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Competing Competing with with

Information TechnologyInformation Technology

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ObjectivesObjectives

• Identify basic competitive strategies and Identify basic competitive strategies and explain how IT may be used to gain explain how IT may be used to gain competitive advantage.competitive advantage.

• Identify strategic uses of information Identify strategic uses of information technology.technology.

• How does business process engineering How does business process engineering frequently use e-business technologies frequently use e-business technologies for strategic purposes?for strategic purposes?

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(Objectives – continued)(Objectives – continued)

• Identify the business value of using e-Identify the business value of using e-business technologies for total quality business technologies for total quality management, to become an agile management, to become an agile competitor, or to form a virtual competitor, or to form a virtual company.company.

• Explain how knowledge management Explain how knowledge management systems can help a business gain systems can help a business gain strategic advantage.strategic advantage.

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Fundamentals of Strategic AdvantageFundamentals of Strategic Advantage22

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Fundamentals of Strategic AdvantageFundamentals of Strategic Advantage

• Competitive Forces (Porter)Competitive Forces (Porter)– Bargaining power of customersBargaining power of customers– Bargaining power of suppliersBargaining power of suppliers– Rivalry of competitorsRivalry of competitors– Threat of new entrantsThreat of new entrants– Threat of substitutesThreat of substitutes

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Competitive Strategies & the Role of IT

• Cost Leadership (low cost Cost Leadership (low cost producer)producer)– Reduce inventory (JIT)Reduce inventory (JIT)– Reduce manpower costs per sale Reduce manpower costs per sale

(see Real World Case 1)(see Real World Case 1)– Help suppliers or customers reduce Help suppliers or customers reduce

costscosts– Increase costs of competitorsIncrease costs of competitors– Reduce manufacturing costs Reduce manufacturing costs

(process control)(process control)

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT (continued)(continued)

• DifferentiationDifferentiation– Create a positive difference between Create a positive difference between

your products/services & the your products/services & the competition.competition.

– May allow you to reduce a competitor’s May allow you to reduce a competitor’s differentiation advantage.differentiation advantage.

– May allow you to serve a niche market.May allow you to serve a niche market.

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT (continued)(continued)

• InnovationInnovation– New ways of doing businessNew ways of doing business

• Unique products or servicesUnique products or services• New ways to better serve customersNew ways to better serve customers• Reduce time to marketReduce time to market• New distribution modelsNew distribution models

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT (continued)(continued)

• GrowthGrowth– Expand production capacityExpand production capacity– Expand into global marketsExpand into global markets– DiversifyDiversify– Integrate into related products and Integrate into related products and

services.services.

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT

(continued)(continued)

• AllianceAlliance– Broaden your base of supportBroaden your base of support

• New linkagesNew linkages

– Mergers, acquisitions, joint ventures, Mergers, acquisitions, joint ventures, “virtual companies”“virtual companies”

– Marketing, manufacturing, or distribution Marketing, manufacturing, or distribution agreements.agreements.

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT (continued)(continued)

• Other Competitive StrategiesOther Competitive Strategies– Locking in customers or suppliersLocking in customers or suppliers

• Build value into your relationshipBuild value into your relationship

– Creating switching costsCreating switching costs• ExtranetsExtranets• Proprietary software applicationsProprietary software applications

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Competitive Strategies & the Role of IT Competitive Strategies & the Role of IT (continued)(continued)

• Other Competitive Strategies Other Competitive Strategies (continued)(continued)– Raising barriers to entryRaising barriers to entry

• Improve operations or promote Improve operations or promote innovationinnovation

– Leveraging investment in ITLeveraging investment in IT• Allows the business to take advantage Allows the business to take advantage

of strategic opportunitiesof strategic opportunities

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The Value ChainThe Value Chain

• Views a firm as a series, chain, or Views a firm as a series, chain, or network of activities that add value to its network of activities that add value to its products and services.products and services.– Improved administrative coordinationImproved administrative coordination– TrainingTraining– Joint design of products and processesJoint design of products and processes– Improved procurement processesImproved procurement processes– JIT inventoryJIT inventory– Order processing systemsOrder processing systems

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Value Chain (continued)Value Chain (continued)

Support Support ProcessesProcesses

PrimaryPrimary

BusinessBusiness

ProcessesProcesses

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Section IISection II

• Using Information Technology for Using Information Technology for Strategic AdvantageStrategic Advantage

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Strategic Uses Of Information TechnologyStrategic Uses Of Information Technology

• Major competitive differentiatorMajor competitive differentiator

• Develop a focus on the customerDevelop a focus on the customer– Customer valueCustomer value

• Best valueBest value• Understand customer preferencesUnderstand customer preferences• Track market trendsTrack market trends• Supply products, services, & information Supply products, services, & information

anytime, anywhereanytime, anywhere• Tailored customer serviceTailored customer service

