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INSTRUCTOR SLIDES

BE SURE TO REVIEW THE DETAILED TEACHING NOTES IN EACH SLIDE FOR CLASSROOM IDEAS, DEBATES, EXERCISES, AND VIDEOS

PELASE DO NOT SHARE THESE SLIDES WITH STUDENTS OR POST ON THE INTERNET

THE STUDENT VERSION OF THESE SLIDES DO NOT INCLUDE ANY CLASSROOM TEACHING MATERIALS

BE SURE TO REVIEW THE DETAILED TEACHING NOTES IN EACH SLIDE FOR CLASSROOM IDEAS, DEBATES, EXERCISES, AND VIDEOS

CHAPTER ONE

MANAGEMENT INFORMATION SYSTEMS

BUSINESS DRIVEN MIS

This chapter sets the stage for the textbook. It starts from ground zero by providing a clear description of what information is and how it fits into business operations, strategies, and systems.

It provides an overview of how companies operate in competitive environments and why they must continually define and redefine their business strategies to create competitive advantages.

Doing so allows them to survive and thrive.

Information systems are key business enablers for successful operations in competitive environments.

You, as a business student, must understand the tight correlation between business and technology.

In today’s hypercompetitive environment technology is driving business success!

You must first recognize information’s role in daily business activities and then understand how information supports and helps implement global business strategies and competitive advantages.

After reading this chapter, you should have a solid understanding of management information systems and their role in managerial decision making and problem solving.

CLASSROOM EXERCISE – VIDEO: FATHER GUIDO SARDUCCI’S FIVE MINUTE UNIVERSITY

I love showing this video on the first day. I start off the class by explaining that we are going to cover hardware, software, telecommunications, and hit the lab to do some actual networking. The looks on the student’s faces are priceless. I then explain that this video will show how to take a hard drive apart and there will be a quick quiz after to see how much everyone learned from the video. Then I play the video: gets several laughs and sets the stage for a fun and exciting class. http://www.youtube.com/watch?v=kO8x8eoU3L4v (If this link is down please Google Father Guido Sarducci’s Five Minute University) After the students watch the video, I discuss how they are going to learn so much in this course and if they can apply it to a real business, they will retain the information. I then introduce the Coffee Shop Cohesion Case (http://www.cohesioncase.com/ )

CHAPTER ONE OVERVIEW

SECTION 1.1 – BUSINESS DRIVEN MIS

Competing in the Information Age

The Challenge of Departmental Companies and the MIS Solution

SECTION 1.2 – BUSINESS STRATEGY

Identifying Competitive Advantages

The Five Forces Model – Evaluating Industry Attractiveness

The Three Generic Strategies – Choosing a Business Focus

Value Chain Analysis – Executing Business Strategies

Information is everywhere.

Information is a strategic asset.

Without information, an organization simply could not operate.

This chapter introduces students to several core business strategies that focus on using information to gain a competitive advantage, including:

Data, Information, Knowledge, Business Intelligence

Competitive advantages

SWOT analysis

Porter’s Five Forces Model

Porter’s three generic strategies

Porter’s Value chain

CLASSROOM OPENER: GREAT BUSINESS DECISIONS – Apple’s Decision to Develop the First Saleable Personal Computer (PC)

Like all great computer companies, Apple began its life in a garage. In 1977, Steve Jobs and Steve Wozniak built the Apple 1, regarded by many as the first real personal computer. This founded the Apple Company and the invention of the Apple 2 and the Apple Macintosh. Apple’s key goal was to make computers accessible to ordinary people. Jobs and Wozniak captured an opportunity and changed the world through a combination of good fortune and technical and marketing brilliance.

Instead of writing commands in computer code, Apple owners invented a mouse to click on easily recognizable icons – for example, a trash can and file folders. Other companies were quick to copy Apple’s competitive advantage, including Microsoft.

The two founders eventually parted, with Wozniak leaving the company to become a teacher and Jobs continuing with the launch of the Apple Macintosh. Unfortunately, Macintosh captured only 20 percent of the desktop market, while Microsoft captured 80 percent of the desktop market with its MS-DOS operating system.

One newspaper described Jobs as a “corporate Huckleberry Finn” and said his early business exploits had already made him part of American folk history. John Sculley, former Pepsi chairman, removed Jobs from Apple in 1985. Sculley was removed from Apple in 1993. Eventually, after a 13-year exile, Jobs returned to Apple in 1998. The man who founded the company had come full circle and was now its only hope for survival.

Jobs’ return brought the creation of the iMac and Apple rediscovered its inventive originality. The iMac sold 278,000 units in the first six weeks and was described by Fortune as “one of the hottest computer launches ever.” The iMac and Jobs’ return contributed to doubling Apple’s share prices in less than a year.

SECTION 1.1: business driven mis

This course is about data and information systems that run worldwide global business – take time to explain the importance of this course for all business majors!!

We used to state business drive business.

Today more and more organizations are stating technology drives business.

If you want to compete in business you need to understand how technology is driving business, regardless of your major.

Learning outcomes

Describe the information age and the differences between data, information, business intelligence, and knowledge

Explain systems thinking and how management information systems enable business communications

A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

COMPETING IN THE INFORMATION AGE

Did you know . . .

Avatar, the movie, took over 4 yrs to make and cost $450 million

Lady Gaga’s real name is Joanne Angelina Germanotta

It costs $2.6 million for a 30-second advertising time slot during the Super Bowl

Why do you think you need to study management information systems?

Technology is everywhere in business

CLASSROOM EXERCISE: UNDERSTANDING THE RELEVANCE OF TECHNOLOGY IN BUSINESS

Be sure to point-out this exercise focuses on business magazines, not technology magazines, and yet they are filled with technology (MIS)

This is a great exercise to begin the course. It clearly demonstrates why anyone involved in business must understand technology. It can be a real revelation for students who do not see the need for taking an MIS course.

Bring in several copies of BusinessWeek, Fortune, Forbes, or any popular business magazine. ((Or ask your students to Google the top business stories of the day))

If you have any physical magazines provide a marking tool such as a small set of Post-It Notes. Ask for a few volunteers and have the students review the magazine and stick a Post-It Note on each technology-related article, advertisement, etc. When the student has completed this task, the magazine will be covered in Post-it Notes, clearly demonstrating that technology is everywhere in business, even in the popular business magazines such as BusinessWeek.

You can break your students into groups and have them research the top 10 business articles of the day. Have them categorize the articles by major and focus on any technology issues. Have the students share their results when they are finished with the exercise.

Since this task can be time consuming, you can put in the Post-It Notes prior to class and simply show your students the completed magazine. You can have one student sit in the front of the class and begin the exercise, placing Post-It Notes on a copy of BusinessWeek. After they have completed several pages on their own, you can produce the same “completed” magazine with all the Post-It Notes. This saves classroom time and still reinforces the point that technology is everywhere in business.

