Management Information Systems:

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Management

Information Systems:

Dr. Kamau G.G.

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Information System :

Concepts and Definitions

• Hardware

• Software

• Data

• Network

• Procedures

• People

Hardware

Software People

Data Application Application

An information system (IS) collects, processes, stores,

analyzes, and disseminates information for a specific

purpose “Application”.

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Chapter 2 3

Information System – Primary Purpose

• Data

• Elementary description of things, events, activities, and

transactions that are recorded, classified, and stored, but not organized to convey any specific meeting

• Information

• Data that has been organized so that they have meaning and value to the recipient

• Knowledge

• Information that has been organized and processed to convey understanding, experience and expertise as they apply to a current problem or activity

Collects data, processes it into information then converts

information into knowledge for a specific purpose.

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Information System – Classification By Organizational Structure

• Departmental IS

• Enterprise-Wide IS

• Inter-Organizational IS

An information system (IS) can span departments, business units and corporations.

Information systems are

usually connected by means

of electronic networks

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Chapter 2 5

Information System ^- Classification By Function (Department)

• Operations

• Accounting

• Finance

• Marketing

• Human resources

An information system (IS) support each department in a corporation.

Transaction Processing Systems (TPS): Automates routine and repetitive tasks that are critical to the

operation of the organization

Point-of-Sale (POS)

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Information System - Classification By Function (Department)

An information system (IS) support each department in

a corporation.

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Management Functions

• Get the job done

• On time

• Within budget

• Satisfactorily

• Using available resources

Planning

Devise short-range and long-range

plans and set goals to help achieve the plans

Organizing

How to use resources

Staffing Directing

Guiding employees to perform their work

Controlling

Monitoring progress towards goals

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Management Levels

• High level (strategic)

• Long-range view

• Planning

• Middle level (tactical)

• Carry out the plan

• Assemble the material

• Hire the resources

• Organize and staff

• Low level (operational)

• Supervisor

• Directing and controlling

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Management Levels

• Job titles

• Chief information officer (CIO)

• Director of information services

• Information resource manager

• MIS manager

• Comfortable with

• Computer technology

• Organization’s business

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Management Levels Interaction Among Employees

Traditional hierarchy

• High level manager issues directives to a group of middle level managers

• Each middle level manager issues directives to a group of low level managers

• Each low level manager supervises other

employees to see that the work is completed

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Chapter 2 11

Information System - Classification By Support Function

Operational Managers Data Workers Middle Managers

Senior Mgr

Executive Support System Executive Support System

Management Information System Management Information System Decision Support System

Decision Support System Intelligent Support Systems Intelligent Support Systems

Knowledge Management System Knowledge Management System Office Automation System

Office Automation System

Transaction Processing System Transaction Processing System

•5-year sales trend

•Profit Planning

•5-year budget forecasting

•Product development

•Sales Management

•Inventory Control

•Annual budget

•Production Scheduling

•Cost Analysis

•Pricing Analysis

•Simulation

•Pgm coding

•System support

•Word Processing

•Desktop Publishing

•Order Processing

•Fulfillment

•Material Movement

•A/R, A/P, GL

•Payroll

•POS

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Information System - Classification By Support Function

Supporting Supporting

Environment Environment

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Chapter 2 13

Transaction Processing System (TPS)

• TPS automates routine and repetitive tasks that are critical to the operation of the organization, such as

preparing a payroll, billing customers, Point-of-Sale and Warehouse operations.

• Data collected from this operation supports the MIS and DSS systems employed by Middle Management

• Computerizes the primary and most of the secondary activities on the Value Chain.

• Primary purpose to perform transactions and collect

data.

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Management Information Systems (MIS)

• These systems access, organize, summarize, and

displayed information for supporting routine decision making in the functional areas. Geared toward

middle managers, MIS are characterized mainly by their ability to produce periodic reports such as a

daily list of employees and the hours they work, or a monthly report of expenses as compared to a budget

• Typical uses would be in Replenishment, Pricing Analysis (Markdowns) and Sales Management

• Decisions supported are more structured.

