This document discusses how companies can use information technology for strategic advantage. It covers various competitive strategies like cost leadership, differentiation, innovation, and growth. It also discusses how IT can support these strategies through activities like reducing costs, creating new products/services, promoting business process innovation, locking in customers/suppliers, and raising barriers to entry. Examples are provided of how companies have leveraged IT for strategic benefits like improving efficiency, creating new business opportunities, and maintaining valuable relationships.

1. Competing with information
technology
Topics:
-Fundamentals of Strategic Advantage
-Using information Technology for Strategic
Advantage

2. The Competitive Environment
Threat of
New
Entrants
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors
Threat of
Substitutes Bargaining Power
of Customers

3. Fundamental Competitive Strategies
Cost Leadership Strategies
Differentiation Strategies
Innovation Strategies
Growth Strategies
Alliance Strategies

5. 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)

6. 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.

7. 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

8. Competitive Strategies & the Role of IT (continued)
• Growth
– Expand production capacity
– Expand into global markets
– Diversify
– Integrate into related products and services.

9. 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.

10. 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

11. 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

12. Examples

13. Strategic Uses of Information Technology
Improving Promote Locking in
Business Customers
Strategy 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 Valuable
Outcome Enhance Business Customers and
Efficiency Opportunities Relationships

14. Strategic Uses of Information
Raise Technology
Build a Build a
Strategic IT Strategic
Strategy 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 Enhance
Outcome Increase Business Organizational
Market Share Opportunities Collaboration

15. The Value Chain
Administrative Coordination & Support Services
Human Resource Management
Technology Development
Procurement of Resources
Marketing
Inbound Outbound Customer
Operations and
Logistics Logistics Service
Sales

16. INFORMATION SYSTEMS AND BUSINESS STRATEGY
Firm Value Chain

17. Example: Airlines

18. The Internet Value Chain
Marketing and Sales and Support and
Internet Product Distribution Customer
Capability Research Feedback
Data for market •Low cost •Access to customer
Benefits research, com-ments online
to distribution
establishes •Reaches new •Immediate re-
Company consumer sponse to customer
customers
responses •Multiplies problems
contact points
Opportunity
for Create New Maintain Valuable
Enhance
Advantage Business Customers and
Efficiency Opportunities Relationships

19. Strategic Positioning of Internet Technologies
High
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

20. Section II
• Using Information Technology for Strategic
Advantage

21. IT Used for Competitive Strategy
• Use of IT in two different ways.
1. Support Operations
2. Strategic Management

22. 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.

23. 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

24. Role of Ecommerce Customers
• Use Internet to ask questions
• Air complaints
• Evaluate products, request support
• Make and report purchases

25. Customer-Focused E-Business
Let customers
place orders
directly
Let customers
check order history
and delivery status Let customers
place orders thru
distribution
Build a partners
community
of customers,
employees,
and partners Customer Transaction
Database Database
Link Employees
Give all and distribution
employees a partners
complete view
of customers

26. 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; Major
What Changes? Job Redesign
Primary IT and Work Simplification IT and Organizational Redesign
Enablers

27. Example

28. 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

29. TQM
• May use a variety of tools and methods to
seek continuous improvement of quality,
productivity, flexibility, timeliness, and
customer responsiveness.

30. 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

31. Example

32. The Customer- Focused Agile Competitor
Cooperate with
Anticipation of Business Partners
future needs and Competitors
Customization
Conformance
Give Customers Organize to
Solutions Master
to Problems Change
Leverage the
Impact of
People and
IS Resources

33. 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

34. Virtual Company Strategies

35. Virtual Corporations
Adaptability
Borderless Excellence
Six
Characteristics
of Virtual
Companies
Technology Trust-Based
Opportunism

36. 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.

37. Knowledge Management Systems
Technical Solution
Support Knowledge
Staff
Customers
Development
Engineers Intranet
The
Internet
Product
Other
Managers
Vendors

38. Sustaining Strategic Success
• Sustained success in using IT
strategically seems to depend on
three sets o factors:
–Environment
–Foundation factors
–Management Actions and Strategies

39. Key Factors for Sustaining Strategic
Success
•Size •Creating switching
•Geographical scope costs
•Product scope •Exploiting
•Organization structure knowledge
•Technological resources
Environment •Developing
•Knowledge resources
response strategies
•Managing risks
Performance
Firm