3. Why was Dean Witter and Retail Brokerage a good place to increase spending on information systems?
The reasons that Dean Witter and the Retail Brokerage department would be good investments for spending on information technology are fairly simple. The rate-of-return on investments would be enormous in the long-term. A lot of investors are well educated and like to have the means necessary to do their own financial analysis. Why not build on that market share and momentum and invest in more technology for the department and make it even more profitable for the company. This can be characterized as a form of Operational Excellence. Operation excellences are companies that seek to improve the efficiency of their operations in order to achieve a higher profit. Also, one must need a business model as well so you can have a guide when developing these goals. For example, Morgan Stanley would make a business model that would show when and how new products would be implemented to make their Retail Brokerage department more effective and efficient in the services to their clients. Another facet of this would be to build Customer and Supplier intimacy. This is when a business truly knows it client’s every need and caters to them. In return, the client will usually, in most cases, return and purchase more services from that business. In the examples stated above, if Morgan Stanley invested like they should in the technology for its clients and employees, it would eventually make a stronger commitment by both parties to do business together and not look at different avenues for the services that they need. All of these initiatives must be done for the survival of a company.
Unfortunately, if you are not investing in such technology, many companies would prevent you from staying competitive. By Morgan Stanley not investing in information technology like they should from the start; it cost them millions of dollars in revenue and profits.
4. If you were James Gorman, the new head of Global Wealth Management Group, what information systems would you invests in? Why? Do you think Morgan Stanley´s plans for an integrated client information system are worthwhile?
As James Gorman, I would first invest in a Decision Support System, which helps management strategically make decisions by providing information, models, and/or analytical tools. This information system allows the user to control the input and output information. Another system that I would consider using would be the Executive Support System. It provides executive information in a readily accessible, interactive format. An ESS usually allows the summary of an entire organization. It also uses the information of middle-managers data to gain more insight of the organization as whole. This would be a great information tool for the executives of the Global Wealth Management Group so they could get a better understanding of the company’s strengths and weaknesses and work towards improving the deficiencies. I think that with the use of these systems effectively and efficiently, they would substantially help their company in many different areas.
5. Aside from new systems, what changes in management and organization are required to restore revenue and profit growth and the Global Wealth Management Group?
I think that a change in the culture maybe warranted. When the merger was first initiated, the two companies were still divided but were supposed to be one entity. This caused a lot of animosity between counterparts and led to many altercations. In order to resolve this issue, the culture must be change from the top of the career ladder. This would show your employees that you are committed to change and they should respond in a positive matter. This should make the overall productivity of the company more efficient and should increase revenue and profit growth overall.
Blockbuster vs. Netflix: Which will win out? – Case Study
1. What is Blockbuster’s business model? How successful has it been?
Blockbuster business model back in the early 2000 was to pay-per-rental. Blockbuster’s customers were frustrated by late fees and not being able to find their movie of choice when they wanted it. Blockbuster’s brick and mortar business model was the only video rental chain that could offer the product that customers wanted. Its biggest strength was their sheer size. However, with customers’ busier lifestyles, demands, and the advancement in technology, Blockbuster was left behind and needed to explore the uncharted waters of the Internet.
Blockbuster focused on market niche when they started decades ago renting VHS tapes. Until Netflix came to the market, Blockbuster was successful.
2. What industry and technology forces have challenged that business model? What problems have they created?
The five forces consist of traditional competitors, new entrants, customers, suppliers, and substitute products and services. First is buyer power which is high when buyers have many choices. Netflix has become a video rental leader and customer's can easily go online and rent. Second is supplier power which is high when buyers do not have many alternative choices. Blockbuster's supplier power used to be high up until Netflix entered the market. Third is the threat of substitute products. Fourth is the threat of new entrants. In order for a new entrant to enter the market they would have to be ready to compete with the thousands of stores that Blockbuster has in place and they would need to warehouse some how the huge product selection they would need to compete. Fifth is rivalry among competitors. This is high when competition among existing competitors is fierce. The on-line video rental and the internet have challenged their business model. Blockbuster was successful in the past because of their size and prevalence, but has found them under attack from Netflix, which offers a wider range, no cancellation fees, and lower subscription fees.
3. Is Blockbuster developing successful solutions to its problems? Are there other solutions it should have considered?
Then after the launch of Netflix in 1998, Blockbuster created a similar business model to Netflix, which was to rent and return DVD’s online. What made Blockbuster different was it being able to offer flexibility to its customers. Blockbuster customer essentially had the best of both worlds. Its customers could rent online or rent at the store, rent online and return to the store, rent at the store and return online (possibly), rent online and return online. Whereas, Netflix only provides customers one service model which is to rent and return online.
4. How successful is Netflix and its business model?
Their business model consists of allowing people to rent DVDs at a set monthly fee; no late fees, no hassle, just movies in the mail at a decent price. I would say that Netflix is successful because they took advantage of new technology and found a way to intertwine it in delivering their product to consumers. Netflix’s level of success has been due to their commitment to improving the customer experience. They added different price plans so there would be something for everybody. More and more traditional businesses are seeing market share slip away to e-businesses, and their efforts to hold onto customers are not terribly successful.
5. Do you think Blockbuster or Netflix will succeed in the future?
Today Blockbuster competes only with prices without regard to the level of service that consumers want. They undercut their online rivals as well as their services are not financially sustainable. In my opinion, I feel that Netflix will be the one that succeeds in the end because the look at the needs of their customers and proactively utilize a value chain model and use information technology to sustain their competitive advantage. Netflix’s strategy will allow them to succeed and come out on top especially because such a strategy utilizes information systems to develop strong ties and loyalty with consumers and suppliers.
Sources:
Laudon & Laudon - Management information systems – Managing the digital firm, 2007. 10th edition