• Primary purpose to process data into information

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Chapter 2 15

Decision Support Systems (DSS)

• These systems support complex non-routine decisions.

• Primary purpose to process data into information

• DSS systems are typically employed by tactical level management whose decisions and what-if analysis are less structured.

• This information system not only presents the results but also expands the information with alternatives.

• Some DSS methodologies

• Mathematical Modeling

• Simulation

• Queries

• What-If (OLAP-Cubes)

• Data mining

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DSS

Decision Support Systems

• Supplements an MIS

• Pulls information from variety of databases

• Interactive

• Nonroutine decision-making

• Model – mathematical representation of real- life system

• Simulation – using a computer model to reach

a decision about a real-life situation

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MIS vs. DSS

• MIS

• Planned reporting

• Standard, scheduled, structured, and routine

• Constrained by the organizational system

• DSS

• Decision making

• Unstructured and by request

• Immediate and friendly

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Intelligent Support Systems (ISS)

• Essentially, artificial intelligence (AI) these systems perform intelligent problem solving.

• One application of AI is expert systems. Expert systems (ESs) provide the stored knowledge of experts to nonexperts, so the latter can solve difficult or time-consuming problems.

These advisory systems differ from TPS, which centered on data, and from MIS and DSS, which concentrated on

processing information. With DSS, users make their decisions according to the information generated from the systems.

With ES, the system makes recommended decisions for the

users based on the built-in expertise and knowledge.

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Chapter 2 19

Executive Support Systems (ESS)

• ESS systems or Enterprise Information Systems (EIS) originally were implemented to support Senior management. These systems have been expanded to support other managers within the enterprise.

• At the senior management level they support Strategic activities which

deal with situations that significantly may change the manner in which

business is done.

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EIS

Executive Information Systems

• DSS for top-level managers

• How decisions effect entire organization

• Overall vision; company goals

• Long-term objectives

• Organizational structure

• Staffing and labor relations

• Crisis management

• Control of overall operations

• Access to information from external sources

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Chapter 2 21

Office Automation Systems (OAS)

• Electronic communication is only one aspect of what is now known as an office automation system (OAS). Other aspects include word processing systems , document

management systems and desktop publishing systems .

• OAS systems are predominantly used by clerical workers who support managers at all levels. Among clerical

workers, those who use, manipulate, or disseminate

information are referred to as data workers.

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Knowledge Management Systems (KMS)

• An additional level of staff support now exists between top and middle management. These are professional people,

such as financial and marketing analysts that act as advisors and assistants to both top and middle management. They are responsible for finding or developing new knowledge (External Content) for the organization and integrating it with existing knowledge (Internal Content).

• KMS that support these knowledge workers range from

Internet search engines and expert systems, to Web-based

computer-aided design and sophisticated data management

systems

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Chapter 2 23

People in organizations

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Expand our Scope to Include External Environments

• Upstream supply chain

• includes the organization’s first-tier suppliers and their suppliers

• Internal supply chain

• includes all the processes used by an organization in transforming the inputs of the suppliers to outputs

• Downstream supply chain

• includes all the processes involved in delivering the products to final customers

omponents of the Supply Chainomponents of the Supply Chain

A supply chain is a concept describing the flow of materials,

information, money, and services from raw material suppliers

through factories and warehouses to the end customers.

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Chapter 2 25

Expand our Scope to Include External Environments

^Continued

Components of the Supply ChainComponents of the Supply Chain

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Inter-Organizational Systems (IOS)

• IOS are systems that connect two or more organizations. These systems are common among business partners and play a major role in e-commerce, as well as in supply chain management

support.

• The first type of IT system that was developed in the 1980s to improve communications with business partners was electronic data interchange (EDI), which involved computer-to-

computer direct communication of standard business documents (such as purchase orders and order confirmations) between

business partners. These systems became the basis for

electronic markets , that later developed to electronic commerce .

