CHAPTER
3
Strategy and Information
Systems
“HOW WOULD WE DO THAT?
WHERE’S THE DATA?”
• Buyers don’t communicate with operations when
negotiating with vendors
• Buyers need data to look at prices and costs of dealing
with individual vendors
• Need more data and people involved in negotiating deals
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STUDY QUESTIONS
QI: How does organizational strategy determine information systems
structure?
Q2: What five forces determine industry structure?
Q3: How does analysis of industry structure determine competitive
strategy?
Q4: How does competitive strategy determine value chain structure?
Q5: How do business processes generate value?
Q6: How does competitive strategy determine business processes and
the structure of information systems?
Q7: How do information systems provide competitive advantages?
Q8: 2023?
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Q1: HOW DOES ORGANIZATIONAL STRATEGY
DETERMINE INFORMATION SYSTEMS
STRUCTURE?
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Q2: WHAT FIVE FORCES
DETERMINE INDUSTRY
STRUCTURE?
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EXAMPLES OF FIVE
FORCES
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FIVE FORCES AT
GEARUP
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Q3: HOW DOES ANALYSIS OF
INDUSTRY STRUCTURE
DETERMINE COMPETITIVE
STRATEGY?
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GEARUP’S COMPETITIVE
STRATEGY
Low Cost/Focused
• Do everything to keep costs down
• Focus within sporting goods category
• Focus on buyers interested in special, short-term sales
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ETHICS GUIDE: YIKES! BIKES
• You are operations manager for Yikes! Bikes, a
manufacturer of high-end mountain bicycles.
• New owners plan to pursue lowest-cost vendor
strategy by importing low-cost, lower quality
bikes.
• New owners are not being honest with
employees about cutting jobs.
• Say you might be promoted to new general
manager. Should you trust them?
Q: Are owners actions illegal? Unethical?
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Q4: HOW DOES COMPETITIVE STRATEGY
DETERMINE VALUE CHAIN STRUCTURE?
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VALUE CHAIN
STRUCTURE?
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SUPPORT ACTIVITIES IN
THE VALUE CHAIN
Support Activity
Description
Technology
R & D, New Techniques, Methods,
Procedures
Procurement
Raw Materials
Human Resources Training, Recruiting, Compensation
Firm Infrastructure
General Management, Finance,
Accounting, Legal, Government Affairs
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Q5: HOW DO BUSINESS
PROCESSES
GENERATE VALUE?
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IMPROVED MATERIAL
ORDERING PROCESS
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Q6: HOW DOES COMPETITIVE STRATEGY
DETERMINE BUSINESS PROCESSES AND THE
STRUCTURE OF INFORMATION SYSTEMS?
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OPERATIONS VALUE CHAINS FOR
BICYCLE RENTAL COMPANIES:
HIGH SERVICE RENTALS
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BUSINESS PROCESS AND
INFORMATION SYSTEMS FOR
HIGH-SERVICE BIKE RENTAL
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Q7: HOW DO INFORMATION
SYSTEMS PROVIDE
COMPETITIVE ADVANTAGES?
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COMPETITIVE ADVANTAGE
VIA PROCESSES
1. Lock in customers
IMPLEMENTATION
• Create high switching costs
2. Lock in suppliers
• Make it easy to connect to and work with your
organization
3. Create entry barriers
 Make it difficult and expensive for new competition
4. Create better business processes to establish
alliances
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HOW DOES AN ACTUAL
COMPANY USE IS TO
CREATE COMPETITIVE
ADVANTAGES?
ABC, Inc. created competitive advantage in shipping
industry through:
• Superior customer service
• Ease of customer business use by minimizing data
entry:
– Drop-down lists, automatic fill-ins, contact lists
for customers
– Minimizing data-entry errors
 Following slides show Web pages of ABC’s
information system.
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HOW DOES AN ACTUAL
COMPANY USE IS TO CREATE
COMPETITIVE ADVANTAGES?
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AUTOMATIC RETRIEVAL
OF CUSTOMER DATA
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ABC, INC., WEB PAGE TO
SPECIFY EMAIL NOTIFICATION
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ABC, INC., WEB PAGE TO PRINT
A SHIPPING LABEL
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HOW DOES THIS SYSTEM
CREATE A COMPETITIVE
ADVANTAGE?
• Enhances existing products
• Differentiates products
• Locks in customers
• Raises barriers to market entry
• Increases profit margins by decreasing costs and
decreasing errors
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Q8: 2023?
• Unlikely GearUp will exist
• New opportunities for IT-based organizations
• Reduce medical costs by supporting
governmental functions, like Medicare and
related programs
• Web-based services to track medical bills,
Medicare and supplemental insurance
payments, track unpaid bills
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SECURITY GUIDE:
DIFFERENTIATING ON
SECURITY!
• Major data centers harden their sites; computer criminals
turn to less strongly protected assets held by small
organizations and individuals
• Habit of effective security behavior easy way to gain a
competitive advantage
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GUIDE: YOUR PERSONAL
COMPETITIVE ADVANTAGE
• Who will be your competitors when you seek a job
after graduating from college?
• What will be your competitive advantage in the job
market?
• What can you do before you graduate to develop
your competitive advantage?
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GUIDE: YOUR PERSONAL
COMPETITIVE ADVANTAGE
(CONT’D)
• How could these concepts help you get and keep a job?
• Switching costs?
• Differentiating products?
• Creating barriers?
• Establishing alliances?
• Reducing costs, increasing revenues?
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