IS312 Information Systems for Business Lecture 1 Business Driven Information Systems (Ch . 1 )
LEARNING OBJECTIVES BUSINESS DRIVEN INFORMATION SYSTEMS Competing in the Information Age The Challenge: Departmental Companies The Solution: Management Information Systems BUSINESS STRATEGY Identifying Competitive Advantages The Five Forces Model – Evaluating Industry Attractiveness The Three Generic Strategies – Choosing a Business Focus Value Chain Analysis – Executing Business Strategies
LEARNING OBJECTIVES IS IN MODERN BUSINESS ENVIRONMENT The global business environment and the new information technology infrastructure Relationships among business pressures, organizational responses, and information systems The role of IS and IS personnel in modern organizations
DID YOU KNOW ?What you need to know to survive in the brave new world !
Competing In The Information Age • Information age - The present time, during which infinite quantities of facts are widely available to anyone who can use a computer • Knowledge worker – Individual valued for their ability to interpret and analyze information
Competing In The Information Age . . . • The core drivers of the information age • Data- Raw facts that describe the characteristics of an event or object • Information - Data converted into a meaningful and useful context • Business intelligence - Information collected from multiple sources for strategic decision making. • Knowledge- Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources
THE CHALLENGE: Departmental Companies Common Departments Working Independently
THE SOLUTION : Integrated Companies Common Departments Working Interdependently
THE SOLUTION: Information Systems • Systems thinking – A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part
THE SOLUTION :Information Systems . . . • Business Perspective (Management Information Systems) : a business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving. • Systems Perspective (Information Systems) : a combinations of hardware, software, and telecom networks that people build and use to collect, create, and distribute useful data in organizations for decision making
IS Department Roles & Responsibilities • Chief information officer (CIO) – Oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives • Chief knowledge officer (CKO) - Responsible for collecting, maintaining, and distributing the organization’s knowledge • Chief privacy officer (CPO) – Responsible for ensuring the ethical and legal use of information
IS Department Roles & Responsibilities . . . • Chief security officer (CSO) – Responsible for ensuring the security of IT systems • Chief technology officer (CTO) – Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT
IDENTIFYING COMPETITIVE ADVANTAGES • Business strategy – A leadership plan to achieve a specific set of goals or objectives such as • Developing new products or services • Entering new markets • Increasing customer loyalty • Attracting new customers • Increasing sales
IDENTIFYING COMPETITIVE ADVANTAGES . . . • Competitive advantage – A product or service that an organization’s customers place a greater value on than similar offerings from a competitor • First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage
IDENTIFYING COMPETITIVE ADVANTAGES . . . • Competitive Intelligence –The process of gathering information about the competitive environment to improve the company’s ability to succeed • Competitive Intelligence analysis tools • Porter’s Five Forces Model • Porter’s Three Generic Strategies • Porter’s Value Chain
PORTER’S FIVE FORCES MODEL : Evaluating Industry Attractiveness
Buyer Power • Buyer power – The ability of buyers to affect the price of an item • Switching cost – Manipulating costs that make customers reluctant to switch to another product • Loyalty program – Rewards customers based on the amount of business they do with a particular organization
Buyer Power . . . Bargaining power of buyers high when buyers have many choices low when buyers have few choices. Internet increases buyers’ access to information, increasing buyer power. Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere. This also increases buyer power.
Supplier Power • Supplier power – The suppliers’ ability to influence the prices they charge for supplies • Supply chain – Consists of all parties involved in the procurement of a product or raw material
Supplier Power . . . Bargaining power of suppliers high when buyers have few choices low when buyers have many choices. Buyers can use the Internet to find alternative suppliers and compare prices more easily, reducing power of suppliers. But companies can use the Internet to integrate their supply chains, suppliers can lock in customers.
Threat of Substitute Products or Services • Threat of substitute products or services • highwhen there are many substitutes for an organization’s products or services • lowwhen there are few substitutes. • Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently.
Threat of New Entrants • Threat of new entrants/ competitors • high when it is easy to enter a market • low when significant barriers to entry exist. • Entry barrier – A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival • Internet increases the threat that new competitors will enter a market.
