Chapter 2
STRATEGIC AND COMPETITIVE
OPPORTUNITIES
Using IT for Competitive Advantage
Competitive Advantage
Providing a product or service in a way that
customers value more than what the competition
is able to do.
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In perspective (do not be fooled) …
Its not the IT, it’s the People
It is not the information technology that gives a
company the competitive advantage; it is the way
people use the technology that makes the
difference.
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… Main Chapter Menu…
Competitive Advantage Examples
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FedEx
Schwabs
Dell
Cisco
Developing A Strategy For The Internet Age
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The five forces model
The three generic strategies
The value chain
Key E-Commerce Strategies
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Mass customization
Disintermediation
Global reach
The U.S. Airline Industry
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23 159 867 632 www.canadapost.ca
Competitive Advantage Examples
Federal Express
FedEx
Package
Tracking
Screen
page 45
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Competitive Advantage Examples
Charles Schwab
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Competitive Advantage Examples
Dell Computer
Buy-hold-sell versus sell-sourceship
page 48
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Competitive Advantage Examples
Dell Computer
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Information partnership - lets two
or more companies cooperate by
integrating their IT systems.
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Competitive Advantage Examples
Cisco Systems
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Cisco Systems - a leader in utilizing the direct sell model
over the Internet.
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Business to Business (B2B) - companies whose
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Business to Consumer (B2C) -companies whose
customers are primarily other businesses.
customers are primarily individuals.
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Developing A Strategy For The Internet Age
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Porter’s three frameworks are:
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The Five Forces model
The Three Generic Strategies
The Value Chain
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Developing A Strategy For The Internet Age
The Five Forces Model
Video: porter
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Developing A Strategy For The Internet Age
Using the Five Forces Model
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Buyer power
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Giving choices to the buyer
For example: hotel chains
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Give points
Other loyalty programs
Cash the points for free hotel stays at one of their resort
hotels
Such programs have the effect of increasing the
likelihood that a traveler will stay at a single chain.
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Developing A Strategy For The Internet Age
Using the Five Forces Model
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Supplier power
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The objective is to reduce supplier
power.
How to reduce supplier power
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B2B marketplace - an Internet-based service
which brings together many buyers and sellers.
Find a way to put more information into the
buyer’s hands
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Developing A Strategy For The Internet Age
Using the Five Forces Model
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Threat of substitute products or services
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Consider the introduction of alternative IT
products such as income tax preparation
software.
Consumers now use it.
Accountant has less clients.
Accountant livelihood is threatened.
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Developing A Strategy For The Internet Age
Using the Five Forces Model
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Threat of new entrants
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It is not a good thing when it is very easy for others to enter
into your market.
Companies can use IT to develop and create barriers for
others.
Entry barrier - a product or service feature that customers
have come to expect from companies in a particular
industry.
A good example is what banks did:
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Introduce the bank card and as many ATMs around the world
as possible.
Banking on the internet to pay bills, transfer funds and print
reports.
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Developing A Strategy For The Internet Age
Using the Five Forces Model
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Rivalry among existing competitors
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Using IT systems to be more efficient and
compete more strongly with others.
An example would be PRICE.
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Computer systems can be bought from two different
stores but one is cheaper than the other.
This is possible when one company uses IT in such a
way to reduce its price.
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Developing A Strategy For The Internet Age
The Three Generic Strategies
Figure 2.5
The Three
Generic
Strategies
page 52
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Developing A Strategy For The Internet Age
The Value Chain
Once you understand how IT can
help you develop business strategy,
you can ensure that IT supports all
important business processes.
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Developing A Strategy For The Internet Age
The Value Chain
The Components of a Value Chain
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Developing A Strategy For The Internet Age
The Value Chain
The Value-Added View of a Necktie Manufacturer
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Manufacturing Value Chain
Where has information system added value in the value chain?
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Key E-Commerce Strategies
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Three capabilities made possible by the
Internet should be kept in mind by
companies searching for ways to use
the new economy to gain competitive
advantage:
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Mass customization and personalization
Disintermediation
Global reach
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Key E-Commerce Strategies
Mass Customization and Personalization
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Mass customization - a business gives its customers the
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Personalization - a Web site can know enough about your
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Collaborative filtering - a method of placing you in an affinity
opportunity to tailor its product or service to the customer’s
specifications.
likes and dislikes that it can fashion offers that are more likely to
appeal to you.
group of people with the same characteristics.
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Key E-Commerce Strategies
Disintermediation
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Key E-Commerce Strategies
Disintermediation
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Disintermediation – using the Internet as a delivery vehicle,
intermediate players in a distribution channel can be bypassed.
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Key E-Commerce Strategies
Global Reach
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Global reach - the ability to extend a
company’s reach to customers anywhere
there is an Internet connection, and at a
much lower cost.
Permission marketing - when you
have given a merchant your permission
to send you special offers.
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The U.S. Airline Industry
Airline Reservation Systems
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Reservations systems
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Frequent flyer programs
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Yield management systems
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Disintermediating the Travel Agent
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Show porter video
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Chips system from earlier
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What kinds of information systems
could be beneficial? Why?
What kinds of information products
would be helpful? Why?
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Utz Chips case Answer the
following
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What is the major role of UTZ information systems?
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What are the characteristics of the information UTZ
receives that would make it valuable?
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Analyze the industry that UTZ is in using the porter
model, is it a good industry to be in?
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What competitive advantage do you feel Utz has?
How does information play into that competitive
advantage
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