e-Everything Age

Competing with Information Technology
Chapter 2
 James A. O’Brien Introduction to Information Systems Eleventh Edition 2

Chapter Objectives
• Identify competitive strategies of
information technologies.
• Give examples of how business process
reengineering frequently involves the
strategic use of e-business technologies.
• Identify the business value of using e-
business technologies

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 The Age of Networked Intelligence
• Not just networking of technology but it is about the 
networking of humans through technology
Competitive Forces Strategy
• A company can survive and succeed in the long run only 
if it successfully develops strategies to confront five 
competitive forces that shape the structure of 
competition in its industry.
 Porters Five Forces Strategy
Using IS
• (1) the rivalry of competitors within its industry ,
• (2) the threat of new entrants into an industry and its
markets ,

• (3) the threat posed by substitute products that might

capture market share ,

• (4) the bargaining power of customers , and

• (5) the bargaining power of suppliers .
 Five basic competitive
strategies using IS
• Cost Leadership Strategy

• Differentiation Strategy

• Innovation Strategy.

• Growth Strategies.

• Alliance Strategies.
 Digital Economy
• Individuals and enterprises create wealth by applying 
knowledge, networked human intelligence, and effort to 
manufacturing, agriculture, and services
 Knowledge Economy
• Based on the application of human know how
• Life long learner
• “SMART” products
• Economy added value will be created by brain not 
brawn
• Mass Customized rather than mass-produced 
(Boutique Bakers/Garden scents)
Examples of E-Business

10
 Mass Customization
• One of the most  • Mass customization 
successful models of e- can be facilitated by 
Commerce is mass the Web in four 
customization. different approaches; 
o the production of large quantities
of customized items.  o Collaborative customizers
o Adaptive customizers
o Cosmetic customizers
• It supplements or even  o Transparent customizers 
replaces one of the most 
innovative concepts of 
the Industrial Revolution, 
mass production. 
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 Mass Customization
• Mass customization is the process of delivering wide-
market goods and services that are modified to satisfy a 
specific customer need. 
• Mass customization is a marketing and manufacturing 
technique that combines the flexibility and 
personalization of custom-made products with the 
low unit costs associated with mass production.
• Mass production is the manufacture of large quantities of 
standardized products, frequently utilizing assembly 
line technology.
 Mass Customization
• An assembly line is a manufacturing process in which 
parts (usually interchangeable parts) are added as the 
semi-finished assembly moves from workstation to 
workstation
Approaches of Mass
Customization
 Approaches of Mass
Customization
Collaborative

• Collaborative customizers conduct a dialogue with 
individual customers to help them articulate their needs

Adaptive

• Adaptive customizers offer one standard, but 
customizable, product that is designed so that users can 
alter it themselves.
 Approaches of Mass
Customization
Cosmetic
• Cosmetic customizers present a standard product 
differently to different customers.
• The cosmetic approach is appropriate when customers 
use a product the same way and differ only in how they 
want it presented.
Transparent
• Transparent customizers provide individual customers 
with unique goods or services without letting them know 
explicit
• ly that those products and services have been 
customized for them.
Organization
Structure
Need for new structures…..
Information Technology

• Information technologies are flexible tools, 
constrained primarily by managers’ will to use 
them, expectations about their roles, and 
applications choices.
Cash p.267

18
 Organization Structure
• Division of Labor 
o Who does what?
• Division of Decision Rights  
o Who should make which decision?
• Coordination Mechanisms
• Organizational Boundaries
• Informal Structures

19
 James A. O’Brien Introduction to Information Systems Eleventh Edition 20

Strategic Uses of Information Technology
Raise Build a Locking in
Barriers Strategic IT Customers
Strategy
to Entry Platform and Suppliers

IT Role Increase   Leverage  Use IT to 

amount of  investment in  improve quality
investment or  IS resources  Use IT to link 
complexity of  from operat-  business to 
IT needed to  ional uses to  customers and 
compete strategic uses suppliers

Create New Enhance

Outcome Increase Business Organizational
Market Share Opportunities Collaboration

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 Strategic Information
Systems
• Cost leadership
• Differentiation
• Supports strategic changes – like
reengineering
• Growth
• Innovation
• Provide business intelligence by collecting
and analyzing information
o Improve internal efficiency
• Customer-oriented approaches

21
 James A. O’Brien Introduction to Information Systems Eleventh Edition 22

The Internet Value Chain
Marketing and Sales and Support and
Internet Distribution Customer
Product
Capability Feedback
Research

Data for  •Low cost  •Access to 

Benefits customer com-
market  distribution
to ments online
research,  •Reaches new 
Company •Immediate re-
establishes  customers 
consumer  •Multiplies  sponse to 
responses contact points customer 
problems

