UNIT-3

 Competitive environment of business - IT strategy -

information systems and competitive strategy.
 Value chain -role of CIO - information system’s plan
technology updates –
 Business processes - Business Process Integration
- Business Process Re-engineering (BPR).
 BPR versus continuous improvement - Motivation
for Enterprise Systems - Enterprise wide systems –
E Business
 Applications and E-governance
COMPETITIVE ENVIRONMENT

 A competitive environment is the dynamic

external system in which a business competes
and functions.
 The more sellers of a similar product or service,
the more competitive the environment in which
you compete
 Direct competitors are businesses that are selling
the same type of product or service as you.
 For example, McDonalds is a direct competitor
with Burger King.
 Indirect competitors are businesses that still
compete even though they sell a different service
or product.
 You have the option to travel by plane, train, or
car.
 Competitors will try to win market share by
cutting costs, improving efficiency, lowering
price and innovating by either creating new
products and services or improving upon old
ones.
 In other words, competition tends to give
consumers better goods and services at lower
prices.
THE INFORMATION REVOLUTION IS AFFECTING
COMPETITION IN THREE VITAL WAYS:

 It changes industry structure and, in so doing,

alters the rules of competition.
 It creates competitive advantage by giving
companies new ways to outperform their rivals.
 It spawns whole new businesses, often from
within a company’s existing operations.
AN IMPORTANT CONCEPT THAT HIGHLIGHTS
THE ROLE OF INFORMATION TECHNOLOGY IN
COMPETITION IS THE “VALUE CHAIN.”
VALUE CHAIN

 Value chain analysis focuses on analyzing the

internal activities of a business in an effort to
understand costs, locate the activities that add
the most value, and differentiate from the
competition.
VALUE CHAIN
 This concept divides a company’s activities into
the technologically and economically distinct
activities it performs to do business.
 The value a company creates is measured by the
amount that buyers are willing to pay for a product
or service.
 A business is profitable if the value it creates
exceeds the cost of performing the value activities.
 To gain competitive advantage over its rivals, a
company must either perform these activities at a
lower cost or perform them in a way that leads to
differentiation and a premium price
A COMPANY’S VALUE ACTIVITIES FALL INTO
DIFFERENT GENERIC CATEGORIES
 Primary activities are those involved in the
physical creation of the product, its marketing
and delivery to buyers, and its support and
servicing after sale.
 A company’s value chain is a system of
interdependent activities, which are connected
by linkages.
 For example, a more costly product design and
more expensive raw materials can reduce after-
sale service costs.
THE FORMAL ELEMENTS OF VALUE CHAIN
ANALYSIS
Primary value activities: Primary value activities
included:
 Inbound logistics

 Operations

 Outbound logistics

 Marketing & sales

 Customer service
Inbound logistics.

such as purchasing systems, transportation, and other

production and employee related activities that may be involved.
Operations.

Items to consider may include raw materials and inventory,

including how they are moved and handled.

Outbound logistics.

Consider the processes and systems involved in how the

finished product ends up in the hands of customers and clients.
Sales and Marketing.
Consider marketing activities and sales processes. Begin a
new column, adjacent to the third with the label "Sales and
Marketing." Record your analysis of the customer-purchasing
experience and the post-purchase experience and activities.

Service.
Look at the service-related activities of your business. In the
fifth and final column, include analysis related to the
various services provided by your business.
THE FORMAL ELEMENTS OF VALUE CHAIN
ANALYSIS
Support value activities: Support value activities
include:
 Procurement

 Technology

 Human resources

 Firm infrastructure
 Linkages also require activities to be
coordinated. On-time delivery requires that
operations, outbound logistics, and service
activities (installation, for example) should
function smoothly together
 The value chain for a company in a particular
industry is embedded in a larger stream of
activities that we term the “value system”.
 The value system includes the value chains of
suppliers, who provide inputs (such as raw
materials, components, and purchased
services) to the company’s value chain.
 The company’s product often passes through
its channels’ value chains on its way to the
ultimate buyer.
 Finally, the product becomes a purchased
input to the value chains of its buyers, who use
it to perform one or more buyer activities
 Linkages not only connect value activities
inside a company but also create
interdependencies between its value chain and
those of its suppliers and channels.
 For example, a candy manufacturer may save
processing steps by persuading its suppliers to
deliver chocolate in liquid form rather than in
molded bars.
 Just-in-time deliveries by the supplier may have
the same effect.
 Competitive advantage in either cost or
differentiation is a function of a company’s value
chain.
 A company’s cost position reflects the collective
cost of performing all its value activities relative to
rivals.
 Each value activity has cost drivers that determine
the potential sources of a cost advantage.
Similarly, a company’s ability to differentiate itself
reflects the contribution of each value activity
toward fulfillment of buyer needs
 Information technology is permeating the value
chain at every point, transforming the way
value activities are performed and the nature
of the linkages among them.
 It also is affecting competitive scope and
reshaping the way products meet buyer needs.
 Technological transformation is expanding the
limits of what companies can do faster than
managers can explore the opportunities.
A technological product is just something
that man created using the application of
knowledge to improve a person's life,
environment or society.
 Information technology is also transforming the
physical processing component of activities.
Computer-controlled machine tools are faster,
more accurate, and more flexible in
manufacturing than the older, manually
operated machines.
INFORMATION TECHNOLOGY AND CHANGING NATURE
OF COMPETITION

 That information technology is changing the

rules of competition in three ways.

