1

Chapter
2
Competing
with
Information Technology

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

 Identify strategic uses of information

technology.

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(Objectives – continued)

 Identify the business value of using e-

business technologies for total quality
management, to become an agile
competitor, or to form a virtual company.

 Explain how knowledge management

systems can help a business gain
strategic advantage.

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Section I

Fundamentals of Strategic Advantage

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Strategic information System:-

A system that deliver information product &
service that play a direct & prominent role in
helping the firm achieve its strategic goal.
Business Intelligence :-
Internal & external data that help a company
access & analyze the business environment
& identify any possible opportunities or
Threats.

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External Strategic system:- system that are

Used primarily by a company costumers, client
Suppliers other external entities.

Internal Strategic System:- system that are

used by employees with in the organization &
designed primarily to enhance internal
productivity

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Fundamentals of Strategic Advantage

 Competitive Forces (Porter)

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Competitive Strategies & the Role

of IT
 Cost Leadership (low cost producer)
 Ex Walmart, Target
 Reduce inventory (JIT)
 Reduce manpower costs per sale (see Real
World Case 1)
 Help suppliers or customers reduce costs
 Increase costs of competitors
 Reduce manufacturing costs (process control)

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Competitive Strategies & the Role of IT (continued)

 Differentiation
 Porsche, Nordstrom, IBM
 Create a positive difference between your
products/services & the competition.
 May allow you to reduce a competitor’s
differentiation advantage.
 May allow you to serve a niche market.

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Competitive Strategies & the Role of IT (continued)

 Innovation
 Dell
 New ways of doing business
 Unique products or services
 New ways to better serve customers

 Reduce time to market

 New distribution models

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Competitive Strategies & the Role of IT (continued)

 Growth
 Expand production capacity
 Expand into global markets
 Diversify
 Integrate into related products and services.

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Competitive Strategies & the Role of IT (continued)

 Alliance
 Broaden your base of support
 New linkages
 Mergers, acquisitions, joint ventures, “virtual
companies”
 Marketing, manufacturing, or distribution
agreements.

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Competitive Strategies & the Role of IT (continued)

 Other Competitive Strategies

 Locking in customers or suppliers
 Build value into your relationship
 Creating switching costs
 Extranets
 Proprietary software applications

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Competitive Strategies & the Role of IT (continued)

 Other Competitive Strategies (continued)

 Raising barriers to entry
 Improve operations or promote innovation
 Leveraging investment in IT
 Allows the business to take advantage of strategic
opportunities

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 Using Systems for Competitive

Advantage: Management Issues
 Using Information Systems to beat the
competition and increase the value of your
product is not easy at all. It requires
changing processes and methods that
probably have been in the organization
since time began. The responsibility for
successfully developing and then using an
integrated Information System will usually
fall to the managers throughout the
organization.
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 Managing Strategic Transitions

The changes taking place in an organization
affect both the social element and the technical
element of the organization and are strategic
transitions. When your company installs a new
information system, some people will lose their
jobs, managers may be reassigned, hopefully
you'll gain new customers, and your relationship
with your old customers may change. At the very
least, when a company installs a new system,
the business processes should metamorphose
to accommodate the new technologies.

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 Retail businesses realize the value of

vender-managed inventory and are eager
to embrace it. Convenience stores and
grocery stores give the responsibility for
stocking shelves to their vendors. Tying
those vendors into the store's information
system gives the vendor critical
information about stock levels and the
pace of sales. Inventory costs for both
retailer and vendor are reduced and the
quality of information improves for both. .

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What Managers Can Do?

 The important thing to remember is the need to
pay attention to the industry to which your business
belongs. Look at what others are doing and how
they're doing it. What are they doing right? What
are they doing wrong? What can you do better
than your competitors? What technologies can you
exploit that the rest of your industry isn't using?
Observe the following questions that managers
should ask when identifying and developing a
successful Information System. Take a moment to
review them.

