Transcript Lecture 7.ppt

Competing
with
Information Technology
Lecture 7
By
Dr. Sadaf Sajjad
Chapter Objectives
• Identify several basic competitive
strategies and explain how they can use
information technologies to confront the
competitive forces faced by a business.
• Identify several strategic uses of
information technology for electronic
business and commerce, and give
examples of how they give competitive
advantages to business.
• Give examples of how business process
reengineering frequently involves the
strategic use of e-business technologies.
Chapter Objectives
• Identify the business value of using ebusiness technologies for total quality
management, to become an agile competitor,
or to form a virtual company.
• Explain how knowledge management
systems can help a business gain strategic
advantages.
The Competitive Environment
Bargaining Power
of Suppliers
Threat of
New
Entrants
Rivalry Among
Existing
Competitors
Threat of
Substitutes
Bargaining Power
of Customers
• A firm can survive in the long run if it
successfully develops strategies to confront
five generic competitive forces that operate
in the firm's relevant environment. As
illustrated on the above slide these forces
include:
• Threat of New Entrants. Many threats to
long run survival come from companies
that do not yet exist or have a presence in a
given industry or market. The threat of
new entrants forces top management to
monitor the trends, especially in technology,
that might give rise to new competitors.
This is especially true as the effects of globalization increase the
likelihood that previously "domestic only" competition will encounter
new international competitors.
Bargaining Power of Suppliers. Suppliers with access to key or limited
resources, or who dominate their industries, may exert undue influence
on the firm. Many firms seek to reduce their dependence on a single
firm to limit the suppliers' bargaining power.
Rivalry Among Existing Firms. In mature industries, existing
competitors are not much of the threat: typically each firm has found
its "niche". However, changes in management, ownership, or "the
rules of the game" can give rise to serious threats to long term
survival from existing firms.
For example, the airline industry faces serious threats from airlines
operating in bankruptcy, who do not pay on the debts while slashing
fares against those healthy airlines who do pay on debt.
Bargaining Power of Customers. Customers can grow large and
powerful as a result of their market share. For example, Wal-Mart is
the largest customer for consumer package goods and often dictates
terms to the makers of those goods -- even a giant like Procter &
Gamble.
Threat of Substitutes. To the extent that customers can use different
products to fulfill the same need, the threat of substitutes exists.
Fundamental Competitive Strategies Cont.
Cost Leadership Strategies
Differentiation Strategies
Innovation Strategies
Growth Strategies
Alliance Strategies
Competitive Advantage is created or maintained with the company succeeds
in performing some activity of value to customers significantly better than
does its competition. According to Porter, competitive advantage can be
developed by following one or more of these strategies:
Cost Strategies. Becoming a low-cost producer in the industry allows the
company to lower prices to customers. Competitors with higher costs cannot
afford to compete with the low-cost leader on price.
Differentiation Strategies. Some companies create competitive advantage
by distinguishing their products on one or more features important to their
customers. Unique features or benefits may justify price differences and/or
stimulate demand.
Innovation Strategies. Unique products or services or changes in business
processes can cause fundamental changes in the way an industry does
business.
Growth Strategies. Significantly expanding
production capacity, entering new global markets,
diversifying into new areas, or integrating related
products or services can all be a springboard to
strong company growth.
Teaching Tip: For example, Intel has increased
its capacity (and lowered its costs) just as
competitors were close to matching its previous
technology in integrated chip manufacturing and
design.
Alliance Strategies. Establishing new business
linkages and alliances with customers, suppliers,
former competitors, consultants, and others can
create competitive advantage
Strategy
Strategic Uses of Information
Locking in
Promote
ImprovingTechnology
IT Role
Outcome
Business
Process
Business
Innovation
Use IT to
reduce costs
of doing
business
Use IT to
create new
products or
services
Enhance
Efficiency
Create New
Business
Opportunities
Customers
and Suppliers
•Use IT to
improve quality
•Use IT to link
business to
customers and
suppliers
Maintain Valuable
Customers and
Relationships
•Develop interprise information systems whose
convenience and efficiency create switching
costs that lock in customers or suppliers.
