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AP/ADMS 2511

Session 2 (and Chapter 2) Learning Objectives

1. Importance of planning for information technology (IT) and links to business planning 2. Role of business processes and business process management 3. Examine worldwide changes that have created the modern organization, the resulting business pressures and organizational responses 4. Describe Porters competitive forces and value chain models and how they relate to competition and strategies for competitive advantage 5. Discuss IT Governance and effective IT-business alignment

Management Information Systems

Session 2 Chapter 2

Importance of planning for information technology

Systems planning is becoming more difficult and more important at the same time. Technology is changing so fast that it is seems futile to plan for it, yet the dependence on this technology makes planning its effective use a matter of organizational life and death.

Lululemon and IT
Ch 2 Case 2.2, p. 62

Lets go through this case together

Why is IT important to Lululemon? What business processes did Lululemon automate? How?

Why is it important for Lululemon to match its IT processes to its business strategy?

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Without a clear understanding of how IT can add value to your organization, your investment in IT will
Add expense and no value Create additional work for everyone Alienate your staff Reduce your Quality and Productivity
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Session 2 (and Chapter 2) Learning Objectives

1. Importance of planning for information technology (IT) and links to business planning 2. Role of business processes and business process management 3. Examine worldwide changes that have created the modern organization, the resulting business pressures and organizational responses 4. Describe Porters competitive forces and value chain models and how they relate to competition and strategies for competitive advantage 5. Discuss IT Governance and effective IT-business alignment

About business processes

A business process is a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. A process has inputs and outputs, and its activities can be measured. Many processes cross functional areas in an organization, such as product development, which involves design, engineering, manufacturing, marketing, and distribution. Other processes involve only one functional area. 7

Indigo changes require new processes

Have you been to an Indigo store (chapters.indigo.ca) lately? The toy section and giftware section is growing while the books section is declining. In December 2013 it added Apple products such as iPads and iPods. Different products require different sales strategies how do you think that these changes affect the store operations and processes?

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Business processes are what organizations DO

Table 2.1 from Wiley text p. 38 gives us examples of business processes in several functional areas:
Accounting: managing accounts payable & receivable Finance: Producing business forecasts Marketing: Handling customer complaints POM: Processing physical inventory Human Resources: Overseeing workplace safety MIS: Training computer users

Business processes connect to customers and others: Fig. 2.1, p. 39

The role of business process management

Business process management (BPM), includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes. Consultants and software help organizations to improve their business processes, for example:
http://www.ibm.com/ibm/ca/en/national_agenda/ (IBM Canada consultants)

Session 2 (and Chapter 2) Learning Objectives

1. Importance of planning for information technology (IT) and links to business planning 2. Role of business processes and business process management 3. Examine worldwide changes that have created the modern organization, the resulting business pressures and organizational responses 4. Describe Porters competitive forces and value chain models and how they relate to competition and strategies for competitive advantage 5. Discuss IT Governance and effective IT-business alignment

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Thomas Friedmans The world is Flat

The main concept is that through technology our world is becoming more and more accessible to anyone, whether you are a large corporation in downtown Chicago, or a small business owner located down the street from me. Our society is run by technology, it is not something we should be scared of, but something we can utilize. Though new technologies may change things such as business practice, it forces one to change and adapt.

Practice midterm question

Using Table 2.2 (page 43), look at Friedmans ten flatteners You can see Thomas Friedman talk about his Three Eras of Globalization in this video: http://www.youtube.com/watch?v=lp4znWHvsjU On a midterm, you might be asked to describe a few of these flatteners and provide examples For each of the flatteners, jot down how the flattener has affected Lululemon, the business we discussed earlier

Business Pressures,

Fig.2.2, p. 42

Business Pressures
The business environment is the combination of social, legal, economic, physical and political factors that effect business activities. Significant changes in any of these factors are likely to create business pressures on organization. Market Pressures Technology Pressures Social/Political/Legal Pressures

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Market Pressures
The Global Economy and Strong Competition
Cost of labour (relocate plants in developing countries)

The retail world changes daily?

Walls that show toys you can buy online, for example Walmart in the Brookfield Rotunda in the PATH (an underground walkway in Toronto) Source: Peoples Insights: Volume 1, Issue 50,
Jan 5, 2013 http://www.slideshare.net/mslgroup/peoples-insights-volume-1-issue-50-la

The Changing Nature of the Workforce

more diverse workforce , more women, people with disabilities, all can be integrate and work even from home.

Powerful Customers
Consumer expectation increase as customers become more knowledgeable about the availability and quality of products and services. CRM customer relationship management (to learn more about your customer in order to give him more!)

