Chapter 3 Effects of IT on Strategy and Competition

Report
Chapter 3
Information Systems for
Competitive Advantage
- Case & Exercise
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business
Gonzaga University
Spokane, WA 99258 USA
[email protected]
Dr. Chen, Management Information Systems
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In-Class-Exercise (p.99-100)
(UYK - 4&5)
• 4. Consider the two different bike rental
companies in Figure 3-10. Think about the
bikes that they rent. Clearly, the student
bikes will be just about anything that can be
ridden out of the shop. The bikes for the
business executives, on the other hand, must
be new, shiny, clean, and in tip-top shape.
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• #4-a) Compare and contrast the operations value chains of
these two businesses as they pertain to management of
bicycles.
•
• In the low-cost student rental business, used bicycles are acquired
as cheaply as possible (e.g., garage sales, campus and community
police unclaimed bicycle auctions, classified ads, etc.). Minimal
care and maintenance is provided, such as tire repair, lubrication,
and brake and gear adjustment. If anything significant is damaged
on the bicycle, it is disposed of at the landfill.
• In the high-service rental business, new bicycles are purchased
from known, quality bicycle manufacturers. An array of types,
models, and sizes will be acquired to satisfy a range of bicycle
preferences. Maintenance will be meticulous so that every bicycle
is well-tuned prior to each rental. When a bicycle gets to the end of
its service life, possibly after a year or two of use, it is sold because
it will still have a good market value.
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• #4b) Describe a business process for maintaining bicycles for
both businesses.
• In the low-cost student rental business, maintenance is
performed only in response to a customer complaint.
Otherwise, the bicycle is assumed to be OK. In the high-service
rental business, a maintenance checklist is performed after each
bicycle is returned from a rental before it is released to be
rented again.
• #4c) Describe a business process for acquiring bicycles for
both businesses.
• In the low-cost student rental business, cheap bicycle sources
are utilized (e.g., garage sales, campus and community police
unclaimed bicycle auctions, classified ads, etc.). In the highservice rental business, the latest models are purchased from
the most well-known bicycle manufacturers.
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• #4d) Describe a business process for disposing of
bicycles for both businesses.
•
• In the low-cost student rental business, bicycles
are used until they break down completely.
Disposal involves taking them to the landfill.
• In the high-service rental business, the bicycles
will have a lot of market value and so disposal will
involve reselling them, perhaps using eBay to get
the best possible price for the bicycle.
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• #4e) What roles do you see for information systems in
your answers to the earlier questions? The information
systems can be those you develop within your company
or they can be those developed by others, such as
“Craig’s List.”
• The information system for the low-cost student rental
business will be quite simple, perhaps an index card for
each bicycle in inventory.
• The information system for the high-service rental
business could be more sophisticated, with complete
information on each bicycle’s acquisition and maintenance
records.
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• 5. Samantha Green owns and operates Twigs Tree Trimming
Service. Samantha graduated from the forestry program of a
nearby university and worked for a large landscape design
firm, performing tree trimming and removal. After several
years of experience, she bought her own truck, stump grinder,
and other equipment and opened her own business in St. Louis,
Missouri.
• Although many of her jobs are one-time operations to remove a
tree or stump, others are recurring, such as trimming a tree or
groups of trees every year or every other year. When business
is slow, she calls former clients to remind them of her services
and of the need to trim their trees on a regular basis.
• Samantha has never heard of Michael Porter or any of his
theories. She operates her business “by the seat of her pants.”
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• #5a) Explain how an analysis of the five competitive
forces could help Samantha.
•
• By looking at the five competitive forces, Samantha can
better understand how to achieve a profitable performance
in her industry. In this situation, the bargaining power of
customers may be relatively strong with the ability to
select another tree service based on price and
responsiveness. Customers will not perceive differences in
quality when removing a tree, other than judging response
time and the thoroughness of cleanup. With tree trimming
for tree maintenance, quality work will be harder for
customers to appreciate. Samantha will have to sell her
training and experience.
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• #5a) cont. The threat of substitution is a fairly weak force
with few alternatives available to customers who have a dead
or damaged tree that needs removing. There is, however, the
option of doing nothing in terms of tree maintenance.
Samantha needs to emphasize the benefits of performing
regular tree trimming for long-term tree health.
• The bargaining power of suppliers of equipment is a weak
force with many options available for machinery and
equipment. The threat of new entrants is somewhat strong
since anyone with a ladder, saw, and no fear of heights could
sell him/herself as a tree trimmer. Samantha will have to sell
her training and expertise. Finally, rivalry among existing
firms is probably strong. Samantha will have to work to make
her company’s name well known, sell her professional
knowledge and training, be responsive and keep her prices
competitive.
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• #5b) Do you think Samantha has a competitive strategy?
What competitive strategy would seem to make sense for
her?
•
• Samantha probably has not thought about a competitive
strategy. Many small business owners have not stepped back
from the hectic pace of just keeping the business going to
consider this issue. For Samantha, given her forestry
education, a differentiation strategy with a focus on the tree
health and maintenance industry segment may make sense.
Her education will clearly distinguish her from many others in
the field, and she should be able to capitalize on that with
residential and commercial properties requiring regular tree
maintenance.
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• #5c) How would knowledge of her competitive
strategy help her sales and marketing efforts?
