chapter 3 effects of it on strategy and...

1

1

Chapter 2.

Strategic Use of Information

Resources

Jason C. H. Chen, Ph.D.

Professor of MIS

School of Business Administration

Gonzaga University

Spokane, WA 99258

[email protected] John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

File name on your group work

• Please name your group files as follows:

• mbacup-G1-Swimming in the VCPool with

PlentyofFish (.pptx or .docx)

• Other group, please change G1 to your

designated group#.

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices 3

Learning Objectives

• List the identifying factors of the eras of information

usage.

• Know what makes an information resource valuable.

• Explain how information resources are used

strategically in context of the 5-forces model.

• Understand how information resources can be used to

alter the value chain.

• Explain the importance of strategic alliances.

• Know the risks of information resources.

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Real World Example

• Zara aligns its __________________ strategy

with its _________ strategy.

• The system links demand to manufacturing

and distribution.

• Customers visit up to 17 times per year to

check on new items that may have arrived.

• Limited products lead customers to

immediately purchase products they like.

• Zara’s business strategy leads to a loyal and

satisfied customer base.

information system

business


Real World Example (Cont.)

• The POS system sends daily updates to Zara’s

headquarters.

• Managers report to designers what sold and what

customers wanted but couldn’t find.

• The ___________ is used to determine inventory

management.

• New designs can be ordered twice a week.

• The entire process is automated so that new

designs and products can be created quickly.

• Zara uses its ___________ resources to sustain its

advantages over competitors

information

information


Discussion Questions

• Q4

• It has been said that there are no sustainable

competitive advantages can be gained from IT

other than the capability of the IT organization

itself. Do you agree or disagree? Defend your

position.

• As the chapter discusses, sustainable advantage

is hard to come by. Just about any advantage

gained by a company seems to be copied by

another at some point in the future.

2


Discussion Questions - Answer

• Those who agree (i.e., IT does not provide S.A.) with this statement might argue that even the capability of the IT organization is not a sustainable advantage because people come and go, they can be bought by another organization as a move to create the capability elsewhere, and their skills and knowledge atrophy over time, when new capabilities arise. Witness IT organizations who excelled at managing mainframe applications, who are now struggling to keep up with web-based applications.

• Those who disagree (i.e., IT provides S.A.) with this statement might argue that the key to sustaining any advantage comes from the way all business resources are organized and used, and ultimately that comes down to how the managers and the people are able to perform.


What is the

“Competitive Advantage”?

• A competitive advantage is a benefit derived from

something a company does or has that its customers

want and its competitors cannot (or choose not to)

match.

• If a company can sustain its competitive advantage,

the company will succeed in its industry – how?

• Two types of people lead a company to succeed

– Those know how to innovate the enterprise

– Those know how to execute their strategy onto the

enterprise using IS/IT.


9

Sustainable Competitive Advantages

• Any sustainable competitive advantages?

• How can an organization sustain its competitive advantage?

• Firms may create/improve their competitive advantages only if they:

– have ________ to learn,

– employ ________ _________ approach • With the service economy accounting for over 70 percent of GDP in

OECD (Organization for Economic Co-operation and Development) countries, service firms are becoming increasingly competitive with revenue management (RM) and pricing becoming central in their focus for sustaining long term profitability (and competitive advantage).

–

capacity

revenue management

learning to learn and learning to change (life-long learning environment)


Co-Creating IT and Business Strategy

• Information is increasingly a core component of the

product or service offered by the firm.

• IT strategy is ________ strategy – they cannot be

created without each other.

• Some company’s main product is information

(financial services).

• Q: Is FedEx is a package delivering company?

– Y/N (and Why?)

– FedEx can not function without ____ even though

they are primarily a package delivering company.

• Other companies such as Walmart, UPS, or Zipcar

business

IT


What is Business Model?

• A business model is a set of planned activities (sometimes referred to as business processes) designed to result in a profit in a marketplace.

