Information Systems For Strategic Advantage

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Information Systems For Strategic Advantage
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Fundamentals of Strategic Advantage
The strategic role of information
systems involves using information technology
to develop products, services, and
capabilities that give a company strategic
advantage over the competitive forces it faces in
the global marketplace.
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Competitive Strategy Concepts
A firm can survive and succeed in the long-run if
it successfully develops strategies to
confront five competitive forces that shape the
structure of competition in its industry.
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Competitive Strategy Concepts

• Rivalry of competitors within its industry
• Threat of new entrants
• Threat of substitutes
• Bargaining power of customers
• Bargaining power of suppliers

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Businesses can develop competitive strategies
to confront the actions of the competitive forces
they confront in the market place.
Cost leadership strategy Differentiation
strategy Innovation strategy Growth
strategies Alliance strategies
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Cost Leadership Strategy

• Become a low-cost producer of products and
  services
• Find ways to help suppliers or customers reduce
  their costs
• Increase the costs of competitors

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Differentiation Strategy

• Develop ways to differentiate products and
  services from competitors
• Reduce the differentiation advantages of
  competitors

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Innovation Strategy

• Develop new products and services
• Enter new markets or marketing segments
• Establish new business alliances
• Find new ways of producing products and services
• Find new ways of distributing products and
  services

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Growth Strategies

• Significantly expand the companys capacity to
  produce goods and services
• Expand into global markets
• Diversify into new products and services
• Integrate into related products and services

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Alliance Strategies

• Establish new business linkages and alliances
• With customers, suppliers, competitors,
  consultants and other companies
• Mergers, acquisitions, joint ventures, forming
  virtual companies

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Strategic Roles for Information Systems
Information technology can be used to implement
a variety of these competitive strategies.
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Improving Business Operations
By improving operation efficiency a firm may be
able to

• Dramatically cut costs
• Improve the quality delivery of its product or
  service
• Business process reengineering can improve
  operational efficiency
• Adopt a low-cost leadership strategy
• Increase quality and service by choosing a
  product differentiation strategy

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Promoting Business Innovation
Investments in information systems technology can
result in the development of new
products, services, and processes. This can

• Create new business opportunities
• Enable a firm to enter new markets
• Enable a firm to enter into new market segments
  of existing markets

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Lock-In Customers Suppliers
Investments in information technology can also
allow a business to lock-in customers and
suppliers (and lock out competitors) by building
valuable new relationships with them.
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Lock-In Customers Suppliers

• Deter both customers and suppliers from
  abandoning a firm for its competitors or
  intimidating a firm into accepting less
  profitable relationships
• Offer better-quality service to customers
  allowing a company to differentiate themselves
  from their competitors

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Lock In Customers Suppliers

• Create inter-organizational information systems
  in which telecommunications networks
  electronically link the terminals and computers
  of businesses with their customers and suppliers,
  resulting in new business alliances and
  partnerships

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Create Switching Costs
A major emphasis in strategic information systems
is to build switching costs in the relationships
between a firm and its customers and suppliers.
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Create Switching Costs
Investments in information technology can make
customers or suppliers dependent on the continued
use of innovative, mutually beneficial
inter-organizational systems. They become
reluctant to pay the cost in time, money, effort
and inconvenience that it would take to change to
competitors.
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Raising Barriers to Entry
Investment in information technology that
increase operational efficiency can erect
barriers to entry for new players in the
industry, and can discourage firms already in the
market.
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Raising Barriers to Entry

• Increasing the amount of investment or the
  complexity of the technology required to compete
  in a market segment
• Discourage firms already in the industry and
  deter external firms entering the industry

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Building A Strategic IT Platform
Information technology enables a firm to build a
strategic platform that allows it to take
advantage of strategic opportunities.

• Developing telecom networks
• Acquiring hardware and software
• Hiring information systems specialists
• Training end users
• A firm can then leverage investment in IT by
  developing new products and services.

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A Strategic Information Base
Information systems allow a firm to develop a
strategic information base that can
provide information to support the firms
competitive strategies. These resources are
being used in such areas as

• Strategic planning
• Marketing campaigns
• Erecting barriers to entry for competitors
• Finding better ways to lock in customers and
  suppliers

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The Value Chain
An important concept that can help a manager
identify opportunities for strategic information
systems is the value chain concept.
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The Value Chain

• Some business activities are viewed as primary
  activities and other are support activities
• Views a firm as a series or chain of basic
  activities that add value to its products and
  services
• Framework can highlight where competitive
  strategies can best be applied in a business

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Strategic Applications Issues In Information
Technology
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Breaking Business Barriers
Several vital capabilities of information technolo
gy that break traditional barriers to strategic
business success include

• Break time barriers
• Break geographic barriers
• Break cost barriers
• Break structural barriers (See
  Appendix, Section V)

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Breaking Time Barriers
Information technology is used to shorten the
intervals between the various critical steps in a
business process. Telecommunications is a lot
faster than most other forms of communications
thus, it provides information to remote locations
immediately after it is requested.
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Breaking Cost Barriers
Computers and telecommunications can often
significantly reduce the cost of business
operations when compared with other means of
information processing and communications.
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Breaking Cost Barriers

• IT can reduced costs in such areas as production,
  inventory, distribution, or communication.
• IT has also helped companies cut labor costs,
  minimize inventory levels, reduce the number of
  distribution centers, and lower communications
  costs.

