Rosenbluth International responded to challenges in the travel agency industry with two strategies: withdrawing from leisure travel and implementing web-based travel technology solutions like DACODA and customer-focused systems. These systems provided competitive advantages like reduced costs and improved customer service globally. Successfully implementing strategic information systems requires justifying benefits, managing risks, identifying appropriate systems, and sustaining competitive advantages over time despite increased competition.
2. Case: Rosenbluth International
Rosenbluth Int. - a global player in the travel agency industry
They responded with 2 strategies
Withdrawal from the leisure travel business
Implementation of web-based travel technology
DACODA (Discount Analysis Containing Optimal Decision Algorithms)
Electronic Messaging ServicesE-Ticket Tracking Solution
Res-Monitor A Globalization Network
Customer-Res IntelliCenters
NOC (Network Operations Center)
Lessons from the Case
Need for exchange business models and strategies
Importance of web-based IT
Global competition over service is key
Large investment over time
Importance of networked infrastructure for global systems
Web-based applications for superior customer service
Need to patent innovative systems
3. 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
4. Strategic Information Systems (SISs)
SISs provide strategic solutions to the 5 Business Pressures
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.
5. 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
6. Strategic Evaluation & Development
SWOT Analysis
Product Life Cycle
Quality Preference
Competitive
Advantage
Position,
Capabilities, Cost-
Quality Curve,
Sustainability Company
ARC,
Coordination,
Incentives,
Explorer-Exploiter
Value Chain
Creation/Capture,
PIE, Supplier,
Buyer
Performance
Product
Differentiation,
Substitutions
Competition
Life Cycle, Market
Structure, Behavior,
Barriers to Entry
Strategy
Scope, Goals,
Competitive
Advantage,
Logic
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline
Stage
Total
Market
Sales
Time
Laggards
Late
Majority
Early
Majority
Early
Adopters
Innovators
"The
Chasm"
Technology Adoption Process
Weaknesses
Opportunities Threats
Strengths
p
r
i
c
e
product
p
l
a
c
e
promotion
target
market
Mental Map
SCOPE
Exit
Strategy
Cash
Cows
Stars
Market
growth
rate
Relative market share
?
Time
&
Action
Oligopoly
Dominant
Monopoly
Niche
Competitive
$
Low
High
High
Low
Preference
UNC
E
RTA
INTY&
C
HA
NG
E
January 2002
S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31
Implement
G1 G2 G3 G4 G5 G6
Demand
Needs
Analysis
Strategy Evaluation & Development
Competitors
Management
Strategy Statement
A
B
C
D
E
F
G H
7. 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
8. Competitive Intelligence (cont.)
The Internet
is central to
supporting
competitive
intelligence
Such activities drive
business performance by
Increasing market
knowledge
Improving internal
relationships
Raising the quality of
strategic planning
Many
companies
monitor the
activities of
competitors
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
9. Competitive Advantage in the Web Economy
Competitive
Advantage
Look for a
competitive
necessity, which
will help your
company keep up
with the
competitors.
Competitive
Strategy
Search for a
competitive
advantage in an
industry, which
leads to control
of the market.
Sustainable
Strategic
Advantage
Maintain
profitable &
sustainable
position against
the forces that
determine
industry
competition.
11. 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
External
Competitive
Forces
13. 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?
15. Impact of competitive forces & role of IT
Key force Business implications Potential IT effects
Threat of
new entrants
Additional capacity
Reduced prices
New basis for competition
Provide entry barriers/reduce access by:
exploiting existing economies of scale
differentiate product and service
control distribution channels
segment markets
Buyer power
high
Force price down
Demand higher quality
Require service flexibility
Encourage competition
Differentiate product and service
Improve price/performance
Increase switching costs of buyer
Facilitate buyer product selection
Supplier
power high
Raise prices/costs
Reduced quality of supply
Reduced availability
Supplier sourcing sys.
Extended quality control into supplier
Forward planning with supplier
Substitute
products
threatened
Limits potential market &
profit
Price ceilings
Improve price/performance
Redefine product and service to increase value
Redefine market segments
Intense
competition
from rivals
Price competition
Product development
Distribution and service
critical
Customer loyalty required
Improve price/performance
Differentiate product and service in
distribution channel and to consumer
Get closer to end customer
16. Strategies forCompetitive Advantage
Niche/Focus
Select a narrow-scope segment (niche
market) and be the best in quality,
speed, or cost in that market
Differentation
Being unique in the
industry
Cost leadership
Provide products and/or
services at the lowest cost in
the industry
Growth
Increase market share,
acquire more customers
or selling more products
Improve internal efficiency
To improve employee &
customer satisfaction
CRM
Customer-oriented approaches
(the customer is king)
Alliances
Working with business partners
to create synergy & provide
opportunities for growth
Innovation
Developing new
products & services
Time
Treat time as a resource,
then manage it and use it
to the firm’s advantage
Lock in customers/suppliers
Encourage customers/suppliers to
stay with you rather than going to
competitors
Entry-barriers
Developing new
products &
services
Increase switching cost
Discourage
customers/suppliers from
going to competitors for
economic reasons
17. Porter’s value chain model
The initial purpose of the value chain model was to analyze the internal operations of a corporation,
in order to increase its efficiency, effectiveness, and competitiveness. We can extend that company
analysis, by systematically evaluating a company’s key processes and core competencies to
eliminate any activities that do not add value to the product.
19. VALUE SYSTEM
A firm’s value chain is part of a larger stream of activities, which Porter calls a
“Value System”.
Includes the suppliers that provide the necessary inputs AND their value chains
Applies to both products & services, for any organization, PUBLIC or PRIVATE
Is the basis for the Supply Chain Management
Many of these alliances and business partnerships are based on Internet connectivity are
called interorganizational information systems (IOSs)
Used to
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
These Internet-based EDI systems offer strategic benefits
Faster business cycle (PO to Receiving)
Automation of business procedures (Automated Replenishment)
Reduced operational costs
Greater advantage in a fierce competitive environment
Consortia – Horizontal vs. Vertical
20. 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.
22. SISs: Examples
Cases
Wiring the “customer supply chain” at 1-800-Flowers
Increasing Tax Collection Efforts at the Wisconsin Department of
Revenue
Time-based Competitive Advantage at Cannondale
Southwest Airlines Flies high with SWIFT
Using ERP to Meet Strategic Challenges at Turner Industries
The Port of Singapore exports its intelligent systems over its enterprise
portal
Problem - The Port of Singapore, the world’s largest international port,
faced increased global competition.
Solution - Implementation of Intelligent Systems
Results
Reduction in Cycle Time: 4 hours versus 16 - 20 hours in neighboring ports
Reduction in uploading/ loading time: 30 sec. versus 4-5 min./ truck in neighboring ports
The Summary – Table 3.2 (p. 115)
23. SIS Implementation & Sustaining SIS
Major Issues in SIS Implementation
Justification
Justifying SIS may be difficult due to the intengible 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
Sustaining SIS & Strategic Advantage
A Major problem that companies face is how to sustain their SIS competitive
advantage.
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
24. Managerial Issues
Implementing SIS Can Be Risky
The investment involved in implementing 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.
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.