ISM 50 - Business Information SystemsLecture 5Instructor: John MusacchioUC Santa CruzOct 7, 2010AnnouncementsReadMesserschmitt Ch 2.3 (38-50)Messerschmitt Ch 3.1-3.3 (59-82)Due TuesdayFor those assigned News FolioFirst News Folio ArticleDue Next Thursday:Assignment 210/19:Business paper proposal duePorter Model and Porter Model and Information Systems:Information Systems:1. Build barriers to prevent a company from entering an industry?2. Build in costs that would make it difficult for a customer to switch to another supplier?3. Change the basis for competition within the industry?4. Change the balance of power between a company and its customers or suppliers?5. Provide the basis for new products and services?Porters Value Chain The Competitive Model deals with the environment within which a company competes The Value Chain addresses the flow of a product through the organization. It starts with the original idea in research and tracks its progress all the way to the customers.Generic Value ChainGeneric Value ChainINBOUNDLOGISTICSOPERATIONSOUTBOUNDLOGISTICS MARKETING AND SALES SERVICEPRIMARY ACTIVITIESPROCUREMENTTECHNOLOGY DEVELOPMENTHUMAN RESOURCE MANAGEMENTFIRM INFRASTRUCTURESUPPORT ACTIVITIESValue Chain Purpose A way of classifying a companies activities and how they help deliver value to customer. A framework for evaluating decisions like outsourcing, or deployment of IT.Things to Remember Regarding the Value Chain The ultimate objective is value to customer. As a new product and/or services moves through the value chain, maximize value-add activities minimize/ eliminate things that do not add value to customer. Functional departments must be sure to emphasize the ultimate goal of valueService Sales and Distribution Marketing Production and Manufacturing Engineering Research and DevelopmentSimple Value Chain for Manufacturing IndustryExamples of IT Supporting Value Chain Explicit knowledgeThat which can be written down Tacit KnowledgeThat which is can not be written downExample: How to Ride a bicycle. Much of a companys value is in its knowledgePatents, documentsTacit knowledge in employees headsOther terms in Chapter 2Other terms in Chapter 2 Knowledge-Creating CompanyCreate new business knowledgeDisseminate knowledge throughout company Knowledge Management SystemsFacilitate this disseminationOften, like a search engine on a company intranet. Aside: might a knowledge management system affect the negotiating power of employees?Chapter 2 Summary Porter models are important as a way to evaluate competitive environment and/or internal processes. Use Porter strategy terminology in discussing how an industry and companies in the industry compete.Frito Lay CaseFrito Lay Market: Salty Snacks Who owns Frito Lay Pepsico Competitors:P & G (Pringles)Anheuser Busch (Eagle Snacks)Borden (Wise Chips)Small Regionals Sales Force10000 peopleDrive around in trucks; sell and deliver snacksFrito Lay GrowthIn the 70s, double digitMid 80s slowed to single digit.Foreign Expansion? Not for Frito-Lay division, because PepsiCo has a separate international snacks div. Good:Several top brands BadMonolithic national approachFrito-Lay SegmentationSupermarketsup/down street Regionalized Micro-MarketingTargeted smaller brands to regional customers Hand Held ComputerSmall computer for each salesperson to cary aroundLog sale transaction data.Frito-Lay 3 stated objectivesReplace optical scanner system used now IBM will stop supporting it soon½ hour per day per driver paper-work reductionMarketing effectiveness Detailed sales data will help make regional marketing decisionsNegotiate with stores for more shelf spaceFrito-LayCost of Implementation:Data Center upgrade $1.2 millionMachinery in Truck 10000 X 3000 = $30 millioncomputers in distribution centers 5-10 million?45 Systems Development Professionals $70K x 45 = ~3 millionTOTAL: 45-55 millionFrito LayTo have a 10% Rate of Return, what would the benefits per year have to be? (for simplicity assume these benefits are received every year forever)~5 millionBreak into discussion groups of 3 or 4 What are the risks the project is facing? What is Frito Lay doing to mitigate these risks? Does your group think the potential benefits are worth the risks and costs? Why or why
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