•Make major investments in advanced IT
applications that build barriers to entry against
industry competitors or outsiders.
•Include IT components in products and services
to make substitution of competing products or
services more difficulty.
•Leverage investment in IS people, hardware,
software, databases, and networks from
operational uses into strategic applications.
The Value Chain Concept developed by Michael
Porter views a firm as a series of basic activities
(the "chain") that add value to its products and
services that support a profit margin for the firm.
In the value chain concept, some business
activities are primary activities and others
support activities. For each activity, the role of
strategic information systems (SIS) can
contribute significantly to that activity's
contribution to the value chain:
Support Activities. Support activities create the
internal infrastructure that provides direction to
and support for the specialized work of primary
activities:
•Management and Administrative Services. The key
role of SIS here is in automated office systems.
• Human Resources Management. SIS role:
Employee Skills Database.
• Technology Development. SIS role: ComputerAided Design.
• Procurement of Resources. SIS role: EDI with
suppliers.
Primary Activities. These activities directly
contribute to the transformation process of the
organization.
• Inbound Logistics. SIS role: Automated
Warehousing, JIT.
• Operations. SIS role: Computer-Aided
Manufacturing.
• Outbound Logistics. SIS role: Online Data
Entry.
• Marketing and Sales. SIS role: Market
Analysis.
• Service. SIS role: Diagnostic Expert System.
The Value Chain
Administrative Coordination & Support Services
Human Resource Management
Technology Development
Procurement of Resources
Inbound
Outbound
Operations
Logistics
Logistics
Marketing
Customer
and
Service
Sales
Value chains can be used to strategically position a company’s Internetbased applications to gain competitive advantage.
1. This value chain model outlines several ways that a company’s
Internet connections with its customers could provide business benefits
and opportunities for competitive advantage.
Example: Company-managed Internet newsgroups, chat rooms, and ecommerce websites are powerful tools for market research and product
development, direct sales, and customer feedback and support.
2. Company Internet connections with its suppliers could be used for
competitive advantage.
Example: Online auctions and exchanges at suppliers’ e-commerce
websites and online shipping, scheduling, and status information at an ecommerce portal that gives employees immediate access to up-to-date
information from a variety of vendors. This can substantially lower
costs, reduce lead times, and improve the quality of products and
services.
The Internet Value Chain
Internet
Capability
Benefits
to
Company
Marketing and
Product
Research
Data for
market
research,
establishes
consumer
responses
Opportunity
for
Increase
Advantage Market Share
Sales and
Distribution
•Low cost
distribution
•Reaches
new
customers
•Multiplies
contact
points
Lower
Cost Margins
Support and
Customer
Feedback
•Access to
customer comments online
•Immediate response to
customer
problems
Enhanced
Customers
Satisfaction
Strategic Positioning of Internet Technologies
High
Global Market Product and Services
Strategy
Penetration
Transformation
E-Commerce Website
Value-added IT Services
Cost and
Efficiency
Improvements
E-Mail, Chat Systems
Low
E-Business; Extensive
Intranets and Extranets
Solution
Performance
Improvements in
Business
Effectiveness
Intranets and Extranets
E-Business Processes Connectivity
Internal Drivers
High
For Internet technologies to be used strategically applications must be
correctly positioned. The strategic positioning matrix shown can be used to
help a company optimize the strategic impact of Internet Technologies.
The matrix recognizes two major drivers:
Internal Drivers. The amount of connectivity, collaboration and use of IT
within a firm.
External Drivers. The amount of connectivity, collaboration and use of IT
by customers, suppliers, business partners, and competitors.
Cost and Efficiency Improvements. When there is a low amount of
connectivity, collaboration and use of IT within the company and by
customers and competitors, a firm should focus on improving efficiency
and lowering costs by using Internet technologies to enhance
communications between the company and its customers and suppliers.
Performance Improvement in Business Effectiveness. When there is a high
amount of internal connectivity, but external connectivity by customers and
competitors is still low, a firm should focus on using Internet technologies like
intranets and extranets to make major improvements in business effectiveness.
Global Market Penetration. When there is a high degree of connectivity by
customers and competitors and low internal connectivity, a firm should focus on
developing Internet-based applications to optimize interactions with customers
and build market share.