• Web-based systems ( many using XML ) deliver business

applications via the Internet. Using browsers and the Internet,

people in different organizations communicate, collaborate,

access vast amounts of information, and run most of the

organization’s tasks and processes.

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Chapter 2 27

Inter-Organizational Systems (IOS)

Two or more organizations

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Information Systems Function

Information Infrastructure

• Hardware

• Software

• Networks & communication facilities

• Databases

• IS personnel

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Chapter 2 29

Information Architecture Classified by Hardware

• Mainframe Environment

• PC Environment

• PC-LAN Environment

• Distributed Computing Environment

• Client/server Environment

• Enterprise-wide Computing Environment

• Legacy systems

A common way to classify information architecture is by computing paradigms, which are the core of the

architecture .

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The Web Based IT Architectures

• The Internet

• Intranets

• Extranets

• Corporate Portals

• E-commerce Systems

Web-based systems refer to those applications or services that are resident on a server that is accessible using a Web browser. The only client-side software needed to access and execute these applications is a Web browser environment.

• Electronic Storefronts

• Electronic Markets

• Electronic Exchanges

• M-Commerce

• Enterprise Web

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Chapter 2 31

The Internet

• Sometimes called simply “the Net,” the Internet is a worldwide system of computer networks—a network of networks hence Internet, in which users at any one

computer can get information from any other computer

• The Internet uses a portion of the total resources of the currently existing public telecommunication networks.

Technically, what distinguishes the Internet is its use of

a set of protocols called TCP/IP (Transmission Control

Protocol/Internet Protocol).

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Intranets

• An intranet is the use of Web technologies to create a private network, usually within one enterprise.

• It is typically a complete LAN, or several intra-connected LANs

• Intranets are used for:

• work-group activities

• the distributed sharing of projects within the enterprise

• Controlled access to company financial documents

• use of knowledge management, research materials, online training, and other information that requires distribution within the

enterprise.

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Chapter 2 33

Extranets

• Connect several intranets via the Internet, by adding a security mechanism and some additional functionalities

• They form a larger virtual network that allows remote users ( such as business partners or mobile employees ) to securely connect over the Internet to the enterprise’s main

intranet.

• Extranets are also employed by two or more enterprises ( suppliers & buyers ) to share information in a controlled

fashion, and therefore they play a major role in the development of business-to-business electronic

commerce and Supply Chain systems.

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Corporate Portals

• Web sites that provide the gateway to corporate

information from a single point of access. They aggregate information and content from many files and present it to the user.

• Corporate portals also are used to personalize information for individual customers and for employees.

• Intranets and Extranets are usually combined with and

accessed via a corporate portal

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Chapter 2 35

E-commerce Systems

• Web-based systems that enable business transactions to be conducted seamlessly twenty-four hours a day,

seven days a week

• Some classifications of E-commerce systems are:

• B2C (Business to Consumer)

• B2B (Business to Business)

• B2E (Business to Employee)

• The major components of Web-based EC are:

• Electronic storefronts

• Electronic markets

• Mobile commerce

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Electronic Storefronts

• These are Web-equivalents of a physical store. Through the electronic storefront, an e-business can display and/or sell its products.

• The storefront may include electronic catalogs that contain descriptions, graphics, and possibly product reviews.

• They have following common features and functions:

• an E-catalog

• a shopping cart

• a checkout mechanism

• a payment processing feature

• a back office order fulfillment system

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Chapter 2 37

Electronic Markets

• Is a web-based network of interactions and relationships over which information, products, services, and payments are

exchanged. It is equivalent to a physical marketplace except is Web-based.

• The principal participants in marketplaces are: transaction handlers, buyers, brokers, and sellers.

• The means of interconnection vary among parties and can change from event to event, even between the same parties.

