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ISS key notes: 1.

“Operational Effectiveness” means performing similar activities better than rivals do


“Strategy Positioning” means performing different activities from rivals or performing similar activities in different ways

3. Organizations have competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price 4.


Information Management Strategy concerned with the effective coordination of technology, people, and information resources, in order to support organizational strategy and processes •

Use information quickly and effectively to facilitate decision-making

Promotes openness of communications throughout companies, allow timely response

Fosters a culture of innovation and knowledge sharing

Links a company with its business partners/customers effectively

Reduce costs

Helps to create new products that are in demand in the market

Information System is a company’s window towards the external environment, including government, competitors, customers, financial institutions, social culture, knowledge, technology

6. IS strategy: Identifying a portfolio of computer-based applications to be implemented •

Highly aligned with organizational strategy

Analysis of the competitive environment

Has the ability to create an advantage over competitors

7. IT strategy: The vision of how technology can support organization’s demand for information and systems, policies for H/W and S/W 8.

Business strategy corporate making business decision, objective and direction, change IS strategy is business based, demand oriented and application focused IT strategy is activity based, supply oriented and technology focused

9. Drives and sets goals: Business strategy  IS strategy  IT strategy Informs and enables: IT strategy  IS strategy  business strategy 10. IS planning stages •

Strategic planning/analysis:

a. establishing the relationship between the overall organizational plan and the IT plan (or, aligned with overall organizational planning)

b. Analyse competition in business environment and potential of using IS and technology to gain competitive advantage over other companies

 SWOT Analysis / Porter’s competitive Forces model

Information Requirement Analysis: Identifying broad, organizational information requirements to establish a strategic information architecture that can be used to direct specific application (information system, database, networks) development projects

Information System Strategy lecture summary by Mark Chen


Resource allocation: H/W, S/W, data communication, facilities, personnel, financial plans

Project Planning: overall framework within which specific applications can be planned, scheduled and controlled, this stage is associated with system development

11. Different strategic uses of IS/IT in business, firm, industry: •

Business: Product differentiation, low cost producer, focused differentiation  Porter’s value chain

Firm: Synergies (team-working cooperation), core competencies

Industry:  Porter’s Competitive forces model

12. Porter’s Competitive Forces model (industry-level strategy): Competitive advantage can be achieved by enhancing the firm’s ability to deal with customers, suppliers, substitute products and services, and new entrants to its market, which in turn may change the balance of power between a firm and other competitors in the industry in the firm’s favour

Threat of new market entrants. Key: Brand identity, switching costs, capital requirements, access to distribution, government policy

Threat of substitutes. Key: Relative price performance of substitutes, switching costs, buyer propensity (preference) to substitute

Bargaining power of customers. Key: buyer information, buyer volume, switching costs, product difference

Bargaining power of suppliers. Key: input differentiation, supplier concentration, importance of volume to supplier, impact of inputs on cost or differentiation

Intensive competition among current industry

13. IS strategies and Competitive forces:

Basic strategy: Align IT with business objectives, leading to higher profitability a.

Identify business goals and strategies

b. Break strategic goals into concrete activities and processes c.

Identify metrics for measuring progress

d. Determine how IT can help achieve business goals e. Measure actual performance •

Low-cost leadership: achieve lowest operational costs and the lowest price, e.g. Wal-Mart IS strategy

Product differentiation

a. Use IS to enable new products and services, or greatly improve your current products or service, e.g. Apple’s iphone, ipad

b. Us IS to customize, personalize products to fit specification of individual customers, e.g. Dell’s assemble-to-order system is a major source of competitive advantage

Focus on market niche: use IS to enable specific market focus, and reach/serve narrow target market better than competitors a.

Analyse customer buying habit, preferences


Advertising pitch to smaller target markets

Information System Strategy lecture summary by Mark Chen


Strengthen customer and supplier intimacy: strong linkages to customers and suppliers increase switch costs and loyalty, e.g. Amazon keep track of user preferences for purchase, and recommends titles purchased by others

14. Porter’s Value Chain Analysis Model (business-level strategy) •

Industry Value Chain

a. Sourcing and procurement systems: Suppliers’ suppliers, Suppliers b. CRM systems: firm, Distributors, Customers •

Firm value Chain

a. Primary Activities  related directly to organization’s customers and products - Inbound logistics: Automated warehousing systems - Operations: Computer-controlled machining systems - Sales and marketing: Computerized ordering systems - Service: Equipment maintenance systems - Outbound logistics: Automated shipment scheduling systems

b. Support Activities  facilitated Primary Activities -

Administration and Management: Electronic scheduling and messaging systems


Human Resources: Workforce planning systems


Technology: Computer-aided design systems


Procurement: Computerized ordering systems

15. Resource-based view of the firm Components of Internal Analysis •

Resources (What a firm has)  is the source of a firm’s capabilities a.