Be sure to reinforce that these are business magazines, not technology magazines. Yet they are filled with technology – which is clearly demonstrated by the Post-It Notes. How can any business student today possibly argue that they do not need to know or understand technology when faced with a magazine, such as BusinessWeek, that is filled with technology? Read a few of the articles or advertisements.

The goal of this course is to help your students understand the business side of technology. Being able to understand all the technology articles and how 5G, Machine Learning, AI, IoT, data analytics, etc. is impact business, regardless of major, is a major key point to teach in the first class.

Competing in the information age

Fact - The confirmation or validation of an event or object

Information age - The present time, during which infinite quantities of facts are widely available to anyone who can use a computer

CLASSROOM EXERCISE: BUSINESS DRIVEN DISCUSSION: DATA BITS

Have you ever wondered how your computer stores your data? The answer: Bits. A bit, which is short for binary digit, is the smallest unit of storage on a computer. 8 bits is equal to one byte. A byte is big enough to store a letter, number, space, or symbol. Each time you press a key the computer translates the keystroke into a numerical code that takes up one byte of space. For example, the sentence “Your computer stores your data.” uses 31 bytes of storage, with 8 bits per byte.

One megabyte is equal to 1 million bytes

One gigabyte is equal to 1 billion bytes

One terabyte holds a trillion bytes

Original computer hard drives only had the capacity to store 250 megabytes of data. The first Google server had only ten 4-megabyte hard drives. Today, personal computers can save and analyze gigabytes of data. This is one of the key drivers of the technologies radically changing our world and environment. It is estimated that by 2025, every second there will be 1.7 megabytes of new data created for every person in the world. That is an unimaginable amount of data.

It has been stated that future business leaders must be data literate to survive and thrive in the hyper-competitive business arena. Do you agree or disagree with this statement? If you are a marketing major how will understanding inventory data help your career? If you are a management major how will analyzing employee data help your career? If you are a future business leader how will analyzing competitor data help drive your business strategies? Overall, how will this course help prepare you for your future career?

Competing in the information age

Examples of the power of business and technology

Amazon – Not a technology company; primary business focus was selling books

Netflix – Not a technology company; primary business focus is streaming content

Zappos – Not a technology company; primary business focus is selling shoes

You may think only students well versed in advanced technology can compete in the information age.

This is simply not true!

Many business leaders have created exceptional opportunities by coupling the power of the information age with traditional business methods.

Amazon’s founder, Jeff Bezos, at first saw an opportunity to change the way people purchase books. Using the power of the information age to tailor offerings to each customer and speed the payment process, he in effect opened millions of tiny virtual bookstores, each with a vastly larger selection and far cheaper product than traditional bookstores. The success of his original business model led him to expand Amazon to carry many other types of products.

The founders of Netflix and Zappos have done the same thing for videos and shoes. All these entrepreneurs were business professionals, not technology experts. However, they understood enough about the information age to apply it to a business, creating innovative companies that now lead entire industries.

CLASSROOM EXERCISE – VIDEO: STEVE JOB’S COMMENCEMENT SPEECH AT STANFORD UNIVERSITY (Best 40 minutes you could spend in your class!!)

Best way to start off your course! I simply love this speech and it helps to set the tone of the course from one of the greatest innovators in history! After watching the video ask the following questions:

What was the greatest point Steve Jobs made that you can use for your future?

What course/skill/class have you taken that will have the greatest impact on your future (like Steve Jobs Calligraphy Course)?

How will learning about technology have a direct impact on your future career in business?

To locate the video online please Google Steve Jobs Commencement Speech at Stanford

Competing in the information age

Internet of Things (IoT) - A world where interconnected Internet-enabled devices or “things” have the ability to collect and share data without human intervention

Machine-to-Machine (M2M) - Refers to devices that connect directly to other devices

Over 20 years ago a few professors at MIT began describing the Internet of Things (IoT), a world where interconnected Internet-enabled devices or “things” can collect and share data without human intervention.

To date, the 50 petabytes of data available on the Internet has been captured mostly by humans through such methods as typing, recording, and scanning text, photos, and voice recordings. Data entry is the process of gathering data from business documents and entering it into a computer. A vital process for any business. The issue with human data collection is the fact that humans make mistakes! Numbers are frequently transposed, addresses mistyped, and some files are skipped completely. Inaccurate data in a system will lead to incorrect reports and ultimately bad business decisions. Allowing computers to perform the data entry process greatly reduces human error. Computers are precise and accurate and would know when things need replaced, repaired, or recalled saving time and money for companies.

CLASSROOM EXERCISE: OPENING CASE: FOURTH INDUSTRIAL REVOLUTION

Are you prepared to compete in the Fourth Industrial Revolution?

What can you do to prepare for your future career?

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Break your students into groups by major and have them brainstorm the following:

How will M2M and IoT impact your future career?

How do you anticipate the major functions of your job changing over the next 10 years?

Competing in the information age

The core drivers of the information age

Data

Information

Business intelligence

Knowledge

The primary goal of this course is to arm your students with the knowledge they need to compete in the information age. Understanding data, information, BI, and knowledge are the core drivers of the information age.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

When discussing MIS, it is important to understand the difference between data and information

Ask your students to look around the classroom and identify 3 pieces of data and 3 pieces of information

This is a bit of a trick question, unless you know the system you are building or the problem you are trying to solve it is impossible to know what data is and what is information

For example, if you were building a system to track students:

Data might include height, name, and hair color

Information might include student to professor ratio, percentage of marketing majors who are female, number of students who pass the course.

If you were building a system to track inventory:

Data might include chair manufacturer, chair color, and chair size

Information might include number of chairs required for students in each class, average number of chairs needed to be replaced each semester.

data

Data - Raw facts that describe the characteristics of an event or object

Structured data – Stored in a traditional system such as a relational database or spreadsheet

Unstructured data – Not defined and does not follow a specified format

Machine-generated data – Created by a machine without human intervention

Human-generated data – Data that humans, in interaction with computers, generate

Can an individual be successful in business today if they don’t know how to collect, cleanse, understand, and analyze data?

You have an important decision that must be made within two weeks, and you’ve just learned of some new data that, when combined with existing data, could offer potentially game-changing insights. But there isn’t a clear indication whether this new information can be trusted. How should you proceed?

There is, of course, no simple answer. While many managers are skeptical of new data and others embrace it wholeheartedly, the more thoughtful managers take a nuanced approach. They know that some data (maybe even most of it) is bad and can’t be used, and some is good and should be trusted implicitly. But they also realize that some data is flawed but usable with caution. They find this data intriguing and are eager to push the data to its limits, as they know game-changing insights may reside there.

Fortunately, you can work with your data scientists to assess whether the data you’re considering is safe to use and just how far you can go with flawed data. Indeed, following some basic steps can help you proceed with greater confidence — or caution — as the quality of the data dictate. It is amazing how many employees do not trust the data they are using to make daily decisions that are critical to business operations.

CLASSROOM EXERCISE: DEBATE: DO YOU TRUST YOUR DATA?

Here is a great question to kick-start your course and help students get excited about the impact this course will have on their future careers!

