Sultan Qaboos University

College of Economics and Political Science

Department of Information systems
INFS 4461
Strategic IS
Dr. Rafi Ashrafi FBCS PMP CEng

Chapter 2
Strategic Use of Information Resources

Keri Pearlson, Carol Saunders, and Dennis Galletta

© Copyright 2020
Managing and Using Information Systems:
John Wiley & Sons, Inc.
A Strategic Approach – Seventh Edition
 Zara

• Chapter opening case

• How often do customers visit Zara each year?
• When do customers buy the designs? Why?
• How many designs do they make each year?
• Is this possible without IT?

© 2020 John Wiley & Sons, Inc. 2

 Era I 1960s Era II 1970s Era III 1980s Era IV 1990s Era V 2000s Era VI 2010s Era VII 2020+

Primary Role Efficiency Effectiveness Strategy Strategy Value creation Value extension Value capture
of IT
Automate existing Solve problems Increase individual Transform industry/ Create collaborative Create community Connect intelligent
paper-based and create and group organization partnerships and social business devices; Establish
processes opportunities effectiveness platforms; Harness
big data

Justify IT Return on Increase in Competitive Competitive Added value Creation of New revenue
Expenditures investment productivity and position position relationships models
better decision
quality

Target of Organization Organization/ Individual Business processes Customer/ Supplier Customer/ Platforms
Systems Group manager/Group relationships Employee/supplier
ecosystem
Information Application Data driven User driven Business driven Knowledge driven People driven (or Big Data driven
Models specific relationship driven)

Dominant Mainframe, Minicomputer, Microcomputer, Client server, Internet, global Social platforms, Intelligent devices,
Technology “centralized mostly “decentralized “distributed “ubiquitous social networks, sensors,
intelligence” “centralized intelligence” intelligence” intelligence” mobile, cloud electronics,
intelligence” platforms

Basis of Scarcity Scarcity Scarcity Plenitude Plenitude Hyperplenitude

Value
Underlying Economics of Economics of Economics of Economics of Economics of Economics of Economics of
Economics information information information information information relationships information and
bundled with bundled with bundled with separated from separated from bundled with data bundled with
economics of economics of economics of things economics of things economics of things economics of economics of
things things information things

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2.1 Eras of Information Usage in Organizations © 2020 John Wiley & Sons, Inc.
Information Resources as Strategic Tools

What are information resources?

IT assets and capabilities (not just assets!)

© 2020 John Wiley & Sons, Inc. 4

 IT Assets and Capabilities
IT Assets IT Capabilities
•Technical Skills
•IT infrastructure • Proficiency in systems analysis
• Hardware • Programming and web design skills
• Software and company apps • Data analysis/data scientist skills
• Network • Network design and implementation
• Data skills
• Website •IT Management Skills
• Business process knowledge
• Ability to evaluate technology
options
•Information Repository • Project management skills
• Customer information • Envisioning innovative IT solutions
• Employee information •Relationship Skills
• Marketplace information • Spanning skills such as business-IT
• Vendor information
relationship management
• External skills such as vendor-
management
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 IT Assets

• Infrastructure
• Information, technology, people and processes available
to perform business processes and tasks. (not just
technology!)
• Might even include resources not owned by the firm
(e.g., eBay, Facebook, LinkedIn)
• Information repository
• Data captured, organized, and retrievable by the firm

© 2020 John Wiley & Sons, Inc. 6

 IT Capabilities
• Technical Skills (designing, developing,
implementing IS)
• Management Skills (managing the IT function and
IT projects)
• Relationship Skills
• Outside the organization (vendors, customers)
• Within the organization (managers)

© 2020 John Wiley & Sons, Inc. 7

 Examples
• Assets:
• Proprietary technology (e.g., platforms)
• Online community
• Customer information
• Capabilities:
• Knowledge
• Technical skills of IT staff
• Friendly, helping nature of IT staff

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 The Strategic Landscape

• Managers must take multiple views of the strategic

landscape, such as:
• First view - Porter’s five competitive forces model.
• Second view - Porter’s value chain.
• Third view – focuses on the types of IS resources needed
(Resource Based View).

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Five competitive forces with potential
strategic use of information resources

© 2020 John Wiley & Sons, Inc. 10

 Application of five competitive forces model
Competitive Force IT Influence on Competitive Force
Threat of New Entrants Can be lowered if there are barriers to entry.
Sometimes IS can be used to create barriers to entry

Bargaining Power of Buyers Can be high if it’s easy to switch. Switching costs are
increased by giving buyers things they value in
exchange such as lower costs, effort, or time; or useful
information
Bargaining Power of Suppliers Strongest when there are few firms to choose from,
quality of inputs is crucial, or the volume of purchases
is insignificant to the supplier

Threat of Substitute Products Depends on buyers’ willingness to substitute and the

level of switching costs buyer’s face

Industrial Competitors Rivalry is high when it is expensive to leave an

industry, the industry’s growth rate is declining, or
products have lost differentiation