Product and Service Transformation. When a company and its customers,
suppliers, and competitors are extensively networked, Internet technologies
should be used to develop and deploy products and services that strategically
reposition it in the marketplace.
Customer-Focused e-Business
Let customers
place orders
directly
Let customers
check order history
and delivery status
Build a
community
of customers,
employees,
and partners
Customer
Database
Give all
employees a
complete view
of customers
Let customers
place orders thru
distribution
partners
Transaction
Database
Link Employees
and distribution
partners
There are other key strategies enabled by IT that can be used to enable a business
to become successful and to maintain their success. These will be discussed on the
next slides.
A key strategy for becoming a successful e-business is to maximize customer
value. This strategic focus on customer value recognizes that quality rather than
price becomes the primary determinant in a customer’s perception of value. A
Customer-Focused e-business, then, is one that uses Internet technologies to
keep customer loyal by anticipating their future needs, responding to
concerns, and providing top quality customer service.
As the slide indicates, such technologies like intranets, the Internet, and extranet
websites create new channels for interactive communications within a company,
with customers, and with suppliers, business partners, and others in the external
business environment. Thereby, encouraging cross-functional collaboration with
customers in product development, marketing, delivery, service and technical
support.
A successful Customer-Focused e-business attempts to ‘own’ the customer's total
business experience through such approaches as:
•Letting the customer place orders directly, and through distribution partners
•Building a customer database that captures customers' preferences and
profitability, and allowing all employees access to a complete view of each
Business Reengineering and Quality Management
Business Quality
Improvement
Definition
Target
Potential
Payback
Risk
What Changes?
Primary
Enablers
Business
Reengineering
Incrementally Improving
Existing Processes
Radically Redesigning Business
Systems
Any Process
Strategic Business Processes
10%-50% Improvements
10-Fold Improvements
Low
High
Same Jobs - More Efficient
Big Job Cuts; New Jobs; Major
Job Redesign
IT and Work Simplification
IT and Organizational Redesign
One of the most important competitive strategies today is business
process reengineering (BPR) most often simply called
reengineering. Reengineering is more than automating business
processes to make modest improvements in the efficiency of
business operations. Reengineering is a fundamental rethinking and
radical redesign of business processes to achieve dramatic
improvements in cost, quality, speed, and service. BPR combines a
strategy of promoting business innovation with a strategy of making
major improvements to business processes so that a company can
become a much stronger and more successful competitor in the
marketplace.
However, while many companies have reported impressive gains,
many others have failed to achieve the major improvements they
sought through reengineering projects.
Business quality improvement is a less dramatic
approach to enhancing business success. One important
strategic thrust in this area is called Total Quality
Management (TQM). TQM emphasizes quality
improvement that focuses on the customer requirements
and expectations of products and services. This may
involve many features and attributes, such as
performance, reliability, durability, responsiveness etc.
TQM uses a variety of tools and methods to provide:
•More appealing, less-variable quality of products or
services
•Quicker less-variable turnaround from design to
production and distribution
•Greater flexibility in adjusting to customer buying habits
and preferences
Lower costs through rework reductions, and non-valueadding waste elimination.
The Customer- Focused Agile Competitor
Cooperate with
Business Partners
and Competitors
Anticipation of
future needs
Customization
Give Customers
Solutions
to Problems
Conformance
Organize to
Master
Change
Leverage the
Impact of
People and
IS Resources
Agility in competitive performance is the ability of a business
to prosper in rapidly changing, continually fragmenting global
markets for high-quality, high-performance, customerconfigured products and services. Agile companies depend
heavily on information technology to support and manage
business processes. The four fundamental strategies of agile
competition are:
Enrich Customers. Agile companies enrich customers with
solutions to their problems. Long term value-added products
and services succeed when they solve problems based on
customer needs. As conditions change, the agile competitor
establishes a relationship based on the ability and willingness
to change to meet new customer problem situations.
Cooperate. Agile companies cooperate to enhance
competitiveness. This means internal cooperation and, where
necessary, cooperation with competitors in order to bring
products and services to market more quickly.