Source: E-Commerce: business, technology, society, Laudon and Traver, A/W N

• The business model is at the center of the business plan.

• An e-commerce business model aims to use and leverage the unique qualities of the Internet and the www.


Why New Models?

• We need some new models

– for how we go about exploring IT for

competitive advantage,

– for IT infrastructure how we create it and

manage it

– for how we acquire, manage and deploy the

skills that are needed to run that infrastructure

N

– Profitability (making money)

3


Business Model vs.

Revenue Model

• Business model is the architectural configuration of

the components of transactions designed to exploit

business opportunities.

N

• Revenue model refers to “the _______ ways in

which a business model enables revenue

___________.”

• Revenue mechanism is a key component of the

business model because it provides a sustainable

financial source for the business’ effort of innovation

(Afuah, 2004).

specific

generation


Business Model Revenue Model

Value _________ Value ____________

It describes the way in

which a company

enables transactions

that create value for

all participants,

including partners,

suppliers and

customers.

It can be realized through a

combination of

- subscription fees,

- advertising fees,

- transactional income

(e.g., fixed transactional

fees, referral fees,

fixed/variable commissions,

etc)

Business vs. Revenue Model

creation appropriation


Revenue Management

• If you are interested in

the issues of RM

• International Journal of

Revenue Management

• http://www.inderscience.

com/ijrm


EVOLUTION OF INFORMATION

RESOURCES


Evolution Of Information Resources

• IS strategy from the 1960s to the 1990s was

driven by internal organizational needs

– Lower existing transaction costs

– Provide support for managers by collecting and distributing

information

– Redesign business processes

• In the 2010 era IS strategy was driven by

______ IT platforms and new capabilities

– A new evolution of applications, processes, and strategic

opportunities

social


Information Resources

• The term information resources is defined as the available data, technology, people, and processes available to perform business processes and tasks.

• Organizations have moved from an “_______ model” of the 1960’s to a “______ creation and ______ business model” of the 2010’s.

• Companies seek to utilize those technologies that give them competitive advantage.

• Maximizing the effectiveness of the firm’s business strategy requires the general manager to identify and use information resources.

• Figure 2.1 shows this change.

efficiency value social

4


Era I

1960s

Era II

1970s

Era III

1980s

Era IV

1990s

Era V

2000+

Era VI

2010+

Primary

role of IT Efficiency

Automate

existing

paper-based

processes

Effectiveness

Solve problems

and create

opportunities

Strategic

Increase

individual

and group

effectiveness

Strategic

Transform

industry/

organization

___________

Create

collaborative

partnerships

____________

Community

and social

business

Justify IT

expenditures

ROI Increasing

productivity

and better

decision quality

Competitive

position

Competitive

position

Adding value Creating

relationships

Target of

systems

Organization

Organization/

group

Individual

manager/

group

Business

processes

ecosystem

Customer/

supplier

ecosystem

Customer/

employee

supplier

ecosystem

Information

models

Application

specific

Data driven User driven Business driven Knowledge

driven

People driven (or

relationship

driven)

Dominate

technology Mainframe,

“centralized

intelligence”

Minicomputer,

Mostly

“centralized

intelligence”

Microcomputer,

“decentralized

intelligence”

Client Server,

“distributed

intelligence”

Internet, global

“ubiquitous

intelligence”

Social platforms,

Social networks,

mobile, cloud

Basis of

value Scarcity Scarcity Scarcity Plentitude Plentitude Plentitude

Underlying

economics

Economics of

information

bundled with

economics of

things

Economics of

information

bundled with

economics of

things

Economics of

information

bundled with

economics of

things

Economics of

information

separated

from

economics of

things

Economics of

information

separated

from

economics of

things

Economics of

relationships

bundled with

economics of

information

Value creation

Figure 2.1 – Mission statements of computer companies

Value creation


Figure 2.2 Information Resources

Type of Information Resource Definition Example

Anything that can be used by a firm in its processes for creating, producing

and/or offering its products (goods or services)

- IS infrastructure Base foundation of the IT portfolio

shared through the firm

Hardware, software, network, data components,

proprietary technology, web-based services

- Information repository Data that is logically related and

organized in a structured form

accessible and able for decision

making purposes.