Electronic markets can reside in one company, where there is

either one seller and many buyers, or one buyer and many

sellers. These are referred to as private marketplaces .

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Electronic Exchanges

• A special form of electronic markets electronic

exchanges, are Web-based public marketplaces where many buyers and many sellers interact dynamically.

• Originally set as trading places for commodities,

electronic exchanges have emerged for all kinds of

products and services

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Chapter 2 39

M-Commerce – Mobile Computing

• M-commerce or Mobile commerce is commerce ( buying and selling of goods and services ) in a wireless environment, such as through wireless devices like cellular telephones and PDAs.

• M-commerce enables users to access the Internet

without needing to find a place to “plug” in their device.

• As this wireless environment expands, a pervasive

computing environment will develop, employed by

mobile employees and others, will change the way

business is transacted.

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Enterprise Web

• Is an open environment for managing and delivering Web applications. It combines services from different vendors in a technology layer that spans rival platforms and

business systems, creating a foundation for building applications at a lower cost.

• Applications, including business integration, collaboration, content management, identity management, and search, which work together via integrating technologies.

• The result is an environment that spans the entire

enterprise.

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Chapter 2 41

New Computing Environments

• Utility Computing

is computing that is as available, reliable, and secure as electricity, water services, and telephony. The vision behind utility

computing is to have computing resources flow like electricity on demand

from virtual utilities around the globe—always on and highly available, secure, efficiently metered, priced on a pay-as-you-use basis, dynamically scaled,

self-healing, and easy to manage.

• Subscription Computing

is a form of utility computing that puts the pieces of a computing platform together as services, rather than as a collection of separately purchased components.

• Grid Computing

employs networked systems to harness the unused processing cycles of all computers in that given network thus creating

powerful computing capabilities. Grid computing is already in limited use, for example the well-known grid-computing project SETI (Search for

Extraterrestrial Intelligence) @Home project. In this project, PC users worldwide donate unused processor cycles to help the search for signs of extraterrestrial life by analyzing signals coming from outer space.

• Pervasive Computing,

a future in which computation becomes part of the environment. Computation will be embedded in things, not in computers.

• Web services

are self-contained, self-describing business and consumer modular applications, delivered via the Internet, that users can select and combine through almost any device, ranging from PC to mobile phones.

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Managing Information Systems

• Information Systems (IS) have enormous strategic value so when they are not working even for a short time, an organization

cannot function. Furthermore, the Life Cycle Costs ( acquisition, operation, security, and maintenance ) of these systems is

considerable. Therefore, it is essential to manage them properly.

The planning, organizing, implementing, operating, and

controlling of the infrastructures and the organization’s portfolio of applications must be done with great skill.

• The responsibility for the management of information resources is divided between two organizational entities:

• The information systems department (ISD), which is a corporate entity

• the end users , who are scattered throughout the organization.

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Chapter 2 43

MANAGERIAL ISSUES

• The transition to e-business. Converting an organization to a networked-computing-based e-business may be a complicated process. The e-business requires a client/ server architecture, an intranet, an Internet connection, and e-commerce policy and strategy, all in the face of many unknowns and risks. However, in many organizations this potentially painful conversion may be the only way to succeed or even to survive. When to do it, how to do it, what the role of the enabling information technologies will be, and what the impacts will be of such a

conversion are major issues for organizations to consider.

• From legacy systems to client/server to intranets, corporate portals, and Web-based systems. A related major issue is whether and when and how to move from the legacy

systems to a Web-based client/server enterprise-wide architecture. While the general trend is toward Web-based client/server, there have been several unsuccessful transformations, and many unresolved issues regarding the implementation of these systems. The introduction of intranets seems to be much easier than that of other client/server applications. Yet, moving to any new architecture requires new infrastructure and a decision about what to do with the legacy systems, which may have a considerable impact on people, quality of work, and budget.

A major aspect is the introduction of wireless infrastructure.

• How to deal with the outsourcing and utility computing trends.

