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Lecture 3 Information Systems, Organization and Strategy

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69 views11 pages

Lecture 3 Information Systems, Organization and Strategy

Uploaded by

Ruth Nyawira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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2/6/2020

Lecture 3

Using Information Systems


to Achieve Competitive
Advantage

What Is Strategy?
• Competitive moves and business
approaches management employs in
running a company
• Management’s “game plan” to
– Please customers
– Position a company in its chosen market
– Compete successfully
– Achieve good business performance

A. Thompson, Jr. & A. J. Strickland, (1998)I

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Strategic IT
• Technology is no longer an afterthought in
forming business strategy, but the actual cause
and driver.
• IT can change the way businesses compete.
• A strategic information system is
– Any kind of information system
– That uses IT to help an organization
• Gain a competitive advantage
• Reduce a competitive disadvantage
• Or meet other strategic enterprise objectives

The Strategic Landscape


• Managers confront elements that influence the
competitive environment.
• Managers must take multiple view of the strategic
landscape, such as:
– First view - Porter’s five competitive forces model.
– Second view - Porter’s value chain.
– Third view – focuses on the types of IS resources needed
(Resource Based View).

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Using Information Resources to Influence


Competitive Forces
• Porter’s five forces model show the major forces that
shape the competitive environment of the firm.
1. Threat of New Entrants: new firms that may enter a companies market.
2. Bargaining Power of Buyers: the ability of buyers to use their market
power to decrease a firm’s competitive position
3. Bargaining Power of Suppliers: the ability suppliers of the inputs of a
product or service to lower a firm’s competitive position
4. Threat of Substitutes: providers of equivalent or superior alternative
products
5. Industry Competitors: current competitors for the same product.

See Figure Next Slide.

If a business wants to succeed must develop


strategies to counter these forces

Figure 2.3 Five competitive forces with potential


strategic use of information resources.

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Competitive Forces and Strategies

Five Competitive Strategies


• Cost Leadership
– Become low-cost producers
– Help suppliers or customers reduce costs
– Increase cost to competitors
e.g. Walmart
– Inventory replenishment system sends orders to suppliers when purchase recorded at
cash register
– Minimizes inventory at warehouses, operating costs.
– Efficient customer response system.
• Differentiation Strategy
– Develop ways to differentiate a firm’s products from its
competitors
– Can focus on particular segment or niche of market
e.g., Google’s continuous innovations, Apple’s iPhone.

Use information systems to customize, personalize products to fit specifications of


individual consumers.
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Competitive Strategies (cont.)


• Innovation Strategy
– Find new ways of doing business
• Unique products or services
• Or unique markets
• Radical changes to business processes to alter the fundamental
structure of an industry
– Example, Amazon uses online full-service customer systems
• Growth Strategy
– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services
– Example, Wal-Mart uses merchandise ordering by global
satellite tracking

Competitive strategies (cont.)


• Alliance Strategy
– Establish linkages and alliances with
• Customers, suppliers, competitors, consultants and
other companies
– Includes mergers, acquisitions, joint ventures,
virtual companies
– Example, Wal-Mart uses automatic inventory
replenishment by supplier

10

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2/6/2020

Using these strategies


• The strategies are not mutually exclusive
• Organizations use one, some or all

• Some companies pursue several strategies at


same time.
Dell emphasizes low cost plus customization of
products.
• Successfully using IS to achieve competitive
advantage requires precise coordination of
technology, organizations, and people.

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Using IT for these strategies

12

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Other competitive strategies


• Lock in customers and suppliers
– And lock out competitors
– Deter them from switching to competitors
– Build in switching costs
– Make customers and suppliers dependent on the use
of innovative IS
• Barriers to entry
– Discourage or delay other companies from entering
market
– Increase the technology or investment needed to
enter

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Other competitive strategies (cont.)

• Include IT components in products


– Makes substituting competing products more
difficult
• Leverage investment in IT
– Develop new products or services not possible
without IT

14

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Value Chain
• View the firm as a chain of basic activities that
add value to its products and services
• Activities are either
– Primary processes directly related to manufacturing or
delivering products
– Support processes help support the day-to-day
running of the firm and indirectly contribute to
products or services
• Use the value chain to highlight where
competitive strategies can best be applied to add
the most value

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Using IS in the value chain

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Value Chain (contd.)


• Inbound Logistics: raw materials brought into
the company
• Operations: any part of the business that
converts raw materials into products and
services
• Outbound Logistics: Getting the products
and services to the customers.

Value Chain (contd.)


• Sales/Marketing: Entire buyers to purchase
products and services.
• Service: Support of products and services that
customers have purchased.
• Firm Infrastructure: All the organizational
functions that support the business.
Technology connected/supported.
• Human Resources Management: Recruiting
hiring, and retaining employees.

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Value Chain (contd.)


• Technology Development: Advances and
innovations adopted to add value to the
company.
• Procurement: Acquiring raw materials for
production/operations.

Extending the Value Chain: The Value Web

• A firm’s value chain is linked to the value chains of


its suppliers, distributors, and customers.
• A value web is a collection of independent firms
that use information technology to coordinate their
value chains to produce a product collectively.
• Value webs are flexible and adapt to changes in
supply and demand.

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The Value Web

The value web is a


networked system that
can synchronize the
value chains of
business partners
within an industry to
respond rapidly to
changes in supply and
demand.

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