Do you trust your data? If not, what business problems will occur as you run your departments and companies?

Just imagine the date 2/5/2025. Depending on the country you are in that could be February 2 or January 5.

Why is raw data useless without interpretation?

What does it mean to interpret data?

How would a data analysis change depending on different functional area managers? For example, one piece of data reviewed by accounting and also reviewed by human resources, and marketing?

What happens if the data you are analyzing is incorrect?

What does Garbage In is Garbage Out mean when referring to data?

Why would a manager care about Garbage In when running a report?

data

A fundamental role of all business managers is to be able to take the data and analyze it to find information to make great business decisions

The rows in an Excel spreadsheet demonstrate data – raw facts that describe the characteristics of an event or object

A fundamental role of all business managers is to be able to take the data and analyze it to find information to make great business decisions

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your student how a business uses data to improve decision making?

Review Tony‘s Snack Company Data and ask what types of questions they would want to answer to improve operations

What represents data in this figure?

The unit price for Doritos is one piece of data

The unit price for Ruffles is one piece of data

The unit cost for Doritos is one piece of data

The unit cost for Ruffles is one piece of data

The sales representative per order is one piece of data

Ask your students what is the difference between price and cost?

Ask your students what is the difference between total sales and profit? This is a critical distinction for analyzing a business. A best selling product could be the least profitable!

What would happen to a manager that only focuses on total sales, not total profit?

data

Big data – A collection of large, complex data sets, including structured and unstructured data, which cannot be analyzed using traditional database methods and tools

Snapshot – A view of data at a particular point in time

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Data is the new Oil is a common phrase in business

Data is the new Soil is the new translation

What does this term mean?

What is different about big data?

Structured, unstructured, massive volumes, streaming, real-time, petabytes of data in seconds!

What types of problems will business managers of the future encounter with big data?

Information overload? How many times do you scan Netflix without watching anything because you can’t make a collaborative decision on what to watch?

Analysis paralysis is a great discussion point, so much data how do you ever make a decision? And without data cleansing and analysis skills how will you possibly survive?

The power of big data analytics

Four Characteristics of Big Data

Variety - Different forms of structured and unstructured data

Veracity - The uncertainty of data, including biases, noise, and abnormalities

Volume - The scale of data

Velocity - The analysis of streaming data as it travels around the Internet,

Variety - Different forms of structured and unstructured data,

Data from spreadsheets and databases as well as from email, videos, photos, and PDFs, all of which must be analyzed

Veracity – The uncertainty of data, including biases, noise, and abnormalities.

Uncertainty or untrustworthiness of data,

Data must be meaningful to the problem being analyzed;

Must keep data clean and implement processes to keep dirty data from accumulating in systems

Volume - The scale of data,

Includes enormous volumes of data generated daily,

Massive volume created by machines and networks,

Big data tools necessary to analyze zettabytes and brontobytes

Velocity - The analysis of streaming data as it travels around the Internet,

Analysis necessary of social media messages spreading globally,

CLASSROOM EXERCISE: BUSINESS DRIVEN MIS: COMPUTER ARE EVERYWHERE

A computer is a programmable machine that responds to a specific set of defined instructions. It consists of hardware (the machinery and housing for its electronics) and software (the programs that contain the data used by the computer). The hardware includes a central processing unit (CPU) that controls an operating system, which directs your inputs (keyboard, mouse), outputs (monitor or printer), memory, and storage. The first computers were enormous slow machines designed to solve complicated mathematical questions. Built in 1954, the ENIAC (Electronic Numerical Integrator and Computer) was one of the first digital computers; it weighed 30 tons and was powered by thousands of vacuum tubes, capacitors, relays, and electrical equipment. IBM president Tom Watson famously remarked, “I think there is a world market for maybe five computers.” Clearly the world market for computers was far more than five!

Today’s computers can do almost anything from controlling the temperature in your house and driving your car, to solving advanced analytical equations, and they can be found everywhere; on our desks, in our laps, in our hands, on our wrists, and even in our eyeglasses. And there is so much more coming, including computers that learn on their own, brain-computer interfacing, and quantum computers that utilize fiber optic technology.

Think of your life 5 years ago and list three IoT devices you use today that were not invented 5 years ago. What types of IoT devices will be introduced over the next ten years? What types of data are your IoT devices collecting? As an organization leader would you prefer structured data or unstructured data for your business analysis? Why?

The power of big data analytics

Big data will create 4.4 million global MIS jobs

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students what they think about the importance of data in the business world today

How much data is collected by Wal-Mart every hour?

How much data does a Fitbit generate every day per user?

What types of data does a business require to be successful?

How is data impacting their lives?

How often do they check an IoT device (such as steps or calories) to help focus their efforts each day?

The power of big data analytics

STRUCTURED DATA	UNSTRUCTURED DATA
Sensor data	Satellite images
Weblog data	Photographic data
Financial data	Video data
Click-stream data	Social media data
Point of sale data	Text message
Accounting data	Voice mail data

It is important to remind students that big data includes both structured and unstructured data.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What type of data have we been collecting for years?

Structured Data: Excel, Word, PowerPoint

Why is unstructured data so difficult to collect, analyze, and store?

Voice, Video, Photos are difficult to interpret and store as they are big in size.

Unstructured data is far more difficult to store, analyze, and mine.

INFORMATION

Information - Data converted into a meaningful and useful context

Excel analysis features, such as Auto filter and Pivot Tables, help transform data into information

By turning Tony‘s Snack Company Data in the figure into information students should be able to answer the following questions

Who are my best customers?

Who are my least-profitable customers?

What is my best-selling product?

What is my slowest-selling product?

Who is my strongest sales representative?

Who is my weakest sales representative?

Rows of data in an Excel spreadsheet demonstrate data and nothing more

Transforming the data helps uncover information and business intelligence such as how much did each employee sell this month? Who is the best customer? What is the best product?

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What business questions could Tony answer from this data?

Total products sold

Average unit price per product

Total costs

Total profit

Best sales representative

Worst sales representative

INFORMATION

Report - A document containing data organized in a table, matrix, or graphical format allowing users to easily comprehend and understand information

Static report - Created once based on data that does not change

Dynamic report - Changes automatically during creation

All managers, regardless of their major, will have to present data/findings in managerial reports

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Break your students into groups by major and ask them to answer the following:

What types of reports do accounting majors create?

Financial reports

Profit and Loss statements

Bank Reconciliation

What types of reports do marketing majors create?

Campaign success

Inventory levels for potential spoilage of products

Discount reports

What types of reports do human resource majors create?

Hiring information

Turnover information

Staffing

Sick leave

Benefits

All of these reports have one thing in common – data!!

BUSINESS INTELLIGENCE

Business intelligence - Information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making

BI manipulates multiple variables and in some cases even hundreds of variables such as

Interest rates

Weather conditions

Gas prices

Stock market fluctuations

Competitor information

Population growth rates

Market trends

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students what value a company can gain by analyzing additional variables such as the stock market or gas prices to a data analysis?