Critical information about customers that can be

used to gain strategic advantage. Much of this

information is increasingly available on the

web.

Something that is learned or developed over time in order for the firm to

create, produce or offer it products in IT assets

- Technical skill Ability applied to designing,

developing and implementing

information systems

Proficiency in systems analysis and design;

programming skills

- IT management skills Ability to managing IT function and

IT projects

Being knowledgeable about business processes

and managing systems to support them;

evaluating technology options; envisioning

creative IS solutions to business problems

- Relationship skills Ability of IS specialists to work with

parties outside the IS department.

Spanning: having a good relationship between

IT and business managers

Externally-forced: have a good relationship

with an outsourcing vendor

_________

_________

IT Asset

IT Capability


Advantages of Information Resource

• Information resource appropriation:

– Determining where a resource’s value lies and how it can be

improved in a firm’s favor.

– The attributes of information resources that impact the value

make it possible to create and sustain competitive advantage

(i.e. Zara).

• Information resource distribution across firms:

– Early adopters may experience a competitive advantage from

using an information resource. (______________Advantage)

– The experience gained may lead to inequities between firms.

– Different experiences with a resource creates value, and a

create strategic advantage.

First Mover


Advantages of Information Resource (Cont.)

• Mobility of Information resource:

– Reliance on the individual skills of IT professional

– Risky as key individuals will leave the firm, taking their

experience with them.

– Development of unique knowledge-sharing processes, and

creation of an organizational memory.

• Then

– Q: How and what do we need to sustain organization’s

competitive advantage in terms of using information

resource (software)?

– A: _________________________________

Business Intelligence (e.g.,

Knowledge Management Systems)


Network Externalities

• Definition - The phenomenon whereby a service becomes more valuable as ______ people use it, thereby encouraging ever-increasing numbers of adopters.

– Network _______

• While the word-of-mouth method is often more influential in the beginning, analysis may play a significant role later in the cycle. In other words, you may adopt a service initially because someone you know uses it; later, you may adopt a service because "everyone" uses.

– IT Role?

– Network Externality offers a reason for value derived from plentitude (Eras IV, V & VI)

more

effects


Virtual Companies (Portable Computing)

A Virtual Company is an Organization composed of several Business Partners that Uses

Information ___________ to ___________ People, Assets, Ideas, Costs, and Resources

for the purpose of producing a product or service.

Technology Link/Share

Virtual Companies are Adaptable and Opportunity- Exploiting Organizations Providing World-Class

Excellence in Their Competencies and Technologies.

5


Characteristics of Virtual Companies

Borderless

Opportunism

Adaptability

Trust-Based

Excellence

Technology

Six Characteristics

of Virtual Companies

N John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

26

HOW CAN INFORMATION

RESOURCES BE USED

STRATEGICALLY?


Striving for Competitive Advantage

• ______ level: Industry & Competitive

Analysis

– Competitive Forces Model

– Competitive Strategy

– D’Aveni’s Hypercompetition Model (7-Ss)

• _______ level

– Value-Chain Analysis

Firm

Business


Porter’s Five Forces Model

• According to Porter, there are five competitive

forces in any industry, and the attractiveness of the

industry depends on the strength of each force.

• Under the perspective of market structure, Porter’s

competitive forces model has been broadly adopted

as the underpinning for investigating the effect of

information technology on the relationships

between suppliers, customers, and other potential

threats.