© 2020 John Wiley & Sons, Inc. 11

Application of five competitive forces – Zara example
Competitive Force IT Influence on Competitive Force
Threat of New Entrants Zara supports its tightly knit group of designers, market
specialists, production managers, and planners. These
relationships take time. Rich customer information in its
database would take time to develop.
Bargaining Power of Buyers Recently, Zara has created a laser-created database of
sizes for 10,000 “real” women volunteers. New products
will be more likely to fit.
Bargaining Power of Suppliers Computer-controlled cutting machine can cut 1,000
layers at a time. A large number of sewers are available.
Threat of Substitute Products IT helps Zara offer extremely fashionable clothing that
would last 10 wears. The result is trendy clothes at
reasonable prices, making substitutes difficult
Industrial Competitors Zara tracks breaking trends and customer preferences.
The result is the highest sales per square foot in the
industry without much advertising, low inventories, very
little inventory unsold, new products from idea to
shelves in 15 days, and manufacturing efficiencies

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© 2020 John Wiley & Sons, Inc.
 Porter’s Value Chain Model
• Value Chain model addresses the activities that create,
deliver, and support a company’s product or service.
• Two broad categories:
• Primary activities – relate directly to the value created in a
product or service.
• Support activities – make it possible for the primary activities
to exist and remain coordinated.
• Competition can come from:
• Lowering the cost to perform an activity, increasing profit.
• Adding value to a product or service so buyers will be willing
to pay more (again, increasing profit).

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Value chain of the firm.
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 The Value System
• The value chain model can be extended by linking
many value chains into a value system.
• Much of the advantage of supply chain
management comes from understanding how
information is used within each value chain within
the larger system.

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 The value system: interconnecting
relationships between organizations.

© 2020 John Wiley & Sons, Inc. 16

 Zara and Primary Activities
Primary Activity Zara’s Value Chain
Inbound Logistics • IT-enabled JIT (just in time) strategy
• Most dyes are purchased from Zara subsidiaries
• Suppliers are located near production facilities
Operations • IT supports decisions about fabric, cut, and pricing
• Products are hung on hangers to avoid ironing at stores
• Price tags are already on the products
• 50% of merchandise is produced in house
• Fabric is cut and dyed by robots in 12 highly automated factories
Outbound Logistics • Clothes move on miles of conveyer belts
• Clothes reach stores within 48 hours of the order
Marketing and Sales • Limited inventory permits low percent of unsold goods
• Point-of-Sales systems linked to HQ
• Managers provide information on customer needs daily via hand-
held computers
Service • No focus on service; clothes only last 10 wears

© 2020 John Wiley & Sons, Inc. 17

 Zara and Secondary Activities

Secondary Zara’s Value Chain

Activity
Organization • Tightly-knit collaboration between designers, store
managers, market specialists, production managers,
production planners
Human • Managers are trained to understand customer
Resources needs and report to designers daily
• Managers help Zara keep on cutting edge of fashion
Technology • All primary activities are supported by integrated
technology
• Automated conveyers speed up logistics
Purchasing • Vertical integration reduces the amount of
purchasing needed

© 2020 John Wiley & Sons, Inc. 18

 Sustainability

• Attaining competitive advantage is one thing

• A firm often exploits rare and valuable resources
• But sustaining competitive advantage is
another
• Resources must be difficult to transfer or
relatively immobile

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Sustainability Framework

Source: Piccoli & Ives

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But Isn’t Sustaining an Advantage
a “Deadly Distraction?”
• Some focus on sustaining would be useful
• Some sustaining steps are not too difficult or expensive
• It will help profitability while inventing more “disruptive”
measures
• It might save the firm if disruption measures fail
• But some focus on disruption is also useful
• Sometimes sustaining requires too much effort
• Disruption can have a huge payoff

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The Resource Based View

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IT Assets at Zara

© 2020 John Wiley & Sons, Inc. 23

IT Capabilities at Zara

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 Social Capital as an IT Resource

• Social capital:
• the sum of the actual and potential resources embedded
within, available through, and derived from the individual
or firm’s network of relationships
• Structural – Who is connected to whom
• Relational – How the people interact (e.g., respect,
friendship)
• Cognitive – How the people think and the impact of a
shared language

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 Relationships with Other Firms
• Strategic Alliances
• Inter-organizational relationship that affords one or more
company a strategic advantage
• Example: Zynga and Facebook
• Business ecosystems
• A group of strategic alliances using a platform
• Suppliers “buy in,” providing more value to the platform
• Great example is a smartphones operating system
• Co-opetition
• Companies cooperate and compete at the same time
• Example: Microsoft builds laptops but also supplies operating
systems to other laptop makers
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 Potential Risks
• There are many potential risks that a firm faces when attempting
to use IT to outpace their competition.
• Executives should be aware of these risks in advance!
• Awakening a sleeping giant – a large competitor with deeper
pockets may be nudged into implementing IS with even better
features (Schwab/eTrade; FedX/UPS)
• Demonstrating bad timing – sometimes customers are not
ready to use the technology designed to gain strategic
advantage (Apple’s Newton, Shelternet)
• Implementing IS poorly – information systems can fail because
they are poorly implemented (Nike; Hershey)
• Failing to deliver what users want – systems that don’t meet
the firm’s target market likely to fail (Streamline.com
groceries)
• Running afoul of the law – Using IS strategically may promote
litigation (Airline reservation systems)
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 Co-Creating IT and Business
Strategy
• Not just alignment, but partnership
• Example: FedEx
• Are you paying only for the delivery?
• Or are you also paying for information about the delivery?
• Fedex would not be able to accomplish the delivery
without the IS components.
• Can you separate IT strategy from your business
strategy?
• The trend is towards integrating the two.

© 2020 John Wiley & Sons, Inc. 28