MANAGEMENT INFORMATION

SYSTEMS
(Chapter 2)
COMPETING WITH INFORMATION
TECHNOLOGY (Strategic Uses of IT)
 Information System in Business
IT is a set of technologies that
- supports efficient business operations,
- collaborate people, and
- help make effective business decisions.

But It is more than just that ...

it can change the way businesses compete

- can give major competitive advantages.
Benefits of Information Technology
Using IT properly can help

- adopt strategies and

- improve business processes
- vitals competitive networks,
- reengineer or reinvent organization operations, and

that enable it to

- survive and
- succeed in today’s world.
 Strategic IT
Pinnacle of IT is accomplished through a

"Strategic Information Architecture":

the collection of strategic information systems

(ERPs, CRM, Supply Chain Apps) that

- Shapes the competitive position and

- Help implement strategies of business enterprise.
 Competitive Forces
Various competitive forces effects business and
competitive strategies that can be adopted to
counteract such forces.

These five competitive forces shape the structure

of competition in its industry.

"Competition" is a positive characteristic in

business, and competitors share a natural, and
often healthy, rivalry, which is good for business
 Michael Porter’s 5 Forces
It is a conceptual framework for
- understanding forces of competition and
- various competitive strategies to
- balance them.

Fig 2.2
Page 49.
 5 Strategies
Five basic competitive strategies to encounter 5
forces.

1. Cost Leadership Strategy.

– Becoming a low-cost producer of products and
services in the industry or (Produce low cost)

– Finding ways to help suppliers or customers

reduce their costs or (Reduce cost in Supply chain)

– Increase the costs of competitors.

(Make their product/ Service Expensive)
 5 Strategies
Five basic competitive strategies to encounter 5
forces.

2. Differentiation Strategy.
• Developing ways to differentiate a firm’s
products and services from those of its
competitors or (Become Unique)

• Reduce the differentiation advantages of

competitors. (Eliminate their uniqueness)
 5 Strategies
Five basic competitive strategies to encounter 5 forces.

3. Innovation Strategy.
• Finding new ways of doing business.
• Developing unique products and services or entering
unique markets or market niches.
• Making radical changes to the business/Supply Chain
processes which are different from usual business in
Market.
• Alter the fundamental structure of an industry. Create new
industry e.g.
– Mobile phone Smartphones iPhone,
– Education University  Online Teaching  Virtual University.
 5 Strategies
Five basic competitive strategies to encounter 5 forces.

4. Growth Strategies.
• Significantly expanding a company’s capacity to
produce goods and services, expanding into global
markets,
• Diversifying into new products and services, or
• Integrating into related products and services.
 5 Strategies
Five basic competitive strategies to encounter 5 forces.

5. Alliance Strategies.
• Establishing new business linkages and alliances with
customers, suppliers, competitors, consultants, and
other companies.
• Form Mergers, acquisitions, joint ventures, formation
of virtual companies, or
• other marketing, manufacturing, or distribution
agreements between a business and its trading
partners
 5 Strategies
Other Strategies:
• locking in customers or suppliers, (Lockout Competitors)
• building switching costs (through Quality and Innovation),
• raising barriers to entry, and (Influencing building Govt. Policies)
• leveraging investment in IT. (Building New products and
Services)

It is rare a firm use all strategies simultaneously. It may make use

one or some depends of industry and powers of 5 forces.
 Strategic Uses of Information Technology
Improving Promote Locking in
Strategy Business Business Customers
Process Innovation and Suppliers

IT Role Use IT to Use IT to create •Use IT to improve

reduce costs of new products or quality
doing business services •Use IT to link
business to
customers and
suppliers

Create New Maintain Valuable

Outcome Enhance Business Customers and
Efficiency Opportunities Relationships
 Strategic Uses of Information Technology
Raise Build a Build a
Strategy Barriers Strategic IT Strategic
to Entry Platform Information Base

IT Role Increase Leverage Use IT to provide

amount of investment in IS information to
investment or resources from support firm’s
complexity of IT operational competitive
needed to uses to … strategy
compete strategic uses

Create New Enhance

Outcome Increase Business Organizational
Market Share Opportunities Collaboration
Porter’s Value Chain
 The Internet Value Chain
Marketing and Sales and Support and
Internet Product Distribution Customer
Capability Research Feedback

Data for market •Low cost •Access to

Benefits research, customer com-
to distribution
establishes •Reaches new ments online
Company consumer •Immediate re-
customers
responses •Multiplies sponse to
contact points customer problems

Opportunity
for Create New Maintain Valuable
Advantage Enhance Business Customers and
Efficiency Opportunities Relationships
 Customer-Focused E-Business
Let customers
place orders
Directly (Internet)
Let customers
check order history
and delivery status
(Internet) Let customers
place orders thru
distribution
Build a Partners
community (internet/Extranet)
of customers,
employees,
and partners Customer Transaction
Database Database

Link Employees
Give all and distribution
employees a Partners (internet/
complete view Extranet)
of customers
(Intranet)
 Business Reengineering and Quality Management
Business Quality Business
Improvement Reengineering

Incrementally Improving Radically Redesigning

Definition Existing Processes Business Systems

Any Process Strategic Business Processes

Target (Only Critical ones)

Potential 10%-50% Improvements 10-Fold Improvements

Payback
Low High
Risk

Same Jobs - More Efficient Big Job Cuts; New Jobs;

What Changes? Major Job Redesign

Primary IT and Work Simplification IT and Organizational

Enablers Redesign
 The Customer- Focused Agile Competitor

Cooperate with
Anticipation of Business Partners
future needs and Competitors

Customization
Conformance
Give Customers Organize to
Solutions Master
to Problems Change

Leverage the
Impact of
People and
IS Resources
 Virtual Corporations
Adaptability

Borderless Excellence

Six
Characteristics
of Virtual
Companies

Technology Trust-Based

Opportunism
Knowledge Management Systems
Technical Solution
Support Knowledge
Staff

Customers
Development
Engineers Intranet
The
Internet

Product
Other
Managers
Vendors
 Key Factors for Sustaining Strategic
Success

• Size • Creating
• Geographical scope switching costs
• Product scope • Exploiting
• Organization structure
knowledge
• Technological
Environment • Developing
resources
• Knowledge resources response
strategies
• Managing risks
Performance
Firm
 Chapter Summary
• Information systems can play several strategic
roles in business.

• The Internet, intranets, extranets, and other

Internet-based technologies can be used
strategically for E-Business and E-Commerce.

• A key strategic use of Internet technologies is

to build an E-Business which develops its
business value by making customer value its
strategic focus.
 Chapter Summary (cont)
• IT is a key ingredient in reengineering
business operations, by enabling radical
changes to business processes that
dramatically improve their efficiency and
effectiveness.

• IT can be strategically used to improve the

quality of business performance.

• A business can use IT to help it become an

agile company, that can respond quickly to
changes in its environment.
 Chapter Summary (cont)
• Forming virtual companies has become an
important competitive strategy in today’s dynamic
global market.

• Lasting competitive advantages today can only

come from innovative use and management of
organizational knowledge by knowledge creating
companies and learning organizations.

• Successful strategic information systems are not

easy to develop and implement. They may require
major change in how businesses operate.