Essentials of Management
Information Systems
Fourteenth Edition
Chapter 3
Achieving Competitive Advantage
with Information Systems
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Learning Objectives
3.1 How do Porter’s competitive forces model, the value
chain model, synergies, core competencies, and
network-based strategies help companies use
information systems for competitive advantage?
3.2 How do information systems help businesses compete
globally?
3.3 How do information systems help businesses compete
using quality and design?
3.4 What is the role of business process management (BP
M) in enhancing competitiveness?
3.5 How will M I S help my career?
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Video Cases
• Case 1: G E Becomes a Digital Firm: The Emerging
Industrial Internet
• Case 2: National Basketball Association: Competing on
Global Delivery with Akamai O S Streaming
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Technology Helps Starbucks Find
Better Ways to Compete
• Problem
– Competitive opportunities from new technology
– Improve customer experience
• Solutions
– Wi-Fi wireless network
– Smartphones
– Mobile app
• Illustrates use of IT to differentiate products and improve
customer experience
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Porter’s Competitive Forces Model
• Five competitive forces shape fate of firm
– Traditional competitors
– New market entrants
– Substitute products and services
– Customers
– Suppliers
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Figure 3.1 Porter’s Competitive
Forces Model
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Information System Strategies for
Dealing with Competitive Forces
(1 of 5)
• Basic strategy: Align IT with business objectives
– Identify business goals and strategies
– Break strategic goals into concrete activities and processes
– Identify metrics for measuring progress
– Determine how IT can help achieve business goals
– Measure actual performance
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Information System Strategies for
Dealing with Competitive Forces
(2 of 5)
• Low-cost leadership
– Use information systems to achieve the lowest operational
costs and the lowest prices
– E.g. Walmart
Inventory replenishment system sends orders to
suppliers when purchase recorded at cash register
Minimizes inventory at warehouses, operating costs
Efficient customer response system
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Information System Strategies for
Dealing with Competitive Forces
(3 of 5)
• Product differentiation
– Use information systems to enable new products and
services, or greatly change the customer convenience in
using your existing products and services
– E.g., Google's continuous innovations, Apple's i Phone
– Use information systems to customize, personalize products
to fit specifications of individual consumers
E.g., Nike's NIKE iD program for customized sneakers
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Information System Strategies for
Dealing with Competitive Forces
(4 of 5)
• Focus on market niche
– Use information systems to enable specific market focus,
and serve narrow target market better than competitors.
Analyzes customer buying habits, preferences
Advertising pitches to smaller and smaller target markets
– E.g., Hilton Hotel’s On Q System
Analyzes data collected on guests to determine preferences
and guest's profitability
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Information System Strategies for
Dealing with Competitive Forces
(5 of 5)
• Strengthen customer and supplier intimacy.
– Strong linkages to customers and suppliers increase
switching costs and loyalty
– Toyota: uses IS to facilitate direct access from suppliers to
production schedules
Permits suppliers to decide how and when to ship supplies to
plants, allowing more lead time in producing goods
– Amazon: keeps track of user preferences for purchases,
and recommends titles purchased by others
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The Internet’s Impact on Competitive
Advantage
• Enables new products and services
• Encourages substitute products
• Lowers barrier to entry
• Changes balance of power of customers and suppliers
• Transforms some industries
• Creates new opportunities for creating new markets,
building brands, and large customer bases
• Smart products and the Internet of Things
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The Business Value Chain Model
• Highlights specific activities in a business where
competitive strategies can best be applied and where
information systems are likely to have a strategic impact.
– Primary activities
– Support activities
– Benchmarking
– Best practices
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Figure 3.2 The Value Chain Model
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Interactive Session: Technology
Smart Products Coming Your Way
• Class Discussion
– Describe the role of information technology in the products
described in this case. How is it adding value to these
products? How is it transforming these products?
– How are these smart products changing operations and
decision making for these organizations? How are they
changing the behavior of their users?
– Are there any ethical issues raised by these smart products,
such as their impact on consumer privacy? Explain your
answer.
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The Value Web
• A firm’s value chain is linked to the value chains of its
suppliers, distributors, and customers.