What types of business operations would be impacted by stock market prices, minimum wage changes, or gas prices?

Managers use tools such as Pivot Tables in Excel, to find BI in data

It also allows us to find the answer to multi variable questions such as what is the best sales representative’s worst selling product?

This is a great example of the power of IT to run a business – ask your student the following questions:

Without the ability to analyze data how would a manager run a business?

BUSINESS INTELLIGENCE

Analytics – The science of fact-based decision making

Business Analytics – The scientific process of transforming data into insight for making better decisions

Analytics is the science of fact-based decision making.

Business analytics is the scientific process of transforming data into insight for making better decisions

CLASSROOM EXERCISE: BUSINESS DRIVEN DISCUSSION: VIEW FROM A FLAT WORLD

Bill Gates, founder of Microsoft, stated that 20 years ago most people would rather have been a B student in New York City than a genius in China because the opportunities available to students in developed countries were limitless. Today, many argue that the opposite is now true due to technological advances making it easier to succeed as a genius in China than a B student in New York.

As a group, discuss whether you agree or disagree with Bill Gate’s statement

BUSINESS INTELLIGENCE

Descriptive analytics – Techniques that describes part performance and history

Predictive analytics – Techniques that extract information from data and uses it to predict future trends and identify behavioral patterns

Prescriptive analytics – Techniques that create models including the best decision to make or course of action to take

Be sure your students understand that descriptive analytics focuses on past data to predict the future or understand business today

Predictive analytics uses past data to predict the future

Prescriptive analytics uses today’s data to make the optimal business decision based on efficiency and effectiveness

CLASSROOM EXERCISE: BUSINESS DRIVEN ANALYTICS: CATEGORIZING ANALYTICS

Break your students into groups and ask them to complete the categorizing analytics boxed element.

This is a great activity to ensure your students understand the differences between descriptive, predictive, and prescriptive analytics.

Business intelligence

Behavioral analysis

Correlation analysis

Exploratory data analysis

Pattern recognition analysis

Social media analysis

Speech analysis

Text analysis

Web analysis

ANALYTICS

Behavioral analysis: Uses data about people’s behaviors to understand intent and predict future actions.

Correlation analysis: Determines a statistical relationship between variables, often for the purpose of identifying predictive factors among the variables.

Exploratory data analysis: Identifies patterns in data, including outliers, uncovering the underlying structure to understand relationships between the variables.

Pattern recognition analysis: Classifies or labels an identified pattern in the machine learning process.

Social media analysis: Analyzes text flowing across the Internet, including unstructured text from blogs and messages.

Speech analysis: Analyzes recorded calls to gather information; brings structure to customer interactions and exposes information buried in customer contact center interactions with an enterprise. Speech analysis is heavily used in the customer service department to help improve processes by identifying angry customers and routing them to the appropriate customer service representative.

Text analysis: Analyzes unstructured data to find trends and patterns in words and sentences. Text mining a firm’s customer support email might identify which customer service representative is best able to handle the question, allowing the system to forward it to the right person.

Web analysis: Analyzes unstructured data associated with websites to identify consumer behavior and website navigation.

CLASSROOM EXERCISE: BUSINESS DRIVEN ETHICS AND SECURITY: DATA ANALYSIS GONE WRONG

Can you imagine receiving an add from Target informing you that your teenage daughter was pregnant? Yes, this actually happened a few years ago when Target sent an unsuspecting father discount coupons for cribs and baby clothes for his teenage daughter who had not told anyone she was pregnant. This incident set off a flurry of outrage and privacy concerns against Target’s data analysis practices.

Andrew Pole, statistician for Target, explained how big data helped analyze customer’s purchases to determine pregnancy. Target analyzes its data using a unique ID linked to a customer’s credit card, name, and purchases to look for patterns (for example: a woman buying prenatal vitamins) to then send them special deals and coupons for baby items. When Target’s data analysis system analyzed customer purchase data based on 25 products that pregnant women frequently buy, it could assign a pregnancy prediction score to each shopper and estimate her due date so Target could send her relevant coupons for various stages of her pregnancy. After massive customer outrage against privacy concerns Target began mixing customized coupons by offering a coffee maker with a crib or coupons for baby clothes with wine glasses, so someone reviewing the coupons could not determine anything about the customer.

There is no doubt that some companies data analysis practices feel more like stalking than strategic business moves. How would you feel if you received coupons indicating someone in your family or household was pregnant or sick? How does a company determine if their data analysis practices are crossing the line over data privacy? Do you agree it was a good idea for Target to mix coupons to help ensure customer privacy?

KNOWLEDGE

Knowledge - Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources

Knowledge worker – Individual valued for their ability to interpret and analyze information

Imagine that Tony analyzes his data and finds his weakest sales representative for this period is Craig Schultz.

If Tony considered only this information, he might conclude that firing Craig was a good business decision. However, because Tony has knowledge about how the company operates, he knows Craig has been out on medical leave for several weeks; hence, his sales numbers are low. Without this additional knowledge,

Tony might have executed a bad business decision, delivered a negative message to the other employees, and sent his best sales representatives out to look for other jobs.

The key point in this scenario is that it is simply impossible to collect all the information about every situation, and yet without that, it can be easy to misunderstand the problem.

Using data, information, business intelligence, and knowledge to make decisions and solve problems is therefore the key to finding success in business.

These core drivers of the information age are the building blocks of business systems.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to name different types of knowledge workers found in today’s companies

Ask your students to name a few types of workers that are not knowledge workers found in today’s companies

Ask your students if they consider themselves knowledge workers, why or why not

THE CHALLENGE: DEPARTMENTAL COMPANIES

Common departments working independently

Data in and of itself is not useful unless the right people know how to use and manage it efficiently and effectively

Ask your students to identify a few issues a company might encounter if its departments work independently

People, information, and technology are inextricably linked

If one fails, they all fail

Ensure your students know what processes each department is responsible for performing. If they are not familiar cover the different types of processes from the figure.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What is one of the most important assets in an organization?

Information is one of the most important assets in an organization, and the primary way that people get information is through information technology

Without databases and spreadsheets how would managers gather, correlate, and analyze information?

Manually (AHHHHHHHHH – can you imagine?)

Performing these tasks manually, or by hand, is extremely time consuming and would most likely contain errors

THE MIS SOLUTION

Common departments working interdependently

Successful companies operate cross-functionally, integrating the operations of all departments.

Systems are the primary enabler of cross-functional operations

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to explain how a company operated prior to computers. How did marketing provide information to sales without computers? How did accounting collect information to create financial statements without computers or email?

Explain the numerous ways that systems help distribute information around a company improving operational efficiency and effectiveness

Employees across departments trust each other to use information (especially about problems and failures) to improve performance.

Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.

CLASSROOM EXERCISE: STUDENT EXPECTATIONS AND THE MIS CHALLENGE

Have each student list three things they know and three things they want to know about the content in the course. You can collect this and use as a baseline for teaching.

