Read Aloud the Text Content

This audio was created by Woord's Text to Speech service by content creators from all around the world.

Text Content or SSML code:

The value chain and value system concepts can be diagrammed for both products and services and for any organization, private or public. The initial purpose of the value chain model was to analyze the internal operations of a cor- poration, in order to increase its efficiency, effectiveness, and competitiveness. The model has since then been used as a basis for explaining the support IT can provide. It is also the basis for the supply chain management concept, which we will present in Chapter 8. The value chain model can be used in different ways. First, we can use it to do company analysis, by systematically evaluating a company’s key processes and core competencies. To do so, we first determine strengths and weaknesses of performing the activities and the values added by each activity. The activities that add more value are those that might provide strategic advantage. Then we investigate whether by adding IT the company can get even greater added value and where in the chain its use is most appropriate. For example, Caterpillar uses EDI to add value to its inbound and outbound activities; it uses its intranet to boost customer service. In Chapters 5 through 12, we include many examples of how IT supports the various activities of the value chain for individual firms. A second use for the value chain model is to do an industry analysis, as shown for the airline industry in Figure 3.5. As in the company analysis, once the vari- ous activities have been identified, then it is possible to search for specific infor- mation systems to facilitate these activities. For example, in “Marketing and Sales,” agent training can be conducted on the corporate portal. Similarly, technology now allows preticketed customers to self-check their baggage at some airports. Finally, the value chain model can be used either for an individual company or for an industry by superimposing different types of information systems that may help special activities. For example, EDI can help inbound and outbound logistics; virtual reality can help both advertising and product development. Porter’s Models in the Digital Age The application of Porter’s models is still valid today. But some adjustments may be needed to take into account the realities of business in the digital economy. Consider a company such as Amazon.com. Who are Amazon’s competitors? It depends. In books they compete mainly against Barnes & Noble Online, in toys against Kmart, Wal-Mart, and Sears, and in music against CDNOW.com. Amazon.com could also be seen to compete against television, video games, and the Internet itself, because each of these compete for customers’ leisure time. In that view, Amazon.com is not necessarily in the book-selling business, but in the entertainment business. Could we use one diagram such as Figure 3.3 (p. ••) to describe Amazon.com’s competitive environment? Probably not. We might need several figures, one for each of Amazon’s major products. Furthermore, due to alliances (such as between Amazon.com and Toysrus.com), the competition and the value chain analysis can be fairly complex and frequently in flux. For a presentation of strategic information systems frameworks proposed by other researchers, see Online File W3.2 at the books Web site.