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Strategic IT

The purpose of information system:

To gain competitive advantageTo solve problemTo assist in decision making

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Competitive Forces

If a business wants to succeed must develop strategies to counter these forces:

1. Rivalry of competitors within its industry2. Threat of new entrants into an industry and its

markets3. Threat posed by substitute products which

might capture market share4. Bargaining power of customers5. Bargaining power of suppliers

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Five Competitive Strategies

Cost LeadershipBecome low-cost producersHelp suppliers or customers reduce costsIncrease cost to competitors

Differentiation StrategyDevelop ways to differentiate a firm’s products

from its competitorsCan focus on particular segment or niche of

market

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Competitive Strategies (cont.)

Innovation StrategyFind new ways of doing business

Unique products or services Or unique markets Radical changes to business processes to alter the

fundamental structure of an industryGrowth Strategy

Expand company’s capacity to produceExpand into global marketsDiversify into new products or services

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Competitive strategies (cont.)

Alliance StrategyEstablish linkages and alliances with Customers,

suppliers, competitors, consultants and other companies

Includes mergers, acquisitions, joint ventures, virtual companies

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Other competitive strategies

Lock in customers and suppliersAnd lock out competitorsDeter them from switching to competitorsBuild in switching costsMake customers and suppliers dependent on the

use of innovative ISBarriers to entry

Discourage or delay other companies from entering market

Increase the technology or investment needed to enter

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Other competitive strategies (cont.)

Include IT components in productsMakes substituting competing products more

difficultLeverage investment in IT

Develop new products or services not possible without IT

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Customer-focused business

What is the business value in being customer-focused?

1. Provide top-quality customer service2. Anticipate their future needs3. Respond to customer concerns4. Keep customers loyal

Focus on customer value Quality not price has become primary

determinant of value ??

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Value Chain

View the firm as a chain of basic activities that add value to its products and services

Activities are eitherPrimary processes directly related to

manufacturing or delivering productsSupport processes help support the day-to-day

running of the firm and indirectly contribute to products or services

Use the value chain to highlight where competitive strategies can best be applied to add the most value

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Using IS in the value chain

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Business Process Reengineering

Called BPR or ReengineeringFundamental rethinking and radical redesignOf business processesTo achieve improvements in cost, quality, speed

and servicePotential payback highRisk of failure is also high

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Agility

Agility is the ability of a company to prosperIn a rapidly changing, continually fragmentingGlobal market for high-quality, high-

performance, customer-configured products and services

An agile company can make a profit withBroad product rangesShort model lifetimesMass customization

Individual products in large volumes

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Virtual Company

A virtual company uses IT to linkPeople, Organizations, Assets,And ideas

Creates interenterprise information systems to link customers, suppliers, subcontractors and

competitors

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Strategies of virtual companies