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Role Of IT In Strategic management

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Role Of IT In Strategic management

  1. 1. SUBMITTED BY RAMAPRIYA NITHEESH SRIRAM ASHWIN GANESH RAHUL
  2. 2. Introduction: It is a branch of engineering dealing with the use ofcomputers and telecommunications equipment tostore, retrieve, transmit and manipulate data. Information Technology is defined as "the study,design, development, application, implementation,support or management of computer-basedinformation systems”.
  3. 3. COMPETITIVE ADVANTAGE: Information technology can create competitive advantage foran organization and improve its competitive position in themarket Organizations can achieve sustainable competitive advantageusing information technology in an appropriate way to answerbusiness requirements. Organizations have to know how toapply this technology in their own organizational processes andactivities. This awareness is vital to the organizational success. Evidencesindicate that implementation of successful business strategiesusing information technology has led to the improvement oforganizational efficiency and effectiveness
  4. 4. IT has changed the structures and organizationalprocesses. This technology has caused organizations tobecome small, decreased the number of staffs andorganizational level, extended inside and outsideorganizational communication and also decreasedcommunication costs The difference among organizations in profitability andoptimum performance is more due to the difference inmanagerial skills rather than a difference at the level ofinformation technology. Managers, who are able to organize and manage separateactivities better than others by the use of informationtechnology through an appropriate proportion andrelation, will experience a higher level of profitability and amore optimum performance
  5. 5.  Market-Based Approach Resource-Based Approach Market-Based Approach In this approach, it is believed that the survival of an organization depends on the market, customers needs and creating value for them. An organization must optimally provide the customers with their needs in appropriate time and place and create sustainable competitive advantage for itself through calculated implementation of the information technology tools. This approach looks at the matters out of the organization
  6. 6. Resource-Based Approach In this approach, it is believed that an organizationneeds first to recognize its resources, abilities andskills and then, identify sort of the customers needswhich could be provided efficiently using theseresources and skills One of the most important organizational resourcesand skills is information technology which can be asource of sustainable competitive advantage. Thisapproach tends to direct towards the inner part of theorganization.
  7. 7. If an organization can create a value higher than that ofothers for its own stakeholders using informationtechnology, its name and brand will have such a position inthe minds of its stakeholders that is not easy for thecompetitors to achieve. Customers are the most important stakeholders of anyorganization. In case an organization creates a value lowerthan that created by competitors, the contentment of thisimportant group of stakeholders is decreased, andthus, they will go to other providers and competitors toprovide their own needs. Price, quality and services are themost important aspects
  8. 8. Price is one of the most influential factors in a customersdecision to choose the product or service of an organization. Anorganization can reduce thedesign, production, sales, distribution and official costs of itsown products and services using information technology. Information technology can reduce costs through theautomation of productive sales and distributional activities andprocesses and pave the way for the implementation of the costleadership strategy. The automatic savings resulted from theseactivities in an electronic environment such as using mechanizedsystems and robots instead of manpower, promotions andmarketing and network sales, the electronic data interchangeand so on, will reduce the costs and makes it possible todetermine the price at the lowest level possible
  9. 9. Information technology reduces the need for physical and officialplaces and makes it possible to carry out organizational activitiesremotely. Using Internet, it is possible to establish communicationwith a large number of providers of raw materials and half-madeproducts all over the world, choose the best price offered and then signa contract. Networks also have an important role to play in theoutsourcing of an organization. An organizational activity is said to have been devolved when it cancreate the highest value in the value chain and carry out those activitiesfor which it has sufficient core competency. In consequence, theproducts and services which are offered, are not produced by aparticular organization, but is produced by a collection ofinterconnected organizations. Now, there are more than 2000 companies and 12000 workstations inIntranet of the Hitachi and Ford companies respectively which areconnected to one another. In an intra-organizational network, fast andprecise co-operation is of great import and this cooperation can not beachieved without using the information technology tools.
  10. 10. Services include other aspects of value-creation for the customerwhich have not mentioned in the two categories of price and quality.The aspects of value-creation for the customer in the category ofservices are very wide-ranging and different depending on the kind ofproducts or services.After sales services, offering fast and accurate information tocustomers, fast communication with customers, fast delivery of theproducts and services, facility in paying for the products and services,etc. are the most important aspects of the services category. It is possible to serve customers better and more through masscustomization strategy. Mass customization means designing,producing and offering a product or providing a service based on thecustomer’s need
