Management of

Information Systems
School of Business Administration
Spring 2022

EL Mehdi EL KHACHIA, MBA, PMP, SAFe

Achieving Competitive Advantage with
Information Systems
Business Business

model (BM) Business is fundamentally concerned with creating

value and capturing returns from that value

defined
Model

A representation of reality

Business models provide the axioms and

hypothesis about the logic for value-
generation and capture.
 • The term value generation and capture
reflects two fundamental functions that all
organizations must perform to remain viable
over an extended period of time
• Successful firms create substantial value
Business model by
• doing things in effective, efficient,
(BM) defined differentiated way
• Developing core competencies,
capabilities and positional
advantages that are different from
those of competitors
• Using those capabilities to perform
work in a unique way
 • Successful firms create substantial value
• Successful firms capture value to generate
profit
• Yahoo has been successful in creating
value
• Searches of the Web
Business model • E-mail accounts
(BM) defined • Financial information, greeting
cards,
• But for many years Yahoo struggled to
turn this value into profit
• With a new CEO in 2001 the company
found a way to capture more of the
value with revenues coming from digital
music and online games, job listing, e-
mail accounts with loads of extra storage
Gillette
business
model
 Uber BM
Can you guess who’s Business Model?
What would
be the BM
for Skype?
Skype BM
 Business model:

Business • Describes the logic of a business system for

creating value that lies behind the actual
processes” (Petrovic, et al.2001)
model • Gives sense to the various business
processes by describing why certain business
versus processes are designed the way they are.

Business Business process

Process • The flow of related activities that together

create customer value (Hammer and Champy,
2001)
Business model, Business Process and Strategy

Business models provide the axioms and hypothesis about the logic
for value-generation.

the strategy follows on by providing These provide the foundation for the
development and implementation of business
the details of how to realize that processes. ICT is one important enabler of
value. business processes’ implementation.

Implementation is a core success or failure factor of business models.

A strong and innovative business model can be implemented badly
and fail.
Business model, Business Process and Strategy
 Business model
changes at the
strategy level
impact on the
BPM and process
execution levels
 Porter formula
The 5 Forces That Make Companies Successful
Porter formula

Porter’s Framework stressed rivalry and

Pick a business in an attractive competition. Therefore an attractive industry is
industry in which you can excel. one in which we can achieve as close to a
monopolistic position as possible.

Then excel by adopting or achieving a low cost or differentiation

Porter’s Competitive Forces Model

One way to understand competitive advantage

Five competitive forces shape fate of firm

• Traditional competitors
• New market entrants
• Substitutes products and services
• Customers
• Suppliers
 • Traditional competitors
• Competitors in market space continuously devise new
products, new efficiencies, switching costs to attract
customers
Porter’s • New market entrants
• Some industries have low barriers to entry:
Competitive • E.g., food industry versus microchip industry

Forces • Newer companies may have advantages:

• Newer equipment, younger workforce,
and so on.
Model • Substitutes products and services
• Substitutes customers can purchase if your prices too
high.
• E.g., Internet music service versus CDs.
 Porter’s Competitive Forces Model
• Customers
• Can customers easily switch to competitor’s products?
• Can customers force the firm and competitors to compete on price alone (transparent
marketplace).

• Suppliers
• The market power of suppliers can have significant impact on firm profits, especially when the firm can
not raise prices as suppliers can
• The more suppliers a firm has, the greater control it can exercise over suppliers.
 Industry
structure:
Porter’s 5
forces
Porter formula

Porter’s Framework stressed rivalry and

Pick a business in an attractive competition. Therefore an attractive
industry in which you can excel. industry is one in which we can achieve as
close to a monopolistic position as possible.

Then excel by adopting or achieving a low cost or differentiation

Types of competitive advantage
• There are two ways to compete:

• Achieve a cost leadership, e.g. low cost

• Differentiation
Porter’s Four Competitive Strategies

• To be effective, organization goals,

objectives, culture, and activities
must be consistent with organization
strategy.
 • Align IT with business objectives
Basic Strategy  To align IT:
• Identify business goals and strategies.
• Break strategic goals into concrete
activities and processes.
• Identify metrics for measuring progress.
• Determine how IT can help achieve
business goals.
• Measure actual performance.
Low-cost
leadership
 Use information systems to achieve the lowest
operational costs and the lowest prices.

 E.g. Wal-Mart

• Inventory replenishment system

sends orders to suppliers when
purchase recorded at cash register.

• Minimizes inventory at warehouses,

operating costs.

• Efficient customer response system.

  Use information systems to enable new products
and services, or greatly change the customer
• E.g., Google’s continuous innovations, Apple’s
Product iPhone.

differentiation • Use information systems to customize, personalize

products to fit specifications of individual
consumers.
• Dell
 • Use information systems to enable specific
market focus, and serve narrow target market

Focus on better than competitors.

• Analyzes customer buying habits, preferences

market • Advertising pitches to smaller and smaller

target markets
niche • E.g., Hilton Hotel’s OnQ System
• Analyzes data collected on guests to determine
preferences and guest’s profitability
 • Strong linkages to customers and suppliers
increase switching costs and loyalty
Strengthen  Toyota: uses IS to facilitate direct access from
suppliers to production schedules
customer • Permits suppliers to decide how and when
to ship suppliers to Chrysler factories,
and supplier allowing more lead time in producing
goods.
intimacy  Amazon: keeps track of user preferences for
purchases, and recommends titles purchased
by others
Information
Some companies Dell
System pursue several
strategies at same
emphasizes
low cost plus
customization
Strategies for time. of products.

Dealing with
Competitive Successfully using IS to achieve
competitive advantage requires
Forces precise coordination of technology,
organizations, and people.
Example of Business Process: Finance & Accounting
Receive and validate request
Example of Business Process: Finance & Accounting
Maintaining Price List
Example of IS to benchmark best practices

ILLUSTRATION
Example of IS to benchmark best practices
3.1 The Internet impact on
competitive advantage
 access to information
Increases consumer
Web search, opinions and
power through better reviews

Increases consumer channels and competitors

Bargaining choice through new

Power of – Parallel to stores, catalogs, …

Buyers
– Larger geographic reach increases choice

Good for consumers, bad for business?

Substitutes and Barriers
to Entry
• Increases opportunity for
substitutes
• E.g., online auctions vs. classified ads
and flea markets
• Lowers barriers to entry
• Reduced communication and
coordination costs, lower capital
requirements
• Individuals or small groups can in
principle reach large markets
Inter-Firm Rivalry
• Increase in rivalry between firms
• Internet a powerful tool for increasing operational efficiency
• Necessary cost of business
• Larger geographic regions increases competition
• But offers new opportunities to establish distinctive strategic positions
• Providing defensible value proposition, such as closer integration with customers
• E.g., Fedex, Amazon
A recap