Chapter 2 MAJOR BUSINESS SS INITIATIVES Gaining Competitive Advantage with IT STUDENT LEARNING OUTCOMES 1. Describe how to use Porter s Five Forces Model to evaluate the attractiveness of an industry. 2. Describe the role of value chains in identifying value-added and valuereducing gprocesses. 3. Define SCM systems and describe their strategic and competitive opportunities and IT support. 2-2 1
STUDENT LEARNING OUTCOMES 4. Define CRM systems and describe their strategic and competitive opportunities and IT support. 5. Define BI systems and describe their strategic and competitive opportunities and IT support. 6. Define ICEs and describe their strategic and competitive opportunities and IT support. 2-3 Business Intelligence Is Key to the Success of the Boston Red Sox Professional sports is very much a business Find great players and coaches Work with ticket sales, merchandise sales, concession sales, and stadium events 2-4 2
Business Intelligence Is Key to the Success of the Red Sox Competitive forces are their key The Red Sox must know who buys tickets, when many tickets are unsold, etc Old way ticket information only once or twice per week New way (with IT) ticket information on a daily basis 2-5 INTRODUCTION Businesses must be innovative to stay in business and succeed IT can be a powerful tool Must use IT within business strategy to be successful 2-6 3
INTRODUCTION Major business initiatives that need IT 1. Customer relationship management (CRM) 2. Supply chain management (SCM) 3. Business intelligence (BI) 4. Integrated collaboration environments (ICE) 2-7 PORTER S FIVE FORCES MODEL Five Forces Model helps determine the relative attractiveness of an industry and includes 1. Buyer power 2. Supplier power 3. Threat of substitute products and services 4. Threat of new entrants 5. Rivalry among existing competitors 2-8 4
PORTER S FIVE FORCES MODEL 2-9 Buyer Power Buyer power high when buyers have many choices; low when there are very few choices As a provider of products and services want low buyer power As a consumer of products and services want high buyer power 2-10 5
Buyer Power IT can help you (as a provider) reduce buyer power Examples (all enabled by IT) Loyalty program rewards customers for repeated business Airline industry Hotels Grocery stores 2-11 Supplier Power Supplier power high when buyers have few choices; low when buyers have many choices The opposite of buyer power As a business, you want High buyer power when making purchases High supplier power when selling products and services 2-12 6
Supplier Power 2-13 Threat of Substitute Products or Services Threat of substitute products or services high when there are many alternatives; low when there are few Switching costs can help Switching cost costs that make customers reluctant to switch 2-14 7
Threat of New Entrants Threat of new entrants high when it is easy for new competitors to start; low when it is not Entry barrier feature that customers want and new competition i must provide to enter market ATMs, online banking, etc 2-15 Rivalry Among Existing Competitors Rivalry among existing competitors high in a fiercely competitive market; low in a more complacent market Example retail grocers Highly competitive Use IT to compete on price 2-16 8
Five Forces Model Summary Helps determine the attractiveness of an industry Should enter or expand operations in an industry? How can IT help? Increase/reduce buyer/supplier power? Create/eliminate an entry barrier? 2-17 VALUE CHAINS Value chain organization as a chain or series of processes, each of which either add to or reduce value Business process set of activities that accomplishes a specific task Ordering processing Sales transaction 2-18 9
VALUE CHAINS 2-19 VALUE CHAINS Primary value processes (along bottom) creates, delivers, markets, and sells products and services Support value processes (along top) support primary value processes 2-20 10
Identifying Processes that Add Value Talbott premier necktie manufacturer Value-added process information gathered by surveying customers Manufacturing high quality Purchasing quality materials 2-21 Identifying Processes that Add Value 2-22 11
Identifying Processes that Reduce Value Value-reducing processes information gathered from same customer surveys Out of stock items (for Talbott) Goal use IT to get timely information to sales force 2-23 Identifying Processes that Reduce Value 2-24 12
Value Chain Summary Gathers quantifiable information from customers Identifies value-added and valuereducing processes Increases effectiveness of decision making 2-25 SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) tracks inventory and information among processes and across companies SCM system IT support for supply chain management Dell famous for its sell-source-ship supply chain model 2-26 13
