Chapter 2 Strategic Use of Information Resources

1. Chapter 2Strategic Use of Information Resources CPIS434 Sara Alshagdali Maha Hassan ManalMansour Ghaidaa Mohammad Done By :

2. Outline • Information resources • IT Assets • IT Capabilities • Advantages of Information Resources • The Strategic Landscape • Porter’s five competitive forces model • The Value Chain System • CRM and the Value Chain • Supply Chain Management • The Resource-Based View

3. Learning Objectives • Know what makes an information resource valuable • Explain how information resources are used strategically in context of the 5-forces model • Understand how information resources can be used to alter the value chain

4. Real World Example • The Spanish manufacturer Zara has a Loyal and satisfied customer base • Zara has a simple business model that provides a significant strategic advantage • Zara aligns its information system strategy with its business strategy • Their system links demand to manufacturing and manufacturing to distribution.

5. INFORMATION RESOURCES AS STRATEGIC TOOLS

6. Information Resources • The term information resources is defined as the available data, technology, people, and processes available to perform business processes and tasks. • Information resources can be either assets or capabilities.

7. IT assets • IT asset is anything, tangible or intangible, that can be used by a firm in its processes for creating, producing and/or offering its products (IT infrastructure is an asset). - IS infrastructure: It includes data, technology, people, and processes. The infrastructure provides the foundation for the delivery of a firm’s products or services. - Information repository. Logically-related data that is captured, organized and retrievable by the firm. - Web 2.0 assets now include resources used but not owned by the firm (eBay, Facebook, etc.).

8. IT Capabilities • IT capability is something that is learned or developed over time in order for the firm to create, produce or offer it products. - Three major categories of IT capabilities: • Technical skills - applied to designing, developing and implementing information systems. • IT management skills - critical for managing the IT function and IT projects. • Relationship skills - can either be externally-focused or spanning across departments

9. HOW CAN INFORMATION RESOURCES BE USED STRATEGICALLY?

10. The Strategic Landscape • Managers should look to each element that influence the competitive environment. • Overlooking a single element can bring about disastrous results for the firm. • There are three views that can help a general manager align IS strategy with business strategy : • First view - Porter’s five competitive forces model. • Second view - Porter’s value chain. • Third view – Resource Based View .

11. Using Information Resources to Influence Competitive Forces • Porter’s five forces model show the major forces that shape the competitive environment of the firm. • Threat of New Entrants: new firms that may enter a companies market. • Bargaining Power of Buyers: the ability of buyers to use their market power to decrease a firm’s competitive position. • Bargaining Power of Suppliers: the ability suppliers of the inputs of a product or service to lower a firm’s competitive position. • Threat of Substitutes: providers of equivalent or superior alternative products. • Industry Competitors: current competitors for the same product.

12. Figure 2.3 Five competitive forces with potential strategic use of information resources.

13. Porter’s five competitive forces model ( cont. ) The main purpose of Porters Five Forces is to find a position in an industry where a company can defend itself against competitive forces or it can influence them in its favor. A strategist can analyze any market by rating each competitive force as high, medium, low in strength.

14. Porter’s five competitive forces model Real World Examples As an example we will look at the sportswear industry in America, and how the five forces could be rated .

15. The threat of new entrants might be seen as low, since the US market has reached the maturity stage and sales growth is not as high as it used to be. The bargaining power of buyers could be rated as medium in strength as buyers are interested in buying trendy sports products (well known brands) but they cannot influence the price in their favor The bargaining power of suppliers is low as the major brands have strong price negotiation power over suppliers of raw material and outsourced manufacturing. Competition among existing rivalry is high as key player such as Nike, Adidas, Reebok and Puma compete closely and strongly in the market. The threat of substitutes could also be seen as low because other available brands do not appeal to customers.  Porter’s five competitive forces model at sportswear industry

16. Figure 2.4 Application of five competitive forces model for Zara.

17. Porter’s Value Chain Model • Value chain model addresses the activities that create, deliver, and support a company’s product or service (see Figure 2.5). • Two broad categories: • Primary activities – relate directly to the value created in a product or service. • Support activities – make it possible for the primary activities to exist and remain coordinated

18. Figure 2.5 Value chain of the firm.

19. Altering the Value Chain • The Value Chain model suggest that competition can come from two sources: • Lowering the cost to perform an activity and • Adding value to a product or service so buyers will be willing to pay more. • Lowering costs only achieves competitive advantage if the firm possesses information on the competitor’s costs • Adding value is a strategic advantage if a firm possesses accurate information regarding its customer such as: which products are valued? Where can improvements be made?

20. The Value Chain System • The value chain model can be extended by linking many value chains into a value system. • Much of the advantage of supply chain management comes from understanding how information is used within each value chain of the system. • This can lead to the formation of entirely new businesses designed to change the information component of value-added activities. (Figure 2.6)

21. Figure 2.6 The value system: interconnecting relationships between organizations.

22. CRM and the Value Chain • Customer Relationship Management (CRM) is a natural extension of applying the value chain model to customers. • CRM includes management activities performed to obtain, enhance relationships with, and retain customers. • CRM is a coordinated set of activities. • CRM can lead to better customer service, which leads to competitive advantage for the business.

23. Figure 2.7 Application of Value Chain Model

24. Supply Chain Management • An approach that improves the way a company finds raw components it needs to make a product or service, manufactures that product or service, and delivers it to customers. • Technology permits supply chains of customer’s and supplier’s to be linked. • Requires collaboration and the IT to support the seamless connection. • Electronic marketplaces can be used to limit information sharing.

25. Customer Relationship Management VS. Supply Chain Management • For example, at a small veterinary hospital, the supply chain management personnel make sure the veterinarians and technicians have the medical supplies required to conduct routine examinations, perform surgeries and treat medical conditions for clients' animals at the hospital, while customer relationship management personnel work with customers to make sure they get the right medications to administer to their animals at home.[1]

26. The Resource-Based View • The resource-based view is useful in determining whether a firm’s strategy has created value. • Unlike Porter’ competitive forces framework, this view maintains • that competitive advantage comes from the information and other resources of the firm. • On the other hand, Porter’s competitive forces framework argues that aspects of the firm’s industry create sources of competitive advantage. • Like the value chain model, the resource-based view concentrates on what adds value to the firm. • However, whereas the value chain model focuses on a firm’s activities, the resource-based view focuses on the resources that it can manage.

27. The Resource-Based View • The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources. • Two subsets of information resources have been identified: • Those that enable firms to attain competitive advantage (rare and valuable resources that are not common place). • Those that enable firms to sustain competitive advantage (resources must be difficult to transfer or relatively immobile).

28. Figure 2.8 - Information Resources at Zara, by Attribute

29. Conclusion • Information resources include data, technology, people, and processes within an organization. Information resources can be either assets or capabilities • Three major categories of IT capabilities are technical skills, IT management skills, and relationship skills • The five competitive forces model implies that more than just the local competitors influence the reality of the business situation • The value chain highlights how information systems add value to the primary an support activities of a firm’s internal operations, as well as to the activities of its customers, and other components of its supply chain • CRM systems are a coordinated set of activities designed to help an organization better know and understand their customers • The resource-based view (RBV) helps a firm understand the value created by their strategy. RBV maintains that competitive advantage comes from the information resources of the firm. Resources enable a firm to attain and sustain competitive advantages

30. References • http://smallbusiness.chron.com/supply-chain-management-vs-customer-relationship-management-10231.html