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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-2
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?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-3
Q1: How Does Organizational Strategy
Determine Information Systems Structure?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-4
Q2: What Five Forces Determine
Industry Structure?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-5
Examples of Five Forces
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-6
Five Forces at GearUp
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-7
Q3: How Does Analysis of Industry Structure
Determine Competitive Strategy?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-8
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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-9
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?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-10
Q4: How Does Competitive Strategy
Determine Value Chain Structure?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-11
Value Chain Structure?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-12
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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-13
Q5: How Do Business Processes
Generate Value?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-14
Improved Material Ordering Process
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-15
Q6: How Does Competitive Strategy Determine
Business Processes and the Structure of
Information Systems?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-16
Operations Value Chains for Bicycle
Rental Companies: High Service Rentals
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-17
Business Process and Information
Systems for High-Service Bike Rental
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-18
Using MIS InClass 3: Competitive Strategy
Over the Web
1. Briefly visit each pair.
– www.sportsauthority.com vs. www.soccer.com
– www.target.com vs. www.sephora.com
– www.woot.com vs. www.amazon.com
– www.petco.com vs. www.healthyfoodforpets.com
– www.llbean.com vs. www.rei.com
2. Select two pairs from the list. For each pair of
companies, answer the questions on p. 84.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-19
Q7: How Do Information Systems Provide
Competitive Advantages?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-20
Competitive Advantage via Processes
Implementation
1. Lock in customers
o Create high switching costs
2. Lock in suppliers
o 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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-21
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.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-22
Two Roles for Information Systems
Regarding Products
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-23
How Does an Actual Company Use IS to
Create Competitive Advantages?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-24
Automatic Retrieval of Customer Data
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-25
ABC, Inc., Web Page to Specify Email
Notification
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-26
ABC, Inc., Web Page to Print a Shipping
Label
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-27
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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-28
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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-29
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
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-30
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?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-31
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?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-32
Case Study 3: Fulfillment by Amazon
(FBA):
• Primary product offerings:
1. Online retail store
2. Computing infrastructure leasing
3. Order fulfillment services
• Amazon buys, takes ownership, physical
possession, inventories good, sells from
inventory
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-33
Is FBA Right for GearUp?
• Outsource to Amazon, thus avoiding cost of
developing own processes, facilities, and
order fulfillment information systems.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-34
FBA Fees for Products Like Sporting
Goods as of May 2012
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
3-35
3-36