Competing With Information Technology

Chapter
2
Competing with
Information Technology
Why Study Strategic IT?
Technology is no longer an afterthought in forming
business strategy, but the actual cause and driver.
IT can change the way businesses compete.

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.
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.
Competitive Forces and Strategies
Competitive Forces
Definition:
Shape the structure of competition in its industry.
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
Competitive Strategies
Cost Leadership
Differentiation
Innovation
Growth
Alliance
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

Differentiation Strategy
Developing ways to differentiate a firm’s products and
services from its competitors’
Reduce the differentiation advantages of competitors

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
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

Alliance Strategy
Establishing new business linkages and alliances with
customers, suppliers, competitors, consultants, and
other companies
Competitive Strategy Examples
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.
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.
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
Customer-Focused Business
A business that:
can anticipate customers’ future needs.
responds to customer concerns.
provides top-quality customer service.

IS in a Customer-Focused Business
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.
Value Chain
Business Process Reengineering
Definition:
Fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements
in cost, quality, speed, and service.
BPR vs. Business Improvement
Cross-Functional Processes
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.
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.
Mass Customization
Definition:
Providing individualized products while maintaining
high volumes of production
Agile Competitor
Virtual Company
Definition:
An organization that uses information technology to
link people, organizations, assets, and ideas.
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.
Virtual Company
Virtual Company Strategies
Share infrastructure and risk with alliance partners.
Link complementary core competencies.
Reduce concept-to-cash time through sharing.

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.

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.
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
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
Levels of Knowledge Management
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
Chapter
2
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Competing With Information Technology

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Chapter

IT can change the way businesses compete.

Information systems are a means of organizational

IS are a necessary investment in technologies that help

Rivalry of competitors within its industry

Finding ways to help suppliers and customers reduce

Increase costs of competitors

Reduce the differentiation advantages of competitors

Entry into unique markets or market niches

Making radical changes to the business processes

Expanding into global markets

Diversifying into new products and services

Integrating into related products and services

Building switching costs so a firm’s customers or

Leveraging investment in information technology by

Competitive Necessity – products, services, processes,

can anticipate customers’ future needs.

responds to customer concerns.

provides top-quality customer service.

Link complementary core competencies.

Reduce concept-to-cash time through sharing.

Gain access to new markets and share market or

Migrate from selling products to selling solutions.

Tacit Knowledge – the “how-tos” of knowledge, which

Knowledge Management Systems – manage

IT can help

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