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 ebusiness 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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Fundamentals of Strategic Advantage

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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 competitors 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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14

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 customers 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) Thrive on change and uncertainty Leverage impact of people and peoples knowledge
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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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The Virtual Company (continued)

Strategies
Share

Strategies (continued)
Increase

infrastructure & risk with alliance partners Link complementary core competencies Reduce concept-tocash time through sharing

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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Learning Organizations

Exploit two kinds of knowledge

Explicit Tacit

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Learning Organizations (continued)

Knowledge Management

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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?
How could a business use IT to increase switching costs and lock in its customers and suppliers?
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2.

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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? What strategic role can information technology play in business process reengineering and total quality management?
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4.

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Discussion Questions (continued)

5.

How can Internet technologies help a business form strategic alliances with its customers, suppliers, and others?
How could a business use Internet technologies to form a virtual company or become an agile competitor?
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6.

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Discussion Questions (continued)

7.

IT cant really give a company a strategic advantage, because most competitive advantages dont last more than a few years & soon become strategic necessities that just raise the stakes of the game. Discuss. 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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8.

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