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Chapter 2. Major Business Initiatives. STUDENT LEARNING OUTCOMES. Describe how to use Porter’s Five Forces Model to evaluate the attractiveness of an industry. Describe the role of value chains in identifying value-added and value-reducing processes.
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Chapter 2 Major Business Initiatives
STUDENT LEARNING OUTCOMES • Describe how to use Porter’s Five Forces Model to evaluate the attractiveness of an industry. • Describe the role of value chains in identifying value-added and value-reducing processes. • Define SCM systems and describe their strategic and competitive opportunities and IT support.
STUDENT LEARNING OUTCOMES • Define CRM systems and describe their strategic and competitive opportunities and IT support. • Define BI systems and describe their strategic and competitive opportunities and IT support. • Define e-collaboration and describe its strategic and competitive opportunities and IT support.
Business Intelligence Is Key to the Success of the Miami Dolphins • Professional sports is very much a business • Find great players and coaches • Work with ticket sales, merchandise sales, concession sales, and stadium events
Business Intelligence Is Key to the Success of the Miami Dolphins • Ticket sales are key • Dolphins 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
Business Intelligence Is Key to the Success of the Miami Dolphins • Class poll… • How does this help with customer relationship management? • Do you receive marketing material from pro team? Whom? • Top-line or bottom-line initiative?
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
INTRODUCTION • Major business initiatives that need IT • Customer relationship management (CRM) • Supply chain management (SCM) • Business intelligence (BI) • E-collaboration
INTRODUCTION • Back to strategy… • Top-line versus bottom-line (Chapter 1) • Run-Grow-Transform framework (Chapter 1) • Porter’s Five Forces Model (Here) • Value chains (Here)
PORTER’S FIVE FORCES MODEL • Five Forces Model – helps determine the relative attractiveness of an industry and includes • Buyer power • Supplier power • Threat of substitute products and services • Threat of new entrants • Rivalry among existing competitors
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
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
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
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
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 must provide to enter market • ATMs, online banking, etc
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
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?
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
VALUE CHAINS • Primary value processes (along bottom) – creates, delivers, markets, and sells products and services • Support value processes (along top) – support primary value processes
Identifying Processes that Add Value • Talbott – premier necktie manufacturer • Value-added process – information gathered by surveying customers • Manufacturing high quality • Purchasing quality materials
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
Value Chain Summary • Gathers quantifiable information from customers • Identifies value-added and value-reducing processes • Increases effectiveness of decision making
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
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
Strategic & Competitive Opportunities with SCM • Fulfillment – right quantity of parts at right time • Logistics – transportation costs low • Production – production lines run smoothly
Strategic & Competitive Opportunities with SCM • Revenue and profit – no sales are lost because of stock-outs • Spend – minimizing costs of purchases of material
IT Support for SCM • Previously specialized providers (i2, Manugistics, etc) • Now dominated by enterprise software providers • SAP • Oracle • PeopleSoft
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
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
CUSTOMER RELATIONSHIP MANAGEMENT • Sales force automation (SFA) systems – track all steps in sales process
Strategic & Competitive Opportunities with CRM • More effective marketing campaigns • Efficient sales process • Superior after-sale service and support • Treat customers better • Tailor offerings in response to needs
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
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
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
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
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
Strategic and Competitive Opportunities with BI • Corporate performance management • Optimizing customer relations • Traditional decision support • Management reporting of BI • Information right time, location, and form (personal information dimensions)
IT Support for Business Intelligence • Web supports many BI systems • Movement toward specialized BI packages • Digital dashboard – displays key information tailored to an individual
IT Support for Business Intelligence • Business Intelligence Knowledge Base – http://businessintelligence.ittoolbox.com • Business Intelligence.com – www.businessintelligence.com • Business Intelligence Evaluation Center – www.bievaluation.com
E-COLLABORATION • E-collaboration – technology for • Work activities • Knowledge management • Social networking • Learning • ICE – environment in which virtual teams do their work • Virtual team – when team members are located in varied geographical locations
E-COLLABORATION • Start with e-mail and get more advanced • Workflow system – facilitates automation of business processes (value chain implementation) • Workflow – steps, from beginning to end, required for a business process