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Competitive Role of Information Technology

This document discusses how information technology can be used competitively in services. It outlines competitive uses of IT that can be applied both online/in real-time and offline through analysis. Online, IT is used to create barriers to entry through reservations systems, frequent user clubs, and switching costs. Offline, databases are assets that enable selling customer information and micromarketing. Internally, IT enhances revenue through yield management, point of sale systems, and expert systems, and enhances productivity through inventory monitoring and data analysis.

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Endrei Clyne Mercullo
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62 views14 pages

Competitive Role of Information Technology

This document discusses how information technology can be used competitively in services. It outlines competitive uses of IT that can be applied both online/in real-time and offline through analysis. Online, IT is used to create barriers to entry through reservations systems, frequent user clubs, and switching costs. Offline, databases are assets that enable selling customer information and micromarketing. Internally, IT enhances revenue through yield management, point of sale systems, and expert systems, and enhances productivity through inventory monitoring and data analysis.

Uploaded by

Endrei Clyne Mercullo
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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Competitive Role of Information

Technology
in Services
Competitive Use of Information
Competitive Use of Information
Online (Real Time) Offline (Analysis)
External Creation of Barriers to Entry: Database asset:
(Customer) Reservation system Selling information
Frequent user club Development of services
Switching costs Micromarketing
Internal Revenue generation: Productivity enhancement:
(Operations) Yield management Inventory status
Point of sales Data Envelopment Analysis
Expert systems

Source: Adapted from James A. Fitzsimmons, “Strategic Role of Information in Services,” in Rakesh V. Sarin (ed.), Perspectives in
Operations Management: Essays in Honor of Elwood S. Buffa, Norwell, Mass: Kluwer Academic Publisher, 1993, p. 103.
Creation of Barriers to Entry
 Investment in information technologies that increase
operational efficiency can erect barriers to entry for new
players in the industry, and can discourage firms already in the
market.

 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 from entering the industry.
Creation of Barriers to Entry
 Airline Reservations System (ARS)
• SABRE
 An airline reservation system developed by American
Airlines in the late 1960s .

 It enables a travel agent to make airline, car rental, hotel,


theatre ticket, restaurant, etc. reservations for the clients.

• Apollo and Navitaire


Creation of Barriers to Entry
 Frequent User Club
• Programs that offer the possibility of accumulating
points for repeat purchases of the customers

• These programs, which primarily attract business


travelers in an airline industry, generally succeed in
cultivating customer loyalty for a given carrier.
Creation of Barriers to Entry
 Frequent User Club
• Customer Loyalty
 Customer loyalty competes for the top spot with intellectual property
for effective barriers to entry.

 A clear understanding of your customers current needs, your


preparedness for servicing future needs, the excellence of the value
that you deliver for the price paid and your constant dialogue with
your customers are all excellent attributes to building customer
loyalty.
Barrier to Entry
 Switching Costs
• the costs associated with switching supplier
• Considerations:
 Price
 Time
 Effort
 Uncertainty

• Examples:
 QWERTY vs DVORAK keyboard
Revenue Generation
 Yield Management
• process of understanding, anticipating and influencing
consumer behavior in order to maximize yield or
profits from a fixed, perishable resource (such as airline
seats or hotel room reservations)
• Often called as perishable asset revenue management
Revenue Generation
 Where and Why Firms Practice Yield Management?
 It is expensive or impossible to store excess resource

 Commitments need to be made when future demand is uncertain

 The firm can discriminate among customer segments, and each segment
has different demand curves

 The same unit of capacity can be used to deliver many different products
or services

 Producers are profit-oriented and have broad freedom of action


Revenue Generation
 Yield Management
• American Airlines
 Used highly successful SABRE reservation system for yield
management

 determination of overbooking levels, the allocation of


discount seats, and the setting of prices

 “selling the right seats to the right customers at the right


prices.”
Revenue Generation
 Point of Sale
• or checkout is the location where a transaction occurs.
• allows more time for suggestive selling
Revenue Generation
 Expert System
• software that uses a knowledge base of human expertise for
problem solving, or clarify uncertainties where normally
one or more human experts would need to be consulted.

• Can be used in:


 Diagnosis and troubleshooting
 Planning and scheduling
 Financial decision making
 Process monitoring and control
 Design and manufacturing
Database Asset
 Database Marketing
• Selling information
• Developing services
• Micromarketing

• Customer Relationship Management (CRM)

• Google – Google Ad Words, Google Maps, Google


Earth, Google Scholar, Page Rank
Productivity Enhancement
 Inventory Status
 Data Envelopment Analysis

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