Competing with

Information Technology

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 Strategic View of Information Systems

• Information systems are vital competitive

networks.

• Information systems are a means of

organizational renewal.

• IS are a necessary investment in technologies

that help a company adopt strategies and
business processes that enable it to reengineer
or reinvent itself in order to survive and succeed
in today’s dynamic business environment.
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 Strategic Information Systems

Definition:
• Any kind of information system that uses
information technology to help an
organization gain a competitive
advantage, reduce a competitive
disadvantage, or meet other strategic
enterprise objectives.

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Competitive Forces and Strategies

2-4
 Competitive Forces

Definition:
• Shape the structure of competition in its
industry.

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 Porter’s Competitive Forces Model

To survive and succeed, a business must

develop and implement strategies to effectively
counter the:

• Rivalry of competitors within its industry

• Threat of new entrants into an industry and its
markets
• Threat posed by substitute products which
might capture market share
• Bargaining power of customers
• Bargaining power of suppliers

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Competitive Strategies

• Cost Leadership
• Differentiation
• Innovation
• Growth
• Alliance

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 Cost Leadership Strategy

• Becoming a low-cost producer of products

and services

• Finding ways to help suppliers and

customers reduce their costs

• Increase costs of competitors

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 Differentiation Strategy

• Developing ways to differentiate a firm’s

products and services from its
competitors’

• Reduce the differentiation advantages of

competitors

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 Innovation Strategy

• Development of unique products and services

• Entry into unique markets or market niches

• 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 Strategy

• Significantly expanding a company’s

capacity to produce goods and services

• Expanding into global markets

• Diversifying into new products and

services

• Integrating into related products and

services
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 Alliance Strategy

• Establishing new business linkages and

alliances with customers, suppliers,
competitors, consultants, and other
companies

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Competitive Strategy Examples

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 Other Competitive Strategies

• Locking in customers or suppliers by

building valuable new relationships with
them.

• Building switching costs so a firm’s

customers or suppliers are reluctant to
pay the costs in time, money, effort, and
inconvenience that it would take to switch
to a company’s competitors.

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 Other Competitive Strategies

• Raising barriers to entry that would

discourage or delay other companies from
entering a market.

• Leveraging investment in information

technology by developing new products
and services that would not be possible
without a strong IT capability.

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 Advantage vs. Necessity

• Competitive Advantage – developing

products, services, processes, or
capabilities that give a company a
superior business position relative to its
competitors and other competitive forces

• Competitive Necessity – products,

services, processes, or capabilities that
are necessary simply to compete and do
business in an industry
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 Customer-Focused Business

A business that:

• can anticipate customers’ future needs.

• responds to customer concerns.

• provides top-quality customer service.

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IS in a Customer-Focused Business

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 Value Chain

Definition:
• View of 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 both to the firm and its
customers.

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Value Chain

2 - 20
Value Chain

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 Business Process Reengineering

Definition:
• Fundamental rethinking and radical
redesign of business processes to
achieve dramatic improvements in cost,
quality, speed, and service.

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BPR vs. Business Improvement

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Cross-Functional Processes

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 Agility

Definition:
• The ability of a company to prosper in
rapidly changing, continually fragmenting
global markets for high-quality, high
performance, customer-configured
products and services.

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 Agile Company

Definition:
• A company that can make a profit in
markets with broad product ranges and
short model lifetimes, and can produce
orders individually and in arbitrary lot
sizes.

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 Mass Customization

Definition:
• Providing individualized products while
maintaining high volumes of production

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Agile Competitor

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 Virtual Company

Definition:
• An organization that uses information
technology to link people, organizations,
assets, and ideas.

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 Interenterprise Information Systems

Definition:
• Information systems implemented on an
extranet among a company and its
suppliers, customers, subcontractors, and
competitors with whom it has formed
alliances.

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Virtual Company

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 Virtual Company Strategies

• Share infrastructure and risk with alliance

partners.

• Link complementary core competencies.

• Reduce concept-to-cash time through

sharing.

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 Virtual Company Strategies

• 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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 Knowledge-Creating Companies

Definition:
• Consistently creating new business
knowledge, disseminating it widely
throughout the company, and quickly
building the new knowledge into their
products and services.

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 Types of Knowledge

• Explicit Knowledge – data, documents,

things written down or stored on
computers

• Tacit Knowledge – the “how-tos” of

knowledge, which reside in workers

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 Knowledge Management

Definition:
• Techniques, technologies, systems, and
rewards for getting employees to share
what they know and to make better use of
accumulated workplace and enterprise
knowledge.

Knowledge Management Systems –

manage organizational learning and
business know-how

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Levels of Knowledge Management

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 Case #3: Shareware Grows Up

How a software cooperative works

• Companies pay a membership which
entitles them to use any of the intellectual
property of the co-op.

• Member companies will donate intellectual

property, cooperate in adapting it for other
companies, help troubleshoot problems
and form sub-groups to develop needed
niche software for the library.

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 Case #3: Shareware Grows Up

Benefits
• Decrease in the total cost of ownership of
software

• Co-op becomes responsible for assets

and also ensure that there’s a clear title
so member companies can’t be sued later

• The larger the installation base, the lower

the cost of ongoing maintenance
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 Case #3: Shareware Grows Up

Challenge
• Getting members to really collaborate

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 Case #3: Shareware Grows Up

1. Organizations are constantly striving to

achieve competitive advantage, often
through their information technologies.
Given this constant, why does Hansen
suggest that competition among
members shouldn’t be an issue because
the shared assets don’t bring
competitive advantage? Explain.

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 Case #3: Shareware Grows Up

2. What do you see as the potential risks

associated with the Avalanche
approach? Provide some examples.

3. How could other companies apply the

cooperative model used by Avalanche to
achieve efficiencies in areas other than
software support? Explain.

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 Case #4: Customer-Loyalty Systems

Satisfaction vs. Loyalty

• A satisfied customer is one who sees you
as meeting expectations.

• A loyal customer, on the other hand,

wants to do business with you again and
will recommend you to others.

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 Case #4: Customer-Loyalty Systems

• A good loyalty program combines

customer feedback and business
information with sophisticated analytics to
produce actionable results.

• With good customer loyalty technology, IT

can wire the voice of the customer back
into the enterprise.

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 Case #4: Customer-Loyalty Systems

How can IT help?

• Gathering customer experience data by e-mail
rather than telephone dramatically reduces
survey cycle times
• Can build in validated, multivariate measures of
loyalty into the software
• Software-generated models can accurately
predict customer’s purchasing behavior
• IT can be used to deliver rewards to customers
based on predictive analysis

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 Case #4: Customer-Loyalty Systems

1. Does CDW’s customer loyalty program give

them a competitive advantage? Why or why
not?

2. What is the strategic value of Harrah’s

approach to determining and rewarding
customer loyalty?

3. What else could CDW and Harrah’s do to truly

become a customer-focused businesses?
Visit their websites to help you suggest
several alternatives.
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 Summary

• Information technologies can support many

competitive strategies including cost leadership,
differentiation, innovation, growth and alliance.

• IT can help
• Build customer-focused businesses
• Reengineer business processes
• Businesses become agile companies
• Create virtual companies
• Build knowledge-creating companies

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End of Chapter

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