What retail innovation have you seen lately?

Make-to-order systems

Technology Pressures
Technological Innovation and Obsolescence
Rapid changes, innovation, new technologies How fast are you replacing your old, standard cell phone with the new, smart phones?

View: Bodymetrics video

http://www.youtube.com/watch?v=BU4PW51PVzE

Information Overload
A flood of information from internet and telecommunications networks. To make sense of all, you have to have the ability to access, navigate & utilize these sources. Search engines, data mining will help to navigate between all

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Technological Innovation and Obsolescence

(continued)

Book publishing transforms

Hundreds of thousands of books selfpublished in 2013 Source:
http://www.pressdisplay.com/pressdisplay/viewer.aspx

Nicholas Hoare book stores close, while a new web site about Canadian books opens.
Sources: http://www.thestar.com/business/2013/03/08/publishers_embrace_social_media _as_bricks_and_mortar_outlets_fade_away.html and http://49thshelf.com

Vampire story writer rapid millionnaire as she sells hundreds of thousands of self-published vampire books. Source: http://www.worldofamandahocking.com/

Advances in interface design

It is interesting as it is a leaps and bounds advance in user interface The Sixth Sense
http://www.ted.com/talks/pattie_maes_demos_the_sixth_sense.html

Social/Political/Legal Pressures
Social Responsibility Government Regulation and Deregulation Protection Against Terrorist Attacks Ethical Issues

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Social Responsibility
Some corporations are willing to spend time and/or money on solving various social problems.

Social Responsibility: Digital Divide

Digital divide: the wide gap between those who have access to information and communications technology and those who do not.
This gap exists both within and among countries.

United Nations Report: 90 percent of all Internet hosts are located in developed countries, with only 15 percent of the worlds population Internet kiosks in public places and cybercafs.
In the U.S., cybercafs come in all shapes and sizes, ranging from a chain of cafs (www.easyeverything.com) that include hundreds of terminals in one location to a single computer in a corner of many restaurants.

Digital Divide in Canada

82% of Canadians had Internet access in 2009.
this distribution is highly correlated with household income and education levels. (http://www.digitaljournal.com/article/281131)

Social Responsibility

Check out the following video for a more Canadian perspective on the digital divide.
http://www.youtube.com/watch?v=b5E-Fe1kf_A

http://one.laptop.org/about/mission/

The Canadian federal and provincial governments are attempting to close the digital divide. In Canada, computers with Internet access are often available at public libraries, restaurants, and service organizations.
Taken from 60 minutes show recommend to view later! http://www.cbsnews.com/video/watch/?id=3564316n

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Organizational Responses
By implementing IT , the organizations respond to the pressures. Strategic systems e-business systems Customer focus Make-to-order systems
Reebok http://www.reebok.ca

How has your dentist changed?

When was the last time you visited a dentist? What technology and software were they using? In groups, search for software and other technology that is used by dentists. Each group is to find two and present one to the class, explaining how the technology or software is an organizational response for the dentist.

Video: Healthcare customization

http://youtube.com/watch?v=Hai9LchP5jc

Practice Question 1
Kamelott Industries Ltd. (KIL) This question asks you to apply your knowledge of business pressures to a company that sells playing cards and specialized card decks.

Session 2 (and Chapter 2) Learning Objectives

1. Importance of planning for information technology (IT) and links to business planning 2. Role of business processes and business process management 3. Examine worldwide changes that have created the modern organization, the resulting business pressures and organizational responses 4. Describe Porters competitive forces and value chain models and how they relate to competition and strategies for competitive advantage 5. Discuss IT Governance and effective IT-business alignment

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Competitive Advantage
Competitive advantage is how a firm manages to keep making money and sustain its position against its competitors.

Porters Competitive Forces Model

IT simply offer the tools that can increase an organizations success through its traditional sources of competitive advantage, such as low cost, excellent customer care and superior supply chain management.

The following interview with Michael Porter explains how his model works. Video: https://www.youtube.com/watch?v=mYF2_FBCvXw&list=PL6823FE92CFCC2553

Porters Competitive Forces Model

The Threat of entry of new competitors is high when it is easy to enter a market and low when significant barriers to entry exist

Porters Competitive Forces Model

A barrier to entry is a product or service feature that customers expect from organizations in a certain industry. For most organizations, the Internet increases the threat that new competitors will enter a market

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Porters Competitive Forces Model

The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices Internet impact is mixed. Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers

Porters Competitive Forces Model

The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices Internet increases buyers access to information, increasing buyer power Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere. This also increases buyer power

Porters Competitive Forces Model

The threat of substitute products or services is high when there are many substitutes for an organizations products or services and low where there are few substitutes Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently

Porters Competitive Forces Model

The rivalry among existing firms in the industry. The threat from rivalry is high when there is intense competition among many firms in an industry. The threat is low when the competition is among fewer firms and is not as intense. In the past, proprietary information systemssystems that belong exclusively to a single organizationhave provided strategic advantage among firms in highly competitive industries. Today, however, the visibility of Internet applications on the Web makes proprietary systems more difficult to keep secret.