Organize. Agile companies organize to master change and uncertainty. This is a key
component of agile competition because it seeks development of the anticipation and
rapid response to changing conditions, not an attempt to stifle change itself.
Leverage People and Information. Agile companies leverage the impact of people and
information by nurturing an entrepreneurial spirit and providing incentives to
employees to exercise responsibility, adaptability, and innovation.
The Free.Perfect.Now model developed by AVNET Marshall embodies these
principles into a succinct model for serving its customers in the most agile and
responsive way.
Free Dimension. Emphasizes that most customers want the lower cost for value
received, but are willing to pay more for a value-added service.
Perfect Dimension. Emphasizes that products and services should not only be defect
free, but should be enhanced by customization, added features and should further
anticipate future customer needs.
Now Dimension. Emphasizes that customers want 24x7 accessibility to products and
services, short delivery times, and consideration of the time-to-market for their own
products.
Virtual Corporations
Adaptability
Borderless
Excellence
Six
Characteristics
of Virtual
Companies
Technology
Trust-Based
Opportunism
A Virtual Company (also called a virtual corporation or virtual organization) is an
organization that uses information technology to link people, assets, and ideas. People
and corporations are forming virtual companies in order to take advantage of strategic
opportunities that require time, people competencies and information technologies
resources that may not exist within a single company. By making strategic alliances
with other companies and quickly forming a virtual company of all-star partners, the
virtual company is best able to assemble the components needed to provide a worldclass solution for customers and capture the opportunity.
To succeed the virtual company must possess six characteristics:
Adaptability: Able to adapt to a diverse, fast-changing business environment. Virtual
companies must further reduce concept-to-cash time through sharing.
Opportunism: Created, operated, and dissolved to exploit business opportunities when
they appear. They must gain access to new markets and share market or customer
loyalty, while increasing facilities and market coverage.
Excellence: Possess all-star, world-class excellence in
the core competencies that are needed. These
competencies must be seamlessly linked through the
use of Internet technologies.
Technology: Provide world-class information
technology and other required technologies in all
customer solutions. They must migrate from selling
products to selling solutions.
Borderless: Easily and transparently synthesize the
competencies and resources of business partners into
integrated customer solutions.
Trust-Based: Members are trustworthy and display
mutual trust in their business relationships. They must
be willing to share infrastructures and risks.
Knowledge Management Systems
Technical
Support
Staff
Solution
Knowledge
Customers
Development
Engineers
Intranet
Product
Managers
The
Internet
Other
Vendors
Knowledge Management has become one of the major strategic uses of
information technology. Knowledge Management Systems (KMS) are systems
that are used to manage organizational learning and business know-how. The goal
of knowledge management systems is to help knowledge workers create, organize,
and make available important business knowledge, whenever, and wherever its
needed.
Such knowledge may include explicit knowledge like reference works, formulas,
and processes, or tacit knowledge like “best practices”, and fixes. Internet and
intranet technologies, along with such other technologies like GroupWare, data
mining, and online discussion groups are used by KMS to collect, edit, evaluate
and disseminate knowledge within the organization.
Why Study Strategic IT?
• Technology is no longer an afterthought in
forming business strategy, but the actual
cause and driver.
• IT can change the way businesses compete.
35
Strategic View of Information
Systems
• Information systems are vital competitive networks.
• Information systems are a means of organizational
renewal.
• IS are a necessary investment in technologies that
help a company adopt strategies and business
processes that enable it to reengineer or reinvent
itself in order to survive and succeed in today’s
dynamic business environment.
36
Case #1: Does IT Matter?
Nicholas Carr:
• It is simply the infrastructure of modern business.
• It’s equivalent to railroads, electricity, and internal
combustion engineering.
• Once innovative applications of IT have become
simply the cost of doing business.
37
Case #1: Does IT Matter?
How important is IT to GE?
– Business imperative
– Lifeblood for productivity
– 20% return on technology investments and GE
invests $2.5 to $3 billion a year
38
Case #1: Does IT Matter?
Nicholas Carr:
Today’s main risk is not under using IT but
overspending on it.
