How Is Can Play a Vital Role in the Competitive Strategy of an Organization

Using Information Systems to Achieve Competitive Advantage

Firms with a competitive advantage over others typically have access to special resource that others do not or are able to use resource more than efficiently, resulting in higher revenue growth, profitability, or productivity growth (efficiency), all of which ultimately in the long run translate into higher stock market valuations than their competitors.

Michael Porter's competitive forces model describes v competitive forces that shape the fate of the firm.

1. Traditional competitors: Existing firms that share a firm's market space
2. New market entrants: New companies have certain advantages, such every bit not being locked into old equipment and loftier motivation, likewise as disadvantages, such equally less expertise and piddling brand recognition. Some industries have lower barriers to entry, ie: cost less for a new company to enter the field.
3. Substitute products and services: These are substitutes that your customers might use if your prices become likewise high. For example, Internet phone service can substitute for traditional phone service. The more than substitute products and services in your industry, the less yous tin can control pricing and raise your profit margins.
4. Customers: The power of customers grows if they can hands switch to a competitor's products and services, or if they can force a business organization and its competitors to compete on toll alone in a transparent market where at that place is little product differentiation and all prices are known instantly (such as on the Internet).
5. Suppliers: The more than different suppliers a house has, the greater command information technology can exercise over suppliers in terms of price, quality, and delivery schedules.

Figure 3-10

Effigy 3-10 PORTER�S COMPETITIVE FORCES MODEL In Porter�s competitive forces model, the strategic position of the firm and its strategies are determined not only by contest with its traditional direct competitors but also by four forces in the manufacture�s environment: new marketplace entrants, substitute products, customers, and suppliers.

In that location are four generic strategies used to manage competitive forces, each of which often is enabled by using information technology and systems:

1. Low-cost leadership: Use information systems to achieve the lowest operational costs and the lowest prices. For example, a supply chain direction system can incorporate an efficient customer response organisation to straight link consumer behavior to distribution and product and supply chains, helping lower inventory and distribution costs.
2. Product differentiation: Apply information systems to enable new products and services, or profoundly change the customer convenience in using your existing products and services. For example, Land'south End uses mass customization, offering individually tailored products or services using the same production resources every bit mass production, to custom-tailor habiliment to private customer specifications.
3. Focus on market niche: Employ data systems to enable a specific market focus and serve this narrow target market better than competitors. Information systems support this strategy by producing and analyzing data for finely tuned sales and marketing techniques. Hilton Hotels uses a customer information organisation with detailed data about active guests to provide tailored services and reward profitable customers with actress privileges and attention.
4. Strengthen customer and supplier intimacy: Apply information systems to tighten linkages with suppliers and develop intimacy with customers. Chrysler Corporation uses information systems to facilitate direct access from suppliers to production schedules, and fifty-fifty permits suppliers to decide how and when to ship suppliers to Chrysler factories. This allows suppliers more lead fourth dimension in producing goods. Stiff linkages to customers and suppliers increment switching costs (the cost of switching from one product to a competing product) and loyalty to your business firm.

   The Internet has nearly destroyed some industries and has severely threatened more. The Internet has also created entirely new markets and formed the basis for thousands of new businesses.

   Considering of the Internet, the traditional competitive forces are still at work, but competitive rivalry has get much more than intense. Cyberspace technology is based on universal standards, making information technology easy for rivals to compete on cost solitary and for new competitors to enter the market. Because information is bachelor to anybody, the Internet raises the bargaining power of customers, who tin quickly find the lowest-cost provider on the Spider web. Some industries, such every bit the travel industry and the financial services industry, have been more impacted than others. Withal, the Cyberspace besides creates new opportunities for building brands and building very large and loyal customer bases, such as Yahoo!, eBay, and Google.

   The value chain model highlights specific activities in the business where competitive strategies can all-time be applied and where information systems are well-nigh likely to have a strategic impact. The value concatenation model views the house as a series or chain of basic activities that add a margin of value to a house's products or services. These activities can be categorized as either primary activities or support activities.