 First, Advances in information technology are

changing the industry structure.
 The structure of an industry is embodied in five
competitive forces that collectively determine
industry profitability: the power of buyers, the
power of suppliers, the threat of new entrants,
the threat of substitute products, and the
rivalry among existing competitors
 Second, information technology is an
increasingly important lever that companies
can use to create competitive advantage.
 A company’s search for competitive advantage
through information technology often also
spreads to affect industry structure as
competitors imitate the leader’s strategic
innovations
 Third, the information revolution is spawning
completely new businesses. These three
effects are critical for understanding the impact
of information technology on a particular
industry and for formulating effective strategic
responses
For example, the traditional manner of
'printing' magazines involved a
mechanical printing press. Now, a new
technological process has been
developed to digitize the magazine to be
transmitted and stored electronically.
THE ROLE OF THE CIO HAS INCREASED IN
POPULARITY AND IMPORTANCE
 A chief information officer (CIO) is the company
executive responsible for the management,
implementation, and usability of information
and computer technologies.
 Because technology is increasing and
reshaping industries globally,
 The chief information officers uses the value
chain to
 gain the competitive advantage,

 customer needs and demands,

 evaluating the existing performance

 Proactively work
 INFORMATION SYSTEM’S PLAN
There are five factors to consider when assessing the growing impact
of IT in business firms both today and over the next ten years.
 Internet growth and technology convergence
 Transformation of the business enterprise
 Growth of a globally connected economy
 Growth of knowledge and information-based
economies
 Emergence of the digital firm These changes in the
business environment, summarized in number of
new challenges and opportunities for business
firms and their managements.
 The Internet and related technologies make it possible
to conduct business across firm boundaries almost as
efficiently and effectively as it is to conduct business
within the firm.
 This means that firms are no longer limited by
traditional organizational boundaries or physical
locations in how they design, develop, and produce
goods and services.
 It is possible to maintain close relationships with
suppliers and other business partners at great
distances and outsource work that firms formerly did
themselves to other companies
 For example, Cisco Systems does not
manufacture the networking products it sells; it
uses other Companies, such as Flextronics, for
this purpose. Cisco uses the Internet to
transmit orders to Flextronics and to monitor
the status of orders as they are shipped. .
THE IMPACT OF TECHNOLOGICAL CHANGE ON BUSINESS ACTIVITY

 Small business owners should consider

implementing technology in their planning
process for streamlined integration and to
make room for future expansion.
 Small businesses use an array of tech –
everything from servers to mobile devices – to
develop competitive advantages in the
economic marketplace.
 Impact on Operating Costs
 Securing Sensitive Information

 Improved Communication Processes

 Collaboration and Outsourcing

BUSINESS PROCESS
 A business process is a series of repeatable
steps taken by a team or company to achieve
some sort of business goal: managing
deliveries, assembling products, on boarding
employees, etc.

 The key aspect of a business process is

repeatability – a process is not a one-time
thing.
KEY REASONS TO HAVE WELL-DEFINED
BUSINESS PROCESSES

 Identify what tasks are important to your larger business

goals
 Improve efficiency
 Streamline communication between people/ functions/
departments
 Set approvals to ensure accountability and an optimum
use of resources
 Prevent chaos from creeping into your day-to-day
operations
 Standardize a set of procedures to complete tasks that
really matter to your business
 The method with which work is organized,
coordinated and controlled is the Business Process.
 Business Processes are also the flow of information
– sets of activities through the organization.
 Examples include: processing payroll, account
payables, class registration, inventory management,
sales, purchases etc.
 Activities transform resources and information of
one type into resources and information of another
type. In a payroll process, the activity of paying an
employee turns into an activity of salaries and
benefits information report for the organization.
 BUSINESS PROCESS & FUNCTIONAL
AREAS

 Traditionally, business processes are often tied

to specific functional area of the organization.
 Examples include the following:
Function Process

Sales & Marketing Identify potential clients and Sell products

Finance & Accounting Processing payroll, managing cash accounts,

paying creditors , collecting receivables.

