Management Information Systems

Management Information Systems Islamia University of Bahawalpur Delivered by: Tasawar Javed Lecture 9

The Role of Information Technology Overview of Chapter

The Role of Information Technology The Strategic Context! The Business Strategy & Information strategy • IT can form an important part in the entire strategic planning process. For example • It can help provide new technological developments which open up growth opportunities • It can help a business cope with it’s competitive environment and market position • Strategic choice can be made easier through the use of IT • IT can help in strategy implementation • IT can help review performance and monitor controls

The Role of Information Technology On a SWOT analysis IS/IT can appear in any of the four quadrants and appropriate responses have to be made • Strength: A business has a very advanced IS/IT system that allows it to respond flexibility to orders while maintaining a low cost base • Weakness: An organization’s system is in disarray and customers are becoming irritated by its inability to deliver the proper goods on time.

The Role of Information Technology • Opportunities: set up new internet site that allows customers to buy over the web • Threats: A competitor has spent heavily on IS/IT and can offer very high levels of services as a result IT-The Strategic context MP3 sound compression, the internet and fast broadband connections have forced companies like Sony and EMI to reassess their music retailing strategies. Technology is a threat to these companies

IS/IT and Porter’s Five Forces To analyse the SWOT factors relating to IS/IT, it can be useful to consider how IS/IT can be used to counter Porter’s Five Forces so as to help an organization have a more comfortable existence than some of its components • Rivalry: use IT to reduce the effects of tough competition for example, by building strong relationship with customers and lowering costs. Cost leadership can be exploited by IT; IT used to support JIT system • Threat of New Entrant: sophisticated IT applications are expensive, slow to develop and technically challenging. All of these are barriers to entry. • Defensively and offensively

IS/IT and Porter’s Five Forces • Supplier Pressure: Use IT to find new suppliers. Use IT to automatically rotate orders between suppliers. Compare prices on the internet. • The degree to which switching costs apply and substitutes are available • The pressure of one or two dominant suppliers controlling prices • The products offered having a uniqueness of brand, technical performance or design not available elsewhere. • Customer pressure: use IT to improve customer service, for example, by allowing on line ordering • Threat of Substitute: use computer aided design and manufacturing to develop new products first.

IT in Generic Strategies • IT/IS and Porter’s Generic Strategies if it is known which strategy an organization is currently using to promote their products and or services, it should be possible to define a role for IS to enhance that strategy • Overall cost leadership • Driving down inventory levels, with the assistance of IT for supply chain planning and scheduling, can reduce costs • Differentiation • Where the differentiation is by customization, CAD can reduce costs effectively. Online info providing, online ordering process • Focus • IS/IT include providing access to customer information, trends and competitors so as to maximize competitive thrust and exclude competitors

IT in Generic Strategies • Consider how an estate agent could use IS/IT to improve its competitive position?

McFarlan’s Grid

McFarlan’s Strategic Grid • The strategic grid model is an IT specific model that can be used to assess the nature of the projects that the IT organization has in its portfolio with the aim of seeing how well that portfolio supports the operational and strategic interests of the firm. The X-axis: • The X axis represents impact of the project on IT strategy. One way of expressing what we mean by this is: what options does this project offer the firm by way of affecting one of Porter’s five forces in our favour? • Does it change the nature of competition in our market. • Does it enable us to offer completely new products and services, or enable us to substitute one of ours for one of someone else’s in the eyes of their customers?

McFarlan’s Strategic Grid The Y-axis: • The Y axis represents the impact of the project on IT operations. One way of expressing this is to say that projects that are high on this axis improve the efficiency or quality of our existing systems and business processes, or lower their costs. • McFarlan divided the grid into 4 quadrants • Support • Factory • Turnaround • Strategic

McFarlan’s Strategic Grid Support: • Low operational impact, low strategic impact. This quadrant is about local process improvements for individual users. Factory: • High operational impact, low strategic impact. This quadrant is about operational improvements that affect large portions of the firm, and are aimed at improving performance or decreasing cost. Turnaround: • Low operational impact, high strategic impact. This quadrant is about exploiting new technologies to provide strategic opportunities. Strategic: • High operational impact, high strategic impact. IT organizations that have most projects in this quadrant understand that IT can both improve core operations of the firm while simultaneously generating strategic options.

E-Business: The meaning and use of E-Business E-Commerce: is described as ‘all electronically mediated information exchanges between an organization and its external stakeholder’. E-Business: has been defined as the transformation of key business processes through the use of internet technologies. So E-commerce is a subset of e-business. The most generic description of e-commerce is trading on the internet, buying and selling products and services online. How the IS/IT in general can affect the competitive environment and an organizations ability to compete???????????

E-Business: The meaning and use of E-Business Three ways suggested by Porter: • New business might become possible. For example, auction sales and photo album sites • The industry structure can be changed. For example, in the music business it can be argued that the large CD publishers have less power because music can be self-published on the internet. • IS/IT can provide an organization with competitive advantage by providing new ways of operating. For example, airlines save money by encouraging internet booking. Buy and sell side E-commerce ‘buy side’ e-commerce focuses on transactions between a purchasing organization and its suppliers ‘sell side’ e-commerce focuses on transactions between a purchasing organizations and its customers

E-Business: The meaning and use of E-Business Categories of E-Business • B2B • Supermarket IS system automatically placing orders into supplier’s IS Systems • B2C • Selling over the internet – books, flights, music etc • C2B • Some internet sites display a selection of supplier’s offering from which the user can choose. A model that largely depends on the internet • C2C • Auction sites, such as ebay, putting consumers in touch with each other. Amazon does the same by offering second hand books. This model largely depends on the internet.

E-Business: The meaning and use of E-Business The stages of e-business: • Web presence • Static or dynamic web-pages but no transactions are carried out. Would show information about the organization, products, contact details, FAQs, Faster updates are possible than paper based • E-commerce • Buying and selling transactions using e-commerce. Might cut out middleman, but there is probably no fundamental change in the nature or the business • Integrated e-commerce • Integrated e-commerce. For example, information can be gathered about each customer’s buying habits. This can allow the organizations to target customers very precisely and to begin to predict demand • E-business • E-business is now fundamental to the business strategy and may well determine the business strategy

E-Business: The meaning and use of E-Business Benefits of E-business • Cost reduction eg lower overheads, cheaper procurement • Increased revenue • Better information control • Increased visibility • Enhanced customer services • Improved marketing • Market penetration • Enhance company’s CA Free home delivery and goods are ordered online from the customer

E-Business: The meaning and use of E-Business What should the super market do if it is out of stock of an ordered item, when it comes to be picked for packing? Solution: • Have standard options for the customer at ordering time: substitute with a similar product or omit item • Email customer (likely to be inefficient) • Phone customer (perhaps not welcomed by the customer)

E-Business: The meaning and use of E-Business Barriers to e-business • Technophobia • Security concerns • Set up costs • Running costs • Limited opportunities to exploit e-business • Limited IT resources in house • Customers not likely to be interested in e-business

Thank you!!! • Q&A

Management Information Systems