Information Technology, Corporate Strategy, and Competitive Advantage

COMPETITIVE STRATEGIES AND NEW PROCESSES – FRAMEWORKS • ISSUES: • Corporate strategy • Information technology • APPROACHES: • Five - forces model • Value chain model • Transform processes • Long-term impacts Competitive Advantage Interlinked Value Chains TECHNOLOGY IMPACTS STRATEGY BY: 1. SUPPORTING COST AND DIFFERENTIATION STRATEGIES 2. SPAWNING ENTIRELY NEW BUSINESSES a) new business economically feasible b) created by new demand c) create new business within old d) information by-products 3. ALTERING INDUSTRY STRUCTURE MODIFIED 5-FORCES MODEL I. INTER-ORGANIZATIONAL NEW ENTRANTS/ COMPETITORS SUPPLIER STRATEGIC BUSINESS UNIT •COORDINATE SUPPLIER - TOYS ‘R US • CONTROL INVENTORY SHIPPING • RESPOND TO DEMAND (SELL-OFF LOSERS FAST NOTE: POSITIVE AND NEGATIVE LINKAGES/CONNECTIVITY •WARD OFF COMPETITION - DELTA • MAILING TO FREQUENT FLYERS MATCHING AND BEATING COMPETITION NEW PRODUCTS AND SERVICES CUSTOMER •LOCK IN CUSTOMER - AMERICAN HOSPITAL SUPPLY • ORDER ENTRY • BID PREPARATION - AIRLINES • FREQUENT FLYER - RED RIVER CONSTRUCTION • UNDERBID ON ALL CONTRACTS •EXPAND MARKET DEFINITION - JC PENNY • CREDIT CARD SERVICE FOR MOBIL & GULF - CITIBANK, MORGAN GUARANTY •TRANSACTION PROCESSORS 2. INTRA-ORGANIZATIONAL VALUE CHAIN MODEL SUPPORT ACTIVITIES { FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT MARGIN TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE PRIMARY ACTIVITIES Opportunities: - lower cost - add value - within individual value chain - through improved linkages MARGIN INTERLINKED VALUE CHAINS FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OUTBOUND LOGISTICS OPERATIONS MARKETING AND SALES SERVICE MARGIN POTENTIAL NEW ENTRANT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN PROCUREMENT PROCUREMENT INBOUND LOGISTICS FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT INBOUND LOGISTICS SERVICE OPERATIONS OUTBOUND LOGISTICS MARGIN MARKETING AND SALES PROCUREMENT SERVICE INBOUND LOGISTICS MARGIN YOU (A) SUPPLIER OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE MARGIN PROCUREMENT OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN CUSTOMER (B) FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT INBOUND LOGISTICS MARGIN SERVICE MARGIN OPPORTUNITY FOR NEW PRODUCTS AND SERVICES INTERDEPENDENCE OF ACTIVITIES BETWEEN VALUE CHAINS Value Chain A Value Chain B Inbound Logistics Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Operations Outbound Logistics Marketing & Sales Service EXAMPLE 1 FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE MARGIN POTENTIAL NEW ENTRANT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN PROCUREMENT PROCUREMENT INBOUND LOGISTICS FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT SERVICE INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARGIN MARKETING AND SALES PROCUREMENT SERVICE INBOUND LOGISTICS MARGIN OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES CUSTOMER SUPPLIER AMERICAN HOSPITAL SUPPLY (BAXTER) FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN SERVICE MARGIN OPPORTUNITY FOR NEW PRODUCTS AND SERVICES SERVICE MARGIN AMERICAN HOSPITAL SUPPLY (AHS) • SIMPLE STORY • Provided hospitals with direct data-entry capability • IMPLICATIONS • Raised barrier to entry • Locked in customer • Lowered clerical and inventory costs (customer and AHS) • Volume discounts • Better inventory control less stock-outs • Better production coordination reduce costs and improve service • Reduced data entry errors reduce costs and improve service • New activities: • Business consultants to hospitals • Marketing information data EXAMPLE 2 FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE MARGIN POTENTIAL NEW ENTRANT (COMPETITOR) FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SUPPLIER MARGIN PROCUREMENT PROCUREMENT INBOUND LOGISTICS FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT INBOUND LOGISTICS SERVICE OPERATIONS OUTBOUND LOGISTICS MARGIN PROCUREMENT MARKETING SERVICE AND SALES INBOUND LOGISTICS MARGIN Normal Frequent Flyers FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT OPERATIONS OUTBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES CUSTOMER DELTA AIR LINES INBOUND LOGISTICS MARKETING AND SALES MARGIN SERVICE MARGIN OPPORTUNITY FOR NEW PRODUCTS AND SERVICES SERVICE MARGIN AIRLINE RESERVATION SYSTEMS AND FREQUENT FLYER PROGRAMS • SIMPLE STORY: • Added incentive to fly on that airline • HISTORICAL ASIDE • "Big brother" concern • AIRLINE RESERVATION SYSTEM INITIAL BENEFITS: • “Lock you in” and generate revenue • Preferential screen display • OTHER IMPACTS increase profits • Much better data for Yield management • Special deals edge over competition • Against new competition protect revenues • Generate new revenues • INTERESTING ISSUE: Who is the "customer"? MANY OTHER EXAMPLES FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OUTBOUND LOGISTICS OPERATIONS MARKETING AND SALES SERVICE MARGIN POTENTIAL NEW ENTRANT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN PROCUREMENT PROCUREMENT INBOUND LOGISTICS FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT INBOUND LOGISTICS SERVICE OPERATIONS OUTBOUND LOGISTICS MARGIN MARKETING AND SALES PROCUREMENT SERVICE INBOUND LOGISTICS MARGIN SUPPLIER OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES CUSTOMER FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT MARGIN PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES MARGIN SERVICE MARGIN OPPORTUNITY FOR NEW PRODUCTS AND SERVICES SERVICE MARGIN SUMMARY • NEED TO EXPLORE NEW COMPETITIVE STRATEGIES AND PROCESSES • APPROACHES: INTERLINKED • Competitive forces (5-forces) VALUE CHAINS • Value chain analysis • Changes what work gets done and by whom • LONG-TERM IMPACTS ON COMPANY AND INDUSTRY • Support cost and differentiation strategies • Alters industry structure • Spawn entirely new businesses • NOTE INTERDEPENDENCE OF STRATEGY, TECHNOLOGY, AND ORGANIZATION