1. ManagementInformation Systemsin Organizations IT STRATEGY Prepared by: Jan Wong

2. The Learning Outcomes At the end of this session you should be able to: UNDER- STAND the role of IT & IS in competition and Strategic Information Systems the Porter’s 5 Forces and Porter’s Value Chain DESCRIBE managerial issues in IT Strategies DISCUSS

4. (1950’s-1970’s)

5. Microcomputer Era

6. (late 1970’s to 1980’s)

7. Network Era

8. (late 1980’s to present)

9. Ubiquitous computing (wireless)3 Main Eras of I.T. Evolution “Looking at how Information Systems have evolved throughout the years”

10. Strategic Information Systems (SISs) “Provide strategic solutions to business pressures… in other words: inter mediation”

11. Role of IT in Business Innovation IT creates applications that provide strategic advantages to companies IT is a competitive weapon IT supports strategic change, e.g, re-engineering IT networks with business partners IT provides cost reduction IT provides competitive business intelligence

13. Changes industry structure and alters the rule of competition Increasing the power of buyers Raising barriers of entry Influencing the threat of substitution Gives competitive advantageto out-perform their rivals Lowering costs Enhancing differentiation Changing competitive scope Spawns new businesses, even from within own operations Creating derived demand for new products Creating new businesses from old ones New businesses technologically feasible 3 WAYS How IT / IS Affect COMPETITION

14. Technology VS Management of Technology I.T. is so accessible today that organisations cannot compete on technology alone. The competitive advantage is derived from how the technology is used. Today the management of technologyhas become a critical issue in competing more effectively. The issue is not whether to invest in I.T. but where and how.

15. 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. Porter’s 5FORCES (1985)

16. Cost Leadership Providing products / services at the lowest cost in the industry Differentiation Being unique (USP) Focus Selecting a niche market – big fish in a small pond Growth Increase of market share by acquiring more customers or by selling more products Response Strategies “How can companies respond to the 5 forces?”

17. Improve Internal Efficiency Improve employee and customer satisfaction Alliances Working with business partners to provide opportunities for growth CRM Customer-oriented approaches e.g. customer is king / queen Innovation Development of new products and services Response Strategies “How can companies respond to the 5 forces?”

18. What is it all about? The basis for the Supply Chain Management Includes the suppliers that provide the necessary inputs AND their value chains Applies to both products & services, for any organization, PUBLIC or PRIVATE Think about UPSTREAM and DOWNSTREAM Value Chain “A firm’s value chain is part of a larger stream of activities, which Porter calls a - Value System”

19. What is it used for? Evaluate a company’s process and competencies Investigate whether adding IT supports the value chain Enable managers to assess the information intensity and the role of IT Value Chain Model “A firm’s value chain is part of a larger stream of activities, which Porter calls a - Value System”

20. Porter’s Value Chain Model Primary Activities Inbound logistics Materials receiving, storing, and distribution to manufacturing premises Input Operations  Transforming inputs into finished products Manufacturing & testing Outbound logistics  Storing and distributing products Storage & distribution Marketing and Sales  Promotions and sales force Service  Service to maintain or enhance product value

21. Porter’s Value Chain Model Support Activities Corporate infrastructure  Support of entire value chain, e.g. general management planning, financing, accounting, legal services, government affairs, and QM Human resources management  Recruiting, hiring, training, and development Technology Development  Improving product and manufacturing process Procurement Procurement Purchasing input

22. Porter’s Value Chain Model “Value Chain Model for an Airline”

23. Mc Farlan’s Portfolio Framework (1984) “The planning model assists companies in planning their way forward – identifies their strategy”

24. Mc Farlan’s Portfolio Framework (1984) Currently depending upon for success Critical for future success Good to have but not critical Important for future success “The planning model assists companies in planning their way forward – identifies their strategy”

25. STRATEGIC I.S. IMPLEMENTATION EXAMPLES

27. It was too expensive, too complex to useSolution: In 1997, moved to web-based extranet-supported B2B system Results: Reduced transaction cost from $45/order to $1.25 Fewer shortages, better customer service decline in distributor administration costs PGM

31. Many benefits to buyers and suppliers, particularly in Asia, Africa & the Middle East.

32. System enables Caltex to successfully handle complex multinational business environments. PGM

34. Major Issues to be Considered: Justification Justifying SIS may be difficult due to the intangible nature of their benefits. Risks & Failures The magnitude, complexity, continuous changes in technology and business environment may result in failures. Finding appropriate SIS Identifying appropriate SIS is not a simple task. SIS Implement-ation

35. Managerial issues: Implementing SIS Can Be Risky. The investment involved in implementing Strategic Information Systems (SIS) is high. Strategic Information Systems Requires Planning. Planning for an SIS is a major concern of organizations. Sustaining Competitive Advantage Is Challenging As companies become larger and more sophisticated, they develop resources to duplicate the systems of their competitors quickly SIS Implement-ation

36. Ethical Issues Gaining competitive advantage through the use of IT may involve unethical or even illegal actions Companies can use IT to monitor the activities of other companies and may invade the privacy of individuals working there SIS Implement-ation

37. 3 Major approaches: Create inward systems which are not visible to competitors. Provide a comprehensive, innovative & expensive system that is difficult to duplicate. Combine SIS with structural changes. This would include business processes, reengineering & organizational transformation. How to:Sustain SIS Advantage

38. THINGS TO TAKE NOTE OFF The role of IT / IS in businesses How does IT / IS affect businesses How can companies react to the 5 Forces Issues in Strategic Information Systems (SIS) implementation

39. ERP, SUPPLY CHAINS, CRM

40. IT’S TIME FOR SOME DISCUSSIONS! What has been the impact of the Internet based on Porter’s 5 Forces? List and discuss 5 strategies for competitive advantage Give 2 examples that show how IT can help a defending company reduce the impact of the 5 forces in Porter’s model Give 2 examples that show how an attacking company can use IT to increase the impact of the 5 forces in Porter’s model Discuss why having information systems itself can rarely provide a sustainable competitive advantage

41. IT’S TIME FOR ANIN-CLASS ACTIVITY! Get into groups of 5-6 members Using Porter’s 5 Forces, identify 3 potential risks your company may face Propose solutions on how your company can react to the mentioned forces Present your solutions in class

42. Coming soon… next class ManagementInformation Systemsin Organizations MANAGING SYSTEM SECURITY Cyber Crime, security problems and how to defend against them