Information systems and information technology: overview and applications

Information Systems & Information Technology

Provide two examples of firms that you think have been able to create value using Information Systems. The first one should be a firm that has done so by primarily using Customer Relation Management systems. The second one should be a firm that has done so mainly by providing value to business (B2B). Discuss how IS/IT provides the value.

The two firms that continue to generate significant value from their use of information systems and technologies include Dell Computer and Ingram Micro. Dell Computer is the world's leading provider of built-to-order laptops, desktop and server systems. Dell, through all of its selling and services channels, interacts with approximately three million customers per day. The Customer Relationship Management (CRM) system in place is from Salesforce.com, and is used by approximately 4,000 users across the United States. Dell has plans to expand their use of CRM to 15,000 users globally over the next 18 months. Why CRM is so critical to Dell is that they are investing heavily into selling to state & local governments, enterprises, and small and medium businesses in addition to consumers. Nearly 50% of revenues however continue to be from consumers and a large percentage of profits are from consumers who are buying accessories or their second or third generation from the company (Di Gangi, Wasko, 2009). As a result, CRM is critically important to Dell for profitable growth.

What also makes the CRM implementation at Dell unique is how they have integrated it directly into their supply chains as well to better support their build-to-order strategy (Gunasekaran, Ngai, 2009). Dell's approach to creating customized laptops, PCs and servers for customers is to take their order from their website or from one of their many selling channels, get the build order defined and sent to manufacturing all electronically (Gunasekaran, Ngai, 2009) which saves days of time and hours of manual intervention. The CRM system acts as the coordinator of all these transactions and tracks the level of on-time deliveries in addition to the price paid and accessories purchased. The CRM system then is critically important for Dell to get the right product to the right customer at the right time. Dell also extended their CRM system to include Voice of the Customer programs, where customers could give them feedback on new product ideas. Called Dell IdeaStorm, it has to date collected over 2,500 ideas and provides customers with a real-time update on each of their suggestions' status. This illustrates the depth of commitment that Dell has for listening to customers and how pervasive their CRM systems and resulting strategies are.

A company that exemplifies best practices in Business-to-Business (b2B selling and services strategies is Ingram Micro. Ingram is the global leader in computer hardware, software and solutions selling, and has one of the most pervasive channel management and order management systems of any distribution-based industry. Ingram works with approximately 4,500 resellers globally who order systems, software or arrange for services to be delivered, all through their IMPulse ERP system that was entirely developed within the company (Kunert, 2008). Ingram Micro has successfully moved into selling enterprise-level Web services through a partnership with Google as well (Fontana, Jedras, 2007). What differentiates Ingram Micro from the many other distributors in this industry is their ability to track and report the status of orders electronically from anywhere on the globe (Theoharakis, Sajtos, Hooley, 2009). Ingram Micro uses technology to ensure customers get fast responsiveness to their transaction needs.

2. (Netflix, Apple) Technology pioneers/early adopters.

a) Discuss the sustainability of a first mover advantage, particularly a technological one. What forces aid sustainability and which hinder sustainability?

b) Discuss the pros and cons (benefits/costs) of a company being an early adopter of technology vs. A later adopter.

The sustainability of first mover advantage is often generationally limited by technologies as substitutes often arrive into a market or industry and obsolete the previous technologies' advantage (Boulding, 2004). In the area of products that lend themselves to commoditization including printers, PCs and laptops this is certainly true. This dynamic however cannot be applied to first mover advantage in the business models of Netflix and Apple, two companies who have been disruptive in the innovation they produced at a system and process level. Netflix, with its distributed order management system and optimization technologies for defining guided recommendations of videos, and Apple, with an ecosystem that capitalizes on new digital audio and video content, are first mover advantages that are difficult to replicate easily. Clearly both of these companies are exploiting the benefits of network effects and the potential of creating even greater loyalty with their customers through the development of interactive feedback loops (Boulding, 2004). Netflix has been able to outrun the chain store-based strategies of competitors Blockbuster and the many regional chains they compete with to provide movies to consumers as well. Apple dominates MP3 device sales with a consistent market share over 70% for the iPod and iTouch Series in the MP3 market alone (Vossoughi, 2008). The economies of scales of these systems and their advances technologies, Netflix with its optimization software engines and distributed order management, and Apple with its digital entertainment ecosystem, have significant first mover advantages that have significant switching costs as a result (Boulding, 2004). Technology is actually an enabler of sustainability for both of these companies, and their process expertise in each of their core businesses is also a significant differentiator. Both companies also have exceptional insight into their customer bases and Apple uses this intelligence in the development of their next generation of MP3 players and the development of next-generation laptops and desktop systems (Noble, Kumar, 2008).

In assessing the pros and cons of a company being an early vs. late adopter of technologies the competitive advantages relative to the risks need to be assessment. Despite the inherent risks however in being an early adopter, companies who choose this path to technology acquisition also differentiate themselves with greater knowledge gained (Wozniak, 1993). Additional first mover advantages include more personalized vendor attention, greater opportunity to influence product design and performance and also more in-depth training (Slater, Hult, Olson, 2007). The disadvantages include the potential loss of revenue and even customers if the solutions or technology is used and it proves unreliable. There are also the threats of the new technology comprising confidential processes, systems and data, and thereby making the company adopting it more vulnerable. Finally the risk to early adopters of the technology or system being incompatible with existing processes and systems could mean an entirely new structure and approach to making their companies operate.

