The document discusses how businesses can gain competitive advantage through strategic uses of information technology. It covers topics like competitive strategies, the value chain, business process engineering, quality management, agility, virtual companies, and knowledge management. Strategic uses of IT mentioned include developing customer focus, improving business processes, enhancing quality, enabling agility and virtual organizations, and exploiting knowledge resources.

1. 1
Chapter
2
Competing
with
Information Technology
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

2. 2
Objectives
Identify basic competitive strategies and
explain how IT may be used to gain
competitive advantage.
Identify strategic uses of information
technology.
How does business process engineering
frequently use e-business technologies for
strategic purposes?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

3. 3
(Objectives – continued)
Identify the business value of using e-business
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.
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

4. 4
Section I
Fundamentals of Strategic Advantage
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

5. 5
Fundamentals of Strategic Advantage
Competitive Forces (Porter)
Bargaining power of customers
Bargaining power of suppliers
Rivalry of competitors
Threat of new entrants
Threat of substitutes
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

6. 6
Competitive Strategies & the Role of IT
Cost Leadership (low cost producer)
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)
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

7. 7
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.
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

8. 8
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

9. 9
Competitive Strategies & the Role of IT (continued)
Growth
Expand production capacity
Expand into global markets
Diversify
Integrate into related products and services.
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

10. 10
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.
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

11. 11
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

12. 12
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

13. 13
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

14. 14
Value Chain (continued)
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

15. 15
Section II
Using Information Technology
for Strategic Advantage
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

16. 16
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

17. 17
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

18. 18
Strategic Uses of IT (continued)
Improve business quality
Total Quality Management (TQM)
Quality from customer’s perspective
Meeting or exceeding customer
expectations
Commitment to:
Higher quality
Quicker response
Greater flexibility
Lower cost
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

19. 19
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 people’s
knowledge
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

20. 20
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
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

21. 21
The Virtual Company (continued)
Strategies
Share infrastructure & risk with alliance
partners
Link complementary core competencies
Reduce concept-to-cash time through
sharing
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

22. 22
The Virtual Company (continued)
Strategies (continued)
Increase facilities and market coverage
Gain access to new markets and share
market or customer loyalty
Migrate from selling products to selling
solutions
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

23. 23
Learning Organizations
Exploit two kinds of knowledge
Explicit
Tacit
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

24. 24
Learning Organizations (continued)
 Knowledge Management
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

25. 25
Learning Organizations (continued)
Knowledge management systems
Help create, organize, and share business
knowledge wherever and whenever needed
within the organization
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

26. 26
Discussion Questions
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?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

27. 27
Discussion Questions (continued)
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?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

28. 28
Discussion Questions (continued)
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?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

29. 29
Discussion Questions (continued)
IT can’t really give a company a strategic
advantage, because most competitive
advantages don’t 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?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

30. 30
Real World Case 1 – WESCO International, Inc.
Business-to-Business
Describe WESCO’s original system.
Describe WESCO’s new system.
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

31. 31
Real World Case 1 (continued)
What are the business benefits to WESCO and
its suppliers of its new e-procurement system?
Is WESCO’s new system a strategic use of IT?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

32. 32
Real World Case 1 (continued)
Does WESCO’s new system give the company
a competitive advantage?
What other strategic moves could WESCO
implement to gain competitive advantage?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

33. 33
Real World Case 2 – Staples, Inc.
What is the strategic business value to Staples
and their large business clients of the new
web-based procurement system?
What is the strategic business value to Staples
and the value proposition to their customers of
their new clicks and bricks capabilities?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

34. 34
Real World Case 2 (continued)
Is an integrated clicks and bricks strategy the
Internet strategy that most businesses, large
and small, should adopt?
What competitive strategies is Staples
pursuing?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

35. 35
Real World Case 2 (continued)
What other e-business or e-commerce strategy
would you recommend to Staples to help them
gain a competitive advantage in their
industry?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

36. 36
Real World Case 3 – Enron Corp.
What mistakes did Enron make in the use or
management of IT?
Did those mistakes play a part in the failure of
Enron?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

37. 37
Real World Case 3 (continued)
“Is it time to go back to the days when IT
supported the business rather than became the
business?” Explain your position.
What are the major lessons for the future use
of IT in business that you gained from this
case?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

38. 38
Real World Case 3 (continued)
How would you apply one of the lessons from
this case in your present job or in your future
business career?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

39. 39
Real World Case 4 – Delta Technology & FirstHealth Group
What are Delta Technology’s new
requirements for IT investments?
What is the business value of Delta’s new
requirements?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

40. 40
Real World Case 4 (continued)
Explain FirstHealth’s “return on opportunity”
guidelines.
Is FirstHealth’s “return on opportunity”
guideline for IT investments a good way to
evaluate investments in IT?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

41. 41
Real World Case 4 (continued)
What should be the role of ROI in IT decision-
making?
Are the IT investment guidelines of Delta and
FirstHealth applicable to other companies,
including small businesses?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

42. 42
Real World Case 5 – Ford, Dow Chemical, IBM, et al.
What is Six Sigma?
What do critics of Six Sigma see as its
shortcomings?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

43. 43
Real World Case 5 (continued)
Is Six Sigma “an enterprise-wide business
strategy?”
What role does information technology play in
Six Sigma business initiatives?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

44. 44
Real World Case 5 (continued)
What are the benefits and limitations of Six
Sigma as a business strategy?
Can Six Sigma make up for poor management
and faulty vision?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.