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Strategic Uses of IT (continued)Strategic Uses of IT (continued)

• Business Process Reengineering (BPR)– Rethinking & redesign of business

processes– Combines innovation and process

improvement– There are risks involved.– SuccessSuccess factors

• Organizational redesign• Process teams and case managers• Information technology

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Strategic Uses of IT (continued)Strategic Uses of IT (continued)

• Improve business qualityImprove business quality– Total Quality Management (TQM)Total Quality Management (TQM)

• Quality from customer’s perspectiveQuality from customer’s perspective• Meeting or exceeding customer Meeting or exceeding customer

expectationsexpectations• Commitment to:Commitment to:

– Higher qualityHigher quality– Quicker responseQuicker response– Greater flexibilityGreater flexibility– Lower costLower cost

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• Becoming agileBecoming agile– Four basic strategiesFour basic strategies

• Customers’ perception of product/service Customers’ perception of product/service as solution to individual problemas solution to individual problem

• Cooperate with customers, suppliers, other Cooperate with customers, suppliers, other companies (including competitors)companies (including competitors)

• Thrive on change and uncertaintyThrive on change and uncertainty• Leverage impact of people and people’s Leverage impact of people and people’s

knowledgeknowledge

22 Strategic Uses of IT (continued)Strategic Uses of IT (continued)

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• The virtual companyThe virtual company– Uses IT to link people, assets, and Uses IT to link people, assets, and

ideasideas– Forms virtual workgroups and alliances Forms virtual workgroups and alliances

with business partnerswith business partners– Interorganizational information systemsInterorganizational information systems

22 Strategic Uses of IT (continued)Strategic Uses of IT (continued)

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The Virtual Company (continued)The Virtual Company (continued)

– StrategiesStrategies• Share infrastructure & risk with alliance Share infrastructure & risk with alliance

partnerspartners• Link complementary core competenciesLink complementary core competencies• Reduce concept-to-cash time through Reduce concept-to-cash time through

sharingsharing

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– Strategies (continued)Strategies (continued)• Increase facilities and market coverageIncrease facilities and market coverage• Gain access to new markets and share Gain access to new markets and share

market or customer loyaltymarket or customer loyalty• Migrate from selling products to selling Migrate from selling products to selling

solutionssolutions

The Virtual Company (continued)The Virtual Company (continued)22

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Learning OrganizationsLearning Organizations

• Exploit two kinds of Exploit two kinds of knowledgeknowledge– ExplicitExplicit– TacitTacit

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Learning Organizations (continued)Learning Organizations (continued)22

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• Knowledge management systemsKnowledge management systems– Help create, organize, and share Help create, organize, and share

business knowledge wherever and business knowledge wherever and whenever needed within the whenever needed within the organizationorganization

Learning Organizations (continued)Learning Organizations (continued)22

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Discussion QuestionsDiscussion Questions

• You have been asked to develop You have been asked to develop e-business & e-commerce e-business & e-commerce applications to gain competitive applications to gain competitive advantage. What reservations advantage. What reservations might you have about doing so?might you have about doing so?

• How could a business use IT to How could a business use IT to increase switching costs and lock increase switching costs and lock in its customers and suppliers?in its customers and suppliers?

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Discussion Questions (continued)Discussion Questions (continued)

• How could a business leverage its How could a business leverage its investment in IT to build strategic IT investment in IT to build strategic IT capabilities that serve as a barrier to capabilities that serve as a barrier to entry by new entrants into its markets?entry by new entrants into its markets?

• What strategic role can information What strategic role can information technology play in business process technology play in business process reengineering and total quality reengineering and total quality management?management?

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Discussion Questions (continued)Discussion Questions (continued)22

• How can Internet technologies help How can Internet technologies help a business form strategic alliances a business form strategic alliances with its customers, suppliers, and with its customers, suppliers, and others?others?

• How could a business use Internet How could a business use Internet technologies to form a virtual technologies to form a virtual company or become an agile company or become an agile competitor?competitor?

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• IT can’t really give a company a strategic IT can’t really give a company a strategic advantage, because most competitive advantage, because most competitive advantages don’t last more than a few advantages don’t last more than a few years & soon become strategic necessities years & soon become strategic necessities that just raise the stakes of the game. that just raise the stakes of the game. Discuss.Discuss.

• MIS author & consultant Peter Keen says: MIS author & consultant Peter Keen says: “We have learned that it is not technology “We have learned that it is not technology that creates a competitive edge, but the that creates a competitive edge, but the management process that exploits management process that exploits technology.” What does he mean?technology.” What does he mean?

Discussion Questions (continued)Discussion Questions (continued)22

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ReferencesReferences22

• James A. O'Brien; George M. Marakas. Management Information Systems: Managing Information Technology in the Business Enterprise 6th Ed., Boston: McGraw-Hill/ Irwin,2004