Competing With Information Technology
Uploaded by
Anand MauryaCompeting With Information Technology
Uploaded by
Anand MauryaChapter
Competing with
Information Technology
Strategic IT
ı Technology is no longer an afterthought in business
strategy, but the cause and driver
ı IT can change the way businesses compete
ı A strategic information system helps
ı Gain a competitive advantage
ı Reduce a competitive disadvantage
ı Or meet other strategic enterprise objectives
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Competitive Forces and Strategies
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Five Competitive Strategies
ı Cost Leadership
ı Become low-cost producers
ı Help suppliers or customers reduce costs
ı Increase cost to competitors
ı Example: Priceline uses online seller bidding so the buyer sets the price
ı Differentiation Strategy
ı Differentiate a firm’s products from its competitors’
ı Focus on a particular segment or niche of market
ı Example: Puma uses online customer design
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Competitive Strategies (continued)
• Innovation Strategy
– Unique products, services, or markets
– Radical changes to business processes
• Example: Amazon’s online, full-service customer systems
• Growth Strategy
– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services
• Example: Wal-Mart’s merchandise ordering via global satellite
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Competitive Strategies (continued)
ı Alliance Strategy
ı Establish linkages and alliances with customers, suppliers,
competitors, consultants, and other companies
ı Includes mergers, acquisitions, joint ventures, virtual companies
ı Example: Wal-Mart uses automatic inventory replenishment
by supplier
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Using Competitive Strategies
These strategies are not mutually exclusive
Organizations use one, some, or all
A given activity could fall into one or more categories of competitive
strategy
Not everything innovative serves to differentiate one
organization from another
Likewise, not everything that differentiates organizations is
necessarily innovative
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Ways to Implement Basic Strategies
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Other Competitive Strategies
• Lock in Customers and Suppliers
– Deter them from switching to competitors
• Build in Switching Costs
– Make customers and suppliers dependent on the use of innovative IS
• Erect Barriers to Entry
– Discourage or delay other companies from entering the market
– Increase the technology or investment needed to enter
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Other Competitive Strategies
ı Build Strategic IT Capabilities
ı Take advantage of strategic opportunities when they arise
ı Improve efficiency of business practices
ı Leverage Investment in IT
ı Develop products and service that would not be possible
without a strong IT capability
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Customer-Focused Business
• What is the business value in being customer-focused?
– Keep customers loyal
– Anticipate their future needs
– Respond to customer concerns
– Provide top-quality customer service
• Focus on customer value
– Quality, not price, has become the primary determinant of value
– Consistently
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Providing Customer Value
ı Companies that consistently offer the best, they-
ı Track individual preferences
ı Keep up with market trends
ı Supply products, services, and information anytime,
anywhere
ı Tailor customer services to the individual
ı Use Customer Relationship Management (CRM) systems to
focus on the customer
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Building Customer Value via Internet
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The Value Chain and Strategic IS
ı View the firm as a chain of basic activities that add value to its
products and services
ı Primary processes directly relate to manufacturing or delivery
ı Support processes help support the day-to-day running of the firm
and indirectly contribute to products or services
ı Use the value chain to highlight where competitive strategies
will add the most value
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Using IS in the Value Chain
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Strategic Uses of IT
ı A company that emphasizes strategic business use of IT would
use it to gain a competitive differentiation
ı Products
ı Services
ı Capabilities
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Reengineering Business Processes
• Called BPR or simply Reengineering
– Fundamental rethinking and radical redesign of business processes
– Seeks to achieve improvements in cost, quality, speed, and service
• Potential payback is high, also is risk of disruption & failure
• Organizational redesign approaches are important enabler of
reengineering
– Includes use of IT, process teams, case managers
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BPR Versus Business Improvement
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A Cross-Functional Process
ı Many processes are reengineered with…
ı Enterprise resource planning software
ı Web-enabled electronic business and commerce systems
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Reengineering Order Management
IT that supports this process…
ı CRM systems using intranets and the Internet
ı Supplier-managed inventory systems using the Internet and extranets
ı Cross-functional ERP software to integrate Manufacturing,
Distribution, Finance, and HR processes
ı Customer-accessible e-commerce websites for order entry, status
checking, payment, and service
ı Customer, product, and order status databases accessed via intranets
and extranets
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Building a Knowledge-Creating Company
ı A knowledge-creating company or learning organization…
ı Consistently creates new business knowledge
ı Disseminates it throughout the company
ı Builds it into its products and services
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Two Kinds of Knowledge
ı Explicit Knowledge
ı Data, documents, and things written down or stored in
computers
ı Tacit Knowledge
ı The “how-to” knowledge in workers’ minds
ı Represents some of the most important information within an
organization
ı A knowledge-creating company makes such tacit
knowledge available to others
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Knowledge Management
ı Successful knowledge management
ı Creates techniques, technologies, systems,
and rewards for getting employees to share
what they know
ı Makes better use of accumulated workplace and enterprise
knowledge
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Knowledge Management Techniques
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Knowledge Management Systems (KMS)
– A major strategic use of IT
– Manages organizational learning and know-how
– Helps knowledge workers create, organize, and make available
important knowledge
– Makes this knowledge available wherever and whenever it is
needed
• Knowledge includes
– Processes, procedures, patents, reference works, formulas, best
practices, forecasts, and fixes
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