CHAPTER 2:

COMPETING WITH
INFORMATION
TECHNOLOGY
 STRATEGIC IT
 Technology is no longer an afterthought in
business strategy, but the cause and driver
 IT can change the way businesses compete
 Astrategic information system is any
information system that uses IT to help an
organization
‒ Gain a competitive advantage
‒ Reduce a competitive disadvantage, or
‒ Meet other strategic enterprise
objectives.
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 COMPETITIVE FORCES
AND STRATEGIES
 An organization can survive and succeed in
the long run only if it successfully develops
strategies to confront competitive forces
that shape structure of competition in its
industry:
1) The rivalry of competitors within its industry,
2) The threat of new entrants into an industry
and its markets.
3) The threat posed by substitute products that
might capture market share.
4) The bargaining power of customers.
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THE COMPETITIVE ENVIRONMENT
Threat of
New
Entrants
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors

Threat of
Substitutes Bargaining Power
of Customers

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 COMPETITIVE FORCES
AND STRATEGIES
 Competition is a positive characteristic in
business, and competitors share a natural,
and often healthy, rivalry.
 This rivalry encourages and sometimes
requires a constant effort to gain
competitive advantage in the marketplace.
 This ever-present competitive force requires
significant resources on the
part of a firm.

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COMPETITIVE FORCES AND
STRATEGIES

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 FIVE COMPETITIVE STRATEGIES

Cost Leadership Differentiation

Competitive
Strategies

Alliance Innovation

Growth

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8
USING COMPETITIVE STRATEGIES

 These strategies are not mutually exclusive

 Organizations use one, some, or all
 A given activity could fall into one or more
categories
 Not everything innovative serves to
differentiate one organization from another
 Likewise, not everything that differentiates
organizations is innovative

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EXAMPLE OF USE OF IT BY COMPANIES

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 ADDITIONAL WAYS THAT
INFORMATION TECHNOLOGY CAN
BE USED TO IMPLEMENT
COMPETITIVE STRATEGIES

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OTHER COMPETITIVE STRATEGIES

Strategy

Lock in customers and suppliers

Create switching costs
Raise barriers to entry
Build strategic IT capabilities
Leverage investment in IT

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 THE MOVE FROM INNOVATION
TO COMPETITIVE ADVANTAGE TO
COMPETITIVE NECESSITY

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CUSTOMER-FOCUSED BUSINESS

Business Keeps customers loyal

value in Anticipates their future needs
customer
focus Responds to customer concerns

Provides top-quality customer service

Focus on
customer Quality, not price, has become the
value primary determinant of value

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 PROVIDING CUSTOMER VALUE
Companies that consistently offer the best
value…

Track individual Keep up with market

preferences trends

Supply products,
services, and Tailor customer Use CRM
information services to the systems to focus
anytime , individual on the customer
anywhere

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BUILDING CUSTOMER VALUE VIA
THE INTERNET

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THE VALUE CHAIN AND STRATEGIC IS
 View the firm as a chain of basic activities
that add value to its products and services
 Primary processes directly relate to
manufacturing or delivering products
 Support processes support the day-to-day
running of the firm and indirectly contribute
to products or services
 The value chain is used to highlight where
competitive strategies will add the most value
to the product/services of the business.

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USING IS IN THE VALUE CHAIN

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 STRATEGIC USES OF IT
Companies that emphasize strategic business use
of IT use it to gain competitive differentiation

Products Services Capabilities

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 REENGINEERING BUSINESS
PROCESSES
 Called BRP or Reengineering
 Fundamental rethinking and radical
redesign of business processes
 Seeks dramatic improvements in cost,
quality, speed, and service
 Potential payback is high, but so is risk
of disruption and failure
 Organizational redesign approaches are
an important enabler of reengineering
 Includes use of IT, cross-functional/multi-
discipline process teams, & case managers 20
BPR VS. BUSINESS IMPROVEMENT

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 THE ROLE OF INFORMATION
TECHNOLOGY IN BPR

