IS Strategy, Management and Acquisition

Code: IS10602

AlBaha University
Faculty of Computer Science and Information Technology
Department of Computer Information Systems
Program of Computer Information Systems
Level/Year: 6th Level/ 3rd Year
2

CHAPTER

The Changing Competitive

Market Environment
 Introduction
3
 How environment in which marketing takes place is
changing
 Marketing environment can be divided into;
Competitive environment (including company, its
immediate competitors and customers)
Macro-environment (the wider social, political and
economic setting in which organizations operates
 Industry vs. markets
4

 Industries are collection of organizations with

technology and products in common
White good firm comprise and industry – that
make refrigerators, washing machines and so on
 Markets are customer linked by their similar needs
Laundry products comprise a market – products
and services customer use to clean their clothes
 A framework for macro-environmental analysis
5
 Nature of change in macro-environment
 Importance of understanding macro-environment is tow
fold
Market impact of change
Nature of change facing organizations is itself
changing
 PEST analysis (political, economic, social, cultural and
technological)
 P E S T a n a l y s i s o f t h e m a c r o -e n v i r o n me n t
6

Economic

Political Social

Technological Legal
 The economic and political environment
7
 The European single market and its enlargement
Single market of over 320 million consumers was
created to allow free flow of products and services
 Internationalization and globalization
Foundation of OPEC, valuable raw materials
Changes in east/west relationship
Dismantling of berlin wall, liberalization of
economies, break-up of soviet union, regional
trading blocks
9
Social and cultural environment
 Demographic change
‘Demographic time bomb’
 The grey market
Over-60s age group make up 20% of population
 The youth market
 Multi-ethnic market – western societies
 Changing living patterns and lifestyles
Single person households, women employment
 The technological environment
12
 A shortening of commercialization times of new
inventions:
 Innovative marketing research companies
 The internet – the global electronic communications
network
 Globalization of markets
13

 Increasingly becoming global market

 Impact of technology
Gigantic, world-scale markets with economies
of scale
 Problems for competitors that do not operate on a
global scale
 Marketing strategies
15
• Global positioning
– Think globalization and focus core competencies
• The master brand
– Brand identity that links all parts of the business e.g.
Toyota, Honda
• The integrated enterprise and end-user focus
– Challenge of managing people, processes and
infrastructure to deliver value to end user
Five forces model of the
industry competition
 Five forces driving cmpetition
20

Threat of new entrants

Bargaining Bargaining
Rivalry among existing power of
power of
firms in the industry buyers
suppliers

Threat of substitutes
 Rivalry among existing companies
21

 The rivalry is likely to be most intense where;

Competition in the industry are roughly evenly
balanced in terms of size and share
During periods of low market growth
Where exit barriers are high
Where product differentiation is low
Where fixed costs are relatively high
 The threat of substitutes
23

 Substitution can increase competitiveness of an

industry for no of reasons
By making existing technologies redundant
By incremental product improvement
 Bargaining power of suppliers
24
 Suppliers tend to have more bargaining power
where holds;
Suppliers are more concentrated than buyers
Costs of switching suppliers are higher
Supplier's offerings are highly differentiated
 Bargaining power of buyers
25
 Buyers tend to be more powerful in the supply chain
where the following is true
They are more concentrated than sellers
IS Strategy, Management and Acquisition
Code: IS10602

AlBaha University
Faculty of Computer Science and Information Technology
Department of Computer Information Systems
Program of Computer Information Systems
Level/Year: 6th Level/ 3rd Year
2

