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Competing With Information Technology

This document discusses how information technology can be used strategically to gain competitive advantage. It describes competitive forces like rivalry, threats of new entrants and substitutes. Competitive strategies discussed include cost leadership, differentiation, innovation, growth, and alliances. The document also discusses using IT to lock in customers, build switching costs, raise barriers to entry, and leverage IT investments. Finally, it covers customer relationship management and how the value chain can be supported through strategic information systems.

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Manashi Shah
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43 views18 pages

Competing With Information Technology

This document discusses how information technology can be used strategically to gain competitive advantage. It describes competitive forces like rivalry, threats of new entrants and substitutes. Competitive strategies discussed include cost leadership, differentiation, innovation, growth, and alliances. The document also discusses using IT to lock in customers, build switching costs, raise barriers to entry, and leverage IT investments. Finally, it covers customer relationship management and how the value chain can be supported through strategic information systems.

Uploaded by

Manashi Shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Competing With Information

Technology
Chapter 3
Strategic IT
 is important to view information systems as more than a set of
technologies that support efficient business operations, workgroup
and enterprise collaboration, or effective business decision making.

 IT can change the business compete

 also view information systems strategically, that is, as vital


competitive networks, as a means of organizational renewal, and as
a necessary investment in technologies which helps a company
adopt strategies and business processes that enable it to reengineer
or reinvent itself
Competitive Strategy Concepts
 a major role of IS applications in business is to provide effective
support of a company’s strategies for gaining competitive advantage

 It involves the use of IT to develop products, services and


capabilities that give a company major advantages over competitive
forces it faces in the global marketplace

 It is accomplished via. Strategic Information Systems that supports


or shapes the competitive position and strategies of a business
enterprise.

 strategic information system can be any kind of information system


(e.g., TPS, MIS, and DSS)
Competitive Forces and Strategies
Competitive Forces and Strategies
 Rivalry of Competitors
◦ Competition is a positive characteristic in business
◦ Competitors share a natural, and often healthy, rivalry
◦ Rivalry encourages and sometimes requires a constant effort to
gain competitive advantage in the marketplace

 Threats of New Entrants


◦ Not only do firms need to compete with other firms in the
marketplace, but they must also work to create significant barriers
to the entry of new competition.
◦ Requires expenditure of significant organizational resources
◦ Internet has created many ways to enter the marketplace quickly
and with relatively low cost
Competitive Forces and Strategies
 Threat of Substitutes
◦ The effect of this force is apparent almost daily in a wide variety of
industries often at its strongest during periods of rising costs or
inflation
◦ E.g. when airline prices get too high, people substitute car travel for
their vacations

 Bargaining Power of Customer and Supplier


◦ If customers’ bargaining power gets too strong, they can drive prices to
unmanageably low levels or just refuse to buy the product or service
◦ If a key supplier’s bargaining power gets too strong, it can force the
price of goods and services to unmanageably high levels or just starve
a business by controlling the flow of parts or raw materials essential to
the manufacture of a product.
Competitive Strategies
 Cost Leadership Strategy
◦ Becoming a low-cost producer of products and services in the
industry
◦ Finding ways to help suppliers or customers reduce their costs or
increase the costs of competitors.

 Differentiation Strategy.
◦ Developing ways to differentiate a firm’s products and services
from those of its competitors
◦ reduce the differentiation advantages of competitors
◦ allow a firm to focus its products or services to give it an
advantage in particular segments
Competitive Strategies
 Innovation Strategy
◦ Finding new ways of doing business
◦ involve developing unique products and services or entering
unique markets
◦ also involve making radical changes to the business processes
for producing or distributing products and services

 Growth Strategy
◦ expanding a company’s capacity to produce goods and services,
expanding into global markets, diversifying into new products
and services, or integrating into related products and services
Competitive Strategies
 Alliance Strategies
◦ Establishing new business linkages and alliances with customers,
suppliers, competitors, consultants, and other companies.
◦ Linkages may include mergers, acquisitions, joint ventures,
formation of virtual companies, or other marketing,
manufacturing, or distribution agreements between a business
and its trading partners.
Other Strategic Initiatives
 In addition to the five basic strategies there are many
other strategic initiatives
◦ Locking in customers and suppliers (lock out competitors)
◦ Building switching costs
◦ Raising barriers to entry
◦ Leveraging investment in information technology
Other Strategic Initiatives
 Locking in customers and suppliers
◦ Investments in information technology
◦ Building valuable new relationships with customers or suppliers
◦ significantly improving the quality of service to customers and
suppliers in a firm’s distribution, marketing, sales, and service
activities

 Switching Costs
◦ are the costs that a consumer incurs as a result of changing
brands, suppliers or products
◦ most prevalent switching costs are monetary in nature, there are
also psychological, effort- and time-based switching costs
Other Strategic Initiatives
 Raise in Barriers
◦ By making investments in information technology to improve its
operations or promote innovation, a firm could also raise
barriers to entry that would discourage or delay other companies
from entering a market
◦ increase the amount of investment or the complexity of the
technology required to compete in an industry or a market
segment

 Leverage investment in IT
◦ Investing in information technology enables a firm to build
strategic IT capabilities and develop new products and services
that would not be possible without a strong IT capability.
Building Customer Focused Business
 driving force behind world economic growth has changed from
manufacturing volume to improving customer value.
 the chief business value of becoming a customer-focused business
lies in its ability to help them keep customers loyal, anticipate their
future needs, respond to customer concerns, and provide top-quality
customer service.
 focus on customer value recognizes that quality, rather than price,
has become the primary determinant in a customer’s perception of
value
 Internet technologies can make customers the focal point of
customer relationship management (CRM) and other e-business
applications
Building Customer Focused Business
 CRM systems and Internet, intranet, and extranet Web sites create
new channels for interactive communications within a company, as
well as with customers, suppliers, business partners, and others in
the external environment.
 customers use the Internet to ask questions, lodge complaints,
evaluate products, request support, and make and track their
purchases.
 Using the Internet and corporate intranets, specialists in business
functions throughout the enterprise can contribute to an effective
response
 This encourages the creation of problem-solving teams dedicated to
customer involvement, service, and support
Customer Relationship Management
 refers to practices, strategies and technologies that companies use to
manage and analyze customer interactions and data throughout the
customer lifecycle,

 the goal is to improve business relationships with customers, assisting in


customer retention and driving sales growth

 CRM systems are designed to compile information on customers across


different channels -- or points of contact between the customer and the
company -- which could include the company's website, telephone, live
chat, direct mail, marketing materials and social media. 

 CRM systems can also give customer-facing staff detailed information


on customers' personal information, purchase history, buying preferences
and concerns.
The Value Chain and Strategic IS
 Concept developed by Michael Porter

 views a firm as a series, chain, or network of basic activities that


add value to its products and services and thus add a margin of
value to both the firm and its customers

 Two types of business activities


◦ Primary Process
◦ Support Process

 Primary processes are those business activities that are directly


related to the manufacture of products or the delivery of services to
the customer
The Value Chain and Strategic
IS
 support processes are those business activities that help support the
day-to-day operation of the business and that indirectly contribute
to the products or services of the organization.

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