MAJOR BUSINESS INITIATIVES

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2. Chapter 2 MAJOR BUSINESS INITIATIVES Gaining Competitive Advantage with IT

3. 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.

4. 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 ICEs and describe their strategic and competitive opportunities and IT support.

5. 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

6. 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

7. 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?

8. 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

9. INTRODUCTION • Major business initiatives that need IT • Customer relationship management (CRM) • Supply chain management (SCM) • Business intelligence (BI) • Integrated collaboration environments (ICE)

10. 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)

11. 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

12. PORTER’S FIVE FORCES MODEL

13. 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

14. 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

15. 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

16. Supplier Power

17. 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

18. 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

19. 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

20. 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?

21. 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

22. VALUE CHAINS

23. VALUE CHAINS • Primary value processes (along bottom) – creates, delivers, markets, and sells products and services • Support value processes (along top) – support primary value processes

24. Identifying Processes that Add Value • Talbott – premier necktie manufacturer • Value-added process – information gathered by surveying customers • Manufacturing high quality • Purchasing quality materials

25. Identifying Processes that Add Value

26. 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

27. Identifying Processes that Reduce Value

28. Value Chain Summary • Gathers quantifiable information from customers • Identifies value-added and value-reducing processes • Increases effectiveness of decision making

29. 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

30. SUPPLY CHAIN MANAGEMENT

31. 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

32. Strategic & Competitive Opportunities with SCM • Fulfillment – right quantity of parts at right time • Logistics – transportation costs low • Production – production lines run smoothly

33. Strategic & Competitive Opportunities with SCM • Revenue and profit – no sales are lost because of stock-outs • Spend – minimizing costs of purchases of material

34. IT Support for SCM • Previously specialized providers (i2, Manugistics, etc) • Now dominated by enterprise software providers • SAP • Oracle • PeopleSoft

35. 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

36. 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

37. CUSTOMER RELATIONSHIP MANAGEMENT • Sales force automation (SFA) systems – track all steps in sales process

38. 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

39. 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

40. IT Support for CRM

41. 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

42. 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

43. 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

44. BUSINESS INTELLIGENCE

45. 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

46. 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)

47. IT Support for Business Intelligence • Web supports many BI systems • Movement toward specialized BI packages • Digital dashboard – displays key information tailored to an individual

48. IT Support for Business Intelligence

49. 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

50. INTEGRATED COLLABORATION ENVIRONMENTS (ICEs) • ICE – environment in which virtual teams do their work • Virtual team – when team members are located in varied geographical locations