CHAPTER

Electronic Commerce:
New Ways of Doing Business
3
Content
E-Commerce: An Overview
The E-Commerce Difference
E-Commerce for Consumers
E-Commerce Between Organizations
 Objectives
4
Your investment of time and effort in this topic will result in your being
able to answer these questions:
1. What is e-commerce and how is it a part of today’s economy?
2. How does e-commerce make a difference to businesses and
consumers?
3. How does e-commerce allow businesses to create value for their
consumers?
4. How do businesses use e-commerce to enhance the products and
services that they trade with business partners, as well as to
improve their supply chain efficiency?
5
What is e-commerce?
 E-commerce is the use of information systems, technologies, and
computer networks to carry out transactions in order to create or support
the creation of business value.
 Note that we do not say “to buy and sell over the Internet” in our
definition;
do not want to restrict ourselves to just the Internet
want to make our definition as general as possible, so we
concentrate on transactions which we discussed in Chapter 4 and 5
and computer networks which we discussed in Chapter 2 and Field
Guide C.
 E-Commerce includes all types of computer networks and all types of
transactions including electronic funds transfers and EDI over private
networks as well as retail sales and wholesale exchanges over public
networks like the Internet
Types of E-Commerce Transactions
Transaction Description Example Web sites
Business-to-consumer Online equivalent of retail www.landsend.com,
(B2C) store as well as other services www.overstock.com,
www.amazon.com

Business-to-business Electronic exchanges between www.manheim.com,

(B2B) companies www.boeing.com

Business-to- Online sales to government www.irs.gov,

government (B2G) agencies as well as online www.fedbizopps.gov,
payment of taxes App.mt.gov/bustax

Consumer-to- Electronic payment of taxes as www.irs.gov/individuals,

government (B2G) well purchasing licenses express.hsmv.state.fl.us

Consumer-to- Use of online auctions like www.ebay.com,

consumer (C2G) eBay or Yahoo! Auctions auctions.yahoo.com

6
 E-Commerce and Products:
7
Physical and Electronic
 Products can be divided into two primary categories:
physical and electronic.
 Physical products include anything that requires an actual
shipment of a package to the buyer, eg, computer hardware.
 Electronic products can be received directly over the Internet
or other computer network, eg, computer software.
 E-commerce companies must have back-office elements to
handle order fulfillment and to handle returns for physical
goods,
 Companies experienced in order fulfillment and returns have
tended to be successful in dealing with physical goods using
E-commerce.
 The “E-Commerce Difference”
8

 The use of computer networks, especially the Internet, to carry out

transactions between a variety of buyers and sellers is creating a tangible
“e-commerce difference” in our economy, especially with regard to
 Technology
 Competition
 Strategy
 Over 1 billion potential customers around the world in the marketspace due
to increasing Internet access.
 Universal standards make it work the same way no matter where in the
world you might be.
 E-Commerce Differences
9
 Innovative uses of the Internet have produced global
competition with sellers being able to reach any potential
buyer in the world.
 This is true for both the large retailers and for those selling in
niche market.
 Technology has increased information density—the quality
and quantity of information about products and services.
 Customers can obtain product guides, reviews, and prices
from a myriad of Web sites creating business challenges.
 E-commerce and Competition
10

 E-commerce is having a dramatic effect on competition between

organizations in a number of ways including:
Reducing barriers to entry
No one firm or person “owns” the entire market
Enhanced collaboration/alliances
Market niches multiply
Changed marketplace drivers (forces that make things happen in
the market, e.g., consumer preferences, number of suppliers a
business can choose from)
 Business and E-commerce Strategy
11

E-commerce has changed business strategy.

A strategy is a broad-based formula for how a business is going to
compete, what its goals should be, and what plans and policies will be
needed to carry out those goals.
 B2B Transactions
12

 B2B transactions can be divided into two types: spot

buying and strategic sourcing.
 In spot buying, purchases are made at market prices
from an unknown seller.
 Companies often use spot buying to purchase
commodities, i.e., uniform in quality differing only in
price like gasoline, paper, and cleaning supplies.
 In strategic sourcing, prices are set through
negotiation in a long-term relationship with a company
known to the buyer.
 A company’s large-scale computer purchases often
result from strategic sourcing.
 Company Centric Business Model
14
 Exchange Model
15

 In the exchange business model, many companies use

an exchange to buy and sell from each other through
spot-buying transactions.
IS Strategy, Management and Acquisition
Code: IS10602

AlBaha University
Faculty of Computer Science and Information Technology
Department of Computer Information Systems
Program of Computer Information Systems
Level/Year: 6th Level/ 3rd Year
2

CHAPTER

Strategic Information Systems

 Strategic Advantage and IT
 Strategic Information System (SIS)
 Definition
 Systems that support or shape a business unit’s competitive
strategy
 Competitive Advantage
 An advantage over competitors in some measure such as cost, quality, or
speed
 A difference in the Value Chain Data
 Improving Core Competency
 Employee productivity
 Operational efficiency
 Approach
 Outwardly - Aiming at direct competition
 Inwardly - Focused on enhancing the competitive position of the
firm
 Strategic alliance
 Strategic Information Systems (SISs)
Any information system--EIS, OIS, TPS, KMS--that changes the goals,
processes, products, or environmental relationships to help an organization gain
a competitive advantage or reduce a competitive disadvantage.

