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Using MIS

10th Edition

Chapter 3

Strategy and Information Systems

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“We Can't Be Everything to Everybody.”

Known for providing security monitoring.

Current focus on security contracts.

Mateo wants to focus on law enforcement agencies, search & rescue, federal government.

Good money in agricultural surveying, industrial inspection, real estate videos, and wedding videos too.

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Use Falcon Security to:

Practice using Porter’s Five Forces Model.

Understand the application of competitive strategy.

Consider the risks of changes in the market to competitive strategy.

Understand major changes in company operations (3D manufacturing) create opportunity to change company mission.

Study Questions

Q3-1 How does organizational strategy determine information systems structure?

Q3-2 What five forces determine industry structure?

Q3-3 How does analysis of industry structure determine competitive strategy?

Q3-4 How does competitive strategy determine value chain structure?

Q3-5 How do business processes generate value?

Q3-6 How does competitive strategy determine business processes and the structure of information systems?

Q3-7 How do information systems provide competitive advantages?

Q3-8 2027?

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Strategy Determines Information Systems

Figure 3-1 Organizational Strategy Determines Information Systems

Q3-1 How does organizational strategy determine information systems structure?

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This figure summarizes a planning process used by many organizations.

Start with Porter's Five Forces to analyze industry structure.

Organizations examine the industry structure and determine a competitive strategy. That strategy determines value chains, which determine business processes. The structure of business processes determines the design of supporting information systems.

Five Forces Determine Industry Structure

Q3-2 What five forces determine industry structure?

Competitive Forces

Competition from vendors who manufacture substitutes.

Competition from new competitors.

Competition from existing rivals.

Bargaining Power Forces

Bargaining power of suppliers.

Bargaining power of customers.

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Porter’s Five Forces.

Use Five-forces Model to Identify Sources of Strong Competition

Figure 3-3 Examples of Five Forces

Q3-2 What five forces determine industry structure?

Force	Example of Strong Force	Example of Weak Force
Bargaining power of customers	Toyota’s purchase of auto paint (because Toyota is a huge customer that will purchase paint in large volume)	Your power over the procedures and policies of your university
Threat of substitutions	Frequent traveler’s choice of auto rental	Patients using the only drug effective for their type of cancer
Bargaining power of suppliers	New car dealers (because they control what the “true price” of a vehicle is and the customer cannot reliably verify the accuracy of that price)	Grain farmers in a surplus year (an oversupply makes the product less valuable and less profitable)
Threat of new entrants	Corner latte stand (because it is an easy business to replicate)	Professional football team (because the number of teams is tightly controlled by the NFL)
Rivalry	Used car dealers (because there are many to choose from)	Google or Bing (expensive to develop and market a search engine)

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Each of the three competitive forces concerns the danger of customers taking their business elsewhere.

Have students examine table to see why Falcon Security is exploring possibility of 3D printing.

Assessing the Five Forces at Falcon Security

Figure 3-4 Five Forces at Falcon Security

Q3-2 What five forces determine industry structure?

Force	Falcon Security Example	Force Strength	Falcon Security's Response
Bargaining power of customers	A large account wants more services at a lower price	Strong	Lower prices, or diversify into other markets
Threat of substitutions	Replace drones with wireless IP Web cameras	Medium	Offer differentiating services, like LiDAR, that cameras can't provide
Bargaining power of suppliers	We're increasing the cost of the drones we sell	Weak	We'll make our own drones
Threat of new entrants	Amazon begins offering package delivery and surveillance via drones	Medium	Offer differentiating services and enter other markets
Rivalry	A new drone company expands its operations into the state	Weak	Offer additional features like direct streaming video to the customer

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Porter's Four Generic Competitive Strategies

Figure 3-5 Porter's Four Competitive Strategies

Q3-3 How does analysis of industry structure determine competitive strategy?

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To be effective, organization goals, objectives, culture, and activities must be consistent with the organization’s strategy.

This means, all information systems in organization must facilitate the organization’s competitive strategy.

Each of the three competitive forces concerns the danger of customers taking their business elsewhere.

Have students examine table to see why Falcon Security is exploring possibility of 3D printing.

The Lure of Love Bots

Ethics Guide

The problem: 15 percent of the total subscribers were female, while 85 percent were male

“The key to maintaining subscribers on this type of site is keeping them interested”

To keep subscribers paying, “all we have to do is send them some messages from a dummy account”

All interactions can be handled with AI bots

Are the owner’s actions illegal? Unethical?

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GOALS

Sensitize students to the fact that a competitive strategy is not just an academic topic. Changing competitive strategy has dramatic impacts on personnel and company culture.

Understand practical applications of business reports.

Explore ethical questions concerning communication about sensitive topics.

This guide illustrates the uncomfortable position many managers face when they possess knowledge that cannot be communicated to others in the company.

As a manager, you will sometimes have information that you are not supposed to communicate to employees. If an employee asks you directly about that information, you can either divulge it or lie. Which would you choose? What are the consequences of either choice?

Is there an alternative between inappropriately divulging information and lying? What is it? What disadvantages does that alternative have?

