ISM 50 - Business Information SystemsLecture 4Instructor: John MusacchioUC Santa CruzOctober 5, 2010AnnouncementsOffice Hour Change John E2 557 Tuesdays4:15-5:15 and Wednesday 1-2pmRead Frito Lay case and cash flow handout for Thursday.To be posted tomorrow: Group/Company Assignments Presentation/News Folio Assignments Assignment 2 (due 10/14)Student PresentationsTransaction Processing SystemsRecord and Process data resulting from business transactionsExample: Credit card trans. processing2 typesReal-timeBatch-ProcessingWhat is Business Process Reengineering?A fundamental rethinking and redesign of business processes Minor improvement to a business process is often called streamlining the business processBusiness Process ExampleCustomerSalesFinance InventoryControlWarehousingOrderTake OrderCreditCheckEnterOrderCheck StockPrint Packing listFind GoodsPrint InvoiceShipTell Mfg. to make orderBusiness FunctionsA Streamlined Business ProcessCustomerSalesFinance InventoryControlWarehousingOrderTake OrderCreditCheckEnterOrderCheck StockPrint Packing listFind GoodsPrint InvoiceShipTell Mfg. to make orderBusiness FunctionsAutomatic Credit CheckA Reengineered Business ProcessCustomerSalesFinance InventoryControlWarehousingOrderOn webPrint Packing listAnd invoiceFind GoodsShipInform Mfg. to replenish stockBusiness FunctionsAutomatic Credit CheckAutomatic Checking of StockRole of Information Systems in Business Process Reengineering?IS often enables complicated business processes be made more simple.IS doesnt always drive business process reengineering thoughPorter Competitive Model?What is it?A model to help understand the competitive environment in which a company operates.What are the 5 forces?Intra-Industry CompetitionBargaining power of SuppliersBargaining power of CustomersSubstitutesThreat of New Entrants.Porter Competitive ModelPorter Competitive Model(Identify the Industry and the Specific Market (Identify the Industry and the Specific Market Being Evaluated)Being Evaluated)Intra-Industry RivalryStrategic Business UnitBargainingPower of BuyersBargaining Power of SuppliersSubstitute Products and ServicesPotentialNew EntrantsIntra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges BargainingPower of BuyersBargaining Power of SuppliersSubstitute Products and ServicesPotentialNew Entrants Faculty Staff Equipment and Service Suppliers Alumni Foundations Governments IT Vendors Internet Distance Learning Books and Videotapes Computer-Based Training Company Education Programs Students Parents Businesses Employers Legislators Foreign Universities Shift in Strategy by Universities or Companies Porter Competitive ModelEducation Industry  UniversitiesPorter Model in Business PaperYou must include a Porter Model in your Business PaperFigureMake it look nice!Narrative analysis of the five forcesIdentify the industry.Identify the major buyers, suppliers, potential new entrants, substitutes, and inta-industry rivals.Discuss if and why these players put strong or weak competitive pressures on your business.Example: Usefulness of Porter ModelBob wants to start a dentist officeHowever, bob did not go to dental schoolBob will hire the dentist and other staffIs this a good model?Suppliers BuyersBobs Dentist OfficeNew EntrantsDentist (Alice) SubstitutesNo! Dentist has too much bargaining power, she could always go into business for herself.Example: Usefulness of Porter ModelSuppliers BuyersIntra-industry rivalsSBU: Alices Dentist OfficeOther local dentist officesNew EntrantsStaffHygienists SubstitutesAlternative Medicine? Dental School GraduatesDentists moving in from other regionsPublic in generalInsurance companiesThose wanting cosmetic dentistrySuppose Alice, who is a dentist, opens an officePrimary Porter StrategiesIn economics you will learn a market whereProduct is a commodityFirms all have the same production costsNew firms can enter market at no cost (free entry)profits are driven to zero.Consequently Firms need to Differentiate and/orAchieve Cost leadershipPrimary Porter StrategiesDifferentiationcustomer values the differences that you provide in products, services or capabilities.Costbecome the lowest cost provider. If this is the only primary strategy in the industry, over time there will only one ultimate winner.Porter Supporting StrategiesInnovationCan reduce costs and or differentiateGrowthHelp offset fixed costsEstablish reputable brand (differentiate)AlliancesAchieve more complete solution (differentiate)Integration of each others technology may reduce costsRules Regarding Strategies Must pick at least one of the two primary strategies. Can pick any combination o supporting strategies.Lets test the logic of this using Dell and Wal-Mart Stores.Dell, Inc. StrategiesPrimary Strategy:DifferentiationLeast CostSupporting Strategies:InnovationGrowthAlliancesWal-Mart StrategiesPrimary Strategy:Least CostDifferentiationSupporting Strategies:InnovationGrowthAlliancesWhat do Porter Models Have to do with IT?Any ideas?Porter 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