Competing with Information Technology

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Learning Objectives
1. Identify several basic competitive strategies and explain how they use information technologies to confront the competitive forces faced by a business. 2. Identify several strategic uses of Internet technologies and give examples of how they can help a business gain competitive advantages.
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Learning Objectives Learning Objectives

3. Give examples of how business process reengineering frequently involves the strategic use of Internet technologies. 4. Identify the business value of using Internet technologies to become an agile competitor or form a virtual company.
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Learning Objectives
5. Explain how knowledge management systems can help a business gain strategic advantages.

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Fundamentals of Strategic Advantage Technology is no longer an afterthought in forming business strategy, but the actual cause and driver .

1 IT Leaders: Reinventing IT as a Strategic Business Partner

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1. What are the business and political challenges that are likely to occur as a result of the transformation of IT from a support activity to a partner role? Use examples from the case to illustrate your answer.

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2. What implications does this shift in the strategic outlook of IT have for traditional IT workers and for the educational institutions that train them? How does this change the emphasis on what knowledge and skills the IT person of the future should have?

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3. To what extent do you agree with the idea that technology is embedded in just about everything a company does? Provide examples, other than those included in the case, of recent product introductions that could not have been possible without heavy reliance on IT.

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we emphasized that a major role of information systems applications inbusiness is to provide effective support of a companys strategies for gaining competitive advantage. This strategic role of information systems involves using Information technology to develop products, services, and capabilities that give a company major advantages over the competitive forces it faces in the global marketplace.
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Competitive Strategy Concepts

strategic information systems

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Competitive Forces and Strategies

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Cost Leadership Strategy. Becoming a low-cost producer of products and services in the industry or finding ways to help suppliers or customers reduce their costs or increase the costs of competitors.

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Differentiation Strategy. Developing ways to differentiate a firms products and services from those of its competitors or reduce the differentiation advantages of competitors. This strategy may allow a firm to focus its products or services to give it an advantage in particular segments or niches of a market.

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Innovation Strategy. Finding new ways of doing business. This strategy may involve developing unique products and services or entering unique markets or market niches. It may also involve making radical changes to the business processes for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industry.

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Growth Strategies. Significantly expanding a companys capacity to produce goods and services, expanding into global markets, diversifying into new products and services, or integrating into related products and services.

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Alliance Strategies. Establishing new business linkages and alliances with customers,suppliers, competitors, consultants, and other companies. These linkages may include mergers, acquisitions, joint ventures, forming of virtual companies,or other marketing, manufacturing, or distribution agreements between a business and its trading partners.

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Ways to Implement Basic Strategies

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Other Strategic Uses of Information Technology
lock in customers and suppliers create switching costs raise barriers to entry leverage investment in IT
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Innovation

Competitive Advantage Competitive Necessity

Organizational Learning
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Building a Customer- Focused Business

customer value
keep
up with market trends

Internet intranets extranets

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Hilton Hotels:e-Business with the Customer in Mind

Hilton.com Web
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Building Customer Value via the Internet

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The Value Chain and Strategic IS

support processes
Administrative Coordination and Support Services Human Resources Management Technology Development Procurement of Resources

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Primary
Business Processes

Inbound Logistics Operations Outbound Logistic Marketing and Sales Customer Service

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Using IS in the Value Chain

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Value Chain Examples collaborative workflow intranets can increase the communications and collaboration required to improve administrative coordination and support services dramatically

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Value Chain Examples

An employee benefits intranet can help the human Resources management function provide employees with easy, self-service access to their benefits information. Extranets enable a company and its global business partners to use the Web to design products and processes jointly.

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Value Chain Examples e-commerce Web portals can dramatically improve procurement of resources by providing online marketplaces for a firms suppliers.

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Strategic Uses of IT

Organizations may view and use information technology in many ways.

companies may choose to use information systems strategically or they may be content to use IT to support efficient everyday operations.

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1. What competitive advantages can the companies described in the case derive from the use of faster technology and co-location of servers with the exchanges? Which would you say are sustainable, and which ones temporary or easily imitable? Justify your answer.

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2. Tony Bishop of Wachovia stated that Competitive advantage comes from your math, your workflow and your processes through your systems. Referring to what you have learned in this chapter, develop opposing viewpoints as to the role of IT, if any, in the development of competitive advantage. Use examples from the case to support your positions.
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3. What companies in industries other than securities trading could benefit from technologies that focus on reducing transaction processing times? Provide several examples.

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business process reengineering, BPRreengineering
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BPR Versus Business Improvement

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A Cross-Functional Process
Many processes are reengineered with
Enterprise resource planning software Web-enabled electronic business and commerce systems

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Customer relationship management systems using corporate intranets and the Internet. Supplier-managed inventory systems using the Internet and extranets. Cross-functional ERP software for integrating manufacturing, distribution, finance,and human resource processes. Customer-accessible e-commerce Web sites for order entry, status checking, payment, and service. Customer, product, and order status databases accessed via intranets and extranets by employees and suppliers.

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Becoming an Agile Company the business must ensure that customers perceive the products or services of an agile company as solutions to their individual problems. an agile company cooperates with customers, suppliers, other companies an agile company organizes so that it thrives on change and uncertainty. an agile company leverages the impact of its people and the knowledge they possess.
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How IT Helps a Company be Agile

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A Virtual Company

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 The basic business strategies of virtual companies.

Share infrastructure and risk with alliance partners. Link complementary core competencies. Reduce concept-to-cash time through sharing. Increase facilities and market coverage. Gain access to new markets and share market or customer loyalty Migrate from selling products to selling solutions.
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Jabil Circuit Hamilton Standard
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Many companies today can only realize lasting competitive advantage if they become knowledge-creating companies or learning organizations. learning organization

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Knowledge-creating companies exploit two kinds of knowledge. One is explicit knowledge, which is the data, documents, and things written down or stored on computers. The other kind is tacit knowledge , or the how-tos of knowledge, which resides in workers

knowledge-creating company explicit knowledge tacit knowledge

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Knowledge Management Techniques

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Knowledge Management Systems

best practices

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Strategic
Uses of Information Technology

cut costs differentiate innovate in its products and services Promote growth, develop alliances lock in customers and suppliers create switching costs raise barriers to entry leverage its investment in IT resources
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 Building a Customer-Focused Business

build a company that develops its business value by making value its strategic focus
Customer-focused companies use Internet, intranet, and extranet e-commerce Web sites and services to keep track of their customers Internet intranets extranets

customer

to supply products, services, and information anytime, anywhere; and to provide services tailored to the individual needs of the customers .

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Reengineering
Business Processes

Internet

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Becoming an Agile Company

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Creating a Virtual Company

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Building
Company

a Knowledge-Creating

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