Introduction to MIS - Chapter 10: Strategic Analysis

Introduction to MISChapter 10Strategic AnalysisStrategyConnections to suppliers and customers.Become the best firm in the industry. Block the competitors by keeping your customers happy.CompetitionOutlineThe Competitive EnvironmentExternal AgentsIS Techniques to Gain Competitive AdvantageThe Search for InnovationResearchEngineering and DesignManufacturingLogistics and SupplyMarketingSales and Order ManagementServiceManagementCosts and Dangers of StrategiesOperations, Tactics, StrategyE-Commerce FailuresCases: Travel IndustryAppendix: Solving Business Problems and CasesCompetition is increasing in many industries, but it is particularly intense in the restaurant and fast food industry. Competition encourages firms to hold down costs, provide more variety, and provide new and better service to customers.CompetitionRivalry AmongExisting Competitors Bargaining Powerof BuyersBargaining Powerof SuppliersThreat ofNew EntrantsThreat of SubstituteProducts or ServicesPorter’s Five Forces ModelCorporate StrategyPattern ofpurposes andpoliciesdefining thecompany and its businessFormulation(Deciding what to do.)Implementation(Achieving results.)1. Identification of opportunity and risk.2. Material, technical, financial, & human resources.3. Personal values and aspirations. 4. Noneconomic responsibility to society.1. Org. structure & relation. Division of work. Coord. divided responsib. Information systems.2. Org. processes & behavior. Standards and measurement. Motivation & incentive systems. Control systems. Recruit & develop managers.3. Top leadership. Strategic Organizational PersonalHarvard StrategypartssupplierpartssupplierpartssupplierwarehousewarehousesuppliersuppliersuppliertoolmanufacturerManufacturerworkerswholesalerwholesalerdistributordistributordistributorretail storeretail storeretail storeretail storeConsumersProductionChainBarrierTo EntryFirmRivalSupplierSupplierSupplierConsumerConsumerConsumerConsumerConsumerConsumerConsumerDecreasedCostsImprovedQualityTies ToCustomersIncreasedSwitching CostsWholesaleTies ToSuppliersControl OfDistributionInnovation andDifferentiationMethods to Gain Competitive AdvantageBarriers to EntryEconomies of Scale (size)Economies of Scope (breadth)Product DifferentiationCapital requirementsCost Disadvantages (independent of size)Distribution Channel AccessGovernment PolicyCompetitive AdvantageBarriers to EntryAdditional costs of creating an information system. People’s ExpressDistribution ChannelsPrevent others from entering the industry. NapsterSwitching CostsConsumers incur learning and data transfer costs. Baxter HealthcareLower Production CostsIS to cut costs. Wal-MartProduct DifferentiationAdd new features or create new products with IT. Federal Express & Merrill LynchQuality ManagementMonitoring production lines and analyzing data. Digital Equipment Corp.Value ChainExpanding forward or back the value chain to find greater profits. Boeing Information SystemsFirm InfrastructureHuman Resources ManagementTechnology DevelopmentProcurement Inbound Logistics Operations Outbound Logistics Marketing & Sales ServiceMarginMarginValue ChainManufacturingEngineeringand DesignMarketingResearchCustomerServiceManagementSales andOrderManagementLogistics/SupplySuppliersCustomersProductionProcess InnovationMarket Measures- Market share- Concentration- Growth- ProfitabilitymonitorrivalsBusiness Operations & RulesExisting Data and ISPerformance Measures- ROA - ROI- EPS - Growth- SubjectiveCorporate Strategy Development expectations goals rivalry strengths weaknesses opportunities critical success factorsBusiness Strategiesand PrioritiesProcess ChangesData NeedsIS ChangesSystemDevelopment& Implementation- Cost leadership- Differentiation- Innovation- Linkages- Re-engineering- Organization- DecentralizationDeveloping StrategiesSearch for InnovationResearchAnalysis & modeling, project management, work group support, databases, decision support.Engineering & DesignCAD/CAM, testing, networks, work group support.ManufacturingMass customization, links to customers & suppliers, quality monitoring, expert systems for maintenance, production databases, business integration.Logistics & SupplyJust-in-time linkages, forecasts, models, links for design, transaction processing.Search for InnovationMarketingFrequent buyer database, target market & media analysis, survey design and analysis, multimedia promotion design, links to customers and designers.Sales & OrdersPortable computers for sales, ES for order customization, work group tools for customer support.ServicePhone support, GIS locators, scheduling, ES diagnostics, databases.ManagementEIS, e-mail, bulletin boards, decision support systems, personal productivity tools, work group supportLinks to service providersAccountantsConsultantsLawyers, . . .ResearchAnalysis and modelsStatistical analysis of dataProject management and budgetingWork-group collaboration and communicationEngineering and DesignCAD/CAMIntegrated design databaseProduction databases and model testingExpert Systems for manufacturabilityWork group communicationManufacturingLinks to customersLinks to