As opportunities for outsourcing (e.g., ASPs) are becoming cheaper, available, and viable, the concept becomes more attractive. In the not-so-distant future, we will see outsourcing in the form of utility computing. How much to outsource is a major managerial issue.

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MANAGERIAL ISSUES

^Continued

• How much infrastructure? Justifying information system applications is not an easy job due to the intangible benefits and the rapid changes in technologies that often make

systems obsolete. Justifying infrastructure is even more difficult since many users and applications share the infrastructure that will be used for several years in the future. This makes it almost impossible to quantify the benefits. Basic architecture is a necessity, but there are some options.

• The roles of the ISD and end users. The role of the ISD can be extremely important, yet top management frequently mistreats it. By constraining the ISD to technical duties, top management may jeopardize an organization’s entire future. However, it is not economically feasible for the ISD to develop and manage all IT applications in an

organization. End users play an important role in IT development and management. The end users know best what their information needs are and to what degree they are

fulfilled. Properly managed end-user computing is essential for the betterment of all organizations.

• Ethical issues. Systems developed by the ISD and maintained by end users may

introduce some ethical issues. The ISD’s major objective should be to build efficient and effective systems. But, such systems may invade the privacy of the users or create

advantages for certain individuals at the expense of others.

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Management

Information Systems,

4^th Edition 45

Strategy and Strategic Moves

• Strategy

• A plan designed to help an organization outperform its competitors

• A best response counteracting to the competitor’s reactions

• As a plan : a guide or course of action toward the goal and into the future

• As a pattern: consistency in behavior/decision over time

• As a positioning: determining the particular value proposition in a particular market segment

• As a perspective: a concept of shaping the business

• As a ploy: a specific maneuver intended to outwit an opponent

• Strategic Information Systems

• Information systems that help seize opportunities

• Can be developed from scratch, or they can evolve from existing ISs

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Management

Strategy and Strategic Moves (Cont.)

• Strategic advantage:

• Using a strategy to maximize strength/seek monopolistic rents

• Competitive advantage:

• The result of the use of a strategic advantage

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Management

4^th Edition 47

Achieving a Competitive Advantage

• Increase profits through increased market share/profit margin

• Innovation results in advantage

• Strategies that no one has tried before, or conducted more efficiently than others did

• Example: Dell using the Web to take customer

orders quicker than the competitors

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Management

Achieving a Competitive Advantage (Cont.)

Innovation leadership Product proliferation

Co-option

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Management

4^th Edition 49

Achieving a Competitive

Advantage (Cont.)

(50)

Management

• Lower costs results in lower price

• Economies of scale, and experience curve

• Bigger Market Share

• The spill-over effect of a common reputation/goodwill

• Implement automation to become more productive

• The Web has made this possible for many

Initiative #1: Reduce Costs

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Management

4^th Edition 51

• Patenting, ( rent protection enforced by the public orders, mandated monopoly)

• High capital of entering industry, high-level sunk cost

• Limit pricing/predatory pricing/raising cost for entry deterrence

• State Street, Inc. (Pension fund management business)

Initiative #2: Raise Barriers to

Market Entrants

(52)

Analysis of entry/exit barrier

Exit barrier

En try b ar rie r

low high

hig h lo w e.g., 蚵仔麵線

e.g., 石化 , 製藥 , 半導體 … etc

e.g., 祖傳祕方 $₤₡¥

e.g., 黑道

(53)

Management

4^th Edition 53

• Explicit Switching Costs

• Fixed and nonrecurring, penalty costs expiated for breach of contract

• Implicit Switching Costs

• Indirect costs in time and money of adjusting to a new product

Initiative #3: Establish High

Switching Costs

(54)

Management

• Lasts only until competition offers an identical or similar product or service for a comparable or lower price

• First Mover: Creates assets

• Brand Name

• Better Technology

• Delivery Methods

• Cannibalization for leadership

• Critical Mass: body of clients that attracts other clients for crossing the diffusion chasm

