Competing with Information Technology PDF

Competing with Information Technology Chapter 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...

Competing with Information Technology Chapter 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 2  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 Chapter 2 Competing with Information Technology 3  Competitive Forces and Strategies Chapter 2 Competing with Information Technology 4 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 Chapter 2 Competing with Information Technology Example: Moen uses online customer 5  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 Chapter 2 Competing with Information Technology ordering via global satellite tracking 6  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 Chapter 2 Competing with Information Technology 7  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 Chapter 2 Competing with Information Technology 8  Ways to Implement Basic Strategies Chapter 2 Competing with Information Technology 9  Other Competitive Strategies Lock in Customers and Suppliers – Deter them from switching to competitors Build in Switching Costs – Make customers and suppliers dependent on the use of innovative IS Erect Barriers to Entry – Discourage or delay other companies from entering the market – Increase the technology or investment needed to enter Build Strategic IT Capabilities – Take advantage of strategic opportunities when they arise – Improve efficiency of business practices Leverage Investment in IT – Develop products and service that would not be Chapter 2 Competing with Information Technology possible without a strong IT capability 10  Customer-Focused Business What is the business value in being customer-focused? – Keep customers loyal – Anticipate their future needs – Respond to customer concerns – Provide top-quality customer service Focus on customer value – Quality, not price, has become the primary determinant of value – Consistently Chapter 2 Competing with Information Technology 11  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 – Use Customer Relationship Management (CRM) systems to focus on Chapter 2 Competing withthe customer Information Technology 12  Building Customer Value via the Internet Chapter 2 Competing with Information Technology 13  The Value Chain and Strategic IS View the firm as a chain of basic activities that add value to its products and services – Primary processes directly relate to manufacturing or delivering products – Support processes help support the day- to-day running of the firm and indirectly contribute to products or services Use the value chain to highlight where competitive strategies will add the most value Chapter 2 Competing with Information Technology 14  Using IS in the Value Chain Chapter 2 Competing with Information Technology 15  Strategic Uses of IT A company that emphasizes strategic business use of IT would use it to gain a competitive differentiation – Products – Services – Capabilities Chapter 2 Competing with Information Technology 16  Reengineering Business Processes Called BPR or simply Reengineering – Fundamental rethinking and radical redesign of business processes – Seeks to achieve improvements in cost, quality, speed, and service Potential payback is high, but so is risk of disruption and failure Organizational redesign approaches are an important enabler of reengineering – Includes use of IT, process teams, case Chapter 2 Competing withmanagers Information Technology 17  BPR Versus Business Improvement Chapter 2 Competing with Information Technology 18  The Role of IT IT plays a major role in reengineering most business processes – Can substantially increase process efficiencies – Improves communication – Facilitates collaboration Chapter 2 Competing with Information Technology 19  A Cross-Functional Process Many processes are reengineered with… – Enterprise resource planning software – Web-enabled electronic business and commerce systems Chapter 2 Competing with Information Technology 20  Reengineering Order Management IT that supports this process… – CRM systems using intranets and the Internet – Supplier-managed inventory systems using the Internet and extranets – Cross-functional ERP software to integrate manufacturing, distribution, finance, and human resource processes – Customer-accessible e-commerce websites for order entry, status checking, payment, and service –with Chapter 2 Competing Customer, Information Technology product, and order status 21  Becoming an Agile Company Agility is the ability to prosper – In rapidly changing, continually fragmenting global markets – By selling high-quality, high-performance, customer-configured products and services – By using Internet technologies An agile company profits in spite of – Broad product ranges – Short model lifetimes – Individualized products – Arbitrary lot sizes 22 Chapter 2 Competing with Information Technology  Strategies for Agility An agile company… – Presents products as solutions to customers’ problems – Cooperates with customers, suppliers and competitors – Brings products to market as quickly and cost-effectively as possible – Organizes to thrive on change and uncertainty – Leverages the impact of its people and the knowledge they possess Chapter 2 Competing with Information Technology 23  How IT Helps a Company be Agile Chapter 2 Competing with Information Technology 24 Creating a Virtual Company A virtual company uses IT to link… – People – Organizations – Assets – Ideas Inter-enterprise information systems link… – Customers – Suppliers – Subcontractors Chapter 2 Competing – Competitors with Information Technology 25  A Virtual Company Chapter 2 Competing with Information Technology 26  Virtual Company Strategies Basic business strategies – Share information and risk with alliance 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 Chapter 2 Competing with Information Technology 27  Building a Knowledge- Creating Company A knowledge-creating company or learning organization… – Consistently creates new business knowledge – Disseminates it throughout the company – Builds it into its products and services Chapter 2 Competing with Information Technology 28  Two Kinds of Knowledge Explicit Knowledge – 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 Chapter 2 Competing with Information Technology to others 29  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 Chapter 2 Competing with Information Technology 30  Knowledge Management Techniques Chapter 2 Competing with Information Technology 31  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, reference Chapter 2 Competing with Information Technology works, formulas, best practices, forecasts, 32