What’s Happening?!

1. What’s Happening?! Succeeded in making IT an integral part of the company’s business strategy. He had business management experience but no technology background. InformationWeek’s Chief of the Year Roy Dunbar, Eli Lilly CIO Was trained as a pharmacist, studies comparative religion and meditates daily. Spearheaded IT projects that speed drug research and production. Helped form a venture-fund subsidiary that incubates IT-driven business models. Was promoted to president of intercontinental operations.

2. What’s Happening!? First exam is currently scheduled for Feb. 3 (T) and Section I and II of the ATP are due on Feb. 5 (TH). A possible change would be to move the midterm exam to the following Tuesday, Feb. 10 with the understanding that it will mean that it will probably delay the return of the exams until Tuesday of the following week.

3. New Schedule • Feb. 3 (T) Strategic Option Generator and Roles, Roles and Relationships Concept (not on the exam) • Feb. 5 (TH) Redefine and/or Define Concept (not on the exam) • Section I and II due that day. • Midterm Exam clinic at 6 PM. • Feb. 10 (T) Midterm Exam covering Chapter 1 through 7 and course assignments.

4. ISM Toastmasters I have a schedule conflict today so we will not meet. We will either add another Thursday or pick a Tuesday to make up the loss session.

5. Oracle Industry Definition Database System and Enterprise Application Software Industry. Business Strategy Model: Product Strategy: Software categories, operating systems and processor categories. Customer Strategy: Categories of targeted customers. Market Strategy: Geographic Development Strategy: (in lieu of manufacturing) Sales/Distribution: Field sales force, Internet direct, Value-add resellers, retailers. Company Structure: Information Systems:

6. Computer Software Computer Software Application Software System Software General- Purpose Application Programs Application- Specific Programs System Management Programs System Development Programs • Business, Accounting & Finance Engineering ERP, SCM, CRM, etc. • Operating Systems Network Management Database Management Systems Utilities Performance & Security • Programming Languages Programming Editors CASE Packages MS Office Groupware Integrated Desktop • Packages

7. Intel Industry Definition Semiconductors is too broad. Microprocessors is too narrow. PC Component Industry Microprocessors Motherboards Network devices Memory Storage

9. Chapter 4 Summary Airline Industry Analysis

10. Airline Industry Evaluation • Understand the goals of the industry. • Examine the causes of financial difficulty. • Evaluate the environment using the Porter competitive model. • Assess the importance of IT. • Learn from successful company examples.

11. Poor Financial Performance Reasons • Wars and terrorist attacks • Operating cost increases • Aircraft fuel • Employee wages • Capital-intensive • Other airlines in bankruptcy proceedings resort to a cheap ticket strategy.

12. The Airline Industry • 3 Goals of the Airline Industry * Provide Public Service to Customers * Produce a Return to Stockholders * Function as Strategic Resource for the Country • Presidential Commission Conclusions Things that needed to be addressed for the US carriers to succeed domestically and in the global marketplace

13. Porter Competitive Model Airline Industry Analysis - North American Market • Aircraft Manufacturers • Aircraft Leasing Companies • Labor Unions • Food Service Companies • Fuel Companies • Airports • Local Transportation Service • FAA • IT Vendors Potential New Entrants • Foreign Carriers • Regional Carrier Start ups • Cargo Carrier Business Strategy Change Intra-Industry Rivalry SBU: American Airlines Rivals: United, Delta, US Air, Northwest, Southwest Bargaining Power of Suppliers Bargaining Power of Buyers • Travel Agents • Business Travelers • Federal Government • Pleasure Travelers • Charter Service • U.S. Military • Cargo and Mail • Alternate Travel Services • Fast Trains • Boats • Private Transportation • Videoconferencing • Groupware Substitute Products and Services Figure 4-2

14. Major Lessons of Successful Airlines • Southwest Airlines: Focus, focus and focus of business strategies Point-to-point route structure Least cost operations Good relationship with unions Strong company culture Impressive business leadership • Singapore Airlines: Strategic location in Asia Airline strategy is integral to the nation’s strategies Good IT infrastructure Strong Management Team

15. Importance of Information Technology to AA • Convenience to Customers. • Passenger Reservation System • 2. Knowledge of Customers. • Frequent Flyer Program • 3. Providing a foundation for other systems. • Passenger Reservation System • 4. Building a base for other businesses. • Sell use of systems or the actual systems

16. Possible Exam Questions! • How can the Porter Competitive Model be effectively used in writing our Analysis Term Papers? • Identify and explain which business strategies are most important to airlines.