Ask your students to come up with a business that does not need technology to compete. Whatever the business I can demonstrate how technology can help them be more successful – for example a hot dog stand or a taxi cab.

By having a computer I can research what events are happening in the town and ensure my stand or cab is exactly where the event is occurring for optimum traffic.

A lawn service company needs scheduling software to schedule work and maintenance on equipment, a website for advertising and connecting with customers, the Internet for weather forecasting so the company can quickly reschedule due to thunderstorms, email marketing campaigns, payroll processing, and of course Turbo Tax for small business.

To date, my students have not yet won the MIS challenge.

THE MIS SOLUTION

Goods - Material items or products that customer’s will buy to satisfy a want or need. Clothing, groceries, cell phones, and cars are all examples of goods that people buy to fulfill their needs

Cars

Groceries

Clothing

Goods are material items or products that customer’s will buy to satisfy a want or need.

Clothing, groceries, cell phones, and cars are all examples of goods that people buy to fulfill their needs.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to list several types of goods

THE MIS SOLUTION

Services - Tasks performed by people that customers’ will buy to satisfy a want or need

Teaching

Waiting Tables

Cutting Hair

Services are tasks performed by people that customers’ will buy to satisfy a want or need.

Waiting tables, teaching, and cutting hair are all examples of services that people pay for to fulfill their needs

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to list several types of services

SYSTEMS THINKING

Production - The process where a business takes raw materials and processes them or converts them into a finished product for its goods or services

Production is the process where a business takes raw materials and processes them or converts them into a finished product for its goods or services.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to explain the process of making a hamburger including:

Inputs - such as the bun, patty, lettuce, tomato, and ketchup

Process - cook the patty, wash and chop the lettuce and tomato, and place all of the items in the bun.

Outputs - your hamburger!

Productivity is the rate at which goods and services are produced based upon total output given total inputs.

Ask your students how a hamburger restaurant can improve productivity.

Answer: if a business could produce the same hamburger with less expensive inputs or more hamburgers with the same inputs it would see a rise in productivity and possibly an increase in profits.

Ensuring the input, process, and output of goods and services work across all of the departments of a company is where systems add tremendous value to overall business productivity

SYSTEMS THINKING

Systems thinking – A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part

Successful companies operate cross-functionally, integrating the operations of all departments.

Systems are the primary enabler of cross-functional operations.

A system is a collection of parts that link to achieve a common purpose.

A car is a good example of a system, since removing a part, such as the steering wheel or accelerator, causes the entire system to stop working.

Systems thinking is a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part (see Figure). Feedback is information that returns to its original transmitter (input, transform, or output) and modifies the transmitter’s actions. Feedback helps the system maintain stability.

For example, a car’s system continuously monitors the fuel level and turns on a warning light if the gas level is too low.

Systems thinking provides us with an end-to-end view of how operations work together to create a product or service.

Business students who understand systems thinking are valuable resources because they can implement solutions to problems that consider the entire process, not just a single component

System – A collection of parts that link to achieve a common purpose (Input, Process, Output)

Feedback – Information that returns to its original transmitter and modifies the transmitter's actions

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to provide several real-world examples of systems thinking

Example: A car, coffee maker, washer and dryer, On Demand movies, Streaming Movies

SYSTEMS THINKING

Management Information Systems (MIS) – A business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving

MIS is not technology

MIS is a business function

Most organizations have a department that is responsible for performing the MIS function

This is similar to an organization having an Accounting department that is responsible for performing the accounts payable and accounts receivable functions

The MIS department is responsible for gathering, storing, cleansing, and analyzing all data from all of the transactional processing systems

CLASSROOM EXERCISE: BUSINESS DRIVEN ETHICS AND SECURITY: THE INTERNET OF EVERYTHING IS EVERYWHERE

IoT is transforming our world into a living information system as we control our intelligent lighting from our smart phone to a daily health check from our smart toilet. Of course, with all great technological advances come unexpected risks, and you have to be prepared to encounter various security issues with IoT. Just imagine if your devices are hacked by someone who now can shut off your water, take control of your car, or unlock the doors of your home from thousands of miles away. We are just beginning to understand the security issues associated with IoT and M2M, and you can be sure that sensitive data leakage from your IoT device is something you will most likely encounter in your life.5 (For more information about IoT, refer to the Opening Case Study.)

In a group, identify a few IoT devices you are using today. These can include fitness trackers that report to your iPhone, sports equipment that provides immediate feedback to an app, or even smart vacuum cleaners. If you are not using any IoT devices today, brainstorm a few you might purchase in the future. How could a criminal or hacker use your IoT to steal your sensitive data? What potential problems or issues could you experience from these types of data thefts? What might be some of the signs that someone had accessed your IoT data illegally? What could you do to protect the data in your device?

MIS DEPARTMENT ROLES AND RESPONSIBILITIES

Chief information officer (CIO) – Oversees all uses of information and ensures the strategic alignment of MIS with business goals and objectives

Chief data officer (CDO) – Responsible for determining the types of information the enterprise will capture, retain, analyze, and share

Chief technology officer (CTO) – Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of information

Explain to your students that job titles, roles, and responsibilities often differ dramatically from organization to organization

The CIO typically reports directly to the Chief Executive Officer (CEO)

CIOs must possess a solid and detailed understanding of every aspect of an organization coupled with tremendous insight into the capability of IT

CIOs must have strong business skills and strong IT skills

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Can you name any famous CEOs?

Jeff Bezos, Amazon.com

Bill Gates, Microsoft

Michael Dell, Dell computers

Can you name any famous CIOs?

Most students will be familiar with many famous CEOs but not CIOs, CPOs, CSOs, CKOs, or CTOs

MIS DEPARTMENT ROLES AND RESPONSIBILITIES

Chief security officer (CSO) – Responsible for ensuring the security of MIS systems

Chief privacy officer (CPO) – Responsible for ensuring the ethical and legal use of information

Chief knowledge officer (CKO) - Responsible for collecting, maintaining, and distributing the organization’s knowledge

Chief intellectual property officer

Chief automation officer

Chief sustainability officer

Chief user experience officer

While many companies may not have a different individual for each of these positions, they must have top managers who take responsibility for all of these areas.

Define the difference between the CIO, CTO, CSO, CPO, and CKO

CIO oversees all uses of information technology and ensures the strategic alignment of MIS with business goals and objectives

CTOs are similar to CIOs, except CIOs take on the additional responsibility for effectiveness of ensuring that MIS is aligned with the organization's strategic initiatives

CTOs ensure the efficiency of MIS

CPOs are the newest senior executive position, and many CPOs are lawyers by training

CKO is one of the most recent positions added to the executive leadership team

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Define the general organizational structure between CIO, CTO, CSO, CPO, and CKO?