Rivalry Among Existing Competitors • Rivalry among existing competitors – • high when competition is fierce in a market • low when competitors are more complacent • Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand
Sources of Competitive Advantage • Best-made product • Superior customer service • Lower costs • Superior manufacturing technology • Shorter lead times • Well-known brand name • High value per cost
Business Strategies • Intensification: improving processes to serve current customers better: reengineer the current processes, eliminate ineffective operations. • Extension: using efficient existing processes to enter new markets to gain competitive advantage. • Augmentation: expanding processes to provide additional services to current customers. • Conversion: taking a process that the company performs well and performing it as a service to other companies. • Innovation: applying existing processes that one performs well to create and deliver different goods or services. • Diversification: creating new processes to deliver new goods or services
PORTER’S THREE GENERIC STRATEGIES : Choosing A Business Focus . . . Example:
PORTER’S VALUE CHAIN : Executing Business Strategies • Business process – A standardized set of activities that accomplish a specific task, such as a specific process • Value chain analysis – Views a firm as a series of business processes that each add value to the product or service
VALUE CHAIN ANALYSIS :Primary Activities • Inbound logistics - Acquires raw materials and resources, and distributes • Operations - Transforms raw materials or inputs into goods and services • Outboundlogistics - Distributes goods and services to customers • Marketing and sales - Promotes, prices, and sells products to customers • Service - Provides customer support
VALUE CHAIN ANALYSIS : Support Activities • Firm infrastructure – Includes the company format or departmental structures, environment, and systems • Human resource management – Provides employee training, hiring, and compensation • Technology development – Applies technologies to processes to add value • Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies
How Companies Do Business Business Process: A collection of related activities that produce a product or a service of value to the organization, its business, and/or its customers. (Ordering an E-ticket from an airline Web site.) Business Process Management: A management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business process. (Business Process Reengineering / Redesign)
Business Process Reengineering/Redesign IT/IS contributes to Business Process Reengineering / Redesign (BPR) : • Efficient: Do thing right (cheaper) • Effective: Do right thing (better) • Competitive: Do thing differently (faster/newer)
Modern Business Environment : Globalization • Globalization is the integration of economies throughout the world, enabled by technological progress. • Globalization manifests itself through changes in economy, cultures and technology.
Globalization Technological Changes Availability of low cost communication systems Economic Changes Increase in international trade of goods and services Cultural Changes Increased access to other cultures (through TV, Internet, etc.)
Globalization Globalization created a new world characterized by: Worldwide communication Collaboration without barriers
Globalization 1.0 Mainly European countries are globalizing Power is the primary driver Industries changed Slow pace of change
Globalization 2.0 Companies are globalizing Reduction in transportation and telecommunications costs Mainly Europe and America involved
Globalization 3.0 Individuals and small groups are globalizing Fast changes Emergence of new industries
Evolution of Globalization: Summary The convergence of10 Flatteners or key factors enabling globalization 3.0 • The World is Flat (Thomas Friedman)
Flattener #1: The Fall of the Berlin Wall November 9, 1989 Fall of communism and centrally planned economies Shifted the world toward free-marketeconomies The rise of European Union and the idea of the world as a single, global market 2-43
Flattener #2: Netscape Browser August 9, 1995 First mainstream browser Gave individuals accessto the Internet & World Wide Web Failures and over-investments of dot-com companies make telecommunication infrastructure affordable to public
Flattener #3: Work Flow Software Applications that allow people worldwideto communicate XML allows applications to “talk” to each other New possibilities for information sharing
Flattener #4: Open Sourcing Software and source code freely available to everyone Linux operating system, Apache web server, Firefox web browser, OpenOffice suite Constant evolution contributed by users
Flattener #5: Outsourcing Outsourcing companies profited from the drop in telecommunications costs Companies can now use talented engineers from anywhere in certain activities
Flattener #6: Offshoring Companies set up entire factoriesin countries such as China Mass production Low costs
Flattener #7: Supply Chaining Integration of retailers, suppliers, and customers Faster in collaboration in production, scheduling
Flattener #8: Insourcing Delegation of company’s key operationsto a subcontractor UPS provides complete supply chain solutions to companies