• Network externalities

Initiative #4: Create New

Products or Services

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Management

4^th Edition 55

• Product differentiation

• Distinctive Brand recognition, re-branding for re-positioning

• Examples of brand name success

• Levi’s jeans

• Chanel perfumes

• Gap clothes

Initiative #5: Differentiate

Products or Services

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Management

• Examples

• Auto manufacturers enticing customers with a longer warranty

• Real estate agents providing useful financing information to potential buyers

• Charles Schwab moving stock trading services on-line before Merrill Lynch

Initiative #6: Enhance Products or Services

Total solutions!

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Management

4^th Edition 57

• Combined services may attract customers

• Lower cost

• Convenience

• The whole product/the total solution resulted from the aggregation of necessary complements

• Examples

• Travel industry linking related tourist businesses

• HP and FedEx collaborated for the convenient ordering process and fast delivery/return service

Initiative #7: Establish Alliances

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Management

Establishing Alliances (Cont.) Ref. Expedia.c om

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Management

4^th Edition 59

• Bargaining Power—assets specificity

• Purchase volume—monopsony or monopoly

• Strengthen perception as a leader—

bandwagon effects of promotion (sunk costs as credible commitments) and market share

• Create a standard for issuing the problem of compatibility

Initiative #8: Lock in Suppliers

or Buyers

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Management

Types of Lock-in and

Associated Switching Costs

• Contractual commitments

• Compensatory or liquidated damages

• Durable purchases

• Replacement of equipment; tends to decline as the durable ages

• Brand-specific training

• Learning a new system, both direct costs and lost productivity; tends to rise over time

• Information and databases

• Converting data to new format; tends to rise over

time as collection grows

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Management

4^th Edition 61

Types of Lock-in and

Associated Switching Costs (Cont.)

• Specialized suppliers

• Funding of new supplier; may rise over time if capabilities are hard to find/maintain

• Search costs

• Combined buyer and supplier search costs; includes learning about quality of alternatives

• Loyalty programs

• Any lost benefits from incumbent supplier, plus

possible need to rebuild cumulative use

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Management

Strategic Information Systems (SIS)

• An IS that helps achieve long-term competitive advantage

• SIS embodies two types of ideas:

• Potentially-winning business move

• How to harness IT to implement that move

• Two conditions for SIS:

• Serve an organizational goal

• Work with the managers of the other functional

units

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Management

4^th Edition 63

Creating an SIS

• Top management involvement

• From initial consideration through development and implementation

• Must be a part of the overall organizational

strategic plan

(64)

Management

Steps for Considering a new

SIS

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Management

4^th Edition 65

Steps to Take in an SIS Idea-

Generated Meeting

(66)

Management

• To implement an SIS and achieve a

competitive advantage, organization must rethink entire operation

• Goal of re-engineering

• Remove the process bottleneck, the key dead logs

• Achieve efficiency leaps of 100% or higher

Re-engineering and

Organizational Change

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Management

4^th Edition 67

• SISs developed as strategic advantages quickly become standard businesses

• Banking industry (ATMs and banking by phone/Internet)

• Continuous search for new ways of utilizing information technology to their advantage

• SABRE, American Airlines’ reservation system enhanced continuously by several functions including web-based travel site, Travelocity.

Competitive Advantage as

Moving Target

(68)

Management

JetBlue: A Success Story

• Gained competitive advantage where others failed

• Proper technology and management methods

• Reservation system, Electronic ticket, ticketless traveling service, revenue analysis for route management

• Reducing costs resulting in lower prices

• Improving service—on-time departures and arrivals

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Management

4^th Edition 69

• Massive Automation

• Automation of services with software

• Combination reservation system and accounting system

• Supports customer services and sales tracking

JetBlue: A Success Story

(Cont.)

(70)

Management

• Massive Automation, continued

• Electronic tickets

• No paper handling or expense

• Encourages online ticket purchases

• Avoids travel agents

• Significant savings in cost

JetBlue: A Success Story

(Cont.)