3. (Li & Fung)

a) Why is Li & Fung so successful today?

b) Describe the value chain in the export business (i.e. suppliers, transformation costs, customers).

c) How does Li & Fung manage the transformation/supply chain process to achieve the goal of "top-notch quality at the best price in the timeliest manner" (pg 5 in the source paper)?

d) How did its initial acquisition strategy (pages 2-4 in the source paper) support this goal?

e) What factors in the international environment might make Li & Fung less successful in the future?

f) What factors might make it more successful?

Li & Fung continues to be exceptionally successful in that it has created a unique distribution value proposition and continues to add services to the core business model. In addition Li & Fung has created entirely new process workflows for supply chain coordination and supplier management in retailing hard goods and soft goods and is as a result considered one of the global leaders in distribution (Matthews, 2006). The company has successfully transitioned from being a distributor to being more of a private trading exchange specifically managing hard goods and soft goods through retail channels and also managing more complex supply chain processes through China for global clients as well. The Li & Fung value chain is the areas of inbound logistics, operations, outbound logistics, marketing and sales and after sales service. These are the primary activities that anchor the firms' value chain. The areas of firm infrastructure coordinated with Human Resource Management (HRM) and the use of technologies to continually improve and streamline the procurement process are also critically important for the company's value chain to continually deliver profitable performance over time (Ayling, 2007).

The firm was able to attain "top-notch quality at the best price in the timeliest manner" by concentrating on sharing information and knowledge throughout its supply chains with trading partners and those subsidiaries it also owns. This approach to information and knowledge management has helped Li & Fung stay more agile than many of its competitors and therefore more resilient in challenging economic times. The use of technologies to enable this have also acted as an accelerator for the company's efforts to keep everyone informed.

Acquisition strategies that Li & Fung have chosen have accentuated its strength in strategic sourcing and procurement (Ayling, 2007). These acquisitions' have also bolstered specific product strategies the firm has as it seeks to gain greater share of the Asian markets for softwoods. The company's consistent top line revenue growth also illustrates it has been successful in transforming its supplier network into one that operates more on knowledge, less on purely price or product decisions. As a result the company is capable of competing more at the process level and less at the purely price-driven one (Reese, 2007).

In terms of the company's factors for success, the greater opportunities is to move into the global houseware and specialties market in addition to gaining greater market share in the global footwear markets, relying on its supply chain expertise to accomplish this (Reese, 2007). The company's focus on the accelerating market for global apparel, accessories and luxury goods in its key countries and regions sold is also a critical factor in the long-term success of the firm. Overall the ability to continually improve its procurement and strategy sourcing processes however will make the greatest potential impact on the positive growth of the company over the long-term (Ayling, 2007).

4. (Apple)

a) Did Apple gain a competitive advantage from its decision to invest in an online music business?

b) Will this competitive advantage last forever? Why?

c) Using Michael Porter's Five Forces Model, analyze Apple's buyer and supplier power. Which of the 3 generic strategies is Apple following (cost leadership, differentiation, or focused strategy)?

d) Which of Porter's Five Forces did Apple address through its introduction of the iPod? In what way is the iPod a logical extension of Apple's pre-existing product line?

Apple created an economic ecosystem that is fueled by its continual advance of iPods, iTouch and iPhones to support digital video on the one hand and an online store with now over 100 million digital items sold on the other (Vossoughi, 2008). Apple has created an economic ecosystem that scales well and provides a multitude of partnership and co-marketing opportunities. It is debatable if this will be a competitive advantage forever as Nokia, AT&T and many others who have digital convergence platforms including cell phones are working to replicate the success of Apple with this concept. Ultimately there will be imitators of the iTunes store yet the MP3 device business will continue to see price competition and continual strategies on the part of competitors to add more features at a lower price. Using the Five Forces Model (Porter, 2008) to analyze the success of Apple's buyer and suppler power, their focus on differentiation as a competitive strength is evident. Apple chose to integrate the Digital Rights Management (DRM) technologies across the iPod, iTouch and iPhone in addition to its laptops and workstations that also can interpret and mix sounds using the DRM format the company has standardized on. The differentiation aspects of the model are also such that the product strategy is actually in catch-up mode today (Vossoughi, 2008). Eventually every MP3 player will have digital file viewing capability as well.

Apple has an exceptionally loyal customer base, the most loyal in high tech, with a repurchase rate of nearly 90% on systems and accessories (Cuneo, 2003). Apple has extensive analytics on their customer base and realized that with the introduction of the iPod they could potentially risk alienating their most loyal fans yet the company realized it needed additional revenue to grow. As a result, the iPod addresses two areas in the context of the Porter Five Forces Model (Porter, 2008). These include Bargaining Power of Customers and Threat of New Entrants. The Bargaining Power of Customers is exceptionally strong in the Apple customer base (Cuneo, 2003). They have over time been fed a steady diet of exceptional innovation and brilliant products and software. The Threat of New Entrants however is also very significant as the Apple customer base is also one of the most profitable in the high tech industry as well. Taken together these two factors within the Five Forces Model explain how Apple has been successful in attracting new customers while retaining their most loyal and profitable over time. In conclusion, the Apple iTunes concept is being actively imitated by cell phone services companies and manufacturers in addition to other systems software companies including Microsoft for their Zune platform. None of these have been successful as of yet as each suffers from a lack of integration across the broader product lines of the firm. The success of Apple in this area is attributable to their focus on the bargaining power of customers and alleviating threats from new entrants.

5. (iPremier, ChoicePoint) Privacy & security.

a) What lessons were learned through the iPremier & ChoicePoint cases regarding the security of personal information?