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Competing with Information

Technology
Chapter 2 OBrien, James A.,
Management Information Systems,
6
th
edition, McGraw-Hill, USA, 2004.
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Fundamentals of Strategic Advantage
IS is more than a set of technologies that support
business operations.
IT can change the way businesses compete.
IT should be viewed strategically:
a means of organizational renewal
a necessary investment in technologies that help a
company adopt suitable strategies and business
processes.

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Competitive Strategy Concepts (1)
The strategic role of IS involves the use of IT to
develop products, services, and capabilities that give
advantages over competitive forces in the global
marketplace.
Five competitive forces (of Michael Porter):
Rivalry of competitors within its industry
Threat of new entrants
Threat of substitutes
The bargaining power of customers
The bargaining power of suppliers.
Businesses can develop competitive strategies to
counter the actions of the competitive forces.
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Competitive Strategy Concepts (2)
Several strategies can be applied to counter threats
of competitive forces:
Cost leadership strategy become a low-cost producer
of products and services in the industry
Differentiation strategy develop ways to differentiate
a firms products and services from its competitors or
reduce the differentiation advantages of competitors
Innovation strategy find new ways of doing business
(unique products and services, entry into unique markets
or market niches)
Growth strategy significantly expand a companys
capacity to produce goods and services
Alliance strategy establish new business linkage and
alliance with customers, consultants, and other
companies.
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Competitive Strategy Concepts (3)
IS can be used to implement a variety of competitive
strategies:
Lower costs.
Use IT to substantially reduce the cost of business
processes.
Use IT to lower the costs of customers or suppliers.
Differentiate
Develop new IT features to differentiate products and
services
Use of IT features to reduce the differentiation
advantages of competitors.
Use of IT features to focus products and services at
selected market niches.
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Competitive Strategy Concepts (4)
Innovate
Create new products and services that include IT
components.
Develop unique new markets or market niches with the
help of IT.
Make radical changes to business processes with IT.
Promote growth
Use IT to manage regional and global business expansion
Use IT to diversify and integrate into other products and
services.
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Competitive Strategy Concepts (5)
Develop alliances
Use IT to create virtual organizations of business
partners.
Develop inter-organizational IS linked by the Internet,
extranets, or other networks that support strategic
business relationships with customers, suppliers,
subcontractors, and others.

Examples of how companies use IT to implement
strategies to achieve competitive advantages Fig.
2.4, p.44 OBrien.
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The Value Chain and Strategic IS
The value chain concept (by Michael Porter) views a
firm as a series, chain, or network of basic activities
that add value to its products and services, and thus
add a margin value to the firm.
In this framework, some business activities are
primary processes, others are support processes.
Managerial end users must develop strategic IS for
basic processes that add the most value to
companys product and services and thus to the
overall business value of the company.
Example of value chain Fig. 2.6, p.46 OBrien.
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Using IT for Strategic Advantage
Companies can use IT for:
helping to achieve strategic purposes IT is viewed as a
major competitive differentiator business strategies
are devised to develop products and services that can
give the company major advantages in the marketplace..
supporting daily operations.

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Customer-Focused Business
Many businesses try to focus on customer by:
anticipating the customers future needs
responding to customer concerns
providing top-quality customer service
From customers point of view, companies should:
keep track of customers individual preferences
keep up with market trends
supply products, services, and information anytime,
anywhere
provide customer services tailored to individual needs.
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BPR and The Role of IT (1)
BPR is a fundamental rethinking and radical
redesign of business processes to achieve dramatic
improvements in cost, quality, speed, and service.
The potential payback of BPR is high however the
risk of failure and level of disruption to the
organization is also high. Fig. 2.9 shows this. The
figure also shows the difference between BPR and
business improvement.
Example of a business process Fig. 2.10, p.53
OBrien (order management process)
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BPR and The Role of IT (2)
IT plays an important role in most BPR. The speed,
information processing capabilities, and connectivity
of computer networks can substantially increase the
efficiency of business processes as well as com-
munications and collaboration among employees.
Many companies reengineer this process with the
help of IT. Fig. 2.11 shows this.
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Improving Business Quality (1)
IT can also be used strategically to improve business
performance in other ways than in supporting BPR.
One important strategic thrust is continuous quality
improvement called TQM.
Previously quality defined as meeting established
standards or specifications for a product or service.
Statistical quality control program was used to
measure and correct any deviations from standards.
In TQM, quality is emphasized from customers
point of view, therefore quality is defined as meeting
or exceeding the requirements and expectations of
customers for a product or service.
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Improving Business Quality (2)
TQM uses a variety of tools and methods to seek
continuous improvement of quality, productivity,
flexibility, timeliness, and customer responsiveness.
According to Richard Schonberger, companies that
use TQM are committed to:
even better, more appealing, less-variable quality of the
product or service
even quicker, less-variable response
even greater flexibility in adjusting to customers shifting
volume and mix requirement
even lower cost through quality improvement, rework
reduction, and non-value-adding waste elimination.
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Becoming an Agile Competitor (1)
Agility in competitive performance is the ability of a
business to prosper in rapidly changing 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
Offer individualized products while maintaining high
volumes of production.

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Becoming an Agile Competitor (2)
Agile companies depend heavily on IT to support
and manage business processes, while providing the
information processing capability to treat masses of
customers as individuals.
IT is a strategic requirement for agile product
development and delivery. IS provide the
information that people need to support agile
operations, as well as the information built into
products and services.
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Creating a Virtual Company (1)
A virtual company is an organization that uses IT to
link people, assets, and ideas.
The characteristics of a virtual company are:
Adaptability. Able to adapt to a diverse, fast-changing
business environment.
Opportunism. Created, operated, and dissolved to exploit
business opportunities when they appear.
Excellence. Possess all-star, world-class excellence in the
core competencies that are needed.
Technology. Provide world-class IT and other required
technologies in all customer solutions.
Borderless. Easily and transparently synthesize the
competencies and resources of business partners into
integrated customer solutions.
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Creating a Virtual Company (2)
Trust-based. Members are trustworthy and display
mutual trust in their business relationships.
Business strategies of virtual companies are:
Share infrastructure and risk.
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.
Virtual companies are formed to implement key business
strategies that promise to ensure success in todays
turbulent business climate.
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Knowledge-Creating Company
Knowledge-creating company (learning
organization) is an organization that constantly
creating new business knowledge, disseminating it
throughout the organization, and quickly building
the new knowledge into their products and services.
Kinds of knowledge:
explicit knowledge data, documents, stored on
computers
tacit knowledge the how-tos of knowledge which
reside in workers.
Companies build knowledge management systems
to manage organizational learning and business
know-how.