Bachelor of Information Technology Information Systems and Technology
Bachelor of Information Technology Information Systems and Technology - IT 1105 04. Organizations and Information Systems Part IV 4. 3 Competitive Advantage and Strategic Information Systems Prabhajinie Jayabaalasundaram MBCS, MBA
Bachelor of Information Technology Information Systems & Technology IT 1105 04. Organizations and Information Systems 4. 3 Competitive Advantage and Strategic Information Systems – Part 2 Prabhajinie Jayabaalasundaram MBCS, MBA
IT 1105 Information Systems and Technology Intended Learning Outcomes After completing this session you should be able to; Describe how organizations are using Information Systems to gain competitive advantage Identify the strategic uses of Information Systems
IT 1105 Information Systems and Technology Last Lesson The fundamental roles of IS in Business Information systems in the functional areas of business Information systems in industry Competitive advantage Factors that lead firms to seek competitive advantage
IT 1105 Information Systems and Technology Outline Strategic Planning for Competitive Advantage Strategic uses of Information Technology The Value Chain and Strategic IS
IT 1105 Information Systems and Technology Strategic Planning for Competitive Advantage To be competitive, a company must be fast, nimble, flexible, innovative, productive, economical, and customer oriented. It must also align it’s IS strategy with general business strategies and objectives. Given the five market forces previously mentioned, Porter and others have proposed a number of strategies to attain competitive advantage.
IT 1105 Information Systems and Technology Strategic Planning for Competitive Advantage This includes cost leadership, differentiation, niche strategy, altering the industry structure, creating new products and services and improving existing product lines and services. In some cases, one of these strategies becomes dominant. Eg. : with a cost leadership strategy, cost can be the key consideration-at the expense of other factors if need be.
IT 1105 Information Systems and Technology Cost leadership Deliver the lowest possible cost for products and services. Cost leadership is often achieved by reducing the costs of raw materials through aggressive negotiations with suppliers, becoming more efficient with production and manufacturing processes and reducing warehousing and shipping costs. Some companies use outsourcing to cut costs when making products or completing services.
IT 1105 Information Systems and Technology Differentiation Deliver different products and services. This strategy can involve producing a variety of products, giving customers more choices, or delivering higher quality products and services. Companies that try to differentiate their products often strive to uncover and eliminate counterfeit products produced and delivered by others.
IT 1105 Information Systems and Technology Niche strategy Deliver to only a small, niche market. Rolex only makes high-quality, expensive watches. It doesn't make inexpensive, plastic watches Altering the industry structure Change the industry to become more favorable to the company or organization. Creating strategic alliances can also alter the industry structure. A strategic alliance, also called a strategic partnership, is an agreement between two or more companies that involves the joint production and distribution of goods and services.
IT 1105 Information Systems and Technology Creating new products and services Introduce new products and services periodically or frequently. This strategy always helps a firm gain a competitive advantage, especially for the computer industry and other high-tech businesses. If an organization does not introduce new products and services every few months, the company can quickly stagnate, lose market share, and decline. Companies that stay on top are constantly developing new products and services. Apple Computer, for example, introduced the i. Pod, i. Phone, and i. Pad as new products
IT 1105 Information Systems and Technology Improving existing product lines and services Make real or perceived improvements to existing product lines and services. Manufacturers of household products are always advertising new and improved products. In some cases, the improvements are more perceived than actual refinements; usually, only minor changes are made to the existing product, such as to reduce the amount of sugar or fat in breakfast cereal.
IT 1105 Information Systems and Technology Other strategies Some companies seek strong growth in sales, hoping that it can increase profits in the long run due to increased sales. Being the first to market is another competitive strategy. Apple Computer was one of the first companies to offer complete and ready-to-use personal computers. Some companies offer customized products and services to achieve a competitive advantage. Dell, for example, builds custom PCs for consumers.
IT 1105 Information Systems and Technology Other strategies Hire the best people is another example of a competitive strategy. The assumption is that the best people will determine the best products and services to deliver to the market and the best approach to deliver these products and services. Having agile information systems that can rapidly change with changing conditions and environments can be a key to information systems success and a competitive advantage.
IT 1105 Information Systems and Technology Other strategies Achieving a high level of efficiency and effectiveness is an import challenge of developing an agile information system. Other challenges included satisfying various governmental regulations, meeting customer requirements and maintaining good growth level. Innovation is another competitive strategy. Vodafone relied on outside help to provide innovative solutions in its wireless business
IT 1105 Information Systems and Technology Question There are five basic competitive strategies which a firm can use to counter the threats of competitive forces. Which one of the following strategies is concerned with working with two or more companies which involve the joint production and distribution of goods and services? (a) cost leadership (b) innovation (c) product differentiation (d) alliance (e) growth
IT 1105 Information Systems and Technology Answer There are five basic competitive strategies which a firm can use to counter the threats of competitive forces. Which one of the following strategies is concerned with working with two or more companies which involve the joint production and distribution of goods and services? (a) cost leadership (b) innovation (c) product differentiation (d) alliance (e) growth
IT 1105 Information Systems and Technology Question Organisations are able to achieve competitive advantage through (a) selling. (b) cost leadership. (c) differentiation. (d) finance. (e) planning.
IT 1105 Information Systems and Technology Answer Organisations are able to achieve competitive advantage through (a) selling. (b) cost leadership. (c) differentiation. (d) finance. (e) planning.
IT 1105 Information Systems and Technology Strategic uses of Information Technology How can business managers use investments in information technology to directly support a firm's competitive strategies? Figure given below answers that question with a summary of the many ways that information technology can help a business implement the five basic competitive strategies.
