IS for Competitive Advantage

10 Questions

What is the primary function of OnQ system at Hilton Hotels?

To predict future business with Hilton and establish customer value

What is the result of Hilton's implementation of OnQ system?

An increase in customer retention from 41% to 61%

What is a key factor that has changed the competitive landscape in the global market?

The Internet and globalization

What is the primary advantage of the Internet for small and medium-sized firms?

Access to global markets

What is the name of the largest and most widely used network?

Internet

What is the primary goal of using information systems to achieve competitive advantages?

To gain a competitive edge over other firms

What is the primary benefit of using OnQ system for profitable customers?

Ability to check out late without additional fees

What is the role of OnQ system in identifying customers?

Identifying profitable customers

What is the primary advantage of the Internet for large multinational corporations?

Reduced costs of operating on a global scale

What is the primary reason why OnQ system is used at Hilton Hotels?

To provide personalized service to customers

Study Notes

Types of Competitive Advantage

There are four major types of competitive advantage:
- Barriers to Entry That Restrict Supply
- Demand Control
- Economies of Scale
- Process Efficiency

Barriers to Entry That Restrict Supply

Exclusive contracts or agreements can restrict supply and create a monopoly or near monopoly
Examples: exclusive contracts with Hollywood movie stars or suppliers

Demand Control

Powerful brand names and superior product qualities can control customer demand
Examples: Microsoft's operating system and Office personal productivity products, with 95% market share
Brand names and switching costs can keep prices high and increase profits

Economies of Scale

Running operations at a more efficient scale can keep operating costs lower and increase profit margins
Examples: running a plant 24 hours a day versus 8 hours a day

Process Efficiency

Creating new, more efficient production and service processes can gain a competitive advantage
Examples: high customer satisfaction, special expertise, or superior ability to implement new innovations

Porter's Competitive Forces Model

Five forces that affect a firm's competitive advantage:
- Traditional Competitors
- New Market Entrants
- Substitute Products and Services
- Customers
- Suppliers

Porter's Competitive Forces Model (continued)

Traditional Competitors: continuous competition and innovation
New Market Entrants: new companies entering the market, with varying levels of difficulty
Substitute Products and Services: alternatives to a firm's products or services, affecting pricing and profit margins
Customers: attracting and retaining customers, with switching costs and power
Suppliers: negotiating with suppliers, with multiple suppliers providing control and leverage

Information System Strategies for Dealing with Competitive Forces

Four generic strategies to counteract competitive forces:
- Low-Cost Leadership
- Product Differentiation
- Focus on Market Niche
- Strengthening Customer and Supplier Intimacy

Low-Cost Leadership

Using IS to achieve the lowest operational costs and prices
Examples: inventory control systems, HR systems, purchasing systems, and production systems

Product Differentiation

Using IS to enable new products and services, and make them differentiated
Examples: Google's continuous innovation, Apple's iPod and online music service, and Spacestore.com's NASA space theme products

The Internet's Impact on Competitive Advantage

The Internet has reduced the costs of operating on a global scale, creating opportunities for large and small firms
Competing on a global scale is now possible for small and medium-sized firms