•
• Samantha should not try to be all things to all parts
of her market. She should focus her efforts on
making her company’s name well known, selling
her professional knowledge and training, being
responsive to customer calls; and keeping her
prices competitive but not necessarily rockbottom.
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• #5d) Describe, in general terms, the kind of information
system that she needs to support sales and marketing
efforts.
•
• Samantha needs several things from an information system.
She needs to be responsive to customer calls, so she needs a
system to help her track and respond to calls in a timely
way. This system should also build her database of customer
prospects so that she can target her follow up and ongoing
tree maintenance sales efforts. The system should allow her
to keep good notes about each customer’s trees so she can
provide helpful information and services as needed to
combat diseases that might threaten tree health.
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CASE STUDY 3
Bosu Balance Trainer (p.101-102)
• Case Study 3: BOSU balance trainer (p.101102)
• (1,2,3, 6,7)
• Case Study 3: BOSU balance trainer
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BOSU Case Study
• Analyze the five competitive forces (Fig. 3-2) for
Bosu’s market.
• Visit www.bosu.com. What appears to be Bosu’s
competitive strategy? Explain your answer.
• Explain the nature of the five primary value chain
activities (Fig. 3-7) for Bosu.
• Review the principles of competitive advantage in
Figure 3-8 . What information systems can Bosu
create to enhance its product or differentiate it from
existing and emerging competition?
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BOSU Case Study
•What information systems can Bosu
develop to create barriers to entry to the
competition?
•What information system can Bosu
develop to lock in customers?
•What information systems can Bosu
develop to establish alliances?
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Bosu Balance Trainer Case Study
• (Video)
1. Analyze the five competitive forces for Bosu’s market.
2. Visit www.bosu.com. What appears to be Bosu’s competitive
strategy? Explain your answer.
3. Explain the nature of the five primary value chain activities for Bosu.
4. Review the principles of competitive advantage in Figure 3-8. What
information systems can Bosu create to enhance its product or
differentiate it from existing and emerging competition?
5. What information systems can Bosu develop to create barriers to
entry to the competition?
6. What information systems can Bosu develop to lock in customers?
7. What information systems can Bosu develop to establish alliances?
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Summary on Principles of Competitive Advantage:
Two Ways to Respond to the Five Competitive Forces (cont.)
A. Product Implementation
– 1. Create a new product or service
– 2. Enhance products or services
– 3. Differentiate products or services
B. System Implementation
(Business Process)
– 4. Lock in customers and buyers
– 5. Lock in suppliers
– 6. Raise barriers to market entry
– 7. Establish alliance
– 8. Reduce costs
Figure 3-12: Principles of Competitive Advantage
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1. Review the principles of competitive advantage in Figure 312. Which types of competitive advantage has Bosu used to
defeat copycat products?
• Bosu has successfully used the principles of (2) product
enhancement, (4) customer lock-in, (6) raising entry barriers,
and (7) alliances to defeat copycat products
• 2. What role did information systems play in your answer to
question 1?
• Information systems were very important. The database of
trainer data was used extensively to help create and maintain
the close relationship Fitness Quest desired with their trainers.
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3. What additional information systems could Fitness Quest develop
to create barriers to entry to the competition and to lock in
customers?
• Fitness Quest could enhance its products through information systems.
Bosu buyers could register for email-based newsletters. Bosu buyers
could participate in chat groups about how they like and use their Bosu
trainers. Fitness instructors could share ideas about Bosu-based classes.
Bosu buyers could track and monitor their weight loss and fitness goals
on the Web site and share progress with others. These features would
help distinguish Bosu from copycats. The systems described here
would also help to strengthen ties to customers.
• Having sophisticated and valuable information systems distinguishes
Fitness Quest/Bosu from other competitors. Barriers to entry are
raised since a competitor would not only have to develop the trainer,
but would also have to develop the supporting information systems that
customers expect. If Bosu provides valuable product enhancement
through its information systems, then customers are likely to stay loyal
to Bosu (therefore, lock in customers).
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6. Describe major differences between the Bosu product and the
IndoRow product. Consider product use, product price, customer
resistance, competition, competitive threats, and other factors related
to market acceptance.
•
• The Bosu Balance Trainer is at a considerable lower price point that
the IndoRow product. The Bosu easily transitions from a fitness class
use to a home use, but that is probably not the case with the IndoRow
device. The IndoRow is relying on the fun, competitive spirit formed
in the group classes to overcome people’s resistance to rowing
machines (ever notice how rowing machines typically gather dust at
the fitness center?).
• Buyers of an IndoRow for home use would have to be convinced to
spend much more money on a device that takes up a lot of space and
might not ultimately be used very much. In addition, the IndoRow
enters a fitness equipment market that already has many rowing
machines. The Bosu Balance Trainer was an innovative new product
with nothing else like it in the market.
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7. Describe information systems that FitnessQuest could use to
strengthen its strategy for bringing IndoRow to market.
Consider the factors you identified in your answer to question 6
in your response.
•
• Fitness Quest should focus initially on information systems that
help communicate with and support its trainers who are
interested in creating IndoRow classes. Trainers could register
for email-based newsletters. Trainers could participate in chat
groups about how they like and use their IndoRow machines.
Fitness instructors could share ideas about IndoRow-based
classes in forums. Trainers could provide feedback on the
devices that could lead to product enhancements or extensions of
the product line. Referral rewards could be provided to trainers
who sign up their colleagues
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