Organisational strategy, Information Systems and Competitive Advantage (Chapter 3)

Question 1

What are the main components that help determine our organisational strategy and information system structure.

Answer 1

1. Industry structure - informs our value chain.
2. Competitive Strategty - determines the value chain.
3. Value chains - determine business processes
4. Business processes - determine our information systems.

Question 2

What determines the goals and objectives of our business?

How does this effect our IS?

Answer 2

Our competitive strategy will determine our goals and objectives.
Therefore it will effect the information system’s
- Structures
- Features
- Functions

Question 3

How do you determine a competitive strategy?

Answer 3

You need to analyse the industry structure to determine your strategy.

Question 4

What will our competitive strategy determine?

Answer 4

The value chain of a business as well as the business processes.

Question 5

What is competitive advantage?

Answer 5

It is a superiority gained by organisations when it can provide the same vale as it’s competitors through a lower price point. Or, providing a product/service that has greater value though differentiation.

It results from matching core competencies to the opportunities (found in the industry structure).

Question 6

What do you need to answer in your basic business plan?

Answer 6

1. Your ‘one liner’/ description for the company. Vision/ Mission statement.
2. What does your financial model show? How are you going to make money?
3. What are your risk mitigating milestones?
4. What are you uniquely qualified to succeed? What makes you unique in your market?

Question 7

What are the two ways to show uniqueness?

Answer 7

1. Smart and witty = cost and practicality
   E.g. Mazda and Hyundai
2. Bright and proud = Quality
   E.g. Mercedez and Audi

Question 8

What different one liners does a company usually have? Who are they supposed to engage?

Answer 8

1. Product description or value proposition - for customers.
2. Company description - for investors
3. Mission statement - for prospective employees

Question 9

What are 5 forces determine Industry structure?

Answer 9

Porter’s 5 forces:

1. Rivalry among existing organisations
2. Bargaining power for customers
3. Bargaining power of suppliers
4. Threat of substitutes
5. Threat of new entrants

Question 10

What do the 5 forces tell us?

Answer 10

Porter’s 5 forces are a way of looking at the competition and threats and how profitability works in any industry.

The intensity of each force ( strong or weak) determines the characteristics of the industry.

Allow you to position yourself strategically and try to limit some risks and see where opportunities exist.

Question 11

Define: Competition

Answer 11

A business relation in which two business parties compete to gain customers.

E.g. Toyota and Holden, Mazda and Hyundai

Question 12

Give an example of a strong and weak position for each force.

Answer 12

Bargaining power of customers
Weak- a students ability to change policies at university
Strong - Toyota when they buy paint for their cars
[Availability of substitutes, switching costs]

Threat of substitutes
Weak - Only one type of drug to help cure cancer
Strong - Frequent travellers choice of rental car
[Switching costs, customer loyalty, price, perceived benefits]

Bargaining power of suppliers
Weak - Grain farmers in a surplus year
Strong - Fruit farmers in a shortage year
[Availability of substitutes, relative size]

Threat of new entrants
Weak - New professional sporting team
Strong - New coffee stand
[Barriers to entry, capital requirements, other resources, switching costs, customer loyalty]

Rivalry
Weak - Australian Tax office (none)
Strong - Used car dealer
[Price, quality, innovation, marketing, switching costs, customer loyalty]

Question 13

What different competitive strategies are there?

Answer 13

COST LEADER

• Broad: Across the whole industry E.g. Aldi
• Narrow: Across an industry segment E.g. cheapest organic product
• most efficient ways

DIFFERENTIATION

• Broad: Across the whole industry E.g. Apple
• Narrow: Focused on an industry segment E.g. gopro
• most effective ways

Question 14

Define: Value chain

Define: Value

Answer 14

A value chain is a network of value creating activities.

Value is the amount of money that a customer is willing to pay for a resource/product/ service.

Question 15

What are the components of a value chain?

Answer 15

Primary activities

Support activities.

Linkages.

Question 16

Explain primary activities.

Answer 16

• Activities that relate directly to the production.
• Functions that involve the product.
• Add direct value
• Can calculate margins
  E.g. Marketing, Sales, operations, manufacturing, logistics.

Question 17

Explain support activities

Answer 17

• Functions that facilitate and assist the primary ones.
• Indirectly add value
• Often intangible and hard to calculate
• Things that involve the people or the space that the product sits in.
  E.g. Infrastructure, HR, accounting, procurement and technology

Question 18

Explain linkages

Answer 18

• Interactions across the value activities
• Sources of efficiencies
• Can readily be supported by information systems.
  E.g. Using sales forecasts to plan production schedule, and raw material purchasing. Resulting in just in time inventory.

Question 19

What is the most important part of a value chain in an information systems point of view?

Answer 19

LINKAGES - most value can be created here.

Question 20

Describe business process design and its functions.

How are information systems involved?

Answer 20

Business process design is about creating new systems and processes to integrate activities rather than fix old ones.

Business processes implement value chains.
Each value chain is supported by one or more business process.

Information systems can form part of the business processes or are used to support business processes.

Question 21

What two main ways can you gain competitive advantage?

Answer 21

Product implementations.

Process implementations.

Question 22

How do you gain competitive advantage through products?

Answer 22

1. Create new products or services
2. Enhance existing products or services
3. Differentiate products or services
   - Cost
   - Quality

Question 23

How do you gain competitive advantage through processes?

Answer 23

1. Lock in customers
   - Create high switching costs
   E.g. Flybys, frequent flyers
2. Lock in suppliers
   - Easy to connect and work with their organisations through contracts and networks.
   E.g. PR department and courier service or strategic alliances, partner alliances.
3. Create entry barriers.
   - Make it difficult for new competitors to enter the market.
   E.g. Price, rules, regulations.
4. Establish alliances
   - Promote product awareness, and create industry standards.
5. Reduce costs
   - To increase margins and therefore profitability

Question 24

Define: Margin

Answer 24

Margin = Value - Cost

Question 25

How do information systems provide competitive advantage?

Answer 25

They can save effort, time and money for both customer, business and networks/ ancillary businesses or partners.

Question 26

Give an example of how IS can provide competitive advantage.

Answer 26

Online stores information systems could maintain customer account data.

• This stores and collects data from customers for the business (adds value).
• IS saves customers time by remembering their name,./ home/ phone number and email address when filling out shipping details (adds value for customer)
• IS then generates labels for shipping product (saves time and adds value, also helps courier/shipping business)