Competing with Informatio n Technolog y

I. LECTURE OVERVIEW
Foundation Concepts: Foundations of Information in Business presents an overview of the five basic areas

of information systems knowledge needed by business professionals, including the conceptual system components and

major types of information systems. Strategic Uses of Information Technology Information technologies can support many competitive strategies. They

canhelp a business cut costs, differentiate and innovate in its products and services, promote growth, develop alliances, lock incustomers and

suppliers, create switching costs, raise barriers to entry, and leverage its investment in IT resources. Thus,information technology can help a business

gain a competitive advantage in its relationships with customers, suppliers,competi tors, new entrants, and producers of substitute

products. Refer to Figures 2.3 and 2.5 for summaries of the uses of information technology for strategic advantage. Building a Customer-Focused Business

A key strategic use of Internet technologies is to build a company that developsits business value by making customer value its strategic focus. Customerfocused

companies use Internet, intranet, andextranet ecommerce websites and services to keep track of their customers preferences; supply products,

services, andinformation anytime, anywhere; and provide services tailored to the individual needs of their customers.

Reengineering Business Processes Information technology is a key ingredient in reengineering business operations byenabling radical changes

to business processes that dramatically improve their efficiency and effectiveness. Internettechnolog ies can play a major role in supporting

innovative changes in the design of workflows, job requirements, andorganizational structures in a company. Improving Business Quality -

Information technology can be used to strategically improve the quality of business perform ance. In a total quality management

approach, IT can support programs of continual improvement in meeting or exceeding customer requirements and expectations about the quality

of products, services, customer responsiveness, andother features. Becoming an Agile Company A business can use information

technology to help it become an agile company. Then itcan prosper in rapidly changing markets with broad product ranges and short model lifetimes in which

it must processorders in arbitrary lot sizes, and can offer its customers customized products while maintaining high volumes of production. An

agile company depends heavily on Internet technologies to help it be responsive to its customers withcustomized solutions to their needs and

corporate with its customers, suppliers, and other businesses to bring products tomarket as rapidly and costeffectively as possible.

Creating a Virtual Company Forming virtual companies has become an important competitive strategy in todaysdynamic global markets.

Internet and other information technologies play an important role in providing computing andtelecommunic ations resources to support the communications,

coordination, and information flows needed. Managers of avirtual company depend on IT to help them manage a network of people,

knowledge, financial, and physical resources provide d by many business partners to quickly take advantage of rapidly changing

market opportunities. Building a KnowledgeCreating Company - Lasting competitive advantage today can only come from innovative useand

management of organizational knowledge by knowledgecreating companies and learning organizations. Internettechnolog ies are widely

used in knowledge management systems to support the creation and dissemination of businessknowledg e and its integration into

new products, services, and business processes.

II. LEARNING OBJECTIVES

Identify several basic competitive strategies and explain how they can use information technologies to confront thecompetitive

forces faced by a business.

Identify several strategic uses of information technologies for electronic business and commerce, and give examples

of how they give competitive advantages to a business.

Give examples of how business process reengineering frequently involves the

strategic use of Internet technologies.

Identify the business value of using Internet technologies for total quality management, to become an agile

competitor,or to form a virtual company.

Prof. Anatoly Sachenko

Explain how knowledge management

systems can help a business gain strategic advantages.

III. LECTURE NOTESSectio n I: Fundamental

s of Strategic Advantage
STRATEGIC IT Information systems must be viewed as more than a set of technologies that support efficient business

operations,workgr oup and enterprise collaboration, or effective business decision-making. Information technology can change theway businesses

compete. For this reason, you should view information systems strategically, that is, as vital competitivenetwo rks, as a means of organizational

renewal, and as a necessary investment in technologies that help a company adoptstrategies and business processes that enable it to reengineer or

reinvent itself in order to survive and succeed in todaysdynamic e-business environment. Analyzing WESCO International We can learn a lot about the

strategic business uses of Information technologies from this case. Take a few minutes to readit, and we will discuss it (See WESCO

International Section IX). COMPETITIVE STRATEGY CONCEPTS The strategic role of information systems involves using information technology to develop products,

services, andcapabilities that give company major advantages over the competitive forces it faces in the global marketplace. Thiscreates

strategic information systems , information systems that support or shape the competitive position and strategies of an ebusiness

enterprise. So a strategic information system can be any kind of information system (TPS, MIS, DSS, etc.)that helps an organization:

Gain a competitive advantage

Reduce a competitive disadvantage

Meet other strategic enterprise objectivesAccordi

ng to Michael Porter, a firm can survive and succeed in the long run if it successfully develops strategies toconfront five competitive forces

that shape the structure of competition in its industry. These include [Figure 2.2] :
2

Prof. Anatoly Sachenko

Rivalry of competitors within its industry

Threat of new entrants

Threat of substitutes

Bargaining power of customers

Bargaining power of suppliersA variety of competitive strategies can be developed to help a firm confront these competitive

forces. These include[ Figure 2.3 ]:

Prof. Anatoly Sachenko

Cost Leadership Strategy

- Become a lowcost producer of products and services- Find ways to help suppliers or customers reduce their costsIncrease the costs of competitors.

Differentiation Strategy -Developing new ways to differentiate a forms products and services from its competitorsReduce the

differentiation advantages of competitors

Innovation Strategy - Find new ways of doing business:a) Develop of unique products and servicesb) Enter

into unique markets or marketing nichesc) Establish new business alliancesd) Find new ways of producing products/services e) Find new ways

of distributing products/services

Growth Strategies - Significantly expand the companys capacity to produce goods and servicesExpand into

global marketsDiversify into new products and servicesIntegrate into related products and services

Alliance Strategies - Establish new business linkages

and alliances with customers, suppliers, competitors, consultants and other companies (mergers, acquisitions, joint ventures, forming

virtual companies, etc.). STRATEGIC USES OF INFORMATION SYSTEMS [ Figure 2.3 ]How can the preceding competitive

strategy concepts be applied to the strategic role of

competitive strategies. These include the five basic competitivestrate gies (differentiation, cost, innovation, growth, and alliance), as well

as other ways that companies can useinformation systems strategically to gain a competitive edge. For example:
4

Prof. Anatoly Sachenko

Lower Costs

Differentiate

Innovate

Promote Growth

Develop Alliances

Other Competitive Strategies Several key strategies that are implemented with information technology include:

Locking in customers or suppliers - Building valuable relationships with customers and suppliers, which deter themfrom abandoning a firm for its

competitors or intimidating it into accepting less profitable relationships.

Building switching costs the costs in time, money, effort, and

inconvenience that it would take a customer or supplier to switch its business to a firms competitors.

Raising barriers to entry

 technological, financial, or legal requirements that deter firms from entering an industry.

Leveraging investment in information technology

 developing new products and services that would not be possible without a strong IT capability. THE VALUE CHAIN AND STRATEGIC IS - [Figure 2.6]

An important concept that can help a manager identify opportunities for strategic information systems is the value chain

concept as developed by Michael Porter. This concept:

Views a firm as a series or "chain of basic activities that add value to its products and services and thus,

add a marginof value to the firm.

Some business activities are viewed as primary activities, and others are support activities. This framework canhighlight

where competitive strategies can best be applied in a business.

Managers and business professionals should try to develop a variety

of strategic uses of Internet and other technologie s for those activities that add the most value to a companys product or services, and thus to the

overall business value of the company. Value Chain Examples : [Figure 2.6] Collaborative workflow internetbased systems can increase the

communications and collaboration needed to dramaticallyimpro ve administrative coordination and support services. Examples of support processes:

Career development intranet can help the human resources management function provides employees with professional development

training programs.

Computer-aided engineering and design extranets enable a company and its business partners to jointly

design products and processes.

Extranets can dramatically improve procurement of resources by providing an online ecommerce web

site for a firmssuppliers.

Prof. Anatoly Sachenko

Automated justin-time warehousing systems to support inbound logistic processes involving storage of inventory,comput er-aided flexible

manufacturing (CAM) systems for manufacturing operations, and online point-ofsale andorder processing systems to improve outbound logistics

processes that process customer orders.

Support of marketing and sales processes by developing an interactive targeted marketing

capability on the Internetand its World Wide Web.

Customer service can be dramatically improved by a coordinated and integrated customer

relationship managementsyst em.