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Using Five Forces for Assessing IS

HM1 HM2 HM3 HM4 HM5

Porters Value Chain Model

The value chain model is used to describe what organizations do and how they add value, i.e. make their products and earn profits. As our text explains (See Figure 2.4, p. 52), this value chain has relationships with customers and suppliers.
See also: https://www.youtube.com/watch?v=uhS_Ujij8Jk

This model identifies specific activities where organizations can use competitive strategies for greatest impact.
Primary activities Support activities
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Porters Value Chain Model

Porters Value Chain Model

Primary activities are those business activities that relate to the production and distribution of the firms products and services, thus creating value for which customers are willing to pay. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and customer service. Support activities do not add value directly to a firms products and services, but support the primary activities. Support activities include accounting, finance, management, human resources management, product and technology development (R&D), and procurement.

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Slide 41 HM1 ERP - Walmart Website rivalry - Amazon (collaborative filterin !

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HM2

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HM3

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HM4

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HM5

Real estate a ents - tar ete) mar8etin @ emails - *ave o'n Websites
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Furniture value chain practice

What is the value chain for a furniture manufacturing company? Each group in the class will describe how they would implement a competitive strategy for a primary activity in the furniture manufacturing value chain

How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?
Each business must first analyze its industry and choose a competitive strategy. Will it be a low-cost provider or differentiate its products from competitors? Then it must design its business processes to span value-generating activities. Once those decisions have been made, a business can structure an information system that supports its business processes.

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Five Forces Analysis of the Internet Strategies for Competitive Advantage

Cost Leadership. Produce products and/or services at the lowest cost in the industry. Differentiation. Offer different products, services or product features. Innovation. Introduce new products and services, add new features to existing products and services or develop new ways to produce them. Operational Effectiveness. Improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals. Customer-orientation. Concentrate on making customers happy.

The Internet tends to dampen the profitability of industries and reduce firms ability to create sustainable operational advantages because:

It increases the bargaining power of buyers Decreases barriers to entry Increases the bargaining power of suppliers Increases the threat of substitute products and services, and Intensifies rivalry among competitors

Recommend = focus on your strategic position in an industry and how you will maintain profitability

Not growth, market share or revenue

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Session 2 (and Chapter 2) Learning Objectives

1. Importance of planning for information technology (IT) and links to business planning 2. Role of business processes and business process management 3. Examine worldwide changes that have created the modern organization, the resulting business pressures and organizational responses 4. Describe Porters competitive forces and value chain models and how they relate to competition and strategies for competitive advantage 5. Discuss IT Governance and effective IT-business alignment

IT Governance
A structure of relationships and processes to direct and control an enterprise in order to achieve the enterprise's goals by adding value while balancing risk versus return over IT and its processes.
Without effective IT governance, there are many things that could go wrong. IS might not meet organizational business objectives Systems could be error prone, over budget, or hard to use. If there was poor security, data and programs could be damaged or copied by unauthorized individuals.

Information technology governance

The purpose of IT Governance is to provide effective oversight over the use of technology This is enabled using an IT steering committee. Video: IT Steering Committees in a Municipal Setting:
http://www.youtube.com/watch?v=nzRuPpVTGtM

Business-information technology alignment

Using custom-designed robots and software to clean sewers makes profits for LiquiForce Group in Kingsville, Ontario. This is a clear match between business purpose and technology creation. Sources:
http://www.thestar.com/business/2013/01/11/company_keeps_the_dirty _work_out_of_sight.html and liquiforce.com

Lets do Practice Question #2, Lululemon. In addition to the questions listed, how would the company manage its technology to best achieve its objectives?

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Alignment between IS strategy & IT strategy

well aligned IS/Business strategies may or may not provide competitive advantage, but poorly aligned strategies will almost certainly lead to competitive disadvantage

Team work created this course

The materials for this course were developed by Cristobal Sanchez-Rodriguez and Ingrid Splettstoesser, with the help of:
Hila Cohen Ken Cudeck Marius Dobre John Kucharczuk Carl Lapp Donna Rex Mario Vasilkovs

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