SISs provide strategic solutions to the 5 Business Pressures

strategic management
 Strategic management
 the way an organization maps or crafts the strategy of
its future operations
 3 Elements
 Long-range planning
 Response management
 Proactive innovation
The role of IT in Strategic Management
 Innovative applications - Create innovative applications that
provide direct strategic advantage to organizations
 Competitive weapons - IS(s) themselves are recognized as a
competitive weapon
 Changes in processes - IT supports changes in business processes
that translate to strategic advantage
 Links with business partners - IT links a company with its
business partners effectively and efficiently
 Cost reductions - IT enables companies to reduce costs
 Relationships with suppliers and customers -IT can be used
to lock in suppliers and customers, or to build in switching costs
 New products -A firm can leverage its investment in IT to create
new products that are in demand in the marketplace
 Competitive intelligence - by collecting and analyzing information
about products, markets, competitors, and environmental changes
Competitive Intelligence (cont.)
 Overview
 One of the most important aspects in developing a competitive
advantage is to acquire information on the activities and actions of
competitors
 Collect information about market, technologies, and government’s
actions
 Analyze and interpret the information

Such activities drive

Many business performance by The Internet
companies  Increasing market is central to
monitor the knowledge supporting
 Improving internal
activities of relationships
competitive
competitors  Raising the quality of intelligence
strategic planning
 Porter’s Competitive Forces Model
 The model recognizes five major forces that could
endanger a company’s position in a given industry
 5 major forces
 The threat of entry of new competitors
 The bargaining power of suppliers
 The bargaining power of customers (buyers)
 The threat of substitute products or services
 The rivalry among existing firms in the industry
 Use of the model
 List players in each competitive force
 Relate the major determinants of each competitive force
 Devise a strategy
 Look for supportive IT
 The analysis
 First Competitive Force - Competitor Analysis
 What Drives them?
 What are they Doing and can do?
 What are their strengths & weaknesses?
 Is Competition intense?
 Second Competitive Force - Entry Barriers
 If nothing slows entry of competitors competition will become intense.
 Incumbent Reaction?
 What Actions are required to build market share?
 Production Process?
 Third Competitive Force - Substitute Products
 Products or services from another industry enter the market
 Customers becoming acclimated to using substitutes
 Is the substitute market growing?
 Fourth & Fifth Competitive Force – Supply Chain
 Suppliers/Buyers? Who controls the transaction?
 Each element adds value – question who captures it?
Global Competition
 Growth of Companies Operating in a Global Environment
 Fully Global or Multinational Corporations
 Companies that export or import
 Companies facing competitions of low labor cost and high natural
resources
 Companies with low cost production facilities abroad
 Small companies that can now use EC to buy/sell internationally
 Global dimensions along which management can globalize
 Product
 Markets & Placement
 Promotion
 Where value is added to the product
 Competitive strategy
 Use of non-home-country personnel - labor
 Multidomestic Strategy: Zero standardization along the global
dimensions. Global Strategy: Complete standardization along the
seven global dimensions.
IS Strategy, Management and Acquisition
Code: IS10602

AlBaha University
Faculty of Computer Science and Information Technology
Department of Computer Information Systems
Program of Computer Information Systems
Level/Year: 6th Level/ 3rd Year
2

CHAPTER
7&8

Value Creation
with Information Systems
 Traditional Frameworks
3

 Mid-1980s IS research - systematically explore and

document the role of information systems and IT beyond
automation of work and the creation of efficiencies
 Result: strategic models focusing on competitive
positioning and competitive advantage
1. Industry analysis
2. Value chain analysis
3. Customer service life cycle analysis
 Value Chain
4

