2 Competing with Information Technology Chapter 2Competing with Information Technology
3 Learning ObjectivesIdentify basic competitive strategies and explain how a business can use IT to confront the competitive forces it facesIdentify several strategic uses of IT and give examples of how they give competitive advantages to a businessGive examples of how business process reengineering frequently involves the strategic use of IT
4 Learning ObjectivesIdentify the business value of using Internet technologies to become an agile competitor or to form a virtual companyExplain how knowledge management systems can help a business gain strategic advantages
5 Strategic ITTechnology is no longer an afterthought in business strategy, but the cause and driverIT can change the way businesses competeA strategic information system is any information system that uses IT to help an organization…Gain a competitive advantageReduce a competitive disadvantageOr meet other strategic enterprise objectives
6 Case 1: GE, Dell, Intel, GM and Others Does IT matter?NoNicholas Carr argues that IT is infrastructure, much like electricityToo commonplace to offer a competitive advantageYesIt is not just networks and computersThe important part is the software and information and how IT is used
7 Case Study QuestionsDo you agree with the argument made by Nicholas Carr to support his position that IT no longer gives companies a competitive advantage?Do you agree with the argument made in support of the competitive advantage that IT can provide to a business?What are several ways that IT could provide competitive advantage to a business?
8 Competitive ForcesTo succeed, a business must develop strategies to counter these forces…Rivalry of competitors within its industryNew entrants into an industry and its marketsSubstitute products that may capture market shareBargaining power of customersBargaining power of suppliers
10 Five Competitive Strategies Cost LeadershipBecome low-cost producersHelp suppliers or customers reduce costsIncrease cost to competitorsExample: Priceline uses online seller bidding so the buyer sets the priceDifferentiation StrategyDifferentiate a firm’s products from its competitors’Focus on a particular segment or niche of marketExample: Moen uses online customer design
11 Competitive Strategies (continued) Innovation StrategyUnique products, services, or marketsRadical changes to business processesExample: Amazon’s online, full-service customer systemsGrowth StrategyExpand company’s capacity to produceExpand into global marketsDiversify into new products or servicesExample: Wal-Mart’s merchandise ordering via global satellite tracking
12 Competitive Strategies (continued) Alliance StrategyEstablish linkages and alliances with customers, suppliers, competitors, consultants, and other companiesIncludes mergers, acquisitions, joint ventures, virtual companiesExample: Wal-Mart uses automatic inventory replenishment by supplier
13 Using Competitive Strategies These strategies are not mutually exclusiveOrganizations use one, some, or allA given activity could fall into one or more categories of competitive strategyNot everything innovative serves to differentiate one organization from anotherLikewise, not everything that differentiates organizations is necessarily innovative
15 Other Competitive Strategies Lock in Customers and SuppliersDeter them from switching to competitorsBuild in Switching CostsMake customers and suppliers dependent on the use of innovative ISErect Barriers to EntryDiscourage or delay other companies from entering the marketIncrease the technology or investment needed to enter
16 Other Competitive Strategies Build Strategic IT CapabilitiesTake advantage of strategic opportunities when they ariseImprove efficiency of business practicesLeverage Investment in ITDevelop products and service that would not be possible without a strong IT capability
17 Customer-Focused Business What is the business value in being customer-focused?Keep customers loyalAnticipate their future needsRespond to customer concernsProvide top-quality customer serviceFocus on customer valueQuality, not price, has become the primary determinant of valueConsistently
18 Providing Customer Value Companies that consistently offer the best value from the customer’s perspective…Track individual preferencesKeep up with market trendsSupply products, services, and information anytime, anywhereTailor customer services to the individualUse Customer Relationship Management (CRM) systems to focus on the customer
20 The Value Chain and Strategic IS View the firm as a chain of basic activities that add value to its products and servicesPrimary processes directly relate to manufacturing or delivering productsSupport processes help support the day-to-day running of the firm and indirectly contribute to products or servicesUse the value chain to highlight where competitive strategies will add the most value
22 Strategic Uses of ITA company that emphasizes strategic business use of IT would use it to gain a competitive differentiationProductsServicesCapabilities
23 Case 2: GE Energy and GE Healthcare The Internet rapidly advanced large-scale storage and data analysisProducts could be networked and accessed at customer sitesConnectivity was cheapUnprecedented opportunities for strategic relationships and returns
24 Case 2: GE Energy and GE Healthcare GE saw unprecedented opportunities for strategic relationships and returnsInvested heavily in remote monitoring and diagnosticsProfitability went upCreated customer dependencyHas created longer-term customer relationships
25 Case Study QuestionsWhat are the business benefits of using IT to build strategic customer relationships for GE Energy and GE Healthcare?What are the business benefits for their customers?What strategic uses of information technology do you see implemented in this case?How could other companies benefit from the use of IT to build strategic customer relationships?