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The Value Chain

 Views a firm as a series, chain, or network of
activities that add value to its products and
services.
 Improved administrative coordination
 Training

 Joint design of products and processes

 Improved procurement processes

 JIT inventory

 Order processing systems

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Value Chain (continued)

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Section II

Using Information Technology

for Strategic Advantage

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Strategic Uses Of Information

Technology
 Major competitive differentiator
 Develop a focus on the customer
 Customer value
 Best value
 Understand customer preferences

 Track market trends

 Supply products, services, & information anytime,

anywhere
 Tailored customer service

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Strategic Uses of IT (continued)

 Business Process Reengineering (BPR)

 Rethinking & redesign of business processes
 Combines innovation and process improvement
 There are risks involved.
 Success factors
 Organizational redesign
 Process teams and case managers

 Information technology

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Strategic Uses of IT (continued)

 Improve business quality

 Total Quality Management (TQM)
 Quality from customer’s perspective
 Meeting or exceeding customer expectations

 Commitment to:
 Higher quality
 Quicker response
 Greater flexibility
 Lower cost

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Strategic Uses of IT (continued)

 Becoming agile
 Four basic strategies
 Customers’ perception of product/service as
solution to individual problem
 Cooperate with customers, suppliers, other

companies (including competitors)

 Leverage impact of people and people’s

knowledge

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Agility
Agile in business performance is the ability
of a company to prosper in rapidly
changing, continually fragmenting global
markets for high-quality, high-
performance, customer-configured
products and services. An agile
company can: Make a profit in markets
with broad product ranges and short
model lifetimes, Process orders in arbitrary
lot sizes.
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Agile companies depend heavily on

information technology to integrate and
manage business process, while providing
the information processing power to treat
masses of customers individual. Its
customers with customized solutions to
their needs.
Cooperate with other businesses to bring
products to market as rapidly and cost-
efficiently as possible.
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Finally, an agile company Leverages the

impact of its people and the knowledge
they posses, an agile company provide
powerful incentives for employee
responsibility, adaptability & innovation.

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Strategic Uses of IT (continued)

The virtual
company
 Uses IT to link
people, assets, and
ideas
 Forms virtual
workgroups and
alliances with
business partners
 Interorganizational
information systems

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A virtual company (also called a virtual

corporation or virtual organization) is an
organization that uses information
technology to link people, assets, and
ideas. People and corporations are
forming virtual companies as the best way
to implement key business strategies that
promise to ensure success in today’s
turbulent business climate.

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Virtual Company Strategies:

Several major reasons why people are forming
virtual companies include:

•Share infrastructure networks

•Link complementary core competencies
•Reduce concept-to-cash time through sharing
•Increase facilities and market coverage
•Gain access to new markets and share market or
customer loyalty
•Migrate from selling products to selling solutions

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The Virtual Company (continued)

 Strategies  Strategies (continued)

 Share infrastructure &  Increase facilities and
risk with alliance market coverage
partners  Gain access to new
 Link complementary markets and share
core competencies market or customer
 Reduce concept-to- loyalty
cash time through  Migrate from selling
sharing products to selling
solutions

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Learning Organizations (continued)

 Knowledge Management

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Knowledge management has become one

of the major strategic uses of information
technology. Many companies are building
knowledge management systems (KMS)
to manage organizational learning and
business know-how. The goal of KMS is to
help knowledge workers create, organize,
and make available important business
knowledge, wherever and whenever it’s
needed in an organization.
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This includes processes, procedures,

patterns, reference works, formulas, “best
practices,” forecasts, and fixes. Internet
and Intranet web sites, groupware, data
mining, knowledge bases, discussion
forums, and videoconferencing are some of
the key information technologies for
gathering, storing, and distributing this
knowledge.

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Learning Organizations (continued)

 Knowledge management systems

 Help create, organize, and share business
knowledge wherever and whenever needed
within the organization

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

2. How could a business use IT to increase

switching costs and lock in its customers and
suppliers?

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Discussion Questions (continued)

3. How could a business leverage its

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

4. What strategic role can information

technology play in business process
reengineering and total quality management?

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Discussion Questions (continued)

5. How can Internet technologies help a

business form strategic alliances with its
customers, suppliers, and others?

6. How could a business use Internet

technologies to form a virtual company or
become an agile competitor?

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Discussion Questions (continued)

7. IT can’t really give a company a strategic

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

8. MIS author & consultant Peter Keen says: “We

have learned that it is not technology that creates a
competitive edge, but the management process
that exploits technology.” What does he mean?

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