In general what are the consequences on the organization’s culture of moving from a differentiation strategy to a low-cost strategy?

In general what are the consequences on the organization’s culture of moving from a low-cost strategy to a differentiation strategy?

Drone Manufacturer’s Value Chain

Figure 3-6 Drone Manufacturer's Value Chain

Q3-4 How does competitive strategy determine value chain structure?

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Medium-sized drone manufacturer’s value chain—network of value-creating activities

Difference between value an activity generates and its cost is called margin.

Linkages—interactions across value activities.

Task Descriptions for Primary Activities of the Value Chain

Figure 3-7 Task Descriptions for Primary Activities of the Value Chain

Source: Based on Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (The Free Press, a Division of Simon & Schuster Adult Publishing Group). Copyright © 1985, 1998 by Michael E. Porter.

Q3-4 How does competitive strategy determine value chain structure?

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Summary of primary activities of a generic value chain.

Three Examples of Business Processes for Material Ordering Process

Figure 3-8 Three Examples of Business Processes

Q3-5 How do business processes generate value?

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Materials Ordering Process, Manufacturing Process, Sales Process.

Notice that Activities interact with two unconnected databases.

Business processes span the value chain activities

Improved Material Ordering Process Using Integrated Databases

Figure 3-9 Improved Material Ordering Process

Q3-5 How do business processes generate value?

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Here the databases are directly linked to support Customer Demand Query.

Purchase-bicycle-parts activity queries both raw materials inventory and finished goods inventory databases.

Low-Cost Rental Operations Value Chain

Figure 3-10 Operations Value Chains for Bicycle Rental Companies

Q3-6 How does competitive strategy determine business processes and the structure of information systems?

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Operations Value Chains for Bicycle Rental Companies

High-Service Rental Value Chain

Figure 3-10 Operations Value Chains for Bicycle Rental Companies

Q3-6 How does competitive strategy determine business processes and the structure of information systems?

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Operationalized personalized customer service along with use of automation.

Business Process and Information Systems for High-Service Bike Rental

Figure 3-11 Business Process and Information Systems for High-Service Bike Rental

Q3-7 How do information systems provide competitive advantages?

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Notice the personalized customer relationship.

Principles of Competitive Advantage

Figure 3-12 Principles of Competitive Advantage

Q3-7 How do information systems provide competitive advantages?

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Some of these competitive techniques are created via products and services, and some by development of business processes.

The Autonomous Race

So What?

Nearly all major automakers are investing in and have already been testing their own self-driving cars.

Nearly 93 percent of crashes have been attributed to operator error being the “definite or probable” cause.

Identify some implications of driverless vehicles.

What legal obstacles face producers of driverless vehicles?

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Don’t limit yourself to the transportation. Also, include industries like shipping, aviation, and law enforcement.

Security against hacking and malicious code would be a major concern.

The Autonomous Race (cont’d)

So What?

What vulnerabilities could be exploited by equipping self-driving vehicles with Internet access?

What are some logistical issues that could arise from a delivery vehicle without a human operator?

What impact will the widespread use of driverless vehicles have on other industries related to the automotive industry?

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Don’t limit yourself to the transportation. Also, include industries like shipping, aviation, and law enforcement.

Security against hacking and malicious code would be a major concern.

Using IS to Create Competitive Advantages

Q3-7 How do information systems provide competitive advantages?

Enhances existing products.

Differentiates products.

Locks in customers.

Raises barriers to market entry.

Increases profit margins by decreasing costs and decreasing errors.

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Using IS to Create Competitive Advantages (cont’d)

Q3-7 How do information systems provide competitive advantages?

Maintains customer account data

IS collects information for ABC (adds value).

IS saves customers time by automatically filling in part of form (adds value for customer).

Package & information delivery system

IS helps customer to select delivery address and generate shipping labels.

What value does shipper get?

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Two Roles for Information Systems Regarding Products

Figure 3-13 Two Roles for Information Systems Regarding Products

Q3-7 How do information systems provide competitive advantages?

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Web Page to Select a Contact from the Customer’s Records

Figure 3-14 ABC, Inc., Web Page to Select a Recipient from the Customer's Records

Q3-7 How do information systems provide competitive advantages?

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Shows a Web form that an ABC customer is using to schedule a shipment. When the ABC system creates the form, it fills the Company name dropdown list with the names of companies that the customer has shipped to in the past.

This information system enhances an existing service because it eases the effort of creating a shipment to the customer while reducing errors. The information system also helps to differentiate the ABC package delivery service from competitors.

ABC Web Page to Select a Contact from Customer’s Records

Figure 3-15 ABC, Inc., Web Page to Select a Contact from the Customer's Records

Q3-7 How do information systems provide competitive advantages?

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When the user clicks Company name, the underlying ABC information system reads customer’s contact data from a database. Data consist of names, addresses, and phone numbers of recipients from past shipments. User then selects a Contact name, and system inserts that contact’s address and other data into the form using data from the database.

Web Page to Specify Email Notification

Figure 3-16 ABC, Inc., Web Page to Specify Email Notification

Q3-7 How do information systems provide competitive advantages?