26 Reengineering Business Processes Called BRP or simply ReengineeringFundamental rethinking and radical redesign of business processesSeeks to achieve improvements in cost, quality, speed, and servicePotential payback is high, but so is risk of disruption and failureOrganizational redesign approaches are an important enabler of reengineeringIncludes use of IT, process teams, case managers
28 The Role of Information Technology IT plays a major role in reengineering most business processesCan substantially increase process efficienciesImproves communicationFacilitates collaboration
29 A Cross-Functional Process Many processes are reengineered with…Enterprise resource planning softwareWeb-enabled electronic business and commerce systems
30 Reengineering Order Management IT that supports this process…CRM systems using intranets and the InternetSupplier-managed inventory systems using the Internet and extranetsCross-functional ERP software to integrate manufacturing, distribution, finance, and human resource processesCustomer-accessible e-commerce websites for order entry, status checking, payment, and serviceCustomer, product, and order status databases accessed via intranets and extranets
31 Becoming an Agile Company Agility is the ability to prosperIn rapidly changing, continually fragmenting global marketsBy selling high-quality, high-performance, customer-configured products and servicesBy using Internet technologiesAn agile company profits in spite ofBroad product rangesShort model lifetimesIndividualized productsArbitrary lot sizes
32 Strategies for Agility An agile company…Presents products as solutions to customers’ problemsCooperates with customers, suppliers and competitorsBrings products to market as quickly and cost-effectively as possibleOrganizes to thrive on change and uncertaintyLeverages the impact of its people and the knowledge they possess
36 Virtual Company Strategies Basic business strategiesShare information and risk with alliance partnersLink complimentary core competenciesReduce concept-to-cash time through sharingIncrease facilities and market coverageGain access to new markets and share market or customer loyaltyMigrate from selling products to selling solutions
37 Building a Knowledge-Creating Company A knowledge-creating company or learning organization…Consistently creates new business knowledgeDisseminates it throughout the companyBuilds it into its products and services
38 Two Kinds of Knowledge Explicit Knowledge Tacit Knowledge Data, documents, and things written down or stored in computersTacit KnowledgeThe “how-to” knowledge in workers’ mindsRepresents some of the most important information within an organizationA knowledge-creating company makes such tacit knowledge available to others
39 Knowledge Management Successful knowledge management Creates techniques, technologies, systems, and rewards for getting employees to share what they knowMakes better use of accumulated workplace and enterprise knowledge
41 Knowledge Management Systems (KMS) A major strategic use of ITManages organizational learning and know-howHelps knowledge workers create, organize, and make available important knowledgeMakes this knowledge available wherever and whenever it is neededKnowledge includesProcesses, procedures, patents, reference works, formulas, best practices, forecasts, and fixes
42 Case 3: CDW, Harrah’s, and Others A satisfied customer has expectations metA loyal customer wants to do business with the company again, and recommends it to othersA good customer loyalty system combinesCustomer feedbackBusiness informationSophisticated analysisIT must take the lead in loyaltyCreate actionable results
43 Case Study QuestionsDoes CDW’s customer loyalty program give them a competitive advantage?What is the strategic value of Harrah’s approach to determining and rewarding customer loyalty?What else could CDW and Harrah’s do to truly become customer-focused businesses?
44 Case 4: The U.S. Dept. of Commerce The DOC uses DOC Insider to offer advice on doing business abroadThe AskMe system includes…Automated best practicesAutomatic experts’ profile creationMethods for accessing and delivering knowledgeReal-time collaboration servicesAnalytic capabilities
45 Case Study QuestionsWhat are the key business challenges facing companies in supporting their global marketing an expansion efforts?How is the AskMe knowledge management system helping to meet this challenge?How can the AskMe system help identify weaknesses in global business knowledge with the DOC?What other global trade situations could the AskMe system provide information about?
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