Strategy and

Information Systems

by David Kroenke

Using MIS 5e

Chapter 3

Chapter 3-2

“Where’s the Data?”

Buyers don’t communicate with operations

when negotiating with vendors

Buyers need data to look at prices and

costs of dealing with individual vendors

Need more data and people involved in

making negotiating deals

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Chapter 3-3

Study Questions

Q1: How does organizational strategy determine information systems structure?

Q2: What five forces determine industry structure?

Q3: How does analysis of industry structure determine competitive strategy?

Q4: How does competitive strategy determine value chain structure?

Q5: How do business processes generate value?

Q6: How does competitive strategy determine business processes and the structure of information systems?

Q7: How do information systems provide competitive advantages?

Q8: 2022?

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Chapter 3-4

Q1: How Does Organizational Strategy

Determine Information Systems Structure?

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Chapter 3-5

Q2: What Five Forces Determine

Industry Structure?

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Chapter 3-6

Q2: Five Forces at GearUp

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Chapter 3-7

Q3: How Does Analysis of Industry Structure

Determine Competitive Strategy?

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Porter’s Four Competitive Strategies

Chapter 3-8

GearUp’s Competitive Strategy

Low Cost/Focused

• Do everything to keep costs down

• Focus within sporting goods category

• Focus on buyers interested in special,

short-term sales

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Chapter 3-9

Ethics Guide: Yikes! Bikes

• You are the operations manager for Yikes! Bikes, a

manufacturer of high-end mountain bicycles.

• New owners plan to pursue lowest-cost vendor

strategy by importing low-cost, lower quality bikes

• New owners are not being honest with employees

about cutting jobs

• Say you might be promoted to new general

manager. Should you trust them?

Q: Are owners actions illegal? Unethical?

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Chapter 3-10

Q4: How Does Competitive Strategy

Determine Value Chain Structure?

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Chapter 3-11

Q4: Value Chain Structure?

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Chapter 3-12

Support Activities in the Value Chain

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Support Activity Description

Technology R & D, New Techniques,

Methods, Procedures

Procurement Raw Materials

Human Resources Training, Recruiting,

Compensation

Firm Infrastructure

General Management,

Finance, Accounting, Legal,

Government Affairs

Chapter 3-13

Using MIS In-Class 3: A Group Exercise

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1. Briefly visit each pair.

• www.sportsauthority.com vs. www.soccer.com

• www.target.com vs. www.sephora.com

• www.woot.com vs. www.amazon.com

• www.petco.com vs. www.healthyfoodforpets.com

• www.llbean.com vs. www.rei.com

2. Select two pairs from the list. For each pair of companies, answer the

following questions:

a. How do the companies’ market segments differ?

b. How do their competitive pressures differ?

c. How do their competitive strategies differ?

d. How is the “feel” of the content of their Web sites different?

e. How is the “feel” of the user interface of their Web sites different?

f. How could either company change its Web site to better accomplish its

competitive strategy?

g. Would the change you recommended in step f necessitate a change in

one or more of the company’s value chains? Explain.

Chapter 3-14

Q5: How Do Business Processes

Generate Value?

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Chapter 3-15

Improved Material Ordering Process

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Chapter 3-16

Q6: How Does Competitive Strategy Determine

Business Processes and the Structure of

Information Systems?

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Chapter 3-17

Q6: How Does Competitive Strategy

Determine Business Processes and the

Structure of Information Systems? (cont’d)

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Chapter 3-18

High-Service Bike Rental

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Chapter 3-19

Q6: Bottom Line

Organizations analyze their industry, then

choose a competitive strategy

Create business processes to span

value-generating activities to support

given strategy

Processes determine scope and

requirements of the information systems

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Chapter 3-20

Q7: How Do Information Systems Provide

Competitive Advantages?

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Principles of Competitive Advantage

Chapter 3-21

Competitive Advantage via Products

1. Create new products or services

2. Enhance existing products or services

3. Differentiate products or services

By cost

By quality

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Chapter 3-22

Competitive Advantage via Business

Processes

1. Lock in customers

Create high switching costs

2. Lock in suppliers

Make it easy to connect to and work with

your organization

3. Create entry barriers

Make it difficult and expensive for new

competition

4. Create better business processes to

establish alliances

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Chapter 3-23

How Does an Actual Company Use IS to

Create Competitive Advantages?