This structure will vary from organization to organization

A great debate is to have the entire class decide on an organizational structure, including the CFO and CEO for a fictitious company

CLASSROOM EXERCISE: REORGANIZING AN ORGANIZATION

The AAA Management Company specializes in the management of rental properties and generates over $20 million in revenues each year and has over 2,000 employees throughout the United States, Canada, and Mexico. The company has just hired a new CEO, David Paul. David is planning to reorganize the company so that it operates more efficiently and effectively. Below is the new organizational structure that he plans to present to the board of directors on Monday. Break your students into groups and ask them to explain the advantages and disadvantages of such a reporting structure. Ask them to reorganize the reporting structure in the way they feel will be most beneficial to the operations of the company, being sure to give their justifications for the new structure. Student answers to this exercise will vary.

AAA Management’s New Organizational Structure

CTO

CEO

CPO

CIO

Vice Presidents

CSO

CKO

Analysts

Managers

SECTION 1.2: Business strategy

CLASSROOM OPENER: GREAT BUSINESS DECISIONS – HENRY LUCE DECIDES TO RANK COMPANIES IN THE FORTUNE 500

Henry Luce founded Time magazine in 1923 and Fortune magazine in 1929. Luce decided to create a ranking of America’s top 500 companies, called The Fortune 500, which has served as the corporate benchmark for the twentieth century – as well as being a clever marketing tactic for the magazine. The Fortune 500 remains a powerful barometer of who’s up and down in the corporate world. It is also a brilliant marketing tool since every single time its name is mentioned, so is the name of the magazine. However, being ranked on the Fortune 500 does not guarantee that the organization will achieve future success, and its measures of current achievement can also be limited and a bit confusing.

BusinessWeek magazine created a similar ranking by introducing its biannual ranking of business schools. The issue routinely outsells all other issues of the magazine in the year.

Why does the Fortune 500 offer such a brilliant use of data and analytics to determine business value?

LEARNING OUTCOMES

Explain why competitive advantages are temporary

Identify the four key areas of a SWOT analysis

Describe Porter’s Five Forces Model and explain each of the five forces

Compare Porter’s three generic strategies

Demonstrate how a company can add value by using Porter’s value chain analysis

A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

IDENTIFYING COMPETITIVE ADVANTAGES

Business strategy – A leadership plan that achieves a specific set of goals or objectives such as:

Developing new products or services

Entering new markets

Increasing customer loyalty

Attracting new customers

Increasing sales

Competitive advantage – a product or service that an organization’s customers place a greater value on than similar offerings from a competitor

First-mover advantage – occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

Competitive advantages are important for an organization

It is even more important to understand that competitive advantages are typically temporary since competitors are quick to copy competitive advantages

CLASSROOM EXERCISE: TED!!

http://www.ted.com/

This is the best site for videos. TED stands for Technology, Entertainment, Design. It started out (in 1984) as a conference bringing together people from those three worlds. Since then its scope has become ever broader. The annual conference now brings together the world's most fascinating thinkers and doers, who are challenged to give the talk of their lives (in 18 minutes). This site makes the best talks and performances from TED available to the public, for free. More than 500 talks from our archive are now available, with more added each week. These videos are released under a Creative Commons license, so they can be freely shared and reposted.

I challenge my students to watch one TED video each week of the course and to report on great videos to fellow students. I create a TED Wiki in Blackboard and allow the students to share their findings!

IDENTIFYING COMPETITIVE ADVANTAGES

Stakeholder’s Interests

Explain each area and how difficult it can be to ensure all needs and requirements are met.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to explain the different stakeholders and define their agendas/interests.

What types of people or organizations are included in each area?

What does each area care about?

Social good

Profits

Employees

Products

Environment

Governance

How does each area compete or do they work together?

IDENTIFYING COMPETITIVE ADVANTAGES

Competitive advantage – A product or service that an organization’s customers place a greater value on than similar offerings from a competitor

First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to identify current companies and try to analyze their business strategies including do they have a competitive advantage or a first-mover advantage?

Netflix

Airbnb

Uber

Amazon

Wal-Mart

Target

iTunes

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Can you list a few companies that achieved success through competitive advantages?

United was the first airline to offer a competitive advantage with its frequent flyer mileage (this first-mover advantage was temporary)

Sony had a competitive advantage with its portable stereo systems (this first-mover advantage was temporary)

Microsoft had a competitive advantage with its unique Windows operating system

Does Microsoft still has a competitive advantage with its Windows operating system?

Perhaps – primarily due to its first-mover advantage since it is difficult to switch operating systems and users face interoperability if they are using different operating systems at the same organization.

How many students in your class are currently using Windows?

What are the competitors to Windows?

Linux and MacOS

Why are there only three primary competitors in this large operating system market?

What would happen if you had 50 different operating systems to choose from?

Issues with interoperability

IDENTIFYING COMPETITIVE ADVANTAGES

Business tools for analyzing business strategies

SWOT analysis – Evaluates Project Position

Five Forces Model – Evaluates Industry Attractiveness

Three Generic Strategies – Chose Business Focus

Value Chain Analysis – Executes Business Strategy

The four competitive advantages discussed in this chapter include

SWOT Analysis

Five Forces Model

Three Generic Strategies

Value Chain Analysis

Environmental scanning is the acquisition and analysis of events and trends in the environment external to an organization

Technology has the opportunity to play an important role in environmental scanning for competitive intelligence

For example, Frito-Lay, a premier provider of snack foods such as Cracker Jacks and Cheetos, does not just send its representatives into grocery stores to stock shelves—they carry handheld computers and record the product offerings, inventory, and even product locations of competitors. Frito-Lay uses this information to gain business intelligence on everything from how well competing products are selling to the strategic placement of its own products.

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students why they would use a SWOT analysis

Ans: to evaluate a project position

Ask your students why they would use the five forces model

Ans: to evaluate the attractiveness of an industry

Ask your students why they would use the three generic strategies

Ans: to choose a business focus – example Wal-Mart uses a low-cost strategy

Ask your students why they would use a value chain analysis

Ans: to execute business strategies

SWOT ANALYSIS

A SWOT analysis evaluates an organization’s strengths, weaknesses, opportunities, and threats to identify significant influences that work for or against business strategies

Strengths and weaknesses originate inside an organization, or internally.

Opportunities and threats originate outside an organization, or externally and cannot always be anticipated or controlled.

CLASSROOM EXERCISE: BUSINESS DRIVEN INNOVATION: SWOT YOUR STUDENTS

What is your dream job? Do you have the right skills and abilities to land the job of your dreams? If not, do you have a plan to acquire those sought-after skills and abilities? Do you have a personal career plan or strategy? Just like a business, you can perform a personal SWOT analysis to ensure your career plan will be successful. You want to know your strengths and recognize career opportunities while mitigating your weaknesses and any threats that can potentially derail your career plans. A key area where many people struggle is technology, and without the right technical skills, you might find you are not qualified for your dream job. One of the great benefits of this course is its ability to help you prepare for a career in business by understanding the key role technology plays in the different industries and functional areas. Regardless of your major, you will all use business driven information systems to complete the tasks and assignments associated with your career.

Perform a personal SWOT analysis for your career plan, based on your current skills, talents, and knowledge. Be sure to focus on your personal career goals, including the functional business area in which you want to work and the potential industry you are targeting, such as health care, telecommunications, retail, or travel.