PORTER’S FIVE COMPETITIVE

FORCES MODEL

THE FIRM INDUSTRY

COMPETITORS

NEW

MARKET

ENTRANTS

SUPPLIERS

SUBSTITUTE

PRODUCTS

& SERVICES

CUSTOMERS

Threats

Bargaining power

N Dr. Chen, The Trends of the Information Systems Technology TM -29

•Switching cost •Access to distribution channels •Economies of scale

•Redefine products and services •Improve price/performance

•Selection of suppler •Threat of backward integration

•Buyer selection •Switching costs •Differentiation

•Cost-effectiveness

•Market access •Differentiation of product or service


Competitive Force IT Influence on Competitive Force

Threat of New

Entrants

Zara’s IT supports its tightly-knit group of designers, market specialists, production managers

and production planners. New entrants are unlikely to provide IT to support relationships that

have been built over time. Further it has a rich information repository about customers that

would be hard to replicate.

Bargaining

Power of Buyers

With its constant infusion of new products, buyers are drawn to Zara stores. Zara boasts more than 11,000

new designs a year, whereas competitors typically offer only 2,000 – 4,000. Further, because of the low

inventory that the Zara stores stock, the regulars buy products they like when they see them because they are

likely to be gone the next time they visit the store. More recently Zara has employed laser technology to

measure 10,000 women volunteers so that it can add the measurements of ‘real’ customers into its

information repositories. This means that the new products will be more likely to fit Zara customers.

Bargaining

Power of

Suppliers

Its computer-controlled cutting machine cuts up to 1000 layers at a time. It then sends the cut materials to

suppliers who sew the pieces together. The suppliers’ work is relatively simple and many suppliers can do

the sewing. Thus, the pool of suppliers is expanded and Zara has greater flexibility in choosing the sewing

companies. Further, because Zara dyes 50% of the fabric in its plant, it is less dependent on suppliers and can

respond more quickly to mid-season changes in customer color preferences.

Threat of

Substitute

Products

Industry competitors long marketed the desire of durable, classic lines. Zara forces on meeting customer

preferences for trendy, low-cost fashion. It has the highest sales per square foot of any of its competitors. It

does so with virtually no advertising and only 10% of stock is unsold. It keeps its inventory levels very low

and offers new products at an amazing pace for the industry (i.e., 15 days from idea to shelves). Zara has

extremely efficient manufacturing and distribution operations.

Industrial

Competitors

Zara offers extremely fashionable lines that are only expected to last for approximately 10

wears. It offers trendy, appealing apparel at a hard-to-beat price.

Figure 2.4 Application of five competitive forces model for Zara.

6


The Five Forces Model and IS

• The Five Forces Model provides a way to think about how information resources can create competitive advantage.

• Using Porter’s Model, General Managers can:

– Identify key sources of competition they face.

– Recognize uses of information resources to enhance their competitive position against competitive threats

– Consider likely changes in competitive threats over time

N


PORTER’S FIVE COMPETITIVE

FORCES MODEL

THE FIRM INDUSTRY

COMPETITORS

NEW

MARKET

ENTRANTS

SUPPLIERS

SUBSTITUTE

PRODUCTS

& SERVICES

CUSTOMERS

Threats

Bargaining power

N Dr. Chen, The Trends of the Information Systems Technology TM -32

•Cost-effectiveness

•Market access •Differentiation of product or service

Internal Forces: 1.customer focus 2.communication 3.core competencies 4.complexity 5.Quality

Other forces should be considered in the e-Age: 1. Digitalization 2. Globalization 3. Deregulation/ liberalization


Porter’s Value Chain Model

• The value chain model highlights specific activities (i.e. create, deliver, and support a company’s product or service) in the business where competitive strategies can be best applied and where information systems are most likely to have a strategic impact.

• Therefore, the value chain model can be employed to identify specific, critical leverage points where a firm can use IT most effectively to enhance its competitive position.


(Value)

N

Figure 2.5 Process View of the Firm: The Value Chain

Two broad categories:

Primary activities – relate directly to the value created in a product or service.

Support activities – make it possible for the primary activities to exist and remain coordinated


The Value System (Fig 2.6)

• Value chain analysis can be extended beyond the company to include other firms in the industry, such as suppliers and customers, in a “value system” analysis.