39
Case #1: Does IT Matter?
Michael Dell, CEO of Dell Computers
• Anything in business can be either a sinkhole
or a competitive advantage if you do it really,
really bad or you do it really, really well.
• You’ve got a lot of people who don’t know
what they’re doing and don’t do it very well.
40
Case #1: Does IT Matter?
Andy Grove, Chairman of Intel Corp.
• Commercial-transaction processing in the
United States and some parts of Europe has
reach maturation but that’s only one segment
of IT.
41
Case #1: Does IT Matter?
• A bunch of networks and computers
OR
• Hardware plus the software that mediates
and manages human knowledge or
information
42
Case #1: Does IT Matter?
Charles Fitzgerald, Microsoft General Manager
• The source of competitive advantage in
business is what you do with the information
that technology gives you access to. How do
you apply that to some particular business
problem?
43
Case #1: Does IT Matter?
Paul Strassman, former CIO of General Foods,
Xerox, Pentagon, and NASA
• Information technology today is a knowledgecapital issue.
• Look at the business powers – most of all
Wal-Mart, but also companies like Pfizer or
FedEx. They’re all waging information
warfare.
44
Case #1: Does IT Matter?
1. Do you agree with the argument made by
Nick Carr to support his position that IT no
longer gives companies a competitive
advantage? Why or why not?
2. Do you agree with the argument made by
the business leaders in this case in support
of the competitive advantage that IT can
provide to a business? Why or why not?
45
Case #1: Does IT Matter?
3. What are several ways that IT could provide a
competitive advantage to a business? Use some of
the companies mentioned in this case as examples.
Visit their websites to gather more information to
help you answer.
4. What does Mr. Strassman mean by information
warfare?
5. Can information technology give a competitive
advantage to a small business? Why or why not?
Use an example to illustrate your answer.
46
Strategic Information Systems
Definition:
• Any kind of information system that uses
information technology to help an
organization gain a competitive advantage,
reduce a competitive disadvantage, or meet
other strategic enterprise objectives.
47
Mission and Competitive
Strategies
• Corporate Mission or Objective
• Competitive Strategy - Major policies to
support the company to compete with other
companies so it can survive in the long run
48
Competitive Forces and Strategies
49
Competitive Forces
Definition:
• Shape the structure of competition in its
industry.
50
Porter’s Competitive Forces Model
•
•
•
•
•
51
To survive and succeed, a business must develop and
implement strategies to effectively counter the:
Rivalry of competitors within its industry
Threat of new entrants into an industry and its
markets
Threat posed by substitute products which might
capture market share
Bargaining power of customers
Bargaining power of suppliers
Competitive Strategy
•
•
•
•
Cost Leadership Strategy
Differentiation Strategy
Innovation Strategy
Growth Strategy
– Significantly expanding a company’s capacity to
produce goods and services
• Alliance Strategy
52
Cost Leadership Strategy
• Becoming a low-cost producer of
products and services
• Finding ways to help suppliers and
customers reduce their costs
• Increase costs of competitors
53
Differentiation Strategy
• Developing ways to differentiate a firm’s
products and services from its competitors’
• Reduce the differentiation advantages of
competitors
54
Innovation Strategy
• Development of unique products and services
• Entry into unique markets or market niches
• Making radical changes to the business processes
for producing or distributing products and
services that are so different from the way a
business has been conducted that they alter the
fundamental structure of an industry
55
Growth Strategy
• Significantly expanding a company’s
capacity to produce goods and services
• Expanding into global markets
• Diversifying into new products and services
• Integrating into related products and
services
56
Alliance Strategy
• Establishing new business linkages and
alliances with customers, suppliers,
competitors, consultants, and other
companies
57
Competitive Strategy Examples
58
Other Competitive Strategies
• Locking in customers or suppliers by
building valuable new relationships with
them.
• Building switching costs so a firm’s
customers or suppliers are reluctant to pay
the costs in time, money, effort, and
inconvenience that it would take to switch
to a company’s competitors.
59
Other Competitive Strategies
• Raising barriers to entry that would
discourage or delay other companies from
entering a market.
• Leveraging investment in information
technology by developing new products
and services that would not be possible
without a strong IT capability.