After completing your personal SWOT analysis, take a look at the table of contents in this text and determine whether this course will eliminate any of your weaknesses or create new strengths. Determine whether you can find new opportunities or mitigate threats based on the material we cover over the next several weeks. For example, Chapter 9 covers project management in detail—a key skill for any business professional who must run a team. Learning how to assign and track work status will be a key tool for any new business professional. Where would you place this great skill in your SWOT analysis? Did it help eliminate any of your weaknesses? When you have finished this exercise, compare your SWOT with your peers to see what kind of competition you will encounter when you enter the workforce.

THE FIVE FORCES MODEL – EVALUATING INDUSTRY ATTRACTIVENESS

Five Forces Model

CLASSROOM EXERCISE: PORTER’S FIVE FORCES

Ask your students to name a few industries where competition is high?

Restaurants, products, telecommunications, banking

Ask your students to name a few industries where competition is low?

This is typically highly regulated industries such as energy markets and stock exchanges

Porter’s Five Forces is an easy framework to understand and offers students a quick way to analyze a business. Porter’s Five Forces is also reinforced throughout the text and it is important that your students have a solid understanding of each force. For this exercise, break your students into groups and ask them to choose two products to perform a Porter’s Five Forces analysis. The two products must compete in the same market.

Potential Products

Laptop Computer and Desktop Computer

PDA and Laptop Computer

iPod and Walkman

DVD Player and VCR Player

Digital camera and Polaroid Camera

Cell Phone and Blackberry PDA

Coca-Cola Plastic Bottle and Coca-Cola Glass Bottle

GPS Device and a Road Atlas

Roller skates and Rollerblades

Digital Books to Printed Books

Digital Paper to

CLASSROOM EXERCISE: STREAMING MOVIES

Ask your students to analyze the streaming content industry based on Porter’s Five Forces. If they had $10 million would they start a streaming content business?

Buyer power is high as customers have many choices for streaming movies including Netflix, Hulu, Cable channels, On-demand, Disney+, and Amazon. They can also choose to purchase movies at many different stores or rent from Redbox.

Supplier power is low as there are numerous competitors in this fiercely competitive market including Amazon Prime, Disney, Netflix, Xfinity Cable, Hulu, etc.

Competition is high and rivalry is fierce.

Threat of new entrants is high as more and more individuals are making indie movies and offering them on YouTube and Hulu.

Threat of substitute products is high as new forms of online entertainment hit the markets yearly including virtual reality and gaming.

After analyzing this market the majority of students will determine that the industry is highly competitive and risky to attempt to enter.

Paper

BUYER POWER

Buyer power – The ability of buyers to affect the price of an item

Switching cost – Manipulating costs that make customers reluctant to switch to another product

Loyalty program – Rewards customers based on the amount of business they do with a particular organization

Buyer power can also be called customer power

Calling buyer power customer power sometimes helps students understand the difference between buyer power and supplier power

To reduce buyer power (and create a competitive advantage), an organization must make it more attractive for customers to buy from them than from their competition

One of the best IT-based examples is the loyalty programs that many organizations offer

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Which kinds of loyalty programs are you currently using?

Frequent-flyer miles

Grocery store discounts – “Safeway Card”

Restaurant discounts such as Subway’s get your 12th sandwich free

Coffee clubs where you get your 10th cup of coffee free

CLASSROOM EXERCISE: PORTER VIDEO ON YOUTUBE

Great YouTube video with Michael Porter on The Five Competitive Forces that Shape Strategy. (If these links are down please Google Michael Porter)

Michael Porter – The Five Forces that Shape Strategy (20 Mins)

https://www.youtube.com/watch?v=mYF2_FBCvXw

Michael Porter – Why Business Can be Good at Solving Social Problems (15 Mins)

https://www.youtube.com/watch?v=0iIh5YYDR2o

Institute for Strategy and Competitiveness

Ask your students to visit Michael Porter’s Institute for Strategy and Competitiveness. There are numerous articles, videos, book excerpts, etc. for the students to dig into Porter. http://www.isc.hbs.edu/

SUPPLIER POWER

Supplier power – The suppliers’ ability to influence the prices they charge for supplies

Supply chain – Consists of all parties involved in the procurement of a product or raw material

A supplier organization in a market will want buyer (customer) power to be low

The supplier wants to be able to set any price it wants for its goods, and if buyers (customers) have low power, then they do not have any choice but to pay the high price since there are only one or two suppliers

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What is an example of an organization with “high” supplier power?

Microsoft, Government regulated products such as energy markets and telecommunication markets in some countries

How an organization can be both a supplier and a buyer in a supply chain?

Discuss how Dell computers is both a buyer and supplier in the supply chain

Dell is a buyer (customer) of parts, and a supplier to its customers who buy computers

If supplier power is high, the supplier can influence the industry by:

Charging higher prices

Limiting quality or services

Shifting costs to industry participants

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Threat of substitute products or services – High when there are many alternatives to a product or service and low when there are few alternatives

Ideally, an organization wants to be in a market in which there are few substitutes for its products or services

This is difficult to achieve, and most organizations create a competitive advantage through switching costs - the more painful it is for a customer to switch suppliers, the less likely they are to switch

If a customer has to experience pain when switching to a different service provider, then they are unlikely to switch

For example, switching doctors usually involves sending all medical records and explaining all past medical history to the new doctor. Insurance also has to be transferred, along with detailed forms that the customer will be required to complete (such as family history, personal history, HIPAA, etc.) For these reasons customers have to be extremely dissatisfied with a doctor before they will endure the pain of finding or switching to a new doctor

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Students typically confuse rivalry with substitute products so be sure to ask students for examples of substitute products

What would be a substitute product for Starbuck’s coffee?

Jamba Juice

Tea House

Vitamin drink

Soda

What is a Swiffer wet jet a substitute product for?

A mop?

A broom?

Is it a competitor or a substitute?

I own both a mop and a Swiffer Wet Jet.

THREAT OF NEW ENTRANTS

Threat of new entrants – High when it is easy for new competitors to enter a market and low when there are significant entry barriers

Entry barrier – A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What is an industry that has a high entry barrier?

Energy – the organization has to have the infrastructure to support energy

Telecommunications – the organization has to invest in a telecommunications infrastructure prior to offering services

Banking – the bank must offer its customers an array of IT-enabled services including ATMs and online account services

What is an industry that has a low entry barrier?

Restaurants – simply lease a space, obtain a license, and you can sell food

Catering – simply offer food and deliver

Movie rental – simply buy the movies, pay the licensing fee, and offer the movies for rental (although if you want to be a Netflix the entry barrier is high because you have to have the facilities and systems to mimic their movie supply chain)

RIVALRY AMONG EXISTING COMPETITORS

Rivalry among existing competitors – High when competition is fierce in a market and low when competitors are more complacent

Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand

CLASSROOM EXERCISE: QUESTION YOUR THINKING

What are a few industries where competition is high?

Restaurants, products, telecommunications, banking

What are a few industries where competition is low?