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Breaking Structural Barriers
Computers and telecommunications networks can
help a business develop strategic relationships
by establishing new electronic linkages with
customers, suppliers, and other business
entities.
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Breaking Structural Barriers
Telecommunications networks can support
innovations in

• Delivery of service
• Scope and penetration of markets
• Creating strategic alliances with customers,
  suppliers, and even a firms competitors

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Reengineering Business Processes
Reengineering is the fundamental rethinking and
radical redesign of business processes to achieve
dramatic improvements in cost, quality, speed,
and service. The potential payback is high, but
also is its level of risk and disruption to the
organizational environment.
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Improving Business Quality
No single approach to organizational change is
appropriate for all circumstances. Companies use
a portfolio of approaches to operational change,
including

• Continuous Quality Improvement
• Reengineering
• Incremental approaches
• Restructuring techniques

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Total Quality Management
Quality is defined as meeting or exceeding the
requirements and expectations of customers for a
product or service. Total quality management
uses a variety of tools and methods to seek
continuous improvement of quality, productivity,
flexibility, timeliness, and customer
responsiveness. (See Appendix, Section V)
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Quality Features Attributes

• Performance
• Reliability
• Durability

• Responsiveness
• Aesthetics
• Reputation

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Becoming An Agile Competitor
Agility in competitive performance is the ability
to prosper in rapidly changing, continually
fragmenting global markets for high quality,
high-performance, customer- configured products
and services. (See Appendix, Section V)
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An Agile Company Can

• Make a profit in markets with broad product
  ranges and short model lifetimes
• Process orders in arbitrary lot sizes
• Offer individualized products while maintaining
  high volume of production

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Agile companies depend heavily on information
technology to

• Enrich its customers with customized solutions
• Cooperate with other business to bring products
  to market quickly and cost effectively
• Combine the flexible, multiple organizational
  structures it uses
• Leverage the competitive impact of its people and
  information resources

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The Role of IT
IT is a strategic requirement for agile product
development and delivery. Systems provide the
information people need to support agile
operations, as well as the information built into
products and services.
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Creating a Virtual Company
A virtual company is an organization that uses IT
to link people, assets, and ideas. Six basic
characteristics of successful virtual companies
include

• Adaptability
• Opportunism
• Excellence

• Technology
• Borderless
• Trust-based

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Virtual Company Strategies
Forming virtual companies has become an important
competitive strategy in todays global
markets. IT plays an important role in providing
computing and telecom resources to support the
communications, coordination, and information
flows needed.
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Virtual Company Strategies
Managers of a virtual company depend on IT to
help them manage a network of people, knowledge,
financial and physical resources provided by many
business partners to quickly take advantage of
rapidly changing opportunities.
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Virtual Company Strategies
Business strategies of virtual companies include

• Share infrastructure and risk
• Link complementary core competencies
• Reduce concept to cash time through sharing
• Increase facilities and market coverage
• Gain access to new markets and share market or
  customer loyalty
• Migrate from selling products to selling solutions

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Using The Internet
In the past, the Internet has been used as a
marketing channel for companies who want to
publish information about themselves and their
products. Recently, this thinking has given way
to a more innovative way to use it.
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Using The Internet
Organizations have quickly realized that
connecting to the internet can be a key strategy
for seeking quick access to new markets.
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Strategic Business Use Of The Internet
The Internet promises to be an attractive and
cost-efficient way for many companies to develop
strategic collaboration, operations, marketing,
and alliances needed to solve and succeed in
todays fast-changing global markets.
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Strategic Business UseOf The Internet
Computing, telecommunications, and other
information technologies are a necessary
foundation for companies planning to implement
such competitive strategies.
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Ways In Which Companies Use The
Internet Include

• E-mail, bulletin board, file transfer, and remote
  computing capabilities to support real-time
  collaboration among employees and business
  partners
• Developing home pages on the Internets World
  Wide Web
• On-line transaction processing (EDI and EFT)

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Disadvantages Of Using The Internet Include

• Lack of sufficient security
• Lack of standard authorization techniques
• Lack of encryption for monetary transactions

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Challenges of Strategic IS
The IS function can help managers
develop competitive weapons that use IT to
implement a variety of competitive strategies to
meet the challenges of competitive forces
that confront any organization.
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Challenges of Strategic IS
Successful strategic information systems are not
easy to develop and implement. They may require
major changes in the way a business operates, and
in their relationships with customers,
suppliers, competitors, internal and external
stakeholders, and others.
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Sustaining Strategic Success
Sustained success depends on many environmental
and fundamental business factors, and especially
on the actions and strategies of a companys
management team. (See Appendix, Section V)
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Question from Texas Aggie entrance exam.

• Decipher this figure.
• R E A D I N G

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Question from Texas Aggie entrance exam.

• Translate!
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