Chapter 2 Competing With Information Technology

Chapter 2 Competing with
Information Technology
.
Learning Objectives
 Identify several basic competitive strategies
and explain how they use information
technologies.
 Identify several strategic uses of Internet
technologies.
 Identify the business value of using Internet
technologies
 Explain how knowledge management systems
can help a business gain strategic advantages.
Caapter 2 Competing with Information Technology 2

Strategic IT
 Technology is no longer an afterthought in
business strategy, but the cause and driver
 IT can change the way businesses compete
 A strategic information system is any
information system that uses IT to help an
organization…
 Gain a competitive advantage
 Reduce a competitive disadvantage
 Or meet other strategic enterprise objectives
Chapter 2 Competing with Information Technology 3

Competitive Forces
 To succeed, a business must develop strategies
to counter these forces…
 Rivalry of competitors within its industry
 New entrants into an industry and its markets
 Substitute products that may capture market
share
 Bargaining power of customers
 Bargaining power of suppliers

Competitive Forces and Strategies

Five Competitive Strategies
 Cost Leadership
 Become low-cost producers
 Help suppliers or customers reduce costs
 Increase cost to competitors
 Example: Priceline uses online seller bidding
so the buyer sets the price

 Differentiation Strategy
 Differentiate a firm’s products from its
competitors’
 Focus on a particular segment or niche of
market
 Example: Moen uses online customer design

Competitive Strategies (cont’d)
 Innovation Strategy
 Unique products, services, or markets
 Radical changes to business processes
 Example: Amazon’s online, full-service
customer systems
 Growth Strategy
 Expand company’s capacity to produce
 Expand into global markets
 Diversify into new products or services
 Example: Wal-Mart’s merchandise ordering
via global satellite tracking

Competitive Strategies (cont’d)
 Alliance Strategy
 Establish linkages and alliances with
customers, suppliers, competitors,
consultants, and other companies
 Includes mergers, acquisitions, joint ventures,
virtual companies
 Example: Wal-Mart uses automatic
inventory replenishment by supplier

Using Competitive Strategies
 These strategies are not mutually exclusive
 Organizations use one, some, or all
 A given activity could fall into one or more
categories of competitive strategy
 Not everything innovative serves to differentiate
one organization from another
 Likewise, not everything that differentiates
organizations is necessarily innovative

Ways to Implement Basic Strategies

Customer-Focused Business
 What is the business value in being customer-
focused?
 Keep customers loyal trusty
 Anticipate their future needs

do in advance
 Respond to customer concerns

 Provide top-quality customer service
 Focus on customer value
 Quality, not price, has become the primary
determinant of value
 Consistently reliable

Providing Customer Value
 Companies that consistently offer the best value
from the customer’s perspective…
 Track individual preferences
 Keep up with market trends
 Supply products, services, and information
anytime, anywhere
 Tailor customer services to the individual
modify
 Use Customer Relationship Management

(CRM) systems to focus on the customer

Building Customer Value via the
Internet

Strategic Uses of IT
 A company that emphasizes strategic highlights
business use of IT would use it to gain a

competitive differentiation
 Products
 Services
 Capabilities

Reengineering Business Processes
 Called BRP or simply Reengineering
 Fundamental rethinking and radical redesign
of business processes
 Seeks to achieve improvements in cost,
look for
quality, speed, and service

 Potential payback is high, but so is risk of
disruption and failure
disturbance
 Organizational redesign approaches are an

important enabler of reengineering
 Includes use of IT, process teams, case
managers
The Role of IT
 IT plays a major role in reengineering most
business processes
 Can substantially increase process largely
efficiencies
 Improves communication
 Facilitates collaboration

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

Reengineering Order Management
 IT that supports this process…
 CRM systems using intranets and
(customer relationship management)
the Internet
 Supplier-managed inventory systems using the
Internet and extranets
 Cross-functional ERP software to
(enter price resource planning)
integrate manufacturing, distribution, finance, and

human resource processes
 Customer-accessible e-commerce websites for
order entry, status checking, payment, and service
 Customer, product, and order status databases
accessed via intranets and extranets
18
Creating a Virtual Company
 A virtual company uses IT to link…
 People
 Organizations
 Assets effect
 Ideas
 Inter-enterprise information systems link…
 Customers
 Suppliers
 Subcontractors
 Competitors

A Virtual Company

Virtual Company Strategies
 Basic business strategies
 Share information and risk with alliance union
partners
 Link complimentary 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

Two Kinds of Knowledge
 Explicit Knowledge
clear
 Data, documents, and things written down or

stored in computers
 Tacit Knowledge
 The “how-to” knowledge in workers’ minds
 Represents some of the most important
information within an organization
 A knowledge-creating company makes
such tacit knowledge available to others

Knowledge Management
 Successful knowledge management
 Creates techniques, technologies, systems,
and rewards for getting employees to share
what they know
 Makes better use of accumulated workplace
and enterprise knowledge

Knowledge Management
Techniques

Knowledge Management Systems
 Knowledge management systems (KMS)
 A major strategic use of IT
 Manages organizational learning and know-how
 Helps knowledge workers create, organize, and
make available important knowledge
 Makes this knowledge available wherever and
whenever it is needed
 Knowledge includes
 Processes, procedures, patents , official documents
reference works, formulas, best practices,

forecasts, and fixes

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Chapter 2 Competing with

Caapter 2 Competing with Information Technology 2

Chapter 2 Competing with Information Technology 3

Chapter 2 Competing with Information Technology 4

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so the buyer sets the price

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via global satellite tracking

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 Anticipate their future needs

 Respond to customer concerns

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 Use Customer Relationship Management

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business use of IT would use it to gain a

Chapter 2 Competing with Information Technology 14

quality, speed, and service

 Organizational redesign approaches are an

Chapter 2 Competing with Information Technology 16

Chapter 2 Competing with Information Technology 17

integrate manufacturing, distribution, finance, and

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Chapter 2 Competing with Information Technology 20

Chapter 2 Competing with Information Technology 21

 Data, documents, and things written down or

such tacit knowledge available to others

Chapter 2 Competing with Information Technology 22

Chapter 2 Competing with Information Technology 23

Chapter 2 Competing with Information Technology 24

reference works, formulas, best practices,

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