Porters Competitive Forces New entrants Industry competitors Suppliers

Porter’s Competitive Forces New entrants Industry competitors Suppliers Buyers Intensity of rivalry Substitutes

Strategies for Competitive Advantage Competitive Scope Competitive Advantage Cost Broad focus Narrow focus Differentiation Cost leadership Differentiation Cost focus Differentiation focus

Role of IT in Competitive Strategy • Raise Barriers to Entry yoffer unique services that are hard to copy yfirst mover advantages yknowledge barriers

Role of IT in Competitive Strategy • Establish Switching Costs yintegrate IT services with other services yresponse time and service quality yvalue-added services

Role of IT in Competitive Strategy • Generate New Products ytailor existing products to meet customer needs yemergence of new IT-based industries

Role of IT in Competitive Strategy • Change cost structure or product/service offerings ycheaper production, distribution through IT yuse IT to differentiate

Role of IT in Competitive Strategy • Change supplier/buyer relationships yprocess automation yinventory management and JIT yelectronic linkages yreducing the role of the middleman

Role of IT in the Value Chain • Inbound logistics yinventory and ordering ylinks to suppliers • Operations yprocess control yon-line processing ytelecommunications

Role of IT in the Value Chain • Outbound logistics ylinks to buyers • Marketing and sales ycustomer service ylinking suppliers and buyers ydatabase marketing

Role of IT in the Value Chain • After-sales service yon-line support yexpert systems

Classification of Companies’ Use of Information Systems z Adopters z Adapters z Inventors

Characteristics of Adopters z Use purchased, off-the-shelf systems for routine applications z Goal is short-term survival or catching up with competitors

Characteristics of Adopters z Most often found in ystagnant industries yareas of depressed economy ycompanies with insufficient capital resources

Characteristics of Adapters z IT is an essential element of planning z Have awareness, capability, and funds to undertake internal development

Characteristics of Adapters z Have close working relationships with suppliers to take advantage of developments in which timing is critical z Invest significantly in maintenance of existing applications, but also focus on adapting new technology through expansion and innovation

Characteristics of Inventors z Create new technologies that represent significant departures from current practice z Can “leapfrog” the competition

Characteristics of Inventors z Strong R&D department z Ability to market needs and bring products or services to the market at the right time and at a competitive cost

Information Technology Strategic Development Cycles z Assessment Cycle z Planning/Development/Implementation Cycle

Assessment Cycle z Evaluate position and approach used by competitors y. Identify strong and weak points of competitors’ products and services y. Identify competitors’ major applications of IT y. Identify competitors’ technical and financial strength and their ability to invest in IT

Assessment Cycle z Evaluate company’s current IT status yshould be performed by independent group within company or outside consultant ydevelop description of applications of IT to critical operations or products and identify gaps in application’s ability to meet its objectives

Assessment Cycle z Evaluate company’s current IT status (cont’d) yappraise skills, methods, and tools of application developers yreview work mix (e. g. , percentage of time spent on maintenance versus new development)

Assessment Cycle z Understand how information technology could be applied yappraise available IT that could be used for competitive advantage now yappraise anticipated changes or new developments that could be used for competitive advantage over the next 3 -5 years

Assessment Cycle z Understand how information technology could be applied yidentify potential applications of current and future technology -- how will they affect competition? yidentify potential changes in current applications driven by market demands or technology development

Assessment Cycle z Assess environmental factors ytechnology yindustry structure yexternal economic and political forces

Planning/Development/Implementation Cycle z Identify major threats and opportunities ysummary of results of assessment cycle ywhat areas would most benefit from improved use of IT? yrelate to business objectives

Planning/Development/Implementation Cycle z Develop an IT strategy ywhat areas deserve high-priority attention yhow competitors maximize their use of IT yhow does company respond to competitors yidentify any important new threats

Planning/Development/Implementation Cycle z Develop an IT strategy (cont’d) yidentify and analyze new uses of IT for products and services yassess threats and opportunities yidentify parts of company infrastructure that will need to be improved

Planning/Development/Implementation Cycle z Develop the infrastructure to implement the plans y. Specify: xgoals xstrategy xapproach xexpected results xcritical milestones xrequisite resources

Planning/Development/Implementation Cycle z Perform detailed planning and implementation yimprove the IT infrastructure ybegin detailed planning for the application yestablish a steering group to ensure that all interests are represented during this phase

Planning/Development/Implementation Cycle z Evaluate realized returns on investment yevaluation may not be possible for months due to application migration, test marketing, redesign of business processes ymaintain updated estimates on return of technology investments

Planning/Development/Implementation Cycle z Evaluate realized returns on investment (cont’d) ymeasure return in terms of success criteria z Reiterate these cycles to improve competitive position

Risks • Failure to continue investing in new technology • Lowered barriers to entry • Litigation • Dominance of customer or supplier (elimination of middleman)

Risks • Timing • Threats to large firms • Misunderstanding segments • Cultural lag

Management Perspective • Importance of IT in the strategic plan • Securing confidentiality • Evaluating financial and accounting measures for IT • Partnership with IT specialists