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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