Tangible resources: Financial, Physical, Human Resources, Organizational


Intangible resources: Technological, Innovation, Brand name, Corporate culture

Capabilities (What a firm does)  is the source of a firm’s core competencies


represent the firm’s capacity to integrate individual firm resources to achieve a desired objective


capabilities develop over time, it derived from the interaction between the firm’s tangible and intangible resources

Core Competencies: Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage

Sustained Competitive Advantage  gain through core competencies -


a. Is a resource or capability Valuable?  enable a firm improve its efficiency or effectiveness b. Is a resource Rare?  resources that are rare to other competitors

Information System Strategy lecture summary by Mark Chen


c. Is the resource difficult to imitate?  profit generated from imitable resources are more likely to be sustainable

d. Any substance?  e.g. e-business as a substitute for physical retail facility -

Only ensure all a, b, c, d can a firm achieves sustainable competitive advantage

16. Resource-based view of the firm implication:

In an e-business environment, resource-based view is a means of identifying specific resources and capabilities which are difficult for rivals to imitate and that enable superior performance

It focuses on the firm’s capacity to renew existing competencies in a rapidly changing environment

It provides a cogent framework to evaluate the strategic value of information systems resources

17. Dynamic Capabilities for e-business transformation

Rapid strategic decision-making

Acceptance of the need for strategic change

Designing the value proposition to the e-business domain

Reconfiguration of the service process

Market sensing

Organisational learning


18. Organizational culture: Fundamental beliefs in an organization about the ‘reason for being’ •

In terms of: products, way people should be treated -

What products the organization should produce


How and where it should be produced


For whom the products should be produced


The way people should be treated

Competitive Force

IT Influence on Competitive Force

Threat of New Entrants

Zara’s IT supports its tightly-knit group of designers, market specialists, production managers and production planners. New entrants are unlikely to provide IT to support relationships that have been built over time. Further it has a rich information repository about customers that would be hard to replicate.

Bargaining Power of Buyers

With its constant infusion of new products, buyers are drawn to Zara stores. Zara boasts more than 11,000 new designs a year, whereas competitors typically offer only 2,000 – 4,000. Further, because of the low inventory that the Zara stores stock, the regulars buy products they like when they see them because they are likely to be gone the next time they visit the store. More recently Zara has employed laser technology to measure 10,000 women volunteers so that it can add the measurements of ‘real’ customers into its information repositories. This means that the new products will be more likely to fit Zara customers.

Bargaining Power of Suppliers

Its computer-controlled cutting machine cuts up to 1000 layers at a time. It then sends the cut materials to suppliers who sew the pieces together. The suppliers’ work is relatively simple and many suppliers can do the sewing. Thus, the pool of suppliers is expanded and Zara has greater flexibility in choosing the sewing companies. Further, because Zara dyes 50% of the fabric in its plant, it is less dependent on suppliers and can respond more quickly to mid-season changes in customer color preferences.

Threat of Substitute Products

Industry competitors long marketed the desire of durable, classic lines. Zara forces on meeting customer preferences for trendy, low-cost fashion. It has the highest sales per square foot of any of its competitors. It does so with virtually no advertising and only 10% of stock is unsold. It keeps its inventory levels very low and offers new products at an amazing pace for the industry (i.e., 15 days from idea to shelves). Zara has extremely efficient manufacturing and distribution operations.

Information System Strategy lecture summary by Mark Chen


Industrial Competitors

Zara offers extremely fashionable lines that are only expected to last for approximately 10 wears. It offers trendy, appealing apparel at a hard-to-beat price.

People’s reaction to change: 1. Immobilisation: As rumours of the change circulate, the individual feels some sense of shock and possible disbeliefso much that they deem it worthy of doing nothing 2. Minimisation: As the change becomes clearer, people try to fit in the change with their own personal position and may try to believe that it will not affect them 3. Depression: As reality begins to dawn, staff may feel alienated and angry, feelings of lack of control of events overtake people and they feel depressed as they try to reconcile what is happening with their own personal situation 4. Acceptance/letting go: The lowest point in self-esteem finally sees people starting to accept the inevitable. Fear of the future is a feature of this stage 5. Testing out: Individuals begin to interact with the change, they start to ask questions to see how they might to work with the change 6. Search for meaning: Individuals begin to work with the change and see how they might be able to make the change work for them, - self-esteem begins to rise 7. Internalisation: the change is understood and adopted within the individual’s own understanding – they now know how to work with it and feel a renewed sense of confidence of self-esteem

Information System Strategy lecture summary by Mark Chen


ISS Key notes