Competitive Strategies & the Role of IT• Cost Leadership (low cost producer) – Reduce inventory (JIT) – Reduce manpower costs per sale – Help suppliers or customers reduce costs – Increase costs of competitors – Reduce manufacturing costs (process control)
Competitive Strategies & the Role of IT (continued)• Differentiation – Create a positive difference between your products/services & the competition. – May allow you to reduce a competitor’s differentiation advantage. – May allow you to serve a niche market.
Competitive Strategies & the Role of IT (continued)• Innovation – New ways of doing business – Unique products or services – New ways to better serve customers – Reduce time to market – New distribution models
Competitive Strategies & the Role of IT (continued)• Growth – Expand production capacity – Expand into global markets – Diversify – Integrate into related products and services.
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.
Competitive Strategies & the Role of IT (continued)• Other Competitive Strategies – Locking in customers or suppliers • By building valuable new relationship with them – Creating switching costs • Extranets • Proprietary software applications • Example: Wal-Mart
Competitive Strategies & the Role of IT (continued)• Other Competitive Strategies (continued) – Raising barriers to entry • Improve operations or promote innovation – Leveraging investment in IT • Investing in IT enables a firm to build strategic IT capabilities that allows the business to take advantage of strategic opportunities
Strategic Uses of Information Technology Improving Promote Locking in Business CustomersStrategy Business Process Innovation and Suppliers IT Role Use IT to reduce Use IT to create •Use IT to improve costs of doing new products or quality business services •Use IT to link business to customers and suppliers Create New Maintain ValuableOutcome Enhance Business Customers and Efficiency Opportunities Relationships
Strategic Uses of Information Raise Technology Build a Build a Strategic IT StrategicStrategy Barriers to Entry Platform Information Base IT Role Increase amount Leverage Use IT to provide of investment or investment in IS information to complexity of IT resources from support firm’s needed to operat- ional uses competitive strategy compete to strategic uses Create New EnhanceOutcome Increase Business Organizational Market Share Opportunities Collaboration
The Value Chain Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources MarketingInbound Outbound Customer Operations andLogistics Logistics Service Sales
INFORMATION SYSTEMS AND BUSINESS STRATEGY Firm Value Chain
The Internet Value Chain Marketing and Sales and Support andInternet Product Distribution CustomerCapability Research Feedback Data for market •Low cost •Access to customerBenefits research, com-ments online to distribution establishes •Reaches new •Immediate re-Company consumer sponse to customer customers responses •Multiplies problems contact pointsOpportunity for Create New Maintain Valuable EnhanceAdvantage Business Customers and Efficiency Opportunities Relationships
Strategic Positioning of Internet TechnologiesHigh Global Market Product and Services Penetration Transformation Strategy E-Commerce Website E-Business; Extensive Value-added IT Services Intranets and Extranets Solution Performance Cost and Improvements in Efficiency Business Improvements Effectiveness E-Mail, Chat Systems Intranets and Extranets E-Business Processes Connectivity Low High Internal Drivers
Section II• Using Information Technology for Strategic Advantage
IT Used for Competitive Strategy• Use of IT in two different ways. 1. Support Operations 2. Strategic Management
Building a Customer Focused E Business• Concept changed from manufacturing volume to improving customer value.• Key success for many firms is maximizing customer value• Ability to help them keep customers loyal, anticipate their future needs, respond to customers concerns, and provide top quality customer service.
Customer Expectation• Keep track of their preferences• Keep up with market trends• Supply products and services• Ecommerce offers faster, responsive and high quality product and services tailored to individual customer preferences
Role of Ecommerce Customers• Use Internet to ask questions• Air complaints• Evaluate products, request support• Make and report purchases
Customer-Focused E-Business Let customers place orders directly Let customers check order history and delivery status Let customers place orders thru distributionBuild a partnerscommunityof customers,employees,and partners Customer Transaction Database Database Link Employees Give all and distribution employees a partners complete view of customers
Business Reengineering and Quality Management Business Quality Business Improvement Reengineering Incrementally Improving Radically Redesigning Business Definition Existing Processes Systems Any Process Strategic Business Processes Target Potential 10%-50% Improvements 10-Fold Improvements Payback Low High Risk Same Jobs - More Efficient Big Job Cuts; New Jobs; MajorWhat Changes? Job Redesign Primary IT and Work Simplification IT and Organizational Redesign Enablers
Improving Business Quality• IT can be used to improve business performance in many ways rather than supporting reengineering process• TQM: Total Quality Management: Quality as per customer not supplier.• Performance, reliability, durability, responsiveness
TQM• May use a variety of tools and methods to seek continuous improvement of quality, productivity, flexibility, timeliness, and customer responsiveness.
Companies using TQM are committed to• Even better more appealing and less variable quality of product or service• Even Quicker less variable response from design and development through supplier and sales channels• Even greater flexibility in adjusting to customers shifting volume and mix requirement
The Customer- Focused Agile Competitor Cooperate with Anticipation of Business Partners future needs and Competitors Customization ConformanceGive Customers Organize to Solutions Master to Problems Change Leverage the Impact of People and IS Resources
Creating virtual Company• Without meeting set up meetings• A company that uses IT to link people, assets and ideas• Uses organization structure called Network structure since most are linked through Internet and Intranets
Virtual Company Strategies
Virtual Corporations AdaptabilityBorderless Excellence Six Characteristics of Virtual CompaniesTechnology Trust-Based Opportunism
Knowledge Management Systems• Many companies are building knowledge management systems to manage organizational learning and business know-how.• Goal is to help knowledge workers create, organize and make important IS adjustments when ever there is a need in an organization• Includes processes, procedures, patents, reference works, formulas, “best practices” etc.• KMS facilitate organizational learning an knowledge creation.• Internet and intranet, groupware, knowledge bases, online discussion groups are some key technologies that may be used by a KMS.
Knowledge Management Systems Technical Solution Support Knowledge Staff CustomersDevelopmentEngineers Intranet The Internet Product Other Managers Vendors
Sustaining Strategic Success• Sustained success in using IT strategically seems to depend on three sets o factors: –Environment –Foundation factors –Management Actions and Strategies