 IT plays a major role in reengineering most

business processes
 Can substantially increase process
efficiency
 Improves communication 22
REENGINEERING ORDER
MANAGEMENT

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 REENGINEERING ORDER
MANAGEMENT
IT that supports the reengineering process…

CRM systems using intranets and the Internet

Supplier-managed inventory systems

using the Internet and extranets

Cross-functional ERP software to integrate

manufacturing, distribution, finance, HR processes
Customer-accessible e-commerce websites for
order entry, status checking, payment, and service
Customer, product, and order status databases
accessed via intranets and extranets 24
 BECOMING AN AGILE COMPANY

• Global
• Standardized mass- competition
market products • Niche products
and services
• Individualized
• Long-lived
• Short-lived
• Information poor
• Information rich
• Exchanged in one-
• Exchanged on an
time transactions
ongoing basis

Old Marketplace New Marketplace

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 BECOMING AN AGILE COMPANY
 Agility is the ability to prosper
 In rapidly changing, continually fragmenting
global markets
 By selling high-quality, high-performance,
customer-configured products and services
 By using Internet technologies
 An agile company profits in spite of
 Broad product ranges
 Short model lifetimes
 Individualized products
 Arbitrary lot sizes 26
 STRATEGIES FOR AGILITY
An agile company…

Presents products as solutions to customers’

problems

Cooperates with customers, suppliers, competitors

Brings products to market quickly and cost-

effectively

Organizes to thrive on change and uncertainty

Leverages the impact of its people
and the knowledge they possess

Provides incentives for employee

responsibility, adaptability, innovation 27
HOW IT HELPS A COMPANY BE AGILE

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CREATING A VIRTUAL COMPANY

A virtual company uses IT to link…

Organizations Assets

People Ideas

Inter-enterprise information systems link…

Customers Competitors
Subcontractor
Suppliers
s
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A VIRTUAL COMPANY

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 VIRTUAL COMPANY STRATEGIES
Basic Business Strategies

Share
Link Reduce
information &
complimentary concept-to-cash
risk with
core time through
alliance
competencies sharing
partners

Increase Gain access to

Migrate from
facilities and new markets &
selling products
market share market or
to selling
coverage customer
solutions
loyalty

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BUILDING A KNOWLEDGE-CREATING
COMPANY
A knowledge-creating company
or learning organization…

Consistently creates new business

knowledge

Disseminates it throughout the company

Builds it into its products and services

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 TWO KINDS OF KNOWLEDGE

Explicit Knowledge
Data, documents, and things written
down or stored in computers

Tacit Knowledge
The “how to” knowledge in workers’
minds
Represents some of the most important
information within an organization
A knowledge-creating company makes
tacit knowledge available to others 33
KNOWLEDGE MANAGEMENT
 Successful knowledge
management
 Creates techniques,
technologies, systems,
and rewards for getting
employees to share
what they know
 Makes better use
of accumulated
workplace and
enterprise knowledge
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 KNOWLEDGE MANAGEMENT
 Knowledge Management Systems
 They are designed to provide rapid feedback
to knowledge workers, encourage behavior
changes by employees, and significantly
improve business performance.
 Internet and intranet Web sites, groupware,
data mining, knowledge bases, and online
discussion groups are the key technologies
that may be used by a KMS.

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KNOWLEDGE MANAGEMENT
TECHNIQUES

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 KNOWLEDGE MANAGEMENT
SYSTEMS (KMS)
Knowledge management
systems…

Are a major strategic Manage organizational

use of IT learning and know-how

Help knowledge
workers create, Make this knowledge
organize, and make available wherever and
available important whenever it is needed
knowledge

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 KNOWLEDGE MANAGEMENT
SYSTEMS (KMS)
Knowledge includes…

Processes Procedures Patents

Reference works Formulas

Best practices Forecasts Fixes

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 GOODWIN PROCTER MAKES A
STRONG CASE FOR KNOWLEDGE
MANAGEMENT

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 GOODWIN PROCTER MAKES A
STRONG CASE FOR KNOWLEDGE
MANAGEMENT

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