Section II: Using Information Technology

for Strategic Advantage :

may use them in defensive or controlled ways. More and more businesses are beginning to use information systems strategically for

competitive advantage. Analyzing Staples Inc. We can learn a lot about electronic business and commerce strategies from the Real World

Case of Staples Inc. Take a fewminutes to read it, and we will discuss it (See Staples Inc. in Section IX). BUILDING A CUSTOMERFOCUSED eBUSINESS -

[ Figure 2.8 ]
6
Prof. Anatoly Sachenko For many companies, the chief business value of becoming a customer-focused e-business lies in its ability to help them: Keep customers loyal Anticipate customers future needs Respond to customer concerns Provide top quality customer serviceThe concept of customer-focused e-business focuses on customer value . This strategy recognizes that quality, rather than prices, has become the primary determinant in a customers perception of value. From a customers point of view,companies that consistently offer the best value are able to: Keep track of their customers individual preferences Keep up with market trends Supply products, services and information anytime and anywhere Provide customer services tailored to individual needs.Increasingly, businesses are serving many of their customers and prospective customers via the Internet. This large andfast-growing group of customers wants and expects companies to communicate with them and service their needs at ecommerce websites. The Internet has become a strategic opportunity for

companies large and small to offer fast,responsive, high-quality products and services tailored to individual customer preferences. REENGINEERING BUSINESS PROCESSES [ Figure 2.9 ] 7

Prof. Anatoly Sachenko One of the most popular competitive strategies today is business process reengineering most often simply calledreengineering. Reengineering is the fundamental rethinking and radical redesign of business processes to achievedramatic improvements in cost, quality, speed, and service. BPR combines a strategy of promoting business innovationwith a strategy of making major improvements to business processes so that a company can become a much stronger andmore successful competitor in the marketplace. The potential payback of reengineering is high, but also is its level of risk and disruption to the organizational environment. The Role of Information Technology Information technology plays a major role in reengineering business processes. The speed, information processingcapabilities, and connectivity of computers and Internet technologies can substantially increase the efficiency of business processes, as well as communications and collaboration among the people responsible for their operation andmanagement. IMPROVING BUSINESS QUALITY No single approach to organizational change is appropriate for all circumstances. One important strategic thrust iscontinuous quality improvement, popularly called total quality management (TQM). Previous to TQM, quality wasdefined as meeting established standards or specifications for a product or service. Statistical quality control programswere used to measure and correct any deviations from standards. Total Quality Management :Quality is defined as meeting or exceeding the requirements and expectations of customers for a product or service. Thismay involve many features and attributes such as: Performance Reliability

 Durability Responsiveness Aesthetics ReputationTotal quality management uses a variety of tools and methods to seek continuous improvement of quality, productivity,flexibility, timeliness, and customer responsiveness. According to quality guru, Richard Schonberger, companies that useTQM are committed to: Even better, more appealing, less-variable quality of the product or service. Even quicker, less-variable response - from design and development through supplier and sales channels, offices, and plants all the way to the final user. Even greater flexibility in adjusting to customers shifting volume and mix requirement. Even lower cost through quality improvement; rework reduction, and nonvalue-adding waste elimination. BECOMING AN AGILE COMPETITOR 8

Prof. Anatoly Sachenko Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmentingglobal markets for high-quality, highperformance, customer-configured products and services. An agile company can: Make a profit in markets with broad product ranges and short model lifetimes. Process orders in arbitrary lot sizes. Offer individualized products while maintaining high volumes of production.Agile companies depend heavily on information technology to: Enrich its customers with customized solutions to their needs.

Cooperate with other businesses to bring products to market as rapidly and cost-efficiently as possible. Combine the flexible, multiple organizational structures it uses. Leverage the competitive impact of its people and information resources. CREATING A VIRTUAL COMPANY A virtual company (also called a virtual corporation or virtual organization) is an organization that uses informationtechnology to link people, assets, and ideas. People and corporations are forming virtual companies as the best way toimplement key business strategies that promise to ensure success in todays turbulent business climate. Virtual Company Strategies: [Figure 2.13] Several major reasons why people are forming virtual companies include: Share infrastructure and risk Link complementary 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 BUILDING THE KNOWLEDGE-CREATING COMPANY To many companies today, lasting competitive advantage can only be theirs if they become knowledge-creating companies or learning organizations. That means consistently creating new business knowledge, disseminating it widelythroughout the company, and quickly building the new knowledge into their products and services. 9

Prof. Anatoly Sachenko Knowledge-creating companies exploit two kinds of technology:

