1. Competing with Information Technology Lecturer: Dr Mohammad Nabil Almunawar

2. 2 Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business. Identify several strategic uses of information technology for E-business and commerce, and give examples of how they give competitive advantages to business. Give examples of how business process reengineering frequently involves the strategic use of E-business technologies. Learning Objectives

3. 3 Identify the business value of using E-business technologies for total quality management, to become an agile competitor, or to form a virtual company. Explain how knowledge management systems can help a business gain strategic advantages. Identify and evaluate several factors that could help a company sustain a strategic competitive advantage. Learning Objectives

4. 4 The Competitive Forces Model Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes

5. 5 Fundamental Competitive Strategies Cost leadership strategies A company can gain advantage if it can sell more unit at lower price while providing quality and maintaining or increasing its profit margin. Differentiation strategies A company can gain advantage if it can attract customers by convincing them its product differs from the competitor’s. Innovation strategies A company may gain advantage if it offers a unique product or service.

6. 6 Fundamental Competitive Strategies (cont.) Growth strategy A company may gain advantage if it expands its capacity to produce, expands market, diversifies product/service or integrates products/services. Alliance strategy Companies from different industries can help each other gain advantage by offering combine package of goods or services at special prices.

7. 7 Other strategies for achieving a competitive advantage Raise barrier to market entrants Establish high switching cost Enhance products or services Lock in suppliers or buyers

8. 8 Strategic Uses of Information Technology Improving Business Process Promote Business Innovation Locking in Customers and Suppliers Use IT to reduce costs of doing business Use IT to improve quality Use IT to link business to customers and suppliers Use IT to create new products or services Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Strategy IT Role Outcome

9. 9 Strategic Uses of Information Technology Raise Barriers to Entry Build a Strategic IT Platform Build a Strategic Information Base Increase amount of investment or complexity of IT needed to compete Use IT to provide information to support firm’s competitive strategy Leverage investment in IS resources from operat- ional uses to strategic uses Increase Market Share Create New Business Opportunities Enhance Organizational Collaboration Strategy IT Role Outcome

10. 10 The Value Chain & Strategic IS Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources Inbound Logistics Inbound Logistics Operations Outbound Logistics Outbound Logistics Marketing and Sales Marketing and Sales Customer Service Customer Service Competitive Advantage Value activities: distinct activities must be performed (by companies) to do business. They consist of primary and support activities) Value chain is a system of interdependent linkage of value activities.

11. 11 The Value Chain & Strategic IS Administrative Coordination & Support Services SIS: Collaborative workflow Intranet-Based System Human Resource Management SIS: Career Development Intranet for Employees Human Resource Management SIS: Career Development Intranet for Employees Technology Development SIS: Computer-Aided Engineering & Design Extranet with Partners Technology Development SIS: Computer-Aided Engineering & Design Extranet with Partners Procurement of Resources SIS: E-commerce Auctions & Exchanges for Suppliers Procurement of Resources SIS: E-commerce Auctions & Exchanges for Suppliers Inbound Logistics SIS: Automated Just-in-Time Warehousing Inbound Logistics SIS: Automated Just-in-Time Warehousing Operations SIS: Computer Aided Flexible Manufacturing Operations SIS: Computer Aided Flexible Manufacturing Outbound Logistic SIS: Online Point-of-Sale and Order Processing Outbound Logistic SIS: Online Point-of-Sale and Order Processing Marketing and Sales SIS: Interactive Targeted Marketing and Sales SIS: Interactive Targeted Marketing Customer Service SIS: Customer Relationship Management Customer Service SIS: Customer Relationship Management Competitive Advantage

12. 12 Value system: larger system of value chain which include other companies such as value chain of supplier, of the firm, of the channels through which the firm distributes its product and services and the ultimate buyers. Value chain concepts Supplier value chain(s) Firm value chain(s) Channel value chain(s) Buyer value chain(s) IS support: IS links buyer, manufacturer and distributor known as Inter-organizational System (IOS)

13. 13 The Internet Value Chain Marketing and Product Research Sales and Distribution Support and Customer Feedback Data for market research, establishes consumer responses Access to customer com- ments online Immediate re- sponse to customer problems Low cost distribution Reaches new customers Multiplies contact points Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Internet Capability Benefits to Company Opportunity for Advantage