• Value web
– Collection of independent firms that use information
technology to coordinate their value chains to produce a
product collectively
– Value webs are flexible and adapt to changes in supply and
demand
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Figure 3.3 The Value Web
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Synergies, Core Competencies, and
Network-Based Strategies
• Large corporations comprised of business units
– Financial returns overall are tied to performance of business
units
• Information systems improve performance of business
units by promoting
– Communication
– Synergies
– Core competencies
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Synergies
• When output of some business units can be used as inputs
to other units
• When two firms can pool markets and expertise (e.g.,
recent bank mergers)
• Lower costs and generate profits
• Enabled by information systems that ties together
disparate units so they act as whole
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Core Competency
• Activities for which firm is world-class leader
– E.g., world’s best miniature parts designer, best package
delivery service, etc
• Relies on knowledge gained over years of experience as
well as knowledge research
• Any information system that encourages the sharing of
knowledge across business units enhances competency
– E.g., Procter & Gamble uses intranet to help people working
on similar problems share ideas and expertise.
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Network-Based Strategies
• Network economics
– Marginal costs of adding another participant are near zero,
whereas marginal gain is much larger
– E.g., larger number of participants in Internet, greater value
to all participants
• Virtual company
– Uses networks to link people, resources, and ally with other
companies to create and distribute products without
traditional organizational boundaries or physical locations
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Disruptive Technologies
• Technologies with disruptive impact on industries and
businesses, rendering existing products, services and
business models obsolete
– Personal computers
– World Wide Web
– Internet music services
• First movers versus fast followers
– First movers of disruptive technologies may fail to see
potential, allowing second movers to reap rewards (fast
followers)
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The Internet and Globalization
• Prior to the Internet, competing globally was only an option
for huge firms able to afford factories, warehouses, and
distribution centers abroad.
• The Internet drastically reduces costs of operating globally.
• Globalization benefits
– Scale economies and resource cost reduction
– Higher utilization rates, fixed capital costs, and lower cost
per unit of production
– Speeding time to market
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Figure 3.4 Apple i Phone’s Global
Supply Chain
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Global Business and System
Strategies
• Domestic exporters
• Multinationals
• Franchisers
• Transnationals
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Global System Configuration
• Centralized systems
• Duplicated systems
• Decentralized systems
• Networked systems
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Figure 3.5 Global Business
Organization Systems Configurations
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What is Quality?
• Producer perspective
– Conformance to specifications and absence of variation
from specs
• Customer perspective
– Physical quality (reliability), quality of service, psychological
quality
• Total quality management (TQ M )
– Quality control is end in itself
– All people, functions responsible for quality
• Six sigma
– Measure of quality: 3.4 defects/million opportunities
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How Information Systems Improve
Quality
• Reduce cycle time and simplify production
• Benchmark
• Use customer demands to improve products and services
• Improve design quality and precision
– Computer-aided design (CAD) systems
• Improve production precision and tighten production
tolerances
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What is Business Process
Management (BPM )?
• Technology alone is often not enough to improve business
• Organizational changes often necessary
– Minor changes in work habits
– Redesigning entire business processes
• Aims to continuously improve processes
• Uses variety of tools and methodologies to
– Understand existing processes
– Design and optimize new processes
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Steps in BPM
1. Identify processes for change
2. Analyze existing processes
3. Design new process
4. Implement new process
5. Continuous measurement
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Figure 3.6 As-Is Business Process for
Purchasing a Book from a Physical
Bookstore
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Figure 3.7 Redesigned Process for
Purchasing a Book Online
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Interactive Session – Organizations:
Tommy Hilfiger Transforms Its
Wholesale Sales Process with Digital
Showrooms
• Class discussion
– How did Tommy Hilfiger’s previous wholesale sales process affect its
business performance?
– What people, organization, and technology factors contributed to Tommy
Hilfiger’s problems with its wholesale sales business process?
– Diagram Tommy’s Hilfiger’s old and redesigned business process for
ordering merchandise for a retail department store.
– Describe the role of technology and digital showrooms in Tommy Hilfiger’s
business process changes.
– How did Tommy Hilfiger’s redesigned business process change the way
the company worked? What was the business impact? Explain.
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Business Process Reengineering
• A radical form of fast change
• Not continuous improvement, but elimination of old
processes, replacement with new processes, in a brief
time period
• Can produce dramatic gains in productivity
• Can produce more organizational resistance to change
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How Will MIS Help My Career?
• The Company: A+ Superior Data Quality
• Position Description
• Job Requirements
• Interview Questions
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