IT 1105 Information Systems and Technology Strategic uses of Information Technology Basic Strategies in the Business Use of Information Technology Lower Costs • Use IT to substantially reduce the cost of business processes. • Use IT to lower the costs of customers or suppliers. Differentiate • Develop new IT features to differentiate products and services. • Use IT features to reduce the differentiation advantages of competitors. • Use IT features to focus products and services at selected market niches.
IT 1105 Information Systems and Technology Strategic uses of Information Technology Basic Strategies in the Business Use of Information Technology Innovate • Create new products and services that include IT components. • Develop unique new markets or market niches with the help of IT. • Make radical changes to business processes with IT that dramatically cut costs, improve quality, efficiency, or customer service, or shorten time to market.
IT 1105 Information Systems and Technology Strategic uses of Information Technology Basic Strategies in the Business Use of Information Technology Promote Growth • Use IT to manage regional and global business expansion. • Use IT to diversify and integrate into other products and services. Develop Alliances • Use IT to create virtual organizations of business partners. • Develop inter-enterprise information systems linked by the Internet and extranets that support strategic business relationships with customers, suppliers, subcontractors and others.
IT 1105 Information Systems and Technology Other competitive strategies There are many other competitive strategies in addition to the five basic strategies of cost leadership, differentiation, innovation, growth and alliance. Let's look at several key strategies that are also implemented with information technology. They are: • locking in customers or suppliers • building switching costs • raising barriers to entry, and • leveraging investment in information technology.
IT 1105 Information Systems and Technology Other competitive strategies Investments in information technology can allow a business to lock in customers and suppliers (and lock out competitors) by building valuable new relationships with them. These business relationships can become so valuable to customers or suppliers that it deters them from abandoning a company for its competitors, or intimidating it into accepting lessprofitable business arrangements.
IT 1105 Information Systems and Technology Other competitive strategies Early attempts to use information systems technology in these relationships focused on significantly improving the quality of service to customers and suppliers in a firm's distribution, marketing, sales and service activities. Then businesses moved to more innovative uses of information technology.
IT 1105 Information Systems and Technology The Value Chain and Strategic IS The value chain concept was developed by Michael Porter. It views a firm as a series, chain or network of basic activities that add value to its products and services, and thus add a margin of value to the firm. In the value chain conceptual framework, some business activities are primary processes; others are support processes. This framework can highlight where competitive strategies can best be applied in a business.
IT 1105 Information Systems and Technology The Value Chain and Strategic IS That is, managers and business professionals should try to develop a variety of strategic uses of Internet and other technologies for those basic processes that add the most value to a company's products or services and thus to the overall business value of the company. Figure below provides examples of how and where information technologies can be applied to basic business processes using the value chain framework.
IT 1105 Information Systems and Technology The Value Chain and Strategic IS Support Processes Administrative coordination & Support services Collaborative work flow Intranet Human Resources Management Employee Benefits Intranet Technology Development Product Development Extranet with Partners Procurement of Resources e-Commerce Web portals for suppliers Customer Marketing & Inbound Operations Outbound Services Sales Logistics Automated Just Computer -in-time Aided Flexible Warehousing Manufacturing Online Point-of-sale & other Processing Targeted Marketing Customer Relationship Management Primary Business Processes Competitive Advantage
IT 1105 Information Systems and Technology The Value Chain and Strategic IS The value chain concept can help to analyze where and how to apply the strategic capabilities of information technology. It shows how various types of information technologies might be applied to specific business processes to help a firm gain competitive advantages in the marketplace.
IT 1105 Information Systems and Technology Question Which of the following strategy is directly about providing more value to its products and services than competitors? (a) cost leadership (b) product differentiation (c) alliance (d) vertical integration (e) horizontal integration
IT 1105 Information Systems and Technology Answer Which of the following strategy is directly about providing more value to its products and services than competitors? (a) cost leadership (b) product differentiation (c) alliance (d) vertical integration (e) horizontal integration
IT 1105 Information Systems and Technology Question Following statements are about organsations and value chains. Which of the following is/are FALSE? (a) An organization can be considered as a system that has a goal, components, inputs, processing and outputs. (b) The value chain concept shows how organizations can add value to their products and services. (c) Primary processes of a value chain include technology development, administrative support services, human resources management and procurement of resources. (d) Support processes of a value chain include inbound logistics, outbound logistics, services, sales and marketing and operations. (e) Resources are the inputs to an organization.
IT 1105 Information Systems and Technology Answer Following statements are about organsations and value chains. Which of the following is/are FALSE? (a) An organization can be considered as a system that has a goal, components, inputs, processing and outputs. (b) The value chain concept shows how organizations can add value to their products and services. (c) Primary processes of a value chain include technology development, administrative support services, human resources management and procurement of resources. (d) Support processes of a value chain include inbound logistics, outbound logistics, services, sales and marketing and operations. (e) Resources are the inputs to an organization.
IT 1105 Information Systems and Technology Summery Strategic Planning for Competitive Advantage Strategic uses of Information Technology The Value Chain and Strategic IS
Bachelor of Information Technology Information Systems & Technology IT 1105 04. Organizations and Information Systems 4. 3 Competitive Advantage and Strategic Information Systems – Part 2 Prabhajinie Jayabaalasundaram MBCS, MBA
Bachelor of Information Technology Information Systems and Technology - IT 1105 04. Organizations and Information Systems Part IV 4. 3 Competitive Advantage and Strategic Information Systems Prabhajinie Jayabaalasundaram MBCS, MBA
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