1. Competing with Information Technology CHAPTER 2 Lecture-3 / T. Nouf Almujally 1

2. Outline Section 1: Strategic IT Competitive Strategy Concepts Section 2: Creating a Virtual Company Building a Knowledge Creating Company 2

3. Strategic IT In Chapter 1, we emphasized that a major role of IS applications in business is to provide effective support of a company’s strategies for gaining competitive advantage. IT can change the way businesses compete. 3

4. Competitive Strategy Concepts The strategic roles of IS involves using information technology to develop products, services and capabilities that gives a company major advantages over the competitive forces it faces in the marketplace. This role is accomplished through a SIS’s. A Strategic Information System is any information system (e.g. TPS, MIS and DSS) that uses IT to help an organization: Gain a competitive advantage. Reduce a competitive disadvantage. Or meet other strategic enterprise objectives. 4

5. What Does Competitive Advantage Mean? Competitive Advantage: An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competitors. Developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forces. 5

6. Competitive Forces A company can survive and succeed in the long term only if it successfully develops strategies to confront five Competitive forces: 6

7. Competitive Forces 7 1. The rivalry of competitors within its industry.  Rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. 2. The threat of new entrants into an industry and its market.  Internet has created many ways to enter the market quickly with low cost  E-commerce enables a business to emerge overnight (ex. KrispyKreme ) 3. The threat of substitutes products that might capture market share.  A substitute performs the same or a similar function as an industry’s product by a different means.  Ex. Videoconferencing is a substitute for travel. E-mail is a substitute for express mail.

8. Competitive Forces 8 4. The bargaining power of customers.  If the customers’ bargaining power gets too strong, they can drive the price to low levels, or refuse to buy the product or service. 5. The bargaining power of suppliers.  If the supplier’s bargaining power gets too strong, it can force the price of goods and services to high level, or stop raw materials.

9. Competitive Strategies Businesses can develop the following competitive strategies to counter the actions of the competitive forces they confront in the marketplace: 9 Strategies Cost Leadership Alliance Growth Innovation Differentiation

10. Competitive Strategies 1- Cost Leadership:  Produce lower price products and services,  help suppliers or customers to reduce their costs,  increase the cost of competitors.  Ex. eBay.com, Priceline.com 2- Products Differentiation:  Developing ways to differentiate products from those of its competitors  Ex. Moen Inc, Starbuck vs. Dunkin Donuts 10

11. Competitive Strategies 3- Business Innovation  Produce new unique products and services,  entering new markets,  add some changes to the recent business processes  Ex. Amazon.com 4- Growth  Expanding a company's capacity to produce products and services,  expanding into global markets,  diversifying into new products and services,  Integrating into related products and services  Ex. Wal-Mart 11

12. Competitive Strategies 5- Alliances  Establish new business linkages with customer, suppliers, competitors, and other companies.  These linkages could include: Mergers. Acquisitions Joint ventures. Virtual companies. or other marketing, manufacturing or distribution agreements between a business and its trading partners  E x. Wal-Mart /Procter & Gamble. 12

13. 13 Competitive Forces and Strategies

14. Questions..

15. Creating a Virtual Company 15 Organizations Assets Ideas People Virtual company: organization that uses IT to link… Suppliers Subcontractors CompetitorsCustomers Inter-enterprise information systems link…

16. Virtual Company A virtual company uses the Internet, intranet, and extranets to form virtual workgroups and support alliances with business partners. 16

17. Virtual Company Strategies Basic Business Strategies Reduce concept- to-cash time through sharing Share infrastructure & risk with alliance partners Link complimentary competencies Migrate from selling products to selling solutions Increase facilities and market coverage Gain access to new markets & share market or customer loyalty 17

18. Examples Jobs.com is one of the many virtual companies that have brought together job seekers with companies. It allows job seekers and recruiters to come together through the internet. It allows an individual to search for a job by location, salary range, and level of experience. Then submit job seekers resumes online to the companies. The site also offer job seekers helpful information on preparing a resume, salary information and advice from the experts on searching for a job. 18

19. Example: 19

20. 20 Example:

21. Questions..

22. Building a Knowledge-Creating Company A knowledge-creating company or learning organization… Consistently creates new business knowledge disseminates it throughout the company Builds it into its products and services 22

23. Two Kinds of Knowledge Explicit Knowledge Data, documents, and things written down or stored in computers Tacit Knowledge The “how to” knowledge in workers’ minds Represents some of the most important information within an organization A knowledge-creating company makes tacit knowledge available to others 23

24. Successful Knowledge Management Successful knowledge management Creates techniques, technologies, systems, & rewards for getting employees to share what they know. Makes better use of accumulated workplace and enterprise knowledge. 24

25. Knowledge Management levels 25

26. Knowledge Management Systems (KMS) Knowledge management systems… Are a major strategic use of IT Manage organizational learning and know-how Help knowledge workers create, organize, and make available important knowledge Make this knowledge available wherever and whenever it is needed 26

27. Knowledge Management Systems (KMS) Best practices Reference works Processes Forecasts Procedures Fixes Formulas Patents Knowledge includes… 27

28. Knowledge Management Systems (KMS) Some technologies used by KMS:  Internet and intranet, web sites, discussion groups.  Knowledge bases, data mining. As the organizational learning process continues and its knowledge base expands, the company works to integrate its knowledge into its business process, products and services. This integration will help the company to become a more innovative provider of high-quality products and services, as well as a very strong competitor in the marketplace. 28

29. Questions..

30. Read from Chapter 2 (Section 1,2) Resources..