Strategic Information Technology for Competitive Advantage

1. 2 CompetingwithInformation Technology

2. Chapter Objectives • Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business. • Identify several strategic uses of information technology for E-business and commerce, and give examples of how they give competitive advantages to business. • Give examples of how business process reengineering frequently involves the strategic use of E-business technologies.

3. Chapter Objectives • 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 advantages. • Identify and evaluate several factors that could help a company sustain a strategic competitive advantage.

4. Threat of New Entrants Bargaining Power of Suppliers Rivalry Among Existing Competitors Threat of Substitutes Bargaining Power of Customers The Competitive Environment

5. Cost Leadership Strategies Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Fundamental Competitive Strategies

6. Locking in Customers and Suppliers Promote Business Innovation Improving Business Process Strategy IT Role • Use IT to improve quality • Use IT to link business to customers and suppliers Use IT to reduce costs of doing business Use IT to create new products or services Create New Business Opportunities Maintain Valuable Customers and Relationships Enhance Efficiency Outcome Strategic Uses of Information Technology

7. Build a Strategic Information Base Build a Strategic IT Platform Raise Barriers to Entry Strategy IT Role Use IT to provide information to support firm’s competitive strategy Increase amount of investment or complexity of IT needed to compete Leverage investment in IS resources from operat- ional uses to strategic uses Create New Business Opportunities Enhance Organizational Collaboration Increase Market Share Outcome Strategic Uses of Information Technology

8. Administrative Coordination & Support Services Human Resource Management Advantage Technology Development Procurement of Resources Inbound Logistics Operations Outbound Logistics Marketing and Sales Customer Service Competitive The Value Chain

9. Support and Customer Feedback Sales and Distribution Marketing and Product Research Internet Capability • Access to customer com-ments online • Immediate re-sponse to customer problems Data for market research, establishes consumer responses • Low cost distribution • Reaches new customers • Multiplies contact points Benefits to Company Opportunity for Advantage Create New Business Opportunities Maintain Valuable Customers and Relationships Enhance Efficiency The Internet Value Chain

10. High Global Market Penetration Product and Services Transformation Strategy E-Commerce Website Value-added IT Services E-Business; Extensive Intranets and Extranets Solution Customer Competition Connectivity External Drivers Performance Improvements in Business Effectiveness Cost and Efficiency Improvements E-Mail, Chat Systems Intranets and Extranets E-Business Processes Connectivity Low High Internal Drivers Strategic Positioning of Internet Technologies

11. Let customers place orders directly Let customers check order history and delivery status Let customers place orders thru distribution partners Build a community of customers, employees, and partners Customer Database Transaction Database Link Employees and distribution partners Give all employees a complete view of customers Customer-Focused E-Business

12. Business Quality Improvement Business Reengineering Definition Incrementally Improving Existing Processes Radically Redesigning Business Systems Target Any Process Strategic Business Processes Potential Payback 10%-50% Improvements 10-Fold Improvements Risk Low High What Changes? Same Jobs - More Efficient Big Job Cuts; New Jobs; Major Job Redesign Primary Enablers IT and Work Simplification IT and Organizational Redesign Business Reengineering and Quality Management

13. Perfect Cooperate with Business Partners and Competitors Anticipation of future needs Customization Conformance Organize to Master Change Give Customers Solutions to Problems Accessibility Delivery Time Customer’s time to market Leverage the Impact of People and IS Resources Cost of Transaction Cost of Value-added Services Free Now The Customer- Focused Agile Competitor

14. Adaptability Excellence Borderless Six Characteristics of Virtual Companies Technology Trust-Based Opportunism Virtual Corporations

15. Solution Knowledge Technical Support Staff Customers Development Engineers Intranet The Internet Product Managers Other Vendors Knowledge Management Systems

16. Key Factors for Sustaining Strategic Success Management Actions and Strategies Foundation Factors • Size • Geographical scope • Product scope • Organization structure • Technological resources • Knowledge resources • Creating switching costs • Exploiting knowledge • Developing response strategies • Managing risks Environment Firm Performance

17. Chapter Summary • Information systems can play several strategic roles in business. • The Internet, intranets, extranets, and other Internet-based technologies can be used strategically for E-Business and E-Commerce that provide a competitive advantage. • A key strategic use of Internet technologies is to build an E-Business which develops its business value by making customer value its strategic focus.

18. Chapter Summary (cont) • IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness. • IT can be strategically used to improve the quality of business performance. • A business can use IT to help it become an agile company, that can respond quickly to changes in its environment.

19. Chapter Summary (cont) • Forming virtual companies has become an important competitive strategy in today’s dynamic global market. • Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations. • Successful strategic information systems are not easy to develop and implement. They may require major change in how businesses operate.