• Much of the advantage of supply chain management comes from understanding how information is used within each value chain of the system.

• This can lead to the formation of entire new businesses designed to change the information component of value-added activities.


36

Figure 2.6: The Value System: Interconnecting relationships between organizations

Upstream

value

Firm

value

Downstream

value

N

7


New Forces in Today’s Economy • Overcapacity and hypercompetition.

– Overcapacity is 25% pharmaceuticals, 30% chemicals, 35% automobiles

– Leads to falling prices and margins, mergers, and company failures

• Ascendant power of customers. – Customer shortage – Price transparency

• Ascendant power of distributors over

manufacturers.

• Growth of digitalization and the Internet as major sources of efficiency and profitability.

• Proliferation of channels and media.

• Globalization and global interdependence. John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Customer

centric

______ are the customers?

_______are the customers?

Their __________ habits.

What they need/want?

How many they need/want?

When they need/want?

How to reach them?

Demands Products

E-BUSINESS

BUSINESS FOCUS

•SCM

•CRM

•BPR

•ERP

Who

Where purchasing


WHY CRM?

• In this competitive age when product differentiation is difficult, CRM is one of the most valuable assets a company can acquire.

• The sooner a company embraces CRM the better off it will be and the harder it will be for competitors to steal loyal and devoted customers.

• CRM is more than just “Marketing” (what else?)


CUSTOMER RELATIONSHIP

MANAGEMENT’S EXPLOSIVE GROWTH

CRM Business Drivers


BASICS OF SUPPLY CHAIN

• Organizations must embrace technologies that can

effectively manage supply chains

Involvement

(integration) John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

FIVE BASIC SUPPLY CHAIN

MANAGEMENT COMPONENTS

Plan Deliver Source Make Return

8


INFORMATION TECHNOLOGY’S

ROLE IN THE SUPPLY CHAIN

• IT’s primary role is to create integrations or tight process and

information linkages between functions within a firm


Information Resources Strategy:

The Strategic Landscape

• Managers confront elements that influence the

competitive environment.

• Slim tolerance for error requires managers take

multiple view of the strategic landscape, such as:

– First view - Porter’s five competitive forces

model.

– Second view - Porter’s value chain.

– Third view

• focuses on the types of IS resources needed (Resource-

Based View).


45

The Resource-Based View

• The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources.

– Determining whether a firm’s strategy has created _____ .

• Two subsets of information resources have been identified:

– Those that enable firms to ______ competitive advantage (initially rare and valuable resources were the communities many companies implemented using social IT. )

– Those that enable firms to ______ competitive advantage over the long-term (resources must be difficult to transfer or relatively immobile and need to continue to innovate and to protect against resource imitation, substitution, or transfer.)

attain

sustain

value


Porter’s Model/Value

Chain

Resource-Based

View (RBV)

Competitive

Advantage

(CA)

Argues that aspects of the

firm’s industry create

sources of CA.

Maintains that CA

comes from the

information and other

resources at the firm

Focus (what

adds value to

the firm)

Firm’s activities _________ that firm

can manage and create

value

Porter’s Model vs. Resource-Based View

Resources


Social Capital Theory

• Social capital

– is the sum of the actual and potential resources embedded within,

available through, and derived from the network of relationships

possessed by an individual or social unit.

– The focus on the theory is not on managing individuals, but rather

managing relationships.

• The value from networks may be derived in one of three

interrelated ways

– structural: pattern of relationships in the network (who is connected

to whom)

– relational: nature of relationships among members in the network

(how do connected people interact)

– cognitive: the way people think about things in the network (how do

the connected people think).

47 John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

48

• More to be discussed on the topic of

“Strategic IT Resources”

9


STRATEGIC ALLIANCES


Strategic Alliances

• An interorganizational relationship that affords one or

more companies in the relationship a strategic

advantage.

– E.g., the alliance between Zynga and Facebook helped Zynga

benefit from the revenue resulting from its gamers on

Facebook community.