Explicit Knowledge - data, documents, things written down or stored on computers. Tacit Knowledge how-tos of knowledge, which reside in workers.Successful knowledge management creates techniques, technologies, and rewards for getting employees to share whatthey know and to make better use of accumulated workplace knowledge. Knowledge Management Systems: [ Figure 2.16 ]Knowledge management has become one of the major strategic uses of information technology. Many companies are building knowledge management systems (KMS) to manage organizational learning and business know-how. The goal of KMS is to help knowledge workers create, organize, and make available important business knowledge, wherever andwhenever its needed in an organization. This includes processes, procedures, patterns, reference works, formulas, best practices, forecasts, and fixes. Internet and Intranet web sites, groupware, data mining, knowledge bases, discussionforums, and videoconferencing are some of the key information technologies for gathering, storing, and distributing thisknowledge.Characteristics of KMS: KMS are information systems that facilitate organizational learning and knowledge creation. KMS use a variety of information technologies to collect and edit information, assess its value, disseminate it withinthe organization, and apply it as knowledge to the processes of a business. KMS are sometimes called adaptive learning systems. Thats because they create cycles of organizational learningcalled learning loops , where the creation, dissemination, and application of knowledge produces an adaptive learning process within a company. KMS can provide rapid feedback to knowledge workers, encourage behavior changes by employees, and significantlyimprove business performance. As an organizational learning process continues and its knowledge base expands, the knowledge-creating companyintegrates its knowledge into its business processes, products, and services. This makes it a highly innovative andagile provider of high quality products and customer services and a formidable competitor in the marketplace.

IV. KEY TERMS AND CONCEPTS - DEFINED Agile Competitor: A company with the ability to profitably operate in a competitive environment of continual and unpredictable changes incustomer opportunities. Business Process Reengineering: The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality,speed, and service. Competitive Forces: A firm must confront (1) rivalry of competitors within its industry, (2) threat of new entrants, (3) threat of substitutes, (4) 10

Prof. Anatoly Sachenko the bargaining power of customers, and (5) the bargaining power of suppliers. Competitive Strategies: A firm can develop cost leadership, product differentiation, and business innovation strategies to confront its competitiveforces. Creating Switching Costs: The cost in time, money, effort, and inconvenience that it would take a customer or supplier to switch its business to afirms competitors. Customer-Focused e-business: Internet technologies enable a company to emphasize customer value as its strategic focus. Interenterprise Information: Companies develop alliances and extranet links that form interenterprise information systems with suppliers, customers,subcontractors, and competitors. Knowledge-Creating Company: A firm that consistently creates new business knowledge, disseminates it widely throughout the company, and quickly builds the new knowledge into their products and services. Knowledge Management System: An information system that helps knowledge workers create, organize, and make available important business knowledge,wherever and whenever its needed in an organization. Leveraging Investment in IT: A firm can leverage investment in information technology by developing new products and services. Locking in Customers and Suppliers:

Building valuable relationships with customers and suppliers, which deter them from abandoning a firm for itscompetitors or intimidating it into accepting less profitable relationships. Raising Barriers to Entry: Technological, financial, or legal requirements, which deter firms from entering an industry. Strategic Information System: Information systems that provide a firm with competitive products and service that give it a strategic advantage over itscompetitors in the marketplace. Strategic uses of Information Technology: Information systems, which promote business innovation, improve operational efficiency, and build strategic informationresources for a firm. Strategic uses of Internet Technologies: The Internet promises to be an attractive and cost-efficient way for many companies to develop strategic collaboration,operations, marketing, and alliances needed to solve and succeed in todays fast-changing global markets. Total Quality Management: Total quality management uses a variety of tools and methods to seek continuous improvement of quality, productivity,flexibility, timeliness, and customer responsiveness. Value Chain: Viewing a firm as a series or chain of basic activities that add value to its products and services and thus add a margin of value to the firm. Virtual Company: An organization that uses information technology to link people, assets, and ideas. V. DISCUSSION QUESTIONS You have been asked to develop e-business & e-commerce applications to gain competitive 11 Competing with Information Technology Download this Document for FreePrintMobileCollectionsReport Document Report this document? Please tell us reason(s) for reporting this document Top of Form
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Spectrum_edpleft a comment This document is a FULL Copy from the Book "Management Information Systems" of James O302264Brien. This guy is doing Comercial Piracy.... Delete this papers Please. Do not promote illegality 01 / 23 / 2010 Reply Report Artur replied: No You stupid freak! It's a legal copy from my teachers site http://www.umcs.maine.edu/~as/index.html Next time don't comment! Couse you're a ******* liar! 02 / 08 / 2010 angelinaanileft a comment Nice posting. You have shared very useful information. Thanks for sharing this. 09 / 16 / 2008 Reply

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