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Competing with Information Technology

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Learning Objectives1. Identify several basic competitive strategies and explain how

they use information technologies to confront the competitive

forces faced by a business.

2. Identify several strategic uses of Internet technologies

and give examples of how they can help a business gaincompetitive advantages.

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Learning Objectives Learning Objectives

3. Give examples of how business process reengineeringfrequently involves the strategic use of

Internet technologies.

4. Identify the business value of using Internet technologies

to become an agile competitor or form a virtual company.

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Learning Objectives

5. Explain how knowledge management systems can

help a business gain strategic advantages.

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Fundamentals of Strategic Advantage

Technology is no longer an afterthought in forming

business strategy, but the actual cause and driver .

1

IT Leaders: Reinventing IT as a Strategic Business Partner

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1. What are the business and political challenges that are

likely to occur as a result of the transformation of IT

from a support activity to a partner role? Use examples

from the case to illustrate your answer.

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2. What implications does this shift in the strategic outlook

of IT have for traditional IT workers and for the

educational institutions that train them? How does this

change the emphasis on what knowledge and skills the

IT person of the future should have?

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3. To what extent do you agree with the idea that technology

is embedded in just about everything a company

does? Provide examples, other than those included in

the case, of recent product introductions that could nothave been possible without heavy reliance on IT.

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we emphasized that a major role of information systems

applications inbusiness is to provide effective support of a

companys strategies for gaining competitive advantage.

This strategic role of information systems involves usingInformation technology to develop products, services,

and capabilities that give a company major advantages

over the competitive forces it faces in the global marketplace.

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strategic information systems

Competitive Strategy Concepts

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Competitive Forces and

Strategies

2-11

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Cost Leadership Strategy. Becoming a low-cost producer

of products and services in the industry or finding ways to

help suppliers or customers reduce their costs or increasethe costs of competitors.

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Differentiation Strategy. Developing ways to differentiate a

firms products and services from those of its competitors or

reduce the differentiation advantages of competitors.

This strategy may allow a firm to focus its products or services togive it an advantage in particular segments or niches of a market.

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Innovation Strategy.Finding new ways of doing business.

This strategy may involve developing unique products and

services or entering unique markets or market niches. It may

also involve making radical changes to the business processes

for producing or distributing products and services that are sodifferent from the way a business has been conducted that they

alter the fundamental structure of an industry.

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Growth Strategies. Significantly expanding a companys

capacity to produce goods and services, expanding into

global markets, diversifying into new products

and services, or integrating into related products and services.

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Alliance Strategies. Establishing new business linkages

and alliances with customers,suppliers, competitors,

consultants, and other companies. These linkages

may include mergers, acquisitions, joint ventures,

forming of virtual companies,or other marketing,manufacturing, or distribution agreements between a business

and its trading partners.

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Ways to Implement Basic

Strategies

2-18

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lock in customers

and suppliers

createswitching costs

raise barriers to entryleverage investmentin IT

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Innovation

Competitive

Advantage

Organizational

Learning

Competitive

Necessity

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Building a Customer- Focused Business

customer value

keep up with market trends

Internetintranetsextranets

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Hilton.com

Web

Hilton Hotels:e-Business with the Customer in Mind

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Building Customer Value via

the Internet

2-26

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The Value Chain and Strategic IS

support processesAdministrative

Coordination and Support ServicesHuman Resources ManagementTechnology Development

Procurement of Resources

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Primary Business ProcessesInbound Logistics

OperationsOutbound LogisticMarketing and Sales

Customer Service

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Using IS in the Value Chain

2-30

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collaborative workflow intranets can increase the

communications and collaboration required to

improve administrative coordination and supportservices dramatically

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An employee benefits intranet can help the human

Resources management function provide employees

with easy, self-service access to their benefits

information. Extranets enable a company and itsglobal business partners to use the Web to design

products and processes jointly.

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e-commerce Web portals can dramatically improve

procurement of resources by providing online marketplaces for

a firms suppliers.

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Strategic Uses of ITOrganizations may view and use information

technology in many ways.companies may choose to use information systemsstrategically

or they may be content to use IT to support efficienteveryday operations.

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1. What competitive advantages can the companies described

in the case derive from the use of faster technology

and co-location of servers with the exchanges?

Which would you say are sustainable, and which ones

temporary or easily imitable? Justify your answer.

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2. Tony Bishop of Wachovia stated that Competitive advantage

comes from your math, your workflow and your

processes through your systems. Referring to what you

have learned in this chapter, develop opposing viewpoints

as to the role of IT, if any, in the development ofcompetitive advantage. Use examples from the case to

support your positions.

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3. What companies in industries other than securities trading

could benefit from technologies that focus on reducing

transaction processing times? Provide several examples.

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business process reengineering,BPRreengineering

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BPR Versus Business

Improvement

2-40

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Many processes are reengineered

with

Enterprise resource planning software

Web-enabled electronic business and

commerce systems

A Cross-Functional Process

2-42

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Customer relationship management systems using corporate intranets

and the Internet.

Supplier-managed inventory systems using the Internet and extranets.

Cross-functional ERP software for integrating manufacturing, distribution,

finance,and human resource processes.

Customer-accessible e-commerce Web sites for order entry, status checking,

payment, and service.

Customer, product, and order status databases accessed via intranets and

extranets by employees and suppliers.

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Becoming an Agile Company

the business must ensure that customers perceive

the products or services of an agile company as

solutions to their individual problems.

an agile company

cooperates with customers, suppliers, other companies

an agile company organizes so that it thrives on change and uncertainty.

an agile company leverages the impact of its people

and the knowledge they possess.

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How IT Helps a Company be

Agile

2-46

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A Virtual Company

2-48

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Share infrastructure and risk with alliance partners.

Link complementary core competencies.

Reduce concept-to-cash time through sharing.Increase facilities and market coverage.

Gain access to new markets and share market or customer loyaltyMigrate from selling products to selling solutions.

The basic business strategies of virtual companies.

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Jabil CircuitHamilton Standard

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Many companies today can only realize lasting competitive

advantage if they become knowledge-creating companies

or learning organizations.

learning organization

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Knowledge-creating companies exploit two kinds of knowledge.

One is explicit knowledge, which is the data, documents,

and things written down or stored on computers.

The other kind is tacit knowledge , or the how-tos

of knowledge, which resides in workers

knowledge-creating companyexplicit knowledge

tacit knowledge

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Knowledge Management

Techniques

2-54

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best practices

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cut costsdifferentiateinnovate in its products and servicesPromote growth, develop alliances

lock in customers and supplierscreate switching costs

raise barriers to entryleverage its investment in ITresources

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build a company that develops its business value by making customervalue its strategic focus

Customer-focused companies use Internet, intranet,

and extranet e-commerce Web sites and services to

keep track of their customers

Internetintranetsextranets

to supply products, services, and information anytime,

anywhere; and to provide services tailored to the individual needs of the

customers

.

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Internet

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