• IS can be the platform upon which a strategic alliance

functions.

– E.g., The alliance between Delta and e-Travel helped Delta

reduce agency reservation fees and offered e-Travel new

corporate leads.

• Linking value chains through SCM is another way

firms build an IT-facilitated strategic alliance.


Aligning IS strategy with Business

Strategy

• Using multiple approaches to evaluating the strategic landscape is helpful in determining strategic opportunities.

• Here, we look at three such approaches:

– Porter’s five forces model of the competitive advantage of firms

– Porter’s value chain model of internal organizational operations

– and strategic option generator (results in nine possible major options to secure a competitive advantage)

N

Wiseman’s theory of strategic thrusts


Wiseman’s theory of strategic thrusts

and strategic option generator

1. What is our strategic target?

2. What strategic thrust can be used against the target?

3. What strategic mode can be used?

offensive or defensive

4. What direction of thrust can be used? usage or provision

5. What IS skills can we use?

processing/storage/transmission

Suppliers Customers Competitors

Differen-

tiation

Cost

Innovation

I. Major options to secure a

competitive advantage II. Option Generator

Results in nine possible major options

to secure a competitive advantage.


Types of Strategic Alliances

• ____________: a new strategy whereby companies

cooperate and compete at the same time with companies

in their value net.

– Co-opetition is the strategy for creating the best possible

outcome for a business by optimally combining competition

and cooperation.

– e.g, Covisint and General Motors, Ford, and DaimlerChrysler.

• Value net includes a company and its competitors and

complementors, as well as its customers and suppliers,

and the interactions among all of them.

– Complementor is a company whose product or service is

used in conjunction with a particular product or service to

make a more useful set for the customer.

Co-opetition


Summary of Key Strategy Frameworks

Framework Key Idea Usefulness in Information Systems

Discussions

Porter’s generic

strategies

framework

Firms achieve

competitive advantage

through cost leadership,

differentiation, or

focus.

Understanding which strategy is chosen

by a firm is critical to choosing IS to

complement that strategy.

D’Aveni’s

hypercompetition

model

Speed and aggressive

moves and counter-

moves by a firm

create

competitive advantage.

The 7-S’s give the manager suggestions

on what moves and counter moves to

make and IS are critical to achieve the

speed needed for these moves.

Brandenberg and

Nalebuff’s

co-opetition model

Companies cooperate

and compete at the

same time.

Being cooperative and competitive at the

same time requires IS that can manage

these two roles.

10


Social Capital Theory

• Social capital

– is the sum of the actual and potential resources embedded within,

available through, and derived from the network of relationships

possessed by an individual or social unit.

– The focus on the theory is not on managing individuals, but

rather managing _____________.

• The value from networks may be derived in one of

three interrelated ways

– _________: pattern of relationships in the network (who is

connected to whom)

– _________: nature of relationships among members in the

network (how do connected people interact)

– ________: the way people think about things in the network (how

do the connected people think). 55

structural

relational

cognitive

relationships


Co-Creating IT and Business Strategy

• Information is increasingly a core component of the

product or service offered by the firm.

• IT strategy is ________ strategy – they cannot be

created without each other.

• Some company’s main product is information

(financial services).

• Is FedEx is a package delivering company?

– Y/N (and Why?)

– FedEx can not function without ____ even though

they are primarily a package delivering company.

business

IT


-10 -5 0 5 10

0

50

100

150

200

250

300

Time of market introduction relative to competition (months)

Pro

fits

rela

tive t

o c

om

peti

tio

ns (

%)

Relationship between profits and time

of market introduction


Keen’s Six-Stage Competitive Advantage

Model

Stimulus for action

First-mover expansion moves Competitor catch-up moves

N

Commoditization

First major move

Customer acceptance


When to Perform Activities

• First Movers

Advantages

• Build brand recognition

• Control scarce resources

• Establish networks

• Early Economies-of-Scale

Disadvantages

• Newer technology

• Higher development costs

• Reverse engineering by

competitors

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices 60 Copyright 2010 John Wiley & Sons, Inc. 60

RISKS

11


Potential Risks

There are many potential risks that a firm faces when attempting to use IT to outpace their competition.

