1. Information Technology
Chapter 2
Competing
with
Information Technology

2. Objectives
Identify basic competitive strategies and explain how IT may be used to gain competitive advantage.
Identify strategic uses of information technology.
How does business process engineering frequently use e-business technologies for strategic purposes?

3. (Objectives – continued)
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 advantage.

4. Fundamentals of Strategic Advantage
Competitive Forces (Porter)
Bargaining power of customers
Bargaining power of suppliers
Rivalry of competitors
Threat of new entrants
Threat of substitutes

5. Competitive Strategies & the Role of IT
Cost Leadership (low cost producer)
Reduce inventory (JIT)
Reduce manpower costs per sale (see Real World Case 1)
Help suppliers or customers reduce costs
Increase costs of competitors
Reduce manufacturing costs (process control)

6. Competitive Strategies & the Role of IT (continued)
Differentiation
Create a positive difference between your products/services & the competition.
May allow you to reduce a competitor’s differentiation advantage.
May allow you to serve a niche market.

7. Competitive Strategies & the Role of IT (continued)
Innovation
New ways of doing business
Unique products or services
New ways to better serve customers
Reduce time to market
New distribution models

8. Competitive Strategies & the Role of IT (continued)
Growth
Expand production capacity
Expand into global markets
Diversify
Integrate into related products and services.

9. Competitive Strategies & the Role of IT (continued)
Alliance
Broaden your base of support
New linkages
Mergers, acquisitions, joint ventures, “virtual companies”
Marketing, manufacturing, or distribution agreements.

10. 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

11. 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 strategic opportunities

12. The Value Chain
Views a firm as a series, chain, or network of 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

13. Value Chain (continued)

14. Using Information Technology for Strategic Advantage
Section II
Using Information Technology for Strategic Advantage

15. 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

16. Strategic Uses of IT (continued)
Business Process Reengineering (BPR)
Rethinking & redesign of business processes
Combines innovation and process improvement
There are risks involved.
Success factors
Organizational redesign
Process teams and case managers
Information technology

17. Strategic Uses of IT (continued)
Improve business quality
Total Quality Management (TQM)
Quality from customer’s perspective
Meeting or exceeding customer expectations
Commitment to:
Higher quality
Quicker response
Greater flexibility
Lower cost

18. Strategic Uses of IT (continued)
Becoming agile
Four basic strategies
Customers’ perception of product/service as solution to individual problem
Cooperate with customers, suppliers, other companies (including competitors)
Thrive on change and uncertainty
Leverage impact of people and people’s knowledge

19. Strategic Uses of IT (continued)
The virtual company
Uses IT to link people, assets, and ideas
Forms virtual workgroups and alliances with business partners
Interorganizational information systems

20. The Virtual Company (continued)
Strategies
Share infrastructure & risk with alliance partners
Link complementary core competencies
Reduce concept-to-cash time through sharing

21. The Virtual Company (continued)
Strategies (continued)
Increase facilities and market coverage
Gain access to new markets and share market or customer loyalty
Migrate from selling products to selling solutions

22. Learning Organizations
Exploit two kinds of knowledge
Explicit
Tacit

23. Learning Organizations (continued)
Knowledge Management

24. Learning Organizations (continued)
Knowledge management systems
Help create, organize, and share business knowledge wherever and whenever needed within the organization

25. Discussion Questions
You have been asked to develop e-business & e-commerce applications to gain competitive advantage. What reservations might you have about doing so?
How could a business use IT to increase switching costs and lock in its customers and suppliers?

26. Discussion Questions (continued)
How could a business leverage its investment in IT to build strategic IT capabilities that serve as a barrier to entry by new entrants into its markets?
What strategic role can information technology play in business process reengineering and total quality management?

27. Discussion Questions (continued)
How can Internet technologies help a business form strategic alliances with its customers, suppliers, and others?
How could a business use Internet technologies to form a virtual company or become an agile competitor?

28. Discussion Questions (continued)
IT can’t really give a company a strategic advantage, because most competitive advantages don’t last more than a few years & soon become strategic necessities that just raise the stakes of the game. Discuss.
MIS author & consultant Peter Keen says: “We have learned that it is not technology that creates a competitive edge, but the management process that exploits technology.” What does he mean?

29. Real World Case 1 – WESCO International, Inc.
Business-to-Business
Describe WESCO’s original system.
Describe WESCO’s new system.

30. Real World Case 1 (continued)
What are the business benefits to WESCO and its suppliers of its new e-procurement system?
Is WESCO’s new system a strategic use of IT?

31. Real World Case 1 (continued)
Does WESCO’s new system give the company a competitive advantage?
What other strategic moves could WESCO implement to gain competitive advantage?

32. Real World Case 2 – Staples, Inc.
What is the strategic business value to Staples and their large business clients of the new web-based procurement system?
What is the strategic business value to Staples and the value proposition to their customers of their new clicks and bricks capabilities?

33. Real World Case 2 (continued)
Is an integrated clicks and bricks strategy the Internet strategy that most businesses, large and small, should adopt?
What competitive strategies is Staples pursuing?

34. Real World Case 2 (continued)
What other e-business or e-commerce strategy would you recommend to Staples to help them gain a competitive advantage in their industry?

35. Real World Case 3 – Enron Corp.
What mistakes did Enron make in the use or management of IT?
Did those mistakes play a part in the failure of Enron?

36. Real World Case 3 (continued)
“Is it time to go back to the days when IT supported the business rather than became the business?” Explain your position.
What are the major lessons for the future use of IT in business that you gained from this case?

37. Real World Case 3 (continued)
How would you apply one of the lessons from this case in your present job or in your future business career?

38. Real World Case 4 – Delta Technology & FirstHealth Group
What are Delta Technology’s new requirements for IT investments?
What is the business value of Delta’s new requirements?

39. Real World Case 4 (continued)
Explain FirstHealth’s “return on opportunity” guidelines.
Is FirstHealth’s “return on opportunity” guideline for IT investments a good way to evaluate investments in IT?

40. Real World Case 4 (continued)
What should be the role of ROI in IT decision-making?
Are the IT investment guidelines of Delta and FirstHealth applicable to other companies, including small businesses?

41. Real World Case 5 – Ford, Dow Chemical, IBM, et al.
What is Six Sigma?
What do critics of Six Sigma see as its shortcomings?

42. Real World Case 5 (continued)
Is Six Sigma “an enterprise-wide business strategy?”
What role does information technology play in Six Sigma business initiatives?

43. Real World Case 5 (continued)
What are the benefits and limitations of Six Sigma as a business strategy?
Can Six Sigma make up for poor management and faulty vision?