  11. 11. Dell Company produces and distributes its products based on this strategy. ITmakes it possible for an organization to have a close relationships withcustomers inside and outside of organization and make mass customization tobe established in an organization. An organization which can offer its services to customers in a way that usingthe minimum physical movement, a customer who can secure his/hermaximum contentment, will be successful in business. If an organization canperform this procedure better than the competitors, it will gain competitiveadvantage in that particular business. Offering services using the information technology tools creates competitiveadvantage through the omission of the place dimension and saving in time.Expressing guarantees, constant communication with the potential and actualcustomers and offering the latest information to them regarding the productsand services via networks, the electronic exchange of documents, paymentsand etc. will be possible at the least time and with the least physical motionusing the information technology tools. The ability of quick and appropriate response to market and customerdemand through using IT tools, caused more customer loyalty andpossibility for repeated purchasing and also increasing customer’stendency to pay more money for the products.
  12. 12. According to this approach, an organization is a series ofresources and skills which are used to produce products andservices to be able to compete with competitors in a market.Sustainable competitive advantage in an organization is createdthorough a proportionate and unique combination of theorganizations resources and skills. According to the resource-based approach, organizations mustbuild their strategies in accordance with their resources andskills so that they can be the best in that business and create themost degree of value for customers; a value not to be created byothers. Creation of this kind of value is equal to the sustainablecompetitive advantage based upon the resources and skills.
  13. 13. An organizations resources include the physical, humanand organizational capital. In the present era, called "theinformation era", information technology is one of themost important organizational resources. This resourceincludes hardware, software, communication networks andspecialized work force in the field of informationtechnology. Hardware, software and networks are short-living andquickly imitated and patterned. Thus, they cannot createsustainable competitive advantage for an organization.American airlines systems which used informationtechnology in order to achieve differentiation wereimmediately patterned and copied by the competitors
  14. 14. The skills and abilities of an organization is the capability of appropriate implementation and combination of organizational resources in a way that leads to the best performance and highest competitive position in the business market for that organization. Skills and abilities put the resources in competitive status and they cannot easily be copied and imitated. In the category of information technology, we face two kinds of work force skills in organizations: Technical Skills Managerial Skills
  15. 15. TECHNICAL SKILLS These skills include specialties involved in the creation andimplementation of the information technology tools. In order to makeeffective use of information technology in organizations, it is necessaryto possess these skills; but these skills do not have characteristics of aresource having sustainable competitive advantage, because they areeasily and quickly copied and imitated through individual staff trainingor employing the professional work force. MANAGERIAL SKILLS These skills include the ability to change the organizations businessstrategy into long-run architecture of information, the ability tounderstand and discover new and innovative functions of informationtechnology in business, the ability to combine technical resources andskills and the ability to create synergy in organizational proceduresusing information technology.
  16. 16. SAP (Systems, Applications, and Products in DataProcessing) is German multinational corporation thatmakes enterprise software to manage business operationsand customer relations. SAP ERP is thecorporations Enterprise Resource Planning, an integratedsoftware solution that incorporates the key businessfunctions of the organization. The need for ERP arose dueto lack of proper / common database available for all thefunctions in an organization.
  17. 17. With SAP ERP, you can efficiently deal with business challenges in thefollowing areas: Financial Areas – Ensure compliance and predictability of businessperformance – so your organization can gain a deeper financial insightacross the enterprise and tighten control of finances. SAP ERP Financialsautomates financial and management accounting and financial supplychain management. Human Resources – Optimize your HR processes with acomplete, integrated, and global human capital management (HCM)solution. SAP ERP provides this HCM solution for organizations of all sizesand in all industries. You can maximize the potential of yourworkforce, while supporting innovation. growth, and flexibility. The SAPERP HRM solution automates talent management, core HR processes, andworkforce deployment , enabling increased efficiency and bettercompliance with changing global and local regulations
  18. 18.  Operations – Manage end-to-end procurement and logistics business processes for complete business cycles – from self-service requisitioning to flexible invoicing and payment – optimizing the flow of materials. SAP ERP Operations also helps discrete and process manufacturers manage the entire life cycle of product development and manufacturing. The solution automates the entire manufacturing process and reduces costs by controlling and adapting the manufacturing process in real time and increases customer satisfaction by delivering higher-quality products.
  19. 19. With SAP ERP, you can gain the following benefits: Improve alignment of strategies and operations  Run your enterprise in accordance with strategy and plans, accessing the right information in real time to identify concerns early.  Pursue opportunities proactively.  Achieve corporate objectives by aligning workforce and organizational objectives.  Find the best people and leverage their talent in the right job at the right time. Improve productivity and insight  Leverage self-services and analytics across your organization.  Improve operational efficiency and productivity within and beyond your enterprise.
  20. 20.  Reduce costs through increased flexibility  Use enterprise services architecture to improve process standardization, efficiency, and adaptability.  Extend transactions, information, and collaboration functions to a broad business community. Reduce risk  Solve complex business challenges today with SAP, your trusted partner for long-term growth, with 30 years of experience working with organizations of all sizes in more countries than any other vendor. Retain top performers  Retain your top performers through clearly defined career and development plans.  Link employees performance to compensation programs such as variable pay plans and long-term incentives.

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