Strategic Uses of IT

7/29/2019 Strategic Uses of IT

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Strategic Uses of IT


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Challenge: One of the first challenges managers faceis understanding how they can use IT to support

business activities.

How IT Supports Business Activities

Porter & Millars concept of the value chain

(introduced in 1985) helps explain which business

activities can be analyzed and transformed through

the use of IT.


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Value Chain: Value chain is a chain of activities.

Products pass through all activities of the chain in orderand at each activity the product gains some value.

Value activities

Support activitiesPrimary activities


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Organization

Human resources

Technology

Procurement

Inbound Operations Outbound Marketing Services

Logistics Logistics & Sales

Primary activities

Support activities


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Primary activities

Inbound logistics : Include delivery and handlingof incoming materials.

Operations : include manufacturing related

functions Eg. parts assembly and qualityassurance..

Outbound logistics : Order processing and

shipping goods.


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Marketing and Sales: Include advertising,promotion and sales force management.

Marketing must make sure that the product is

targeted towards the correct customer group.

Services: This may come in the form of after salestraining, guarantees and warranties.


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The support activities assist the primary activities

Organization: Every organization needs to ensure thattheir management structure works efficiently.

Technology: The use of technology to obtain acompetitive advantage within the organization.

Technology can be used in production to reduce cost and

add value.

Support Activities


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Human resource management: The organization willhave to recruit, train and develop the correct people forthe organization if they are to succeed in their

objectives.

Procurement: This department must source rawmaterials for the organization.


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Value chain is a

system of

interdependent

linkages

Porters viewEg. Investments in a more

expensive product design and

superior material may reduceafter sale service cost


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Supplier Firm Channel Buyer

Value chain value chain value chain value chain

ValueSystem: includes the value chains of supplier,of the firm, of the channels through which the firm

distributes its products and services and of the

ultimate buyer.

Eg. A link between the automakers and steel maker's

inventory systems can provide information on

delivery dates.


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Supplier channel value chain Buyer

Manufacturer dealership Automobile buyer

IT can provide a more effective interface between

the buyer and channel.

eg. Buick dealers use EPIC system


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Interorganizational Systems: information systemsthat links

Suppliers-Buyers

Manufacturers-Distributors

Distributors-Buyers

These systems benefit both participants.

Eg. Drug distributerJ.C. Penney


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Value Activity

PhysicalComponent

Encompasses thephysical tasks needed

to perform the activity

Information ProcessingComponent

Includes the steps involvedin capturing, manipulating

and channeling the data

necessary to carry out the

activity.

Eg. Wal-mart inventory management activity


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How IT Support Value Activities

Value Activity Use of IT

Inbound logistics Just-in-time Delivery

Eg. Wal-mart

Operations Process control

systems

Eg. Oil-refinement,paints, cookies,

paper


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Outbound Logistics On-line link to order-

entry system of

supplier

Order processingMarketing & sales Laptops for direct

sales

After-sale services Electronic dispatch oftechnical support

Eg. Otis Elevators

Otisline System

Value Activity Use of IT


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How IT Supports Secondary Activities

Secondary Activity Use of IT

Organization Corporate E-mail

HR On-line access topersonnel files with a skills

database

Technology Computer aided design &

manufacturing

Procurement On-line access tosuppliers inventory files.

Eg. American Hospital

Supply


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How IT Supports 3-levelFramework


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Levels

Industry level

Firm Level

Strategy Level


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Effectof IT on

Products & ServicesAlter product development cycle

Book publishing

Production Economics

Food marketer

Markets

ATM, Credit Cards payment


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Firm Level Effect


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Buyers: IT to reduce power of buyers.American Hospital Supply

Supplier: IT to reduce power of suppliers

High priced labor

Quality control

Consumers can gain power over suppliers

Substitute Products

There are five competitive forces that influencethe profitability of an industry


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Strategy Level


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New Business opportunities:

Tele conferencing: effects Hotel and Airline Industry

Databasesfor

maintenanceUpgrades

Improve Customer ServiceAirlines

Retail stores


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Documents

Strategic Uses of IT