14. 14 Strategic Positioning of Internet Technologies Global Market Penetration E-Commerce Website Value-added IT Services Product and Services Transformation E-Business; Extensive Intranets and Extranets Cost and Efficiency Improvements E-Mail, Chat Systems Performance Improvements in Business Effectiveness Intranets and Extranets Strategy Solution Low High Customer Competition Connectivity E-Business Processes Connectivity Internal Drivers External Drivers

15. 15 Customer-Focused E-Business Let customers place orders thru distribution partners Transaction Database Link Employees and distribution partners Let customers check order history and delivery status Let customers place orders directly Customer Database Build a community of customers, employees, and partners Give all employees a complete view of customers

16. 16 Business Process Reengineering (BPR) BPR is commonly used to implement competitive strategies. BPR is a fundamental rethinking and radical design of business processes to achieve dramatic improvement in cost, quality, speed and service. BPR combines strategy of promoting business innovation with a strategy of making major improvements to business process so that a company can become stronger and more successful competitor in the marketplace.

17. 17 Business Process Reengineering and Quality Management Business Quality Improvement Business Quality Improvement Business Process Reengineering Business Process Reengineering Definition Target Potential Payback Potential Payback Risk What Changes? Primary Enablers Primary Enablers Incrementally Improving Existing Processes Radically Redesigning Business Systems Any Process Strategic Business Processes 10%-50% Improvements 10-Fold Improvements Low High Same Jobs - More Efficient Big Job Cuts; New Jobs; Major Job Redesign IT and Work Simplification IT and Organizational Redesign

18. 18 Becoming an Agile Company Agility is the ability of a company to prosper in rapid changing, continually fragmenting global markets fo high-quality, high-performance, customer-configured products and services. Agile companies depends heavily on the Internet technologies to integrate and manage business process, while providing the information processing power to treat masses of customers as individuals.

19. 19 Basic Strategies to achieve Agility Give customers solutions to their problem. Products can be priced by on their value as solution not based on their cost to produce Cooperate with business partners, even with competitors. Organize to thrive on change and uncertainty. Leverage the impact of its people and the knowledge they posses.

20. 20 The Customer- Focused Agile Competitor Leverage the Impact of People and IS Resources Accessibility Delivery Time Customer’s time to market Anticipation of future needs Customization Conformance Cost of Transaction Cost of Value-added Services Give Customers Solutions to Problems Give Customers Solutions to Problems Cooperate with Business Partners and Competitors Cooperate with Business Partners and Competitors Organize to Master Change Organize to Master Change

21. 21 Virtual Corporations A virtual corporation/virtual company is an organization that use IT to link people. Assets and ideas. A virtual company is commonly linked through the Internet, intranet or extranet. In today’s dynamic global business environment, virtual company can be one of the most important strategic uses of IT.

22. 22 Borderless Technology Excellence Trust-Based Adaptability Opportunism Six Characteristics of Virtual Companies Virtual Corporations

23. 23 Knowledge-Creating Companies Knowledge-creating companies: companies that consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and service. Knowledge in this case is a source of competitive advantage

24. 24 Knowledge Management Systems Two types of Knowledge explicit knowledge: things written down or stored on computers. Tacit knowledge (how-to of knowledge): knowledge which reside in workers. Knowledge management becomes one of the major strategic uses of IT. Knowledge management systems facilitate organizational learning and knowledge creation. Use Internet and other technologies to collect and edit information, asses its value, disseminate it within the organization, and apply it as knowledge to the process of a business.

25. 25 Knowledge Management Systems Solution Knowledge Development Engineers Technical Support Staff Product Managers Other Vendors Customers The Internet Intranet

26. 26 Firm Environment Performance Size Geographical scope Product scope Organization structure Technological resources Knowledge resources Creating switching costs Exploiting knowledge Developing response strategies Managing risks Key Factors for Sustaining Strategic Success

27. 27 Information systems can play several strategic roles in business. The Internet, intranets, extranets, and other Internet- based technologies can be used strategically for E- Business and E-Commerce that provide a competitive advantage. A key strategic use of Internet technologies is to build an E-Business which develops its business value by making customer value its strategic focus. Summary

28. 28 IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness. IT can be strategically used to improve the quality of business performance. A business can use IT to help it become an agile company, that can respond quickly to changes in its environment. Summary (cont)

29. 29 Summary (cont) Forming virtual companies has become an important competitive strategy in today’s dynamic global market. Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations. Successful strategic information systems are not easy to develop and implement. They may require major change in how businesses operate.