60
Advantage vs. Necessity
• Competitive Advantage – developing products,
services, processes, or capabilities that give a
company a superior business position relative to
its competitors and other competitive forces
• Competitive Necessity – products, services,
processes, or capabilities that are necessary
simply to compete and do business in an industry
61
Customer-Focused Business
A business that:
• can anticipate customers’ future needs.
• responds to customer concerns.
• provides top-quality customer service.
62
IS in a Customer-Focused Business
63
Value Chain
Definition:
• View of a firm as a series, chain, or network of
basic activities that add value to its products
and services, and thus add a margin of value
both to the firm and its customers.
64
Value Chain
65
Value Chain
66
Case #2: Using IT to tap Expert
Know-How
U.S. DOC AskMe Knowledge Management
System
• Automated best practices
• Automated experts’ profile creation
• Addition of numerous methods for accessing and
delivering knowledge
• Integrated real-time collaborative services
• Comprehensive analytic capabilities
67
Case #2: Using IT to tap Expert
Know-How
Benefits
• Experts’ knowledge is organized
• Experts’ are more easily contacted
• Information is reusable saving 750 hours of
repetitive work
• Return on investment is tracked
• Popular topics are identified so DOC can beef
up its expertise in those areas
68
Case #2: Using IT to tap Expert
Know-How
1. What are the key business challenges
facing companies in supporting their
global marketing and expansion efforts?
How is the AskMe knowledge
management system helping to meet this
challenge? Explain.
69
Case #2: Using IT to tap Expert
Know-How
2. How can the AskMe system help to
identify weaknesses in global business
knowledge within the Department of
Commerce?
3. What other global trade situations could
the AskMe system provide information
about? Provide some examples.
70
Case #2: Using IT to tap Expert
Know-How
4. Is the AskMe system intended to help the
DOC become a knowledge-creating
organization? Why or why not?
71
Business Process Reengineering
Definition:
• Fundamental rethinking and radical redesign
of business processes to achieve dramatic
improvements in cost, quality, speed, and
service.
72
Value Chain Analysis - Disintermediation to the Consumer
Cost/
Sweater
Manufacturer
Manufacturer
Manufacturer
73
Distributor
Retailer
Customer
$48.50
Retailer
Customer
$40.34
Customer
$20.45
BPR vs. Business Improvement
74
Stockless Inventory Compared to Traditional and Just-in-time Supply
Methods
75
Cross-Functional Processes
76
Agility
Definition:
• The ability of a company to prosper in rapidly
changing, continually fragmenting global
markets for high-quality, high performance,
customer-configured products and services.
77
Agile Company
Definition:
• A company that can make a profit in markets
with broad product ranges and short model
lifetimes, and can produce orders individually
and in arbitrary lot sizes.
78
Becoming an Agile Company
Dell Computer – Agility in Action
•
•
•
•
•
•
79
Customer-Focused Company
Champion of Mass Customization
Build-to-Order Business Model
25,000 on a Typical Day
Tight Supply Chain Management
Rarely More than Two Hours Worth of Parts
Inventory
Mass Customization
Definition:
• Providing individualized products while
maintaining high volumes of production
80
Agile Competitor
81
Virtual Company
Definition:
• An organization that uses information
technology to link people, organizations,
assets, and ideas.
82
Inter-enterprise Information
Systems
Definition:
• Information systems implemented on an
extranet among a company and its suppliers,
customers, subcontractors, and competitors
with whom it has formed alliances.
83
Virtual Company Strategies
Cisco Systems: Virtual Manufacturing Alliances
• Alliances Create a Virtual Manufacturing
Company
• Three Companies Involved in the Alliance
• Provides and Agile Build-to-Order Capability in
Fiercely Competitive Industry
84
Virtual Company
85
Virtual Company Strategies
• Share infrastructure and risk with alliance
partners.
• Link complementary core competencies.
• Reduce concept-to-cash time through
sharing.
86
Virtual Company Strategies
• Increase facilities and market coverage.
• Gain access to new markets and share
market or customer loyalty.
• Migrate from selling products to selling
solutions.