• Principal activities are most directly related to the production and distribution of the firm'southward products and services, which create value for the customer. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service.
• Support activities make the delivery of the primary activities possible and consist of organisation infrastructure (administration and direction), human being resources (employee recruiting, hiring, and grooming), technology (improving products and the production procedure), and procurement (purchasing input).

Effigy 3-eleven

FIGURE 3-eleven THE VALUE Concatenation MODEL This figure provides examples of systems for both primary and support activities of a house and of its value partners that can add a margin of value to a business firm�southward products or services.

You can utilise the business value chain model to identify areas where data systems will improve business processes. You can also benchmark your business processes against your competitors or others in related industries, and place and implement industry best practices.

• Benchmarking involves comparing the efficiency and effectiveness of your business processes against strict standards and so measuring performance against those standards.
• Industry all-time practices are usually identified past consulting companies, research organizations, government agencies, and manufacture associations as the almost successful solutions or trouble-solving methods for consistently and finer achieving a business objective.

A firm'due south value chain is linked to the value chains of its suppliers, distributors, and customers.

Information systems can be used to attain strategic advantage at the industry level by working with other firms to develop manufacture-wide standards for exchanging information or business transactions electronically, which force all market participants to subscribe to like standards. Such efforts increase efficiency, making production exchange less likely and perhaps raising entry costs.,

Internet technology has made it possible to create highly synchronized manufacture value chains chosen value webs. A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a production or service for a market collectively. It is more customer-driven and operates in a less linear fashion than the traditional value concatenation.

Effigy 3-12

FIGURE 3-12 THE VALUE Web The value spider web is a networked arrangement that tin synchronize the value chains of business partners within an manufacture to respond rapidly to changes in supply and demand.

A large corporation is typically a drove of businesses. Data systems tin can ameliorate the overall performance of these business organisation units by promoting synergies and cadre competencies.

• In synergies, the output of some units can exist used every bit inputs to other units, or two organizations pool markets and expertise, and these relationships lower costs and generate profits.
• A cadre competency is an activity for which a house is a globe-form leader, such every bit being the world'due south best miniature parts designer. A core competency relies on knowledge that is gained through feel too as incorporating new, external noesis. Whatever information system that encourages the sharing of noesis beyond business units enhances competency.

Business models based on a network may help firms strategically by taking reward of network economic science . In network economic science, the marginal costs of calculation another participant or creating some other production are negligible, whereas the marginal gain is much larger. For example, the more than people offer products on eBay, the more valuable the eBay site is to everyone because more than products are listed, and more competition among suppliers lowers prices.

Another network-based strategy is the virtual company , or virtual organisation, which uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited past traditional organizational boundaries or physical locations. One company tin utilise the capabilities of another visitor without beingness physically tied to that company.

The traditional Porter model of competitive forces assumes a relatively static manufacture environment; relatively clear-cut industry boundaries; and a relatively stable set of suppliers, substitutes, and customers. With the emergence of the digital house and the Cyberspace, some modifications to the original competitive forces model are needed. Some of today's firms are much more enlightened that they participate in business ecosystems, loosely coupled just interdependent networks of suppliers, distributors, outsourcing firms, transportation service firms, and technology manufacturers. In a business organization ecosystem , cooperation takes place across many industries rather than many firms.

Effigy 3-13

FIGURE 3-13 AN ECOSYSTEM STRATEGIC MODEL The digital firm era requires a more dynamic view of the boundaries among industries, firms, customers, and suppliers, with competition occurring among manufacture sets in a business organization ecosystem. In the ecosystem model, multiple industries work together to deliver value to the customer. IT plays an of import office in enabling a dense network of interactions among the participating firms.

Business organisation ecosystems tin be characterized as having one or a few keystone firms that dominate the ecosystem and create the platforms used past other niche firms. Keystone firms in the Microsoft ecosystem include Microsoft and technology producers such every bit Intel and IBM. Niche firms include thousands of software application firms, software developers, service firms, networking firms, and consulting firms that both support and rely on the Microsoft products.

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Source: https://paginas.fe.up.pt/~als/mis10e/ch3/chpt3-3bullettext.htm

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