17. Chapter 5 Introduction Using IS to Redefine Competitive Boundaries and Creating the Extended Enterprise

18. Networks – Crossing company Boundaries to Improve Results • Increase efficiency. Ex: JIT inventory • Increase effectiveness. Ex: Wal-Mart • Improve customer service. Ex: UPS • Enable creation of strategic alliances. Ex: Airline alliances like Star and Skyteam

19. Alliances – Providing Growth Opportunities Allow a company to compete more effectively by: • Providing access to new products or markets. • Improving the position of the enterprise in the current market. • Reducing time-to-market on new products. • Dramatically changing cost structures.

20. Electronic Data Interchange • A formalized computer network used to share critical business information. • Speeds orders and payments between alliance partners. • Reduces overhead that would be allocated to manually processing orders.

21. Email Enabled Applications • Not software applications, but business applications/processes. • Comparable to a less formalized EDI that may be used within an enterprise or across several different enterprises seamlessly. • More flexible than EDI in areas where information may not be easily normalized. Ex: Sun Microsystems travel reimbursements

22. The Internet Changes traditional business networks by connecting everyone, everywhere, all the time. Allows all other networking systems to be implemented quickly and relatively inexpensively.

23. Conclusions IS extends a company’s capabilities: • Builds inter-organizational systems. • Deals with business process changes involving customers, suppliers and business partners. • Establishes multiple forms of strategic business alliances.

24. Chapter 5 Information Systems Can Redefine Competitive Boundaries

25. Chapter Topics A. Interorganizational Systems B. Strategic Business Alliances C. Electronic Data Interchange (EDI) (extranets versus EDI?) With an added dose of globalization.

26. Chapter Questions • Which word—global, international or interdependent—best describes current markets, products and services, and business relationships? • Why is growth such an important part of business success? • What is an extended enterprise and why is it an important competitive consideration? (What terms are currently more commonly used to described an extended enterprise?) • What role does information technology play relative to an extended enterprise? • Have the physical limits of strategic alliances disappeared because of current network capabilities? • Do strategic alliances really work and if so, why?

27. Topic A Interorganizational Systems are defined as automated information systems shared by two or more companies. • Enhance business relationships. • Establish strategic alliances. • Gain efficiencies. • Gain effectiveness. • Lower cost of doing business.

28. Interorganizational System Goals • Efficiency • Effectiveness • Competitive Advantage

29. Competitive Advantage Advantage can be gained through better customer service that accrues from inter-organizational systems. Customer Satisfaction: • We are available. • We are interested in you. • We are responsive. • You can count on us. • We want to earn your trust and respect.

30. Topic B - Strategic Alliances How (why) do they work? • Companies bring strengths to the alliance table. • Alliances create long term advantages. • Alliances drive business growth. • Alliances often represent a difficult transition.

31. Strategic Alliances Why establish a strategic alliance? • To build a combined capability that makes it a stronger competitor. • Extended enterprise against the competitor’s extended enterprise. • Difficult, costly and risky to try to deal with the challenges of a global business.

32. Topic C - EDI Electronic Data Interchange (EDI) (Predecessor to extranets) Exchange of routine business transactions in a structured computer-processed format. Traditional applications included purchasing, pricing, scheduling, payments and financial reporting.

33. Why stay with an EDI system? • It is established and proven. • The network costs are not large enough to justify switching to an extranet approach. • There are other priorities within the organization.

34. EDI Examples Boeing • Parts Logistic System: Provides information regarding parts availability to support aircraft maintenance. • Links with contractors in Japan and U.S. Charles Schwab • Trading systems that connect to stock exchange systems.

35. EDI Value-Added Network Services Two major elements: • Telecommunications network. • EDI application translation support. Connects Trading partners: • Broad range of geographic locations. • Provides network management-multiple routing paths and security. (Would probably be called an ISP or ASP today)

36. The Benefits of a VAN (ISP or ASP) • Having 24-hour service on demand. • Gaining access to national and international networks to connect to trading partners. • Support for multiple telecommunications protocol conversions. • Interchange support for even a smaller number of transactions, since you only pay for the services that you actually use.