Human Resources Hiring employees, managing employees’

benefits
AS AN EXAMPLE, LET’S CONSIDER THE HIRING
PROCESS OF AN HR DEPARTMENT.
 The HR executive posts the job update
 Multiple candidates apply in a portal
 The HR executive screens the candidates and
filters the best-fits
 The selected candidates are called for the next
stages of the recruitment
 The right candidate is chosen at the last stage of
the recruitment
 Salary and policy negotiations take place
 The offer letter is sent and the candidate accepts
BUSINESS PROCESS INTEGRATION
 Business Process Integration (BPI) is the
synchronization of a company’s internal operations
with those of its other divisions and its trading
partners by connecting disparate systems in real-
time.
 Today, businesses of all sizes need a efficient
integration solution to streamline processes
between marketing, sales, customer service, and
supply chain management, etc. Integration among
administrative, operational, and support
processes increases productivity by simplifying
regular enterprise functions
 A business process management system that
doesn’t easily integrate with your other systems
is arrogant, short-sighted, and not worth your
time or money
TYPES OF PROCESS INTEGRATION

 Modern BPM systems should come with

integration capabilities that enable systems to
share tasks seamlessly. It should support the
following types of integration linked to data
 Events happening in another system that trigger a
new process. For example, when a purchase
request gets approved in your workflow
management system, you might want to start a
purchase request order in your ERP.
 Pull capability, meaning drawing data from a third-
party system into your business process so that
BPM users can use that data and make sense of
it.
 Push capability, meaning sending the data to a
third-party system when the data reaches a
particular step (e.g. manager approval).
BUSINESS PROCESS REENGINEERING

 Business process reengineering is the act of

recreating a core business process with the
goal of improving product output, quality, or
reducing costs.
 Business process reengineering became
popular in the business world in the 1990s,
which was published in the Harvard Business
review by Michael Hammer
 BPR has continued to be used by businesses
as an alternative to business process
management (automating or reusing existing
processes), which has largely superseded it in
popularity
 The business Process re-engineering is the
great idea to introduce new plans on the
existing processes that supports to offer great
value to the respective customer.
BUSINESS PROCESS REENGINEERING STEPS

Identity and Communicating the Need for Change

Put Together a Team of Experts

Find the Inefficient Processes and Define KPI

Reengineer the Processes and Compare KPI

IDENTITY AND COMMUNICATING THE NEED FOR
CHANGE

 The management will have to play the role of

salespeople: conveying the grand vision of
change, showing how it’ll affect even the
lowest-ranked employee positively.
 The management need to convince them why
making the change is essential for the
company. If the company is not doing well, this
shouldn’t be too hard.
PUT TOGETHER A TEAM OF EXPERTS

 As with any other project, business process

reengineering needs a team of highly skilled,
motivated people who will carry out the needed
steps.
 The team might include senior managers,
operational managers, reengineering experts etc.
 Having a team full of people who are enthusiastic
(and yet unbiased), positive and passionate
about making a difference
FIND THE INEFFICIENT PROCESSES AND DEFINE
KPI

 For manufacturing unit it might be the cycle time,

defect rate, inventory turnover, maintenance etc.
 Once you have the exact KPIs defined, you’ll need
to go after the individual processes.
 BPR is usually called for when things aren’t going
all that well and businesses need drastic changes.
So, it can be very tempting to hurry things up and
skip through the analysis process and start
carrying out the changes.
REENGINEER THE PROCESSES AND COMPARE KPI

 If the KPIs show that the new solution works

better, you can start slowly scaling the solution,
putting it into action within more and more
company processes.
 If not, you go back to the drawing board and
start chalking up new potential solutions
BPR VERSUS CONTINUOUS IMPROVEMENT
BPR VERSUS CONTINUOUS IMPROVEMENT

Management involvement:
CPI involves employees at all levels and
emphasises continuous improvement of work
processes whereas BPR involves managers in a
“hands-on” role.
Involvement of Teams

 Involvement of team members is more intense

in case of BPR. It is often on a regular (full
time) basis over a shorter time frame. In CPI,
team members are involved on an “as needed”
(part time) basis over an extended time frame.
Implementation approach:
 The incremental improvements made in CPI
add up to significant overall improvement for a
firm. Process reengineering focuses on
outcome and on achieving breakthrough
improvement at one time unlike CPI
 Organizational change:
BPR, radical process changes take place only with
changes in job design, management systems,
organizational structure, training and retraining
and information technology. With CPI,
organizational changes take place over an
extended period of time. Often there will be
minimum disruption to existing jobs, management
systems and organizational structures
 Extent of focus:
 BPR needs to focus on broad-based cross-
functional processes which span the major part
of an entire organisational system. In CPI, the
focus is usually on narrowly defined processes.
These often involve employees working to
improve a sub process which is part of a higher
level process.
 Dependence on information systems:
 With BPR, information systems technology
often helps to achieve radical improvements in
cycle-time reduction, information access and
elimination of paper trail. Organizations using
only CPI occasionally prevent themselves by
redesigning a form, creating a new piece of
correspondence etc.
MOTIVATION FOR ENTERPRISE SYSTEMS