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On right-hand side of form, the customer can request ABC send email messages to the sender (the customer), recipient, and others.

By adding this capability to shipment-scheduling system, ABC extended its product from a package-delivery service to a package- and information-delivery service.

Web Page to Print Shipping Label

Figure 3-17 ABC, Inc., Web Page to Print a Shipping Label

Q3-7 How do information systems provide competitive advantages?

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By doing this, the company reduces errors in preparation of shipping labels, and causes customer to provide paper and ink for document printing.

Strategy and Information Systems in 2027

Q3-8 2027?

Pace of change and integration of new technology fast and increasing.

Augmented reality devices, like Google Glass and Microsoft's HoloLens, will change competitive landscape.

New businesses based on advances in self-driving cars, drones, 3D printing.

New products constructed in someone’s garage.

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Innovations by Technology Companies

Figure 3-18 Innovations by Technology Companies

Company	Market Cap. In Billions	Search	Smartphone	AI	Smartwatch	AR/VR	Drones	Self-driving Car
Apple	$539		iPhone (2007)	Siri (2011)	Apple Watch (2015)	? (dev.)		? (dev.)
Alphabet	$480	Google (1998)	Nexus (2013)	Now (2012)	Wear (os) (2014)	Daydream VR & Magic Leap (dev.)	Wing (dev.)	Self-driving Car (dev.)
Microsoft	$395	Bing (2009)	Lumia (2011)	Cortana (2014)	Band (2014)	Hololens (2016)
Facebook	$306	Facebook (2004)		FAIR (dev.)		Oculus Rift (2016)	Ascenta (dev.)
Samsung	$162		Galaxy S (2010)	S Voice (2012)	Gear S2 (2013)	Gear VR (2015)

Q3-8 2027?

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Hacking Smart Things

Security Guide

Internet of Things (IoT)

Internet-enabled devices.

Outfitting every object with Internet access hazardous, even dangerous, proposition.

Unintended risks associated with incorporating this capability into things.

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GOALS

Raise the students’ awareness of the importance of security knowledge and skills to professionals.

Practice applying the value chain model and competitive strategies to security, both for individuals and organizations.

Investigate the ways that one large organization uses security as part of its differentiation strategy.

Have students count number of passwords you use and compute average length of them.

Do they contain a mixture of letters, numbers, and special characters?

Internet of Threats

Security Guide

What about securing data stored on Internet-enabled smart devices?

How to protect 10, 20, or 30 different Internet-enabled devices in your home?

Could hacker hijack webcam in your living room, or actually hijack your car?

What businesses and government agencies could benefit?

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The guide discusses the potential threat of a hacker accessing a vehicle and downloading data about the car’s performance and operations. Aside from a malicious hacker acting alone, are there any businesses or government agencies that could benefit from accessing these data? How? Police, fire department, auto repair shops, private detectives, state child protection agency, your employer, etc.

Internet of Threats (cont’d)

Security Guide

What are some benefits or risks for businesses adopting new Internet-enabled devices?

How about supply chain, customer service? What else?

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Director of Architecture

Career Guide

Gabe Chino in Financial Services

Q. What attracted you to this field?

A. “I have always been interested in how technology can enhance our lives. After getting some exposure to programming in college, I was hooked. I realize there is no end to innovation and creativity in this field, so I am never bored.”

Q. What advice would you give to someone who is considering working in your field?

A. “My advice would be to always watch where the tech field is going. If this field is really for you, stay current with the latest IT trends.”

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Active Review

Q3-1 How does organizational strategy determine information systems structure?

Q3-2 What five forces determine industry structure?

Q3-3 How does analysis of industry structure determine competitive strategy?

Q3-4 How does competitive strategy determine value chain structure?

Q3-5 How do business processes generate value?

Q3-6 How does competitive strategy determine business processes and the structure of information systems?

Q3-7 How do information systems provide competitive advantages?

Q3-8 2027?

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The Amazon of Innovation

Figure 3-19 Innovation at Amazon

Source: Data from Amazon.com: http://phx.corporate-ir.net/phoenix.zhtml?p=irolcorporateTimeline&c=176060, accessed April 2016.

Case Study 3

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Figure shows list of business innovations created by Amazon for online retailing. Began as an online bookstore in 1994, and added new product categories. In 2016, Amazon sold goods in dozens of product categories.

The Amazon of Innovation (cont'd)

Case Study 3

Amazon’s business lines have three categories:

Online retailing

Own inventory

Associates program

Consignment

Order fulfillment

Cloud services

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Amazon built an enormous supporting infrastructure to ship 9 million items a day during the busy holiday season. Most of the year, Amazon.com has excess infrastructure capacity. Starting in 2000, Amazon began to lease some of that capacity to other companies and that led to the creation of cloud services.

You can ship your inventory to an Amazon warehouse and access Amazon’s information systems just as if they were yours.

Amazon Web Services allows organizations to lease time on computer equipment in very flexible ways. Organizations can expand and contract their computer resources within minutes.

Fulfillment Fees for Regular-Sized Goods for a Company Like Falcon Security

Case Study 3

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10e 2017

David M. Kroenke Randall J. Boyle

Using MIS