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InformationSystemsforCompetitiveAdvantage,InformationManagementChapter6,Thischapterfocusesonhowinformationsystems(IS)supportcompetitivestrategyandhowinformationsystemscancreatecompetitiveadvantages.,ChapterPreview,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,Organizationgoalsandobjectivesaredeterminedbycompetitivestrategy.Competitivestrategydeterminesinformationsystemstructure,features,andfunctions.,HowDoesOrganizationalStrategyDetermineInformationSystemsStructure?,Fig3-1OrganizationalStrategyDeterminesInformationSystems,OrganizationalStrategyDeterminesInformationSystems,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,Fivecompetitiveforcesdetermineindustryprofitability:bargainingpowerofcustomers,threatofsubstitutions,bargainingpowerofsuppliers,threatofnewentrants,rivalryamongexistingfirms.,FiveForcesModel,Intensityofeachforcedeterminescharacteristicsoftheindustry,howprofitableitis,andhowsustainablethatprofitabilitywillbe.Assessinganindustrystructurebasedonfivequestions:Howmuchbargainingpowerdocustomershave?Howmuchofathreatdosubstitutionproductsorservicespose?Howmuchbargainingpowerdosuppliershave?Howgreatisthethreatofnewcompetitorsenteringthemarketplace?Howgreatistherivalryamongexistingfirms?,FiveForcesModel,PortersFiveForcesModelofIndustryStructure,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,Firmsengageinoneoffourcompetitivestrategies:CostleaderacrossawideindustryDifferentiateitsproductsacrossawideindustryCostleaderinafocusedindustrysegmentDifferentiateitsproductinafocusedindustrysegment,PortersCompetitiveStrategyModel,Tobeeffective,organizationgoals,objectives,culture,andactivitiesmustbeconsistentwithorganizationstrategy.,PortersFourCompetitiveStrategies,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,CompetitivestrategyimplementedbycreatingvalueValueamountofmoneyacustomeriswillingtopayforaresource,product,orserviceMargindifferencebetweenvalueanactivitygeneratesandcostofactivityValuechainanetworkofvalue-creatingactivitiesPrimaryactivitiesSupportactivities,ValueChain,BicycleMakersValueChain,Inboundlogisticsreceiving,handlingrawmaterialsandotherinputsValueinparts,timerequiredtocontactvendors,maintainingrelationshipswithvendors,orderingparts,receivingshipment,andsoforthOperationstransformorassemblematerialsintofinishedproductsOutboundlogisticsdeliverfinishedproductstocustomersMarketingandsalescreatemarketingstrategiesandsellproductsorservicestocustomersServicesafter-salecustomersupport,PrimaryActivitiesintheValueChain,SummaryofValueChainPrimaryActivities,Contributeindirectlytoproduction,sale,andserviceofproductProcurementfindingvendors,settingupcontractualarrangements,andnegotiatingpricesTechnologydevelopmentresearchanddevelopment,developingnewtechniques,methods,andproceduresHumanresourcesrecruiting,compensation,evaluation,andtrainingoffull-timeandpart-timeemployeesFirminfrastructuregeneralmanagement,finance,accounting,legal,andgovernmentaffairs,SupportActivitiesintheValueChain,Linkagesaretheinteractionsacrossthevalueactivities.Ex:Manufacturingsystemsuselinkagestoreduceinventorycosts,salesforecaststoplanproduction;productionplantodeterminerawmaterialsneeds;materialneedstoschedulepurchases.Endresultisjust-in-timeinventory,whichreducesinventorysizesandcosts.BusinessprocessdesignOrganizationsshouldnotautomateorimproveexistingfunctionalsystems.Rather,theyshouldcreatenew,moreefficientbusinessprocessesthatintegrateactivitiesofalldepartmentsinvolvedinavaluechain.,ValueChainLinkages,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,Businessprocessnetworkofactivitiesthatgeneratevaluebytransforminginputsintooutputs.Costofabusinessprocessiscostofinputsplusthecostofactivities.Marginofthebusinessprocessequalsthevalueoftheoutputsminusthecost.Activitytransformsinputresourcesintooutputresources.Resourcesflowbetweenoramongactivities.Facilitiesstoreresources;somefacilities,suchasinventories,storephysicalitems.,HowDoBusinessProcessesGenerateValue?,AnAlternateProcessforBicycleManufacturer,NoticethatactivitiesgetdataresourcesfromdatabasesandputdataintodatabasesBusinessprocessesvaryincostandeffectiveness.Infact,thestreamliningofbusinessprocessestoincreasemargin(addvalue,reducecosts,orboth)iskeytocompetitiveadvantage.Exampleofusingalinkageacrossbusinessprocessestoimproveprocessmargin:Queryingbothdatabasesallowspurchasingdepartmenttomakedecisionsonrawmaterialsquantitiesandcustomerdemand.Byusingthisdata,purchasingcanreducesizeofrawmaterialsinventory,reducingproductioncostsandthusaddingmargintothevaluechain.,CompareTwoBusinessProcessesForBicycleManufacturer,ImprovedMaterialOrderingProcess,Keytoacompanyscompetitiveadvantageistoincreasethemarginofitsproductsbyaddingvalue,reducingcosts,orboth.Businessprocessredesignhelpsabusinessstreamlineitsactivitiesinordertoincreaseitsmargins.Mostdifficultpartofprocessredesignisassociatedwithemployeeresistance.,BusinessProcessSummary,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Whatisthecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,OperationsValueChainsforBicycleRentalCompanies,High-ServiceBusinessBikeRental,Organizationsanalyzetheirindustryandchooseacompetitivestrategy.Giventhatstrategy,theydesignbusinessprocessesthatspanvalue-generatingactivities.Thoseprocessesdeterminescopeandrequirementsofeachorganizationsinformationsystems.,summary,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Howdoesanalysisofindustrystructuredeterminecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,StudyQuestions,CompetitiveTechniques,Competitiveadvantageviaproducts:Creatingnewproductsorservices,Enhancingexistingproductsorservices,Differentiatingtheirproductsandservicesfromthoseoftheircompetitors.Informationsystemscanhelpcreateacompetitiveadvantagebybeingpartoftheproductorbyprovidingsupporttotheproduct.,TwoWaystoRespondtotheFiveCompetitiveForces,InformationSystemsCreateCompetitiveAdvantagesasProductorSupport,Lockincustomersviahighswitchingcostsmakeittooexpensiveforcustomertoswitchtoacompetitor.LockinsuppliersbeeasytoconnecttoandworkwithCreateentrybarriersmakeitdifficultandexpensivefornewcompetitiontoenterthemarket.Establishallianceswithotherorganizationsestablishstandards,promoteproductawarenessandneeds,developmarketsize,reducepurchasingcosts,andprovideotherbenefitsReducecostsenablesreducingpricesand/ortoincreasingprofitability.Increasedprofitabilitymeansmorecashtofundfurtherinfrastructuredevelopmentandgreatercompetitiveadvantage.,GainingCompetitiveAdvantagebyUsingBusinessProcesses,ABC,Inc,anactualcompany,createdacompetitiveadvantageinshippingindustryby:SuperiorcustomerserviceMakingiteasyforcustomerstobusinesswithminimizingdataentry:Drop-downlists,automaticfill-ins,contactlistsforcustomersMinimizingdata-entryerrorsFollowingslideshowssomeoftheWebpagesofABCsinformationsystem.,HowDoesanActualCompanyUseIStoCreateCompetitiveAdvantages?,ABC,IncWebPagetoSelectRecipientfromCustomerRecords,ABC,IncWebPagetoSelectContactfromCustomerRecords,Figure3-17,PreparationofShippingLabels,ABCsinformationsystemhelpsthecompanycreateacompetitiveadvantage:Enhancesitsexistingservicesmakingiteasyforthecustomertouseitssystem,andreducingerrors.Differentiatesitsservicefromitscompetitorswhodonthaveasimilarservicetoprovidetocustomers.Providesnewservicesforcustomersthatcompetitorsdontprovide.Locksincustomersintoitssystembasedonthebenefitstheyreceivefromit.RaisesbarrierstomarketentryReducescosts,HowDoesThisSystemCreateaCompetitiveAdvantage?,Q1Howdoesorganizationalstrategydetermineinformationsystemsstructure?Q2Whatfiveforcesdetermineindustrystructure?Q3Howdoesanalysisofindustrystructuredeterminecompetitivestrategy?Q4Howdoescompetitivestrategydeterminevaluechainstructure?Q5Howdobusinessprocessesgeneratevalue?Q6Howdoescompetitivestrategydeterminebusinessprocessesandthestructureofinformationsystems?Q7Howdoinformationsystemsprovidecompetitiveadvantages?,Review,Digitaldividesegregates“haves”and“have-nots”UsingtheInternetisamatterofaccesstoknowledgeAdvantagesaccruetothosewhohaveeasyaccessDigitaldividebetweenthosewhohaveInternetaccessandthosewhodontDividedeepenseducation,income,socialdifferencesInternetaccessmightbeavailableatpublicplaces,but:NoteveryoneservedNotasconvenientashomeaccess,Guide:Digitaldivide,IntellectualcapitalresidesonInternetreadilyavailableBenefitsforbu
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