 As managers – you will analyze opportunities to use strategic IS to

create added value.
 The value chain model identifies:
Primary activities
Support activities

Support Firm
Activities Infrastructure
HR
Management
Technology
development
Procurement
Inbound Operations Outbound Marketing and Service
logistics logistics sales

Primary Margin
Activities
5
Primary Activities

 Those directly related to value creation

 They are:
Inbound logistics
Operations
Outbound logistics
Marketing and Sales
 Support Activities
6

 Those not directly related to the transformation

process
 They are necessary to enable it.
 They are:
Firm infrastructure
HR management
Technology development
Procurement
 Value Chain and Role of Information Systems
7

 Managers need to identify, understand, and analyze the

activities of the firm
 The objective is to enhance or transform them using
Information Systems

Marketing
& Sales
After Stay
Guest Stay Service

Procurement Production
 The Customer Service Life Cycle (CSLC)
8

 Objective:
To map the relationship between a firm and its customers
To identify the stages where customers:
Are unsatisfied or
Receive substandard service
Provide ideas as to how:
To improve customer service through the use of the
advanced IT
or the deployment of IT-dependent strategic
initiatives.
9

Four Phases of CSLS

Phase 1: Requirements
 Establish requirements:
 Customer identifies a need for a firm’s product/service
 Specify:
 Customer details the characteristics of product or service of
interest
10
Phase 2: Acquisition
 Select a source:
 The customer identifies where to acquire the product or
service from
 Internet is a new source that reduces vendor’s distribution
costs
 Ordering:
 The customer requests the product or service
 Authorize and pay for:
 The customer issues payment
 Acquire:
 The customer begins using the product or service
 Evaluate and accept:
 The customer ensures that the product or service meets
specifications and the stated objectives of use
 Phase 3: Ownership
11

 Integrate:
 The customer adds the product
or service to the existing inventory
of resources
 Monitor use and behavior:
 The customer ensures that the
product or service remains in
working order
 Upgrade:
 The customer modifies or
improves the product or service
as needed
 Maintain:
 The customer services the
product or service as needed
 The firm can use such
opportunities to avoid
dissatisfaction and provide
outstanding service
12
Stage 4: Retirement
 Transfer or dispose:
The customer will needs to transfer, resell, return, or
dispose of the product or service
 Account for:
The customer needs to evaluate the experience provided
by the product or service
The customer needs to measure the costs associate with
ownership of the product or service
 13
Virtual Value Chain(VVC)
 Designed to map the set of  Adopts the same logic as the
sequential activities that enable physical value chain
a firm to transform:  VVC recognizes info as the entity
 Raw data in input into being transformed (the value of
 Higher value information in which is being enhanced) through
output the chain of activities

Gather Organize Select Synthesize Distribute

14
Five Activities
 Gather:
Collecting and accumulating information
 Organize:
Storing the gathered data in a way that makes later retrieval and
analysis simple and effective.
 Select:
Identifying and extracting the needed data from the data repository
 Synthesize:
Packaging information so that it can be readily used by the
intended consumer for the specific purpose to which it is directed
 Distribute:
Transmitting the appropriately packaged information to its
intended user or customer.
 Three Classes of Strategic Initiatives
15

 Visibility:
 The ability to “see through” organizational processes
previously treated as black box
 Mirroring Capabilities:
 The ability of transforming physical activities into
information-based ones
Efficiency
Effectiveness
Performance
 New Digital Value:
 Creating relationship with the customer
 Increasing Customer willingness to pay
 Creating new value in the form of new
information enabled products or services.
 Personalization Strategy
16

 Repeated interactions
 Returning customers
 Rewards Strategy
17

Product and service purchased frequently.

Products are fairly standardized
Difficult to tailor them to specific customer requests
18
Acquisition Strategy

 Low theoretical repurchase frequency

 High degree of customization
 Data-Driven Strategic Initiatives
19

 Identify relevant Transaction Processing Systems (TPS)

Narrow the scope of the analysis and focus on the
systems that hold relevant data
 Inventory currently available data
Identify the underlying data tracked in the natural
course of business
Talk to power users
 Conceptualize initiatives
Generate and brainstorm ideas
Don’t evaluate feasibility or financial viability yet