪ Microsoft
▪ Adobe (gave away the reader but sells the writer);
Macromedia
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Top management involvement
From initial consideration through development and
implementation
Must be a part of the overall organizational strategic plan
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Implementation of an SIS often results in
organizational change (sometimes unplanned)
Planned organizational change is often referred to as
“reengineering”
Actively seek ways to employ IT to gain large leaps
in efficiencies
Different from continuous improvement
Often associated with large job losses.
Reengineering projects have high failure rates
GM’s Saturn division
How did GM approach this?
Why did they do it this way?
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Success: JetBlue (you fill in the details)
Use of IT
Change in internal processes
Enhanced customer service
Late mover advantage
Failure: Ford (you fill in the detail)
ConsumerConnect (replaced by FordDirect)
Covisint
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Easy
Reduce cost
Differentiate
product/service
Enhance
product/services
Establish alliances
Hard
Raise barriers to
entrants
Lock in buyers or
suppliers
Establish high
switching costs
Create new
product/service
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Business owners must develop new features to keep
the system on the leading edge.
Adopting a new technology involves great risk.
No experience from which to learn
No guarantee technology will work or customers
and employees will welcome it
Some organizations let competitors assume the risk
associated with being on the leading edge.
Risk losing initial rewards.
Can quickly adopt and even improve pioneer
organization’s successful technology (Microsoft)
Home Depot’s use of a data warehouse
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Competitive advantage is difficult to sustain
In some industries, companies must continually
contemplate new ways of utilizing IS/IT for
competitive advantage
Many strategic systems have been unplanned and
often come from transaction processing systems
You cannot depend on your IS/IT department as your
sole source of ideas for strategic use of IS/IT
Strategic systems often become standard business
procedures (e.g., ATMs, bank by phone)
Personal competitive advantage
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