ITM 309 Identifying competitive advantages Competitive intelligence The process of gathering information about the competitive environment to improve the company s ability to succeed Competitive intelligence tools o Porters five forces Model evaluating industry attractiveness Threat of substitute products or services high when a lot of competitors Buyer power high when many choices to choose from Threat of new entrants high when it s easy for new entrants to enter Supplier power high when buyers have few choices low when many choices Suppliers our company customers buyers Competitive forces porter continued o Bargaining power of customers Wal Mart o Bargaining power of suppliers Automotive o Rivalry of competitors cost quality service o Threat of new entrants depended on entry barrier o Threat of substitutes substitute for palm pilot is a cell phone now Kodak and disposable cameras now digital cameras took their place Generic strategies creating a business focus o Organizations typically follow one of porter s generic strategies when entering a new Broad market low cast Wal Mart Broad market high cost Neiman Marcus market Narrow market low cost payless shoes Narrow market high cost Tiffany and Co Important to focus on only ONE strategy Using more than one doesn t work Corporate strategy is all about deciding how your firm will create economic value added Porter Business Strategy Basics Drivers of firm profability are o Industry structure Determines profitability of average competitor Analyze with the Five Forces Model o Sustainable competitive advantage Determines profitability relative to the average competitor Analyze using the Value Chain Model Value Creation o Once an organization chooses its strategy it can use tools such as the value chain to determine the success or failure of chosen strategy Business process a standardized set of activities that accomplish a specific task such as processing a customer s order Value chain Support activity HR behind the scenes activities support primary activities and primary activity creating value in the company essential in the eyes of customer that we do it right views an organization as a series of processes each of which adds value to the product or service for each customer IT can help o Build customer focused businesses o Reengineer business processes o Businesses become agile companies o Create virtual companies o Build knowledge creating companies Apple Case Merging Technology Business and Entertainment page 28 29 GO BACK AND READ 1 What might have happened to Apple if its top executives had not supported investment in I pods iphones or ipads a Would not have been as successful 2 Using porter s Five Force Model analyze Apple s buyer power and supplier power a When the I phone was first introduced they had high supplier power and buyers had low buyer power No other phone like it unique Eventually entry barrier came down and other phones became like it 3 Whish of porter s five forces did apple address through its introduction of the I phone a Other new products to support the iphone Partnering with other company s 4 Which generic strategies is apple following QUIZ on guest speakers Which of the following was NOT a reason of why the CIOS say they can t sleep at night Which of the following was not a business value creation opportunity noted by CIOS o U of M basketball team Which of the following CIOS are looking to hire MSU business majors who love IT o Lake trust credit union o Delta dental and Jackson national life o Sparrow health systems and farm bureau insurances Business Processes A group of business activities undertaken by an organization in pursuit of a common goal A typical business processes include receiving orders selling products delivering services distributing products or invoicing for services received A business process usually depends upon several business functions for support e g IT or personnel A business rarely operates in isolation it s interdependent Examining business processes o Customer facing process results in a product or service that is received by an organization s external customer o Business facing process invisible to external customer but essential to effective management of business Business process characteristics o The processes have internal and external users o A process is cross departmental o The processes occur across organizations o The processes are based on how work is done in the organization o Every process should be documented and fully understood by everyone participating in the process o Processes should be modeled to promote complete understanding The process steps are the activities the customer and store personnel do to complete the transaction Business process a standardized set of activities that accomplish a specific task such as processing a customer s order Business processes transform a set of inputs into a set of outputs goods or services for another person or process by using people and tools Readings discussion questions HBR Staple yourself to an order o Why do orders fall through the cracks o What is meant by functional silo o What 4 problems emerge in OMC Don t view as an entire system Overlapping responsibilities Top management details are invisible Customer s remote We aren t focused on the customer o What improvements are recommended Pg 168 169 Analyze the OMC graph the gaps from a customer perspective rather than an internal perspective System Focus Move across boundaries interfunctional programs and investments Role of IT Staple yourself to an order Political strategy I need executive involvement o Benefits on 171 EXAM Improve customer satisfaction Better team work Improve financial performance Work is done horizontally Functional silos get in the way of being functional in a horizontal manner Decision making o Reasons for the growth of decision making information systems People need to analyze large amounts of information People must make decisions quickly People must apply sophisticated analysis techniques such as modeling and forecasting to make good decisions People must protect the corporate asset of organizational information o Managerial decision making challenges Analyze large amounts of information Apply sophisticated analysis techniques Make decisions quickly o The six step decision making process 1 Problem identification 2 Data collection 3 Solution generation 4 Solution test 5 Solution selection 6 Solution implementation o Decision making and