suppliersMass customizationRoboticsDiagnostic Expert SystemsQuality monitoring and controlLogistics and SupplyJust-In-Time Inventory and EDIConfiguration and designSearching for availability, pricing, . . . networksMarketingFrequent buyer databasesPoint-of-Sale and trendsStatistical analysis of dataGeographic Information SystemsLinks to external marketing agenciesMultimedia development of promotionsInternetSales and OrdersSales force automation, hand-held computersCustomer Internet accessExpert Systems for product and option selectionExpert Systems for configuration and shippingFront-line support: ES, e-mail, work groupsServicePortable computers for service anywhereDatabases (e.g., customer service)Location monitoring of service personnelProduct internal, automatic diagnosticsExpert System diagnostic toolsManagementExecutive Information SystemsSimulation (and rivalry games)Links to external partners (accounting, law, . . .)Electronic conferencingWork group communication, e-mailStandardization, Modularization, FranchisesKnowledge WorkersClient-server instead of hierarchical computingStrategy AnalysisProduct DifferentiationSkills & ResourcesStrong marketing.Product engineering.Basic research.Distribution channel cooperation.Organization RequirementsInternal coordination.Incentives for innovation.Resources to attract skills.RisksCompetitors imitate.Customers do not accept.Cost is too high.Cost LeadershipSkills & ResourcesContinued capital investment.Process engineering.Continuous quality improvement.Tight supervision of costs.Products designed for low cost.Low cost distribution.Organization RequirementsTight cost controls.Frequent control reports.Highly structured org.Incentives based on qualitative measures.Strategy AnalysisCost LeadershipRisksCompetitors imitate.Technology changes.Lose production or distribution advantage.Customer-Supplier LinksSkills & ResourcesInfluence with partnersCommunication channelsStandards or agreements.Organization RequirementsFlexibility to respond to customers.Service culture.Ability to adapt to emergencies.RisksSecurity threats.Changing standards.Competitors copy with more/better links.Money for researchMoney for information technologyDangers:Capital CostYouRivalTimeIS CostsTimeIS CostsTransactionProcessingNetwork & DSSNetwork & linksales peopleLink to suppliers& customersExperimentaltechnology& global linksCompetitionFollowsIndustry 1(expands intoindustry 2)Industry 2(newcompetitor)CustomerCustomerCustomerCustomerCustomerCustomerCustomerCustomerNew technologyNew servicesSame technologyChanging Industry & Government InterventionSecurityProduction FirmCustomerData we wish to share.Data we want to protect.Need to control access.Need to worry about networkinterceptions and hackers.SecurityfirewallHackersor competitorsrejectedE-Commerce FailuresHundreds of dot-com firms failed in 2001 and 2002Most relied on pure Internet revenue. Outsourcing production and shipping.Most relied on advertising revenue—often revenue from other dot-com firms.Many believed in the importance of being first to market and becoming the biggest, best-known firm in a niche industry.Many believed that it was not necessary to make a profit on sales. Money from advertising and stock sales would be sufficient to keep the firm alive until the world changed.Most were wrong.Cases: Travel IndustryCases: The Sabre GroupAmerican ExpressWhat is the company’s current status?What is the Internet strategy?How does the company use information technology?What are the prospects for the industry?www.sabre.comwww.americanexpress.comAppendix: Solving ProblemsSolve the right problemChoose the right toolsDivide the systemMake decisionsConsider consequencesTest the systemPlan implementationDetailOrganizationScheduleCustomer responseEmployee responseInputProcessOutputCauseFeasibilityAppendix: Evaluating ProjectsDoes the project fit with business goals and management style?Does the project improve the competitive position of the firm?How long will any competitive advantage last?What value or reward is created by the system?What level of technology is needed to create the system?experimentalleading edgeestablishedold-hatWhat is the probability of technical success?What is the probability of commercial success?What are the costs involved in creating the system?MonetaryTimeAdditional capital, marketing and managementAppendix: Good Business AnalysisIdentify the root causes of problems.Solid grasp of strategic components.Identify the critical success factors.Evaluate the financial implications.Thorough discussion of implementation.Realistic analysis of expected results.Effect on future growth and continued development.Effect on human resources.Understanding of target markets.Solving Business Problems & CasesSolve the right problemChoose the right toolsDivide the systemMake decisionsConsider the consequencesTest the systemPlan implementationCase hintsAppendix: Organization of AnalysisProblem descriptionIdentify most important problemsIdentify causes of problemsPlanDescribe the new systemImplementation planContingency planAdvantagesShow how your plan solves the problemsExplain additional benefits or opportunities