 ESs are large-scale, integrated application-

software packages that use the computational,
data storage, and data transmission power of
modern information technology (IT) to support
processes, information flows, reporting, and
data analytics within and between complex
organizations.
 It is convenient to use the term ―enterprise
system‖ to refer to the larger set of all large
organization-wide packaged applications with a
process orientation including Enterprise
resource planning (ERP), Customer
Relationship Management (CRM), Supply Chain
Management (SCM).
MOTIVATION FOR ENTERPRISE SYSTEMS

 Enterprise systems are invaluable in

eliminating the problem of information
fragmentation caused by multiple information
systems in an organization, by creating a
standard data structure.
 This means typically offering high quality of
service, dealing with large volumes of data and
capable of supporting some large organization
 Enterprise system creates an integrated
organization wide platform coordinate key
internal processes of the firm. It can be done
with the help of Supply Chain Management and
Customer Relationship Management
ENTERPRISE WIDE SYSTEM

 Enterprise wide system are large-scale

application software packages that support
business processes, information flows,
reporting and data analytics in complex
organizations.
 It allows the companies to integrate
information across operations on a company
ENTERPRISE SYSTEMS
 Info. Sys. supports various business activities for
internal operations (manufacturing, order
processing, human resource management) as well
as external interactions with customers, suppliers,
and business partners. However, the problem is
they were built on different platforms
(mainframe/minicomputer).
 Enterprise systems are information systems that
allow companies to integrate information across
operations on a company-wide basis
 Also known as enterprise-wide information systems
ENTERPRISE SYSTEMS

 Enterprise systems
 Rather than storing information in separate places
throughout the organization, enterprise systems
provide a central repository common to all
corporate users.
 It provides a common interface and allows
personnel to share information seamlessly no
matter where the data is located.
ENTERPRISE SYSTEMS
INFORMATION FLOW FOR AN ORDER
 When a customer places an order, the order is entered into an
order-entry application.
 The information containing the order is sent to the fulfillment
department.
 Fulfillment department picks the items from inventory,
packages them for distribution, and produces packing list.
 The package, along with the packing list, is forwarded to the
shipping department.
 Shipping department coordinates the shipment, produces
invoice, and sends the package and invoice to the customer.
ENTERPRISE SYSTEMS
INFORMATION FLOW FOR AN ORDER
Information begins to accumulate at the point of entry when a customer sends
an order to the company and flows through the various links.

Delivery
ENTERPRISE SYSTEMS

 Externally focused systems coordinate business

activities with customers, suppliers, and
business partners who operate outside the
organizational boundary.
 Systems that communicate across
organizational boundaries are called
interorganizational systems (IOS).
ENTERPRISE SYSTEMS
 Interorganizational systems (IOS)
 The key purpose of an IOS is to streamline the flow of
information from one company’s operations to
another’s
 It provides electronic transmission of information to
another company.
 Competitive advantage can be accomplished here by
integrating multiple business processes to meet a
wide range of unique customer needs.
 Sharing information between organizations helps
companies to adapt more quickly to changing market
conditions.
INFORMATION FLOW ACROSS
ORGANIZATIONAL BOUNDARIES
INFORMATION FLOW ACROSS
ORGANIZATIONAL BOUNDARIES
 When a company places an order for components, the
supplier performs the shipping activity. The supplier
delivers a physical package and electronic invoice to
the customer.
 The customer’s receiving department takes the
delivery and verifies the invoice. Then the receiving
department stocks the items in the inventory and
updates the inventory level.
 Supply Chain Management (SCM)
 Supply chain – the producers of supplies that a company
uses
 Supply network
 What if supply chain does not collaborate?
 Two objectives of upstream information flow:
 Accelerate product development
 Reduce costs associated with suppliers
 Customer Relationship Management (CRM)
 Sales Force Automation (SFA)
 New opportunities for competitive advantage
 Examples:
 MGM
 American Airlines

 Marriott International
 ERP Implementation
 Business process reengineering (BPR)

Some examples of Business Intelligence technologies

include data warehouses, dashboards, ad hoc reporting, data
discovery tools and cloud data services.
Case Study

Assume that you are thinking about opening a Mobile Shop near to your College. As
part of your decision-making process, you look into the competitiveness of the market.
Answer the following questions:

1. Where would you like to open your Mobile Shop ?

2. How the information technology add values to your business?
3. How did you collect the information relating to that market?
THANK YOU……
Thank You…….. Dr. Issac George. (drissacgeorge@gmail.com)