Competing With Information Technology

Competing with
Information
Technology
Information System
FUNDAMENTALS OF
STRATEGIC ADVANTAGE
• Strategic IT
Strategic IT refers to the thoughtful planning and implementation of

information technology resources to align with overall business
objectives, fostering efficiency, innovation, and competitive advantage.
COMPETITIVE STRATEGY
CONCEPTS
- The strategic role of information systems involves using
information technology to develop products, services, and
capabilities that give a company major advantages over the
competitive forces it faces in the global marketplace
SEVERAL BASIC CONCEPTS DEFINING ROLE OF
COMPETITIVE STRATEGY APPLIED TO
INFORMATION SYSTEMS
• Rivalry of Competitors
• Threat of New Entrants
• Threat of Substitutes
THE VALUE CHAIN AND STRATEGIC
INFORMATION SYSTEM
A value chain concept, 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 to both the firm and its
customers.
Primary Processes - business activities that are directly related to the
manufacture of products or delivery of services to the customer.
Support Processes - help support the day-to-day operations of the business.

Bargaining Power of Customers and
Suppliers
• If customers’ bargaining power gets too strong, they can
drive prices to unmanageably low levels or just refuse to
buy the product or service.
• If a key supplier’s bargaining power gets too strong, it can
force the price of goods and services to unmanageably
high levels or just starve a business by controlling the flow
of parts or raw materials essential to the manufacture of a
product.
Above figure also illustrates that businesses can counter the threats of
competitive forces that they face by implementing one or more of the five
basic competitive strategies:
• Cost Leadership Strategy

Becoming a low-cost producer of products and services in the industry or
finding ways to help suppliers or customers reduce their costs or increase the costs
of competitors.
• Differentation Strategy
Developing ways to differentiate a firm’s products and services from those
of its competitors or reduce the differentiation advantages of competitors. This
strategy may allow a firm to focus its products or services to give it an
advantage in particular segments or niches of a market.
Innovation Strategy
• Finding new ways of doing business. This strategy may involve
developing unique products and services or entering unique markets or
market niches (recess).
• It may also involve making radical changes to the business processes for
producing or distributing products and services that are so different from
the way a business has been conducted that they alter the fundamental
structure of an industry.
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.
Alliance Strategies
Establishing new business linkages and alliances with
customers, suppliers, competitors, consultants, and other
companies. These linkages may include mergers, acquisitions,
joint ventures, formation of virtual companies, or other
marketing, manufacturing, or distribution agreements between a
business and its trading partners.
A summary of how
information technology can
be used to implement the
five basic competitive
strategies.
Examples of how, over time, companies have used information technology to
implement five compatitive strategies for strategic advantage.
Additional ways that information technology can be
used to implement competitive strategies.
Benefits of Interactive
Technology
A. Lock in customers or suppliers
Investments in information technology can allow a business

to lock in customers and suppliers (and lock out competitors) by
building valuable new relationships
with them.
B. Building switching costs
A major emphasis in strategic information systems has

been to find ways to create switching costs in the relationships
between a firm and its customers or suppliers.
C. Raising barriers to entry
By making investments in information technology to improve its
operations or promote innovation, a firm could also raise barriers to
entry that would discourage or delay other companies from entering a
market.
D. Leveraging investment in
information technology
Investing in information technology enables a firm to build strategic
IT capabilities so that they can take advantage of opportunities when
they arise.
A summary of how
information technology can
be used to implement the
five basic competitive
strategies.
Building a Customer-focused
Business
What is a customer-focused
business?
• Keeps customers loyal
• Anticipates needs
• Responds to concerns
• Provides top quality service
How to succeed in a Ciustomer
Focused Business
• Track individual preferences
• Stay informed of market trends
• Offer anytime/anywhere access
• Tailor services to individual needs
Internet's Role in Customer
Focused Business
• Enables fast, responsive service
• Personalizes offerings
•Make customers the center of CRM (Customer
relationship management)
•Creates new communication channels
• Facilitates cross-functional collaboration
How/When does customer internet
interaction occurs?
Customer interaction occurs when they:
•Asks questions
• Lodge complaints
• Evaluates products
• Request support
• Make purchase
How does a good customer focused
business responds
• Cross functional teams address issues

• Discussion of groups for collaboration
• Problem solving dedicated to customer
support

Competing With Information Technology

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Competing with

Strategic IT refers to the thoughtful planning and implementation of

• Threat of New Entrants

A value chain concept, views a firm as a series, chain,

Support Processes - help support the day-to-day operations of the business.

• Cost Leadership Strategy

Investments in information technology can allow a business

A major emphasis in strategic information systems has

• Cross functional teams address issues

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