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Chapter

2Competing

with

Information Technology

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Objectives Identify basic competitive strategies and

explain how IT may be used to gaincompetitive advantage.

Identify strategic uses of informationtechnology.

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(Objectives continued)

Identify the business value of using e-business technologies for total quality

management, to become an agilecompetitor, or to form a virtual company.

Explain how knowledge managementsystems can help a business gainstrategic advantage.

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Section I

Fundamentals of Strategic Advantage

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Fundamentals of Strategic

Advantage

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Fundamentals of Strategic AdvantageCompetitive Forces (Porter)

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Competitive Strategies & the Role

of IT Cost Leadership (low cost producer)

Ex Walmart, Target

Reduce inventory (JIT)Reduce manpower costs per sale (see Real

World Case 1)

Help suppliers or customers reduce costs

Increase costs of competitorsReduce manufacturing costs (process control)

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Competitive Strategies & the Role of IT (continued)

Differentiation Porsche, Nordstrom, IBM

Create a positive difference between yourproducts/services & the competition.

May allow you to reduce a competitors

differentiation advantage.

May allow you to serve a niche market.

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Competitive Strategies & the Role of IT (continued)

Growth

Expand production capacity

Expand into global markets

Diversify

Integrate into related products and services.

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Competitive Strategies & the Role of IT (continued)

Alliance

Broaden your base of support

New linkages

Mergers, acquisitions, joint ventures, virtual

companies

Marketing, manufacturing, or distributionagreements.

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Competitive Strategies & the Role of IT (continued)

Other Competitive Strategies

Locking in customers or suppliers

Build value into your relationship

Creating switching costs

Extranets

Proprietary software applications

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Competitive Strategies & the Role of IT (continued)

Other Competitive Strategies (continued)

Raising barriers to entry

Improve operations or promote innovation

Leveraging investment in IT

Allows the business to take advantage of strategicopportunities

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The Value Chain

Views a firm as a series, chain, or networkof activities that add value to its products

and services. Improved administrative coordination

Training

Joint design of products and processes

Improved procurement processes

JIT inventory

Order processing systems

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Value Chain (continued)

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Section II

Using Information Technologyfor Strategic Advantage

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Strategic Uses Of Information

Technology

Major competitive differentiator

Develop a focus on the customer

Customer value Best value

Understand customer preferences

Track market trends

Supply products, services, & information anytime,anywhere

Tailored customer service

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Strategic Uses of IT (continued)

Business Process Reengineering (BPR)

Rethinking & redesign of business processes

Combines innovation and processimprovement

There are risks involved.

Success factors Organizational redesign

Process teams and case managers

Information technology

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Strategic Uses of IT (continued)

Improve business qualityTotal Quality Management (TQM)

Quality from customers perspective Meeting or exceeding customer expectations

Commitment to: Higher quality

Quicker response

Greater flexibility

Lower cost

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Strategic Uses of IT (continued)

Becoming agile

Four basic strategies

Customers perception of product/service assolution to individual problem

Cooperate with customers, suppliers, othercompanies (including competitors)

Thrive on change and uncertainty Leverage impact of people and peoples

knowledge

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Strategic Uses of IT (continued)

The virtualcompany

Uses IT to linkpeople, assets,

and ideas Forms virtual

workgroups andalliances with

business partners Interorganizational

informationsystems

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The Virtual Company (continued)

Strategies Share infrastructure &

risk with alliance

partners Link complementary

core competencies

Reduce concept-to-

cash time throughsharing

Strategies (continued) Increase facilities and

market coverage

Gain access to newmarkets and sharemarket or customerloyalty

Migrate from sellingproducts to sellingsolutions

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Learning Organizations

Exploit two kinds of knowledge

Explicit

Tacit

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Learning Organizations (continued)

Knowledge Management

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Learning Organizations (continued)

Knowledge management systems

Help create, organize, and share business

knowledge wherever and whenever neededwithin the organization

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Discussion Questions

1. You have been asked to develop e-business &e-commerce applications to gain competitive

advantage. What reservations might you haveabout doing so?

2. How could a business use IT to increase

switching costs and lock in its customers andsuppliers?

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Discussion Questions (continued)

3. How could a business leverage itsinvestment in IT to build strategic ITcapabilities that serve as a barrier to

entry by new entrants into its markets?

4. What strategic role can information

technology play in business processreengineering and total qualitymanagement?

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Discussion Questions (continued)

5. How can Internet technologies help abusiness form strategic alliances with its

customers, suppliers, and others?

6. How could a business use Internet

technologies to form a virtual company orbecome an agile competitor?

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Discussion Questions (continued)

7. IT cant really give a company a strategicadvantage, because most competitiveadvantages dont last more than a few years &soon become strategic necessities that just

raise the stakes of the game. Discuss.

8. MIS author & consultant Peter Keen says:We have learned that it is not technology thatcreates a competitive edge, but themanagement process that exploitstechnology. What does he mean?