Opportunity
for Maintain Valuable
Increase Lower Customers and
Advantage Cost Margins
Market Share Relationships

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 23

Competitive Advantage 

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 24

Customer-Focused e-Business
Let customers
place orders
directly
Let customers
check order history
and delivery status Let customers
place orders thru
Build a distribution
community partners
of customers,
employees,
and partners Customer Transaction
Database Database

Link Employees
Give all and distribution
employees a partners
complete view
of customers

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 25

Customer-Focused e-Business

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 26

The Value Chain and Strategic IS
• Managers and Business invest in information
technology and systems because they provide
real value to the business.
• The value chain is the systematic approach to
examine the development of competitive
advantage.
• It is a tool to identify the various ways to create
customer value.

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 Customer Service on the Web
 Track Accounts or Order Status
 Providing Search and 
Comparison Capabilities. 

 Providing Free Products 
and Services.  

 Providing Technical and 
Other Information and 
Service. 

27
 Tools for Customer Service
 Personalized Web  E-mail and
Pages Automated Response 

 FAQs  Help Desks and Call

Centers 
 Tracking Tools
 Troubleshooting
 Chat Rooms
Tools

28
 Value Chain Model
• The value chain was developed in 1985 by Michael 

Porter in Competitive advantage.

• It is used as a tool to identify various ways to create 

customer value. 
Value Chain Model
 James A. O’Brien Introduction to Information Systems Eleventh Edition 31

Strategic Positioning of Internet Technologies
High
Customer Competition Connectivity

Global Market Product and Services
Penetration Transformation Strategy
External Drivers

E-Commerce Website E-Business; Extensive

Value-added IT Services Intranets and Extranets Solution

Cost and Performance 
Efficiency  Improvements in
Improvements Business 
Effectiveness
E-Mail, Chat Systems Intranets and Extranets

Low E-Business Processes Connectivity
High
Internal Drivers
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 BPR, Process Innovation,  ERP, 

Reengineering….
Mass Customization, Networked Organization, 
Empowerment, Teams, Virtual Corporations, TQM, 
JIT, POM, BPM, CRM
 Reengineering the Corporation

• Written - 1993
• Michael Hammer 
o One of 1996 most influential people in the U.S.
  Time Magazine 
  July 17,1996
• James Champy

33
What is Reengineering?
• “the fundamental rethinking and radical redesign of 
business

processes to achieve dramatic 
improvements in critical, 
contemporary measures or 
performance, such as cost, quality, 
service, and speed”
p. 32

34
36
 Impacts
Company      Customers      Employees
• Increase  • Benefit from  Teams
product by an  better product Less Workers  - 
order of 
magnitude • Needs are met More Work

• Examine  • Tendency to  Empowered

process return
Layoffs
• Vision • Loyalty
• Increase Profits

37
• To reengineer a company is to take a journey from the 
familiar into the unknown.  The journey has to begin 
somewhere and with someone.  Where and with whom?
o P. 101

38
 Business Process Reengineering
o Initially, attention was given to a complete restructuring of organizations. 
o Later, the concept was changed due to failures of BPR projects and the 
emergence of Web-based applications.
o Today, BPR can focus on anything from the complete restructuring of an 
organization to the redesigning of individual processes. 
o Major objective of BPR = Information Integration.

39
Knowledge Management
System
 Process Innovation
Encompasses the envisioning of new work strategies, the 
actual process design activity, and the implementation of 
the change in all its complex technological, human, and 
organizational dimensions – order-of-magnitude
improvements
Davenport (1993)

41
 James A. O’Brien Introduction to Information Systems Eleventh Edition 42

Business Reengineering and Quality Management

Business Quality Business

Improvement Reengineering

Incrementally Improving Radically Redesigning

Definition Existing Processes Business Systems

Any Process Strategic Business

Target Processes

Potential 10%-50% Improvements 10-Fold Improvements

Payback
Low High
Risk

Same Jobs - More Efficient Big Job Cuts; New Jobs;

What Changes? Major Job Redesign

Primary IT and Work Simplification IT and Organizational

Enablers Redesign

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 James A. O’Brien Introduction to Information Systems Eleventh Edition 43

Chapter Summary
• Information systems can play several
strategic roles in business.
• Using the Internet, intranets, extranets,
and other Internet-based technologies as
a strategic competitive advantage for e-
business and e-commerce
• Build the an e-business model by making
customer value its strategic focus.

Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.
 James A. O’Brien Introduction to Information Systems Eleventh Edition 44

Chapter Summary (cont)
• IT is a key driver in changing and streamlining
business processes.
• 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 .

Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.