This is typically highly regulated industries such as energy markets and stock exchanges

Ask your students to provide a few examples of differentiation

Different brands of Coke, Ragu spaghetti sauce, Pepsi

Additional features on a cell phone

STRONG AND WEAK EXAMPLES OF PORTER’S FIVE FORCES

	WEAK FORCE: DECREASES COMPETITION OR FEW COMPETITORS	STRONG FORCE: INCREASES COMPETITION OR LOTS OF COMPETITORS
BUYER POWER	An international hotel chain purchasing milk	A single consumer purchasing milk
SUPPLIER POWER	A company that makes airline engines	A company that makes pencils
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES	Cancer drugs from a pharmaceutical company	Coffee from McDonald’s
THREAT OF NEW ENTRANTS	A professional hockey team	A dog walking business
RIVALRY AMONG EXISTING COMPETITORS	Department of Motor Vehicles	A coffee shop

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to find additional examples of weak forces and strong forces for each of Porter’s Five Forces

ANALYZING THE AIRLINE INDUSTRY

Perform a Porter’s Five Forces analysis of each of the following for a company entering the commercial airline industry

Buyer power

Supplier power

Threat of substitute products/services

Threat of new entrants

Rivalry among competitors

CLASSROOM EXERCISE: QUESTION YOUR THINKING: Potential Answers Include:

Buyer Power – high, many airlines to choose from

Supplier Power – high, limited manufacturers, unions

Threat of Substitute products/services – high, many alternate transportation choices

Threat of new Entrants – high, new airlines enter market continuously

Rivalry among competitors – high, online sales

THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

It is important to explain to your students that organizations are encouraged to follow only one of the three strategies

What would happen to Mercedes Benz if it wanted to follow a broad cost leadership and a focused strategy?

Mercedes Benz would find itself facing the dilemma of attempting to market and sell a highly specialized and expensive product at a discounted price. It simply wouldn’t work!

Organizations typically follow one of Porter’s three generic strategies when entering a new market

Broad cost leadership

Broad differentiation

Focused strategy

CLASSROOM EXERCISE: BUSINESS DRIVEN GLOBALIZATION: SHARING DATA AROUND THE WORLD

In the past few years, data collection rates have skyrocketed, and some estimate we have collected more data in the past 4 years than since the beginning of time. According to International Data Corporation, data collection amounts used to double every 4 years. With the massive growth of smart phones, tablets, and wearable technology devices, it seems as though data is being collected from everything, everywhere, all the time. It is estimated that data collection is doubling every 2 years, and soon it will double every six months. That is a lot of data! With the explosion of data collection, CTOs, CIOs, and CSOs are facing extremely difficult times as the threats to steal corporate sensitive data also growing exponentially. Hackers and criminals have recently stolen sensitive data from retail giant Target and even the Federal Reserve Bank.

To operate, sensitive data has to flow outside an organization to partners, suppliers, community, government, and shareholders. List 5 types of sensitive data your schools collects on students, faculty, and personnel. Review the list of stakeholders working at and with your school; determine which types of sensitive data each has access to and whether you have any concerns about sharing this data. Do you have to worry about theft of your student sensitive data? How can you ensure your school does not have any data leakage problems?

THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

Broad strategies reach a large market segment

Focused strategies target a niche market

Focused strategies concentrate on either cost leadership or differentiation

CLASSROOM EXERCISE: QUESTION YOUR THINKING

Ask your students to choose an industry such as fast food or potato chips and perform a Porter’s Three Generic Strategies analysis

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Business process – A standardized set of activities that accomplish a specific task, such as a specific process

Value chain analysis – Views a firm as a series of business processes that each add value to the product or service

Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

Value chain – views an organization as a series of processes, each of which adds value to the product or service for each customer

Value Chain Groups – Within a company separate the company’s activities into two categories: 1) primary value activities and 2) support value activities

To create a competitive advantage, the value chain must enable the organization to provide unique value to its customers

Examining the organization as a value chain determines which activities add value for customers

The organization can then focus specifically on those activities

CLASSROOM EXERCISE: BUSINESS DRIVEN GLOBALIZATION: SHARING DATA AROUND THE WORLD

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Primary value activities

Inbound logistics - Acquires raw materials and resources, and distributes

Operations - Transforms raw materials or inputs into goods and services

Outbound logistics - Distributes goods and services to customers

Marketing and sales - Promotes, prices, and sells products to customers

Service - Provides customer support

Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services

Support value activities support the primary value activities

Customers determine the extent to which each activity adds value to the product or service

The competitive advantage is to:

Target high value-adding activities to further enhance their value

Target low value-adding activities to increase their value

Perform some combination of the two

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Support value activities

Firm infrastructure – Includes the company format or departmental structures, environment, and systems

Human resource management – Provides employee training, hiring, and compensation

Technology development – Applies MIS to processes to add value

Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies

CLASSROOM EXERCISE: BUSINESS DRIVEN START-UP: SMART CARTING

It is almost impossible for a company to differentiate itself from competitors based on products alone. Competitors are only a click away and can offer products similar to yours with better quality or cheaper prices. One way to stay ahead of the pack is to use sophisticated analysis to understand every area of how your business performs. With analytics, you discern not only what your customers want but also how much they’re willing to pay and what keeps them loyal. Tracking existing inventories and predicting future inventory requirements can offer insights into purchasing patters along with significant costs savings that can be added to the bottom line.

You have decided to start a business that creates an IoT device that can be attached to a shopping cart or basket and tracks store navigation patterns, products placed and removed from carts, and total purchase price. What business strategies can a company such as Target gain from using your IoT device? What types of information can be gleaned by analyzing traffic patterns in the store? What business intelligence can be found by analyzing products placed and removed from carts? Do you think there will be a correlation between time and the amount of the total purchase? How can you use this information to help improve business operations? If you owned a store, would you consider purchasing this great new IoT device?

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Porter’s Value Chain

Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services

Support value activities support the primary value activities

Customers determine the extent to which each activity adds value to the product or service

The competitive advantage is to:

Target high value-adding activities to further enhance their value

Target low value-adding activities to increase their value

Perform some combination of the two

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Value Chain and Porter’s Five Forces Model

If an organization wants to decrease its buyer’s or customer’s power, it can construct its value chain activity of “service after the sale” by offering high levels of quality customer service

This will increase the switching costs for its customers, thereby decreasing their power (buyer power)

CLASSROOM ACTIVITY: BUSINESS DRIVEN DEBATE: IS TECHNOLOGY MAKING US DUMBER OR SMARTER?

Choose a side and debate the following:

Side A: Living in t he information age has made us smarter because we have a huge wealth of knowledge at our fingertips whenever or wherever we need it.

Side B: Living in the information age has caused people to become lazy and dumber because they are no longer building up their memory banks to solve problems; machines give them the answers they need to solve problems.

Learning outcome review

Now that you have finished the chapter please review the learning outcomes in your text

Be sure to review the learning outcomes included in the end-of-chapter material