87
Knowledge-Creating Companies
Definition:
• Consistently creating new business
knowledge, disseminating it widely
throughout the company, and quickly building
the new knowledge into their products and
services.
88
Types of Knowledge
• Explicit Knowledge – data, documents, things
written down or stored on computers
• Tacit Knowledge – the “how-tos” of
knowledge, which reside in workers
89
Knowledge Management
Definition:
• Techniques, technologies, systems, and
rewards for getting employees to share what
they know and to make better use of
accumulated workplace and enterprise
knowledge.
Knowledge Management Systems – manage
organizational learning and business knowhow
90
Levels of Knowledge Management
91
Case #3: Shareware Grows Up
How a software cooperative works
• Companies pay a membership which entitles
them to use any of the intellectual property of
the co-op.
• Member companies will donate intellectual
property, cooperate in adapting it for other
companies, help troubleshoot problems and
form sub-groups to develop needed niche
software for the library.
92
Case #3: Shareware Grows Up
Benefits
• Decrease in the total cost of ownership of
software
• Co-op becomes responsible for assets and also
ensure that there’s a clear title so member
companies can’t be sued later
• The larger the installation base, the lower the
cost of ongoing maintenance
93
Case #3: Shareware Grows Up
Challenge
• Getting members to really collaborate
94
Case #3: Shareware Grows Up
1. Organizations are constantly striving to
achieve competitive advantage, often
through their information technologies.
Given this constant, why does Hansen
suggest that competition among members
shouldn’t be an issue because the shared
assets don’t bring competitive advantage?
Explain.
95
Case #3: Shareware Grows Up
2. What do you see as the potential risks
associated with the Avalanche approach?
Provide some examples.
3. How could other companies apply the
cooperative model used by Avalanche to
achieve efficiencies in areas other than
software support? Explain.
96
Case #4: Customer-Loyalty
Systems
Satisfaction vs. Loyalty
• A satisfied customer is one who sees you as
meeting expectations.
• A loyal customer, on the other hand, wants to
do business with you again and will
recommend you to others.
97
Case #4: Customer-Loyalty
Systems
• A good loyalty program combines customer
feedback and business information with
sophisticated analytics to produce actionable
results.
• With good customer loyalty technology, IT can
wire the voice of the customer back into the
enterprise.
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Case #4: Customer-Loyalty
Systems
How can IT help?
• Gathering customer experience data by e-mail rather
than telephone dramatically reduces survey cycle
times
• Can build in validated, multivariate measures of
loyalty into the software
• Software-generated models can accurately predict
customer’s purchasing behavior
• IT can be used to deliver rewards to customers based
on predictive analysis
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Case #4: Customer-Loyalty
Systems
1. Does CDW’s customer loyalty program give them a
competitive advantage? Why or why not?
2. What is the strategic value of Harrah’s approach to
determining and rewarding customer loyalty?
3. What else could CDW and Harrah’s do to truly
become a customer-focused businesses? Visit
their websites to help you suggest several
alternatives.
100
Summary
• Information technologies can support many
competitive strategies including cost leadership,
differentiation, innovation, growth and alliance.
• IT can help
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Build customer-focused businesses
Reengineer business processes
Businesses become agile companies
Create virtual companies
Build knowledge-creating companies
Chapter Summary
• Information systems can play several
strategic roles in business.
• The Internet, intranets, extranets, and other
Internet-based technologies can be used
strategically for e-business and e-commerce
that provide a competitive advantage.
• A key strategic use of Internet technologies
is to build an e-business which develops its
business value by making customer value its
strategic focus.
Chapter Summary (cont)
• IT is a key ingredient in reengineering
business operations, by enabling radical
changes to business processes that
dramatically improve their efficiency and
effectiveness.
• IT can be strategically used to improve the
quality of business performance.
• A business can use IT to help it become an
agile company, that can respond quickly to
changes in its environment.
Chapter Summary (cont)
• Forming virtual companies has become
an important competitive strategy in
today’s dynamic global market.
• Lasting competitive advantages today
can only come from innovative use and
management of organizational
knowledge by knowledge creating
companies and learning organizations.
Video
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