SUPPLY CHAIN MANAGEMENT 2-27 SUPPLY CHAIN MANAGEMENT Distribution chain path followed by product or service JIT provides product/service just when needed Inter-modal transportation uses multiple channels (trucks, boats, etc) of transportation 2-28 14
Strategic & Competitive Opportunities with SCM Fulfillment right quantity of parts at right time Logistics transportation costs low Production production lines run smoothly 2-29 Strategic & Competitive Opportunities with SCM Revenue and profit no sales are lost because of stock-outs Spend minimizing costs of purchases of material 2-30 15
IT Support for SCM Previously specialized providers (i2, Manugistics, etc) Now dominated by enterprise software providers SAP Oracle PeopleSoft 2-31 IT Support for SCM Supply Chain Knowledge Base http://supplychain.ittoolbox.com Supply Chain Management Review www.manufacturing.net/scm Logistics/Supply Chain http://logistics.about.com 2-32 16
CUSTOMER RELATIONSHIP MANAGEMENT Part of Miami Dolphins opening case study CRM system uses information about customers to gain insight in order to serve them better Sales force automation Customer service and support Marketing campaign management 2-33 CUSTOMER RELATIONSHIP MANAGEMENT Sales force automation (SFA) systems track all steps in sales process 2-34 17
Strategic & Competitive Opportunities with CRM More effective marketing campaigns Efficient sales process Superior after-sale service and support Treat customers s better e Tailor offerings in response to needs 2-35 IT Support for CRM Front office systems primary interface to customers and sales channels Back office systems fulfill and support customer orders Databases are central 2-36 18
IT Support for CRM 2-37 IT Support for CRM CRM Today www.crm2day.com Customer Management Community www.insightexec.com CIO Magazine Enterprise CRM www.cio.com/enterprise/crm/index.html 2-38 19
BUSINESS INTELLIGENCE Business intelligence knowledge about competitors, suppliers, your own internal operations, etc Combined forms of information to create real knowledge Encompasses everything that affects your business Helps you make strategic business decisions 2-39 BUSINESS INTELLIGENCE BI system support business intelligence function Capabilities in the firm State of the art, trends, and future directions External environment affecting competition Actions of competitors 2-40 20
BUSINESS INTELLIGENCE 2-41 BUSINESS INTELLIGENCE The focus of Chapter 3 Data warehouses collections of information (BI) from multiple operational databases Data marts focused portion of a data warehouse 2-42 21
Strategic and Competitive Opportunities with BI Corporate performance management Optimizing customer relations Traditional decision support Management age e reporting of BI Information right time, location, and form (personal information dimensions) 2-43 IT Support for Business Intelligence Web supports many BI systems Movement toward specialized BI packages Digital dashboard displays key information tailored to an individual 2-44 22
IT Support for Business Intelligence 2-45 IT Support for Business Intelligence Business Intelligence Knowledge Base http://businessintelligence.ittoolbox.co m Business Intelligence.com www.businessintelligence.com i Business Intelligence Evaluation Center www.bievaluation.com 2-46 23
INTEGRATED COLLABORATION ENVIRONMENTS (ICEs) ICE environment in which virtual teams do their work Virtual team when team members are located in varied geographical locations 2-47 INTEGRATED COLLABORATION ENVIRONMENTS (ICEs) Start with e-mail and get more advanced Workflow system facilitates automation of business processes (value chain implementation) i Workflow steps, from beginning to end, required for a business process 2-48 24
INTEGRATED COLLABORATION ENVIRONMENTS (ICEs) Knowledge management (KM) system supports capturing, organization, and dissemination of knowledge (know-how) Avoids reinventing the wheel Social network system links you to people you know, and from there, people they know Referral service 2-49 Strategic & Competitive Opportunities with ICEs Joint ventures on large projects within an industry Collaborative preferred provider relationships Sharing knowledge Making the most of contacts 2-50 25
IT Support for ICEs Presence awareness determines if person is immediately reachable Peer-to-peer collaboration software communicate and share files in real time without central server Social network systems 2-51 IT Support for ICEs TYPE Collaboration Workflow Document Management Peer to Peer Knowledge Management Social Network EXAMPLE LiveMeeting (www.microsoft.com) Metastorm (www.metastorm.com) FileNet (www.filenet.com) Groove (www.groove.net) IBM Knowledge (www.ibm.com) Linkedin (www.linkedin.com) 26