competing with information technology chapter 2 mcgraw-hill/irwincopyright © 2011 by the...
TRANSCRIPT
Competing withInformation Technology
Chapter2
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2-2
• Identify several basic competitive strategies and explain how they use information technologies to confront the competitive forces faced by a business
• Identify several strategic uses of Internet technologies and give examples of how they help a business to gain competitive advantages
• Give examples of how business process reengineering frequently involves the strategic use of IT
Learning Objectives
2-3
• Identify the business value of using Internet technologies to become an agile competitor or form a virtual company
• Explain how knowledge management systems can help a business gain strategic advantages
Learning Objectives
2-4
• A strategic information system uses IT to help an organization…– Gain a competitive advantage
– Reduce a competitive disadvantage
– Meet other strategic enterprise objectives
• What is Competitive Advantage?
– Capability for advantage over competitive forces
– Leading the industry in some identifiable way
– Sustains profits above the industry average
– Hard to maintain over a long period of time
Competitive Strategy Concepts
2-5
• Rivalry of Competitors– Positive, natural, healthy
• Threat of new entrants– Apple, TRS 80, Commodore, IBM, HP,
Compaq, Gateway, Dell, Acer
• Threat of substitutes– Salon shampoo vs Wal-Mart brand– VCR vs DVD vs BluRay
• Customer bargaining power– Buy from competitors or don’t buy
• Suppliers bargaining power– Your competitor pays in days not weeks
Porter’s Five Forces of Competition
2-6
• Cost Leadership– Become low-cost producers
– Help suppliers or customers reduce costs
– Increase cost to competitors• Example: Priceline
• Differentiation Strategy– Set a firm’s products apart from competitors’
– Focus on a particular segment or niche market• Example: Dell
Five Competitive Strategies
2-7
• Innovation Strategy– Unique products, services, or markets
– Radical changes to business processes• Example: Dell
• Growth Strategy– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services• Example: Wal-Mart
Competitive Strategies (continued)
2-8
• Alliance Strategy
– Includes mergers, acquisitions, joint ventures, virtual companies
– Customers, suppliers, competitors, consultants, and other companies
• Example: Wal-Mart uses automatic inventory replenishment by supplier
Competitive Strategies (continued)
2-9
• Not mutually exclusive– One alone won’t usually fix the problem– Generally need a combination
• Innovation not necessarily differentiated– Kindle v. iPad – MP3 players vs iPod– Gateway made in US, relaxed office
• Differentiation not necessarily innovative– Shipping more efficient but not different– Telecom companies compete
Using Competitive Strategies
2-10
Other Competitive Strategies
• Lock in Customers and Suppliers– Deter them from switching to competitors
• Create Switching Costs– Time, money, effort or inconvenience needed
to switch to a competitor
• Raise Barriers to Entry– Discourage or delay other companies from
entering the market– Increase the technology or investment
needed to enter
2-11
Other Competitive Strategies
• Build a strong IT department• Use IT to:
– Take advantage of strategic opportunities– Improve efficiency of business practices– Develop products and services that would not
be possible without a strong IT capability
• Use IT to do more than automate a system, be creative
2-12
• Called BPR or simply Reengineering– Radical– Seeks improvements
• High potential• High risk• Important enabler of reengineering
– IT– Process teams– Case managers
Business Process Reengineering
2-13
• Presents products as solutions to problems– Can price as a solution not cost to produce
• Cooperates with customers, suppliers and competitors– Brings products to market as quickly and cost-
effectively as possible
• Thrives on change and uncertainty– Responds to changing customer expectations
• Leverages people and knowledge– Provides incentives for responsibility, adaptability,
and innovation
Strategies for Becoming an Agile Company
2-14
• A virtual company uses IT to link…– People– Organizations– Assets– Ideas
• Inter-enterprise information systems link…– Customers– Suppliers– Subcontractors– Competitors
Creating a Virtual Company