• Awakening a sleeping giant – a large competitor with deeper pockets may be nudged into implementing IS with even better features

• Demonstrating bad timing – sometimes customers are not ready to use the technology designed to gain strategic advantage

• Implementing IS poorly – information systems that fail because they are poorly implemented

• Failing to deliver what users want – systems that don’t meet the firm’s target market likely to fail

• Web-based alternative removes advantages – consider risk of losing any advantage obtained by an information resource that later becomes available as a service on the web

• Running afoul of the law – Using IS strategically may promote litigation if the IS results in the violation of laws or regulations.


62

Summary • Using IS for strategic advantage requires more than

just knowing the technology.

• Remember that not just the local competition is a

factor in success but the 5 competitive forces model

reminds us of other issues.

• Value chain analysis show us how IS add value to the

primary activity of a business.

• Know the risks associated with using IS to gain

strategic advantage.


End of Chapter 2


Mini Case 2-2: ZIPCAR

• This is an interesting, short case about how

a new type of rental car company is able to

operate in a completely new business

model, as compared to other rental car

companies, and embrace Web 2.0

technologies to gain further competitive

advantage.


Questions

1. Analyze the business model of Zipcar using Information

Systems Strategy Triangle.

2. Discuss the synergy between the business strategy of

Zipcar and information technology.

3. Are there any network externalities in the workings of

Zipcar? If so, do they add value? How?

4. As the CEO of Zipcar, what would you do to sustain a competitive advantage?

5. Is the ZIPCAR case related to “Hypercompetition

Model”? What are they (in terms of 7S)?

65 John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

66

1. Analyze the business model of Zipcar using Information Systems Strategy Triangle.

12


Information System Strategy Triangle

Business (Firm)

Strategy

Organizational Strategy IS/IT Strategy

N


Information System Strategy Triangle for

ZIP CAR

Business (Firm)

Strategy

Organizational Strategy IS/IT Strategy

N

1. Innovation (w/ new business model)

2. New Market and Revenue Increase

1. Small staff with little

human interaction

2. Online community

(Zipsters )

3. E-Business organization (Car reservations were for a

specific pick up time and

location around the city, often

in neighborhoods)

1. Internet

2. Wireless and Social

Networking technologies

(e.g., RFID, GPS, and

Zipsters)


2. Discuss the synergy between the business strategy of Zipcar and information technology.

• Ans: There is tremendous synergy between Zipcars business and IT strategy.

• Zipcar is heavily dependent upon an automated process, and supports social networking of its clients, so that they can freely provide feedback on the company and its products and services.

• IT was not only the key enabler of this business strategy (e.g., business model) but also was a facilitator in creating a buzz and encouraging community development around the concept

• IT completely supports what Zipcar is trying to accomplish.


3. Are there any network externalities in the workings of Zipcar? If so, do they add value? How?

• Through their use of social networking they provide value to the customer by providing an open exchange of ideas, and feedback to Zipcar.

• Network Externalities: Definition - The phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters.

– Network effects

• While the word-of-mouth method is often more influential in the beginning, analysis may play a significant role later in the cycle. In other words, you may adopt a service initially because someone you know uses it; later, you may adopt a service because "everyone" uses.

– IT Role?


4. As the CEO of Zipcar, what would you do to sustain a competitive advantage?

• Continue to innovate through the use of IT and by listening to customer feedback on the social network sites. Look for strategic partnerships with suppliers or other potential providers of services that Zipcar could leverage to improve its service or add extra value.


Hypercompetition model

• #5 Is the ZIPCAR case related to

“Hypercompetition Model”?

• What are they (in terms of 7s)?

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chapter 3 effects of it on strategy and...

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