1. 1 Competing with Information Technology 2

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

3. 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.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.Explain how knowledge management systems can help a business gain strategic advantage. 2

4. 4 Fundamentals of Strategic Advantage 2

5. 5 Competitive Forces (Porter)Competitive Forces (Porter) –Bargaining power of customers –Bargaining power of suppliers –Rivalry of competitors –Threat of new entrants –Threat of substitutes 2

6. 6 Competitive Strategies & the Role of IT Cost Leadership (low cost producer)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) 2

7. 7 Competitive Strategies & the Role of IT (continued) DifferentiationDifferentiation –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. 2

8. 8 Competitive Strategies & the Role of IT (continued) InnovationInnovation –New ways of doing business Unique products or servicesUnique products or services New ways to better serve customersNew ways to better serve customers Reduce time to marketReduce time to market New distribution modelsNew distribution models 2

9. 9 Competitive Strategies & the Role of IT (continued) GrowthGrowth –Expand production capacity –Expand into global markets –Diversify –Integrate into related products and services. 2

10. 10 Competitive Strategies & the Role of IT (continued) AllianceAlliance –Broaden your base of support New linkagesNew linkages –Mergers, acquisitions, joint ventures, “virtual companies” –Marketing, manufacturing, or distribution agreements. 2

11. 11 Competitive Strategies & the Role of IT (continued) Other Competitive StrategiesOther Competitive Strategies –Locking in customers or suppliers Build value into your relationshipBuild value into your relationship –Creating switching costs ExtranetsExtranets Proprietary software applicationsProprietary software applications 2

12. 12 Competitive Strategies & the Role of IT (continued) Other Competitive Strategies (continued)Other Competitive Strategies (continued) –Raising barriers to entry Improve operations or promote innovationImprove operations or promote innovation –Leveraging investment in IT Allows the business to take advantage of strategic opportunitiesAllows the business to take advantage of strategic opportunities 2

13. 13 The Value Chain Views a firm as a series, chain, or network of activities that add value to its products and services.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 2

14. 14 Value Chain (continued) Support Processes PrimaryBusinessProcesses 2

15. 15 Section II Using Information Technology for Strategic AdvantageUsing Information Technology for Strategic Advantage 2

16. 16 Strategic Uses Of Information Technology Major competitive differentiatorMajor competitive differentiator Develop a focus on the customerDevelop a focus on the customer –Customer value Best valueBest value Understand customer preferencesUnderstand customer preferences Track market trendsTrack market trends Supply products, services, & information anytime, anywhereSupply products, services, & information anytime, anywhere Tailored customer serviceTailored customer service 2

17. 17 Strategic Uses of IT (continued) Business Process Reengineering (BPR) –Rethinking & redesign of business processes –Combines innovation and process improvement –There are risks involved. –Success –Success factors Organizational redesign Process teams and case managers Information technology 2

18. 18 Strategic Uses of IT (continued) Improve business qualityImprove business quality –Total Quality Management (TQM) Quality from customer’s perspectiveQuality from customer’s perspective Meeting or exceeding customer expectationsMeeting or exceeding customer expectations Commitment to:Commitment to: –Higher quality –Quicker response –Greater flexibility –Lower cost 2

19. 19 Becoming agileBecoming agile –Four basic strategies Customers’ perception of product/service as solution to individual problemCustomers’ perception of product/service as solution to individual problem Cooperate with customers, suppliers, other companies (including competitors)Cooperate with customers, suppliers, other companies (including competitors) Thrive on change and uncertaintyThrive on change and uncertainty Leverage impact of people and people’s knowledgeLeverage impact of people and people’s knowledge 2 Strategic Uses of IT (continued)

20. 20 The virtual companyThe virtual company –Uses IT to link people, assets, and ideas –Forms virtual workgroups and alliances with business partners –Interorganizational information systems 2 Strategic Uses of IT (continued)

21. 21 The Virtual Company (continued) –Strategies Share infrastructure & risk with alliance partnersShare infrastructure & risk with alliance partners Link complementary core competenciesLink complementary core competencies Reduce concept-to-cash time through sharingReduce concept-to-cash time through sharing 2

22. 22 –Strategies (continued) Increase facilities and market coverageIncrease facilities and market coverage Gain access to new markets and share market or customer loyaltyGain access to new markets and share market or customer loyalty Migrate from selling products to selling solutionsMigrate from selling products to selling solutions The Virtual Company (continued) 2

23. 23 Learning Organizations Exploit two kinds of knowledgeExploit two kinds of knowledge –Explicit –Tacit 2

24. 24 Learning Organizations (continued) 2

25. 25 Knowledge management systemsKnowledge management systems –Help create, organize, and share business knowledge wherever and whenever needed within the organization Learning Organizations (continued) 2

26. 26 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?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?How could a business use IT to increase switching costs and lock in its customers and suppliers? 2

27. 27 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?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?What strategic role can information technology play in business process reengineering and total quality management? 2

28. 28 Discussion Questions (continued) 2 How can Internet technologies help a business form strategic alliances with its customers, suppliers, and others?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?How could a business use Internet technologies to form a virtual company or become an agile competitor?

29. 29 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.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?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? Discussion Questions (continued) 2

30. 30 References 2 James A. O'Brien; George M. Marakas. Management Information Systems: Managing Information Technology in the Business Enterprise 6th Ed., Boston: McGraw-Hill/ Irwin,2004