(71)

Management

4^th Edition 71

• Massive Automation, continued

• Maintenance information system

• Logs all airplane parts and time cycles

• Reduces manual tracking costs

• Flight planning software

• Maximize seats occupied on a flight

• Reduced planning costs

JetBlue: A Success Story

(Cont.)

(72)

Management

• Massive Automation, continued

• Blue Performance

• In-house software for tracking operational data

• Updated on a flight by flight basis for maximizing yield

• Accessible by airline’s 2,800 employees

• Managers are able to respond immediately to problems

JetBlue: A Success Story

(Cont.)

(73)

Management

4^th Edition 73

• Massive Automation, continued

• Wireless devices for employees

• Report and respond to irregular events

• Quick response

• Events recorded for future analysis

• Training records stored electronically

• Easy to update

• Efficient retrieval

JetBlue: A Success Story

(Cont.)

(74)

Management

• Away from Tradition

• Decision to not use the hub and spoke routing method

• Paperless Cockpits

• Laptops for Pilots

• Harnessing IT to maintain a strategic gap

JetBlue: A Success Story

(Cont.)

(75)

Management

4^th Edition 75

• Enhanced Service

• Available on all flights and all class tickets

• Live TV through contract with DirecTV

• Leather Seating

• Excellent on-schedule arrivals and departures

• Fewest mishandled bags

• Rapid check-in time

• Security upgrades

JetBlue: A Success Story

(Cont.)

(76)

Management

• Impressive Performance

• Maintains excellent statistics

• 7 cent cost per available seat-mile (CASM) lesser than the industrial average

• 78% of seats are filled higher than the industrial average

• Late Mover Advantage

• New Technology vs. legacy systems

JetBlue: A Success Story

(Cont.)

(77)

Management

4^th Edition 77

• The Ideas

• Wingcast telematics

• Technology in vehicles to enable Web access

• Business to Business: Covisint

• Joint venture with General Motors and DaimelerChrysler

• Electronic market for parts suppliers

• Vendor bidding for proposals from automakers

Ford on the Web: A Failure Story

(78)

Management

• The Ideas (cont.)

• Business to Consumer: FordDirect.com

• Sell vehicles direct to consumers via the Web

• Bypass dealerships

• Provide service while saving dealer fees

• ConsumerConnect

• Special unit to build Web site and handle direct sales

Ford on the Web: A Failure Story

(Cont.)

(79)

Management

4^th Edition 79

• Hitting the Wall

• Wingcast: Failed

• Buyers not interested (as the failure of WAP)

• Product eliminated in June 2001

• Covisint: Successful

• Now includes more automakers, Renault and Nissan

Ford on the Web: A Failure Story

(Cont.)

(80)

Management

• Hitting the Wall

• FordDirect.com: Failed

• Not a result of faulty technology

• Ford failed to consider state laws and dealership relationships

• Dealership relationship was still needed for purchases not on the Web

Ford on the Web: A Failure Story

(Cont.)

(81)

Management

4^th Edition 81

• The Retreat

• ConsumerConnect disbanded

• FordDirect.com used by dealerships now

• Sells used cars

• Price tag for failure: $1 billion

• FordDirect.com today results in 10,000 vehicle per month, and 100,000 sales in 2001

Ford on the Web: A Failure Story

(Cont.)

(82)

Management

Success and Failure on the Web

• Being first is not enough for success

• Business ideas must be sound

• An organization must carefully define what buyers want

• Establishing a recognizable brand name is important but does not guarantee success;

satisfying needs is more important

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Management

4^th Edition 83

The Bleeding Edge

• Business owners must develop new features to keep the system on the leading edge

• Adopting a new technology involves great risk

• No experience from which to learn

• No guarantee new technology will work or customers and employees will welcome it

• Bet on standard competition

• Wait-and-see hesitation

(84)

Management