ABC, Inc. created competitive advantage in

shipping industry through:

• Superior customer service

• Ease of customer business use by minimizing data entry:

–Drop-down lists, automatic fill-ins, contact lists for customers

–Minimizing data-entry errors

Following slides show some Web pages of ABC’s information system.

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Chapter 3-24

Two Roles for Information Systems

Regarding Products

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Chapter 3-25

How Does an Actual Company Use IS to

Create Competitive Advantages?

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Chapter 3-26

ABC, Inc., Web Page to Specify Email

Notification

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Chapter 3-27

ABC, Inc., Web Page to Print a Shipping

Label

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Chapter 3-28

How Does This System Create a

Competitive Advantage?

• Enhances existing products

• Differentiates products

• Locks in customers

• Raises barriers to market entry

• Increases profit margins by decreasing

costs and decreasing errors

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Chapter 3-29

Q8 2022?

• Unlikely GearUp will exist

• New opportunities for IT-based organizations

Reduce medical costs by supporting

governmental functions, like Medicare and

related programs

Web-based services to track medical bills,

Medicare and supplemental insurance

payments, track unpaid bills

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Chapter 3-30

Guide: Limiting Access to Those Who

Have Access

• Digital divide segregates “haves” and “have-nots”

• Internet gives access to knowledge

• Advantages to those with easy access Divide deepens education, income, social

differences

• Internet access available at public places, but: Not everyone served

Not as convenient as home access

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Chapter 3-31

Benefits of Access

• Intellectual capital on Internet readily

available

• Benefits for businesses

Cheaper product customer support

Reduces warehousing costs

Reduces mailings costs

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Chapter 3-32

Digital Divide: Issues to Think About

• What groups of people in the United States are not connected to the Internet?

• Does it make sense for benefactors, such as Bill and Melinda Gates, to provide access to those in poverty?

• What keeps elderly from accessing the Internet?

• Should government help the elderly?

• What could be done to provide Internet access for poorly educated people?

• What role, if any, could local governments have? State? Federal? United Nations?

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Chapter 3-33

Digital Divide: Issues to Think About

(cont’d)

• If you are from outside the United States,

what is the connectivity situation in your

country?

• Is there a digital divide there?

• Do some countries have less connectivity

than others?

• What does this mean for their ability to

compete? What does this mean for citizens

of those countries?

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Chapter 3-34

Take Aways from Guide

• Knowledge grows exponentially—just like

capital

• Digital divide can create or worsen social

problems

• Businesses and government should explore

their social responsibilities with respect to

digital divide

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Chapter 3-35

Guide: Your Personal Competitive

Advantage

• Who will be your competitors when you seek

a job after graduating from college?

• What will be your competitive advantage in

the job market?

• What can you do before you graduate to

develop your competitive advantage?

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Chapter 3-36

Guide: Your Personal Competitive

Advantage (cont’d)

How could these concepts help you get and

keep a job?

• Switching costs?

• Differentiating products?

• Creating barriers?

• Establishing alliances?

• Reducing costs, increasing revenues?

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Chapter 3-37

Active Review

Q1: How does organizational strategy determine information

systems structure?

Q2: What five forces determine industry structure?

Q3: How does analysis of industry structure determine

competitive strategy?

Q4: How does competitive strategy determine value chain

structure?

Q5: How do business processes generate value?

Q6: How does competitive strategy determine business

processes and the structure of information systems?

Q7: How do information systems provide competitive

advantages?

Q8: 2022?

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Chapter 3-38

BOSU Case Study

• Analyze the five competitive forces for Bosu’s market.

• Visit www.bosu.com. What appears to be Bosu’s competitive strategy? Explain your answer.

• Explain the nature of the five primary value chain activities for Bosu.

• Review the principles of competitive advantage in Figure 3-8. What information systems can Bosu create to enhance its product or differentiate it from existing and emerging competition?

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Chapter 3-39

BOSU Case Study

•What information systems can Bosu

develop to create barriers to entry to the

competition?

•What information system can Bosu develop

to lock in customers?

•What information systems can Bosu

develop to establish alliances?

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