37. Boundaries? Customers? Suppliers? Support Service Providers? Business Partners? Industry Forces, Associations, Government? Mobile employees relative to the above? Across town? Throughout the state? Across multiple US regions? Encompassing the entire US? North America? Western Hemisphere? Multiple Continents? Total World?

38. Interorganizational Systems • Is this just another name for outsourcing? • Is there any difference between sending work from Santa Cruz to San Jose and sending it from Santa Cruz to Bombay? The trend is not new and may be overstated. According to Gartner, 10 per cent of info tech jobs with US based technology companies will be based in countries in emerging markets by the end of 2004. It is unlikely that the federal government will do anything to limit or ban outsourcing.

39. The Best Term? • Global • International • Interdependent

40. Globalization Drivers • Customers are global. • Channels are global. • The marketplace is global. • Products that travel.

41. The Internet • Provides the ability to slash transaction and partnering costs between companies. • It supports the ability to mesh information, data and processes with other entities to created a new infrastructure for creating successful customer relations. • This is a rising tide that doesn’t lift all boats. • Only the right business model backed by the right business strategies will lift a specific boat.

42. Toyota Diversification At a time when diversification is often suspect, Toyota, guided by a historical perspective, is moving into other areas such as prefab housing and especially telecommunications.

43. Toyota Perspective The company’s plan is driven by historical cycles dating to the 1700s that suggest that a single line of business rarely prospers for more than sixty years. “We are not arrogant enough to believe that the automobile business can be profitable perpetually.” In 2000 they achieved 10% of sales ($10 billion) to come from outside the auto and truck business. The waves of change are reflected in the dominant infrastructure of the time.

44. Prevailing Infrastructure 1800 Canals 1850 Railroads 1900 Highways 1950 Telecommunications

45. Interstate Highway System • Created the modern economy and reshaped the companies on the Fortune 500. • A major public works project involving 42,793 miles of pavement. • Bill signed by President Eisenhower on June 29, 1956.

46. Impact of Interstate Highway System • Lead to an America that was more mobile, less plagued by regional differences, and vastly wealthier than before. • Sold as a savior for rural America and declining urban core. • Instead it accelerated the trend toward suburanization. • Accelerated the transformation to chain restaurants, hotels, stores, chain everything. • The combination of the new highway system and shipping containers enabled overseas manufacturers and small domestic companies to get products to market faster than ever before.

47. Highway System Perspective • Federal funding of highways in the US began in 1916 but became significant in 1956. • Highways became a state versus federal issue. • Wealthy states built their own. Poorer states were unable to do so. • Southern states gained significant economic benefits from the federally funded highway system. • By eliminating its transportation disadvantages southern states attracted manufacturers, retailers and shipping companies. • Boom cities of the second half of 20th century did their growing along the lines determined by Interstate planners. Los Angeles, Atlanta, Dallas, San Jose, Denver, Phoenix and Las Vegas.

48. Impact of Interstate Internet Highway System • Lead to an America that was more mobile, less plagued by regional differences, and vastly wealthier than before. • Sold as a savior for rural America and declining urban core. • Instead it accelerated the trend toward suburanization. • Accelerated the transformation to chain restaurants, hotels, stores, chain everything. • The combination of the new highway system and shipping containers enabled overseas manufacturers and small domestic companies to get products to market faster than ever before.

49. Highway System Perspective • Federal funding of highways in the US began in 1916 but became significant in 1956. • Highways became a state versus federal issue. • Wealthy states built their own. Poorer states were unable to do so. • Southern states gained significant economic benefits from the federally funded highway system. • By eliminating its transportation disadvantages southern states attracted manufacturers, retailers and shipping companies. • Boom cities of the second half of 20th century did their growing along the lines determined by Interstate planners. Los Angeles, Atlanta, Dallas, San Jose, Denver, Phoenix and Las Vegas.

50. Necessary Questions • How does the Internet impact the structure of the company? • Is a networked enterprise a better vehicle to compete and succeed than a vertically integrated approach. • Does this dictate that a company needs to be smaller to be agile, flexible and responsive? • Can enough of the benefits of the Internet be realized through intranets and similar techniques?