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Competing with Information Technology
CHAPTER 2
Lecture-3 / T. Nouf Almujally
Outline
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Section 1:
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Strategic IT
Competitive Strategy Concepts
Section 2:
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Creating a Virtual Company
Building a Knowledge Creating Company
Strategic IT
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In Chapter 1 , we emphasized that a major role of IS
applications in business is to provide effective support
of a company’s strategies for gaining competitive
advantage.
IT can change the way businesses compete.
Competitive Strategy Concepts
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The strategic roles of IS involves using information
technology to develop products, services and
capabilities that gives a company major advantages
over the competitive forces it faces in the marketplace.
This role is accomplished through a SIS’s.
A Strategic Information System is any information
system (e.g. TPS, MIS and DSS) that uses IT to help an
organization:
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Gain a competitive advantage.
Reduce a competitive disadvantage.
Or meet other strategic enterprise objectives.
What Does Competitive Advantage Mean?
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Competitive Advantage:
• An advantage that a firm has over its competitors,
allowing it to generate greater sales or margins
and/or retain more customers than its competitors.
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Developing products, services, processes, or
capabilities that give a company a superior business
position relative to its competitors and other
competitive forces.
Competitive Forces
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A company can survive and succeed in the long term
only if it successfully develops strategies to confront
five Competitive forces:
Competitive Forces
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The rivalry of competitors within its industry.
1.
Rivalry among existing competitors takes many familiar forms, including
price discounting, new product introductions, advertising campaigns, and
service improvements.
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The threat of new entrants into an industry and its market.
2.
Internet has created many ways to enter the market quickly with low cost
E-commerce enables a business to emerge overnight (ex. KrispyKreme)
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The threat of substitutes products that might capture market
share.
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A substitute performs the same or a similar function as an industry’s
product by a different means.
Ex. Videoconferencing is a substitute for travel. E-mail is a substitute for
express mail.
Competitive Forces
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The bargaining power of customers.
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If the customers’ bargaining power gets too strong, they
can drive the price to low levels, or refuse to buy the
product or service.
The bargaining power of suppliers.
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If the supplier’s bargaining power gets too strong, it can
force the price of goods and services to high level, or
stop raw materials.
Competitive Strategies
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Businesses can develop the following competitive strategies
to counter the actions of the competitive forces they confront
in the marketplace:
Cost Leadership
Differentiation
Strategies
Innovation
Alliance
Growth
Competitive Strategies
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1- Cost Leadership:
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Produce lower price products and services,
help suppliers or customers to reduce their costs,
increase the cost of competitors.
Ex. eBay.com, Priceline.com
2- Products Differentiation:
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Developing ways to differentiate products from those of
its competitors
Ex. Moen Inc, Starbuck vs. Dunkin Donuts
Competitive Strategies
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3- Business Innovation
 Produce new unique products and services,
 entering new markets,
 add some changes to the recent business processes
 Ex. Amazon.com
4- Growth
 Expanding a company's capacity to produce products and
services,
 expanding into global markets,
 diversifying into new products and services,
 Integrating into related products and services
 Ex. Wal-Mart
Competitive Strategies
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5- Alliances
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Establish new business linkages with customer, suppliers,
competitors, and other companies.
These linkages could include:
Mergers.
 Acquisitions
 Joint ventures.
 Virtual companies.
 or other marketing , manufacturing or distribution agreements
between a business and its trading partners
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Ex. Wal-Mart /Procter & Gamble.
Competitive Forces and Strategies
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Questions ..
Creating a Virtual Company
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Virtual company: organization that uses IT to link…
Organizations
Assets
People
Ideas
Inter-enterprise information systems link…
Customers
Competitors
Suppliers
Subcontractors
Virtual Company
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A virtual company uses the Internet, intranet, and extranets to form
virtual workgroups and support alliances with business partners.
Virtual Company Strategies
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Basic Business Strategies
Share
infrastructure &
risk with alliance
partners
Link
complimentary
competencies
Reduce conceptto-cash time
through sharing
Increase facilities
and market
coverage
Gain access to
new markets &
share market or
customer loyalty
Migrate from
selling products
to selling
solutions
Examples
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Jobs.com is one of the many virtual companies that have brought
together job seekers with companies.
• It allows job seekers and recruiters to come together through the
internet.
• It allows an individual to search for a job by location, salary
range, and level of experience.
• Then submit job seekers resumes online to the companies.
• The site also offer job seekers helpful information on preparing a
resume, salary information and advice from the experts on
searching for a job.
Example:
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Example:
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Questions ..
Building a Knowledge-Creating Company
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A knowledge-creating company
or learning organization…
Consistently creates new business knowledge
disseminates it throughout the company
Builds it into its products and services
Two Kinds of Knowledge
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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 tacit
knowledge available to others
Successful Knowledge Management
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Successful knowledge
management
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Creates techniques,
technologies, systems, &
rewards for getting
employees to share what
they know.
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Makes better use
of accumulated workplace
and enterprise knowledge.
Knowledge Management levels
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Knowledge Management Systems (KMS)
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Knowledge management systems…
Are a major strategic use of
IT
Manage organizational
learning and know-how
Help knowledge workers
create, organize, and make
available important
knowledge
Make this knowledge
available wherever and
whenever it is needed
Knowledge Management Systems (KMS)
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Knowledge includes…
Processes
Reference works
Best practices
Patents
Procedures
Forecasts
Formulas
Fixes
Knowledge Management Systems (KMS)
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Some technologies used by KMS:
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Internet and intranet, web sites , discussion groups.
Knowledge bases, data mining.
As the organizational learning process continues and its
knowledge base expands, the company works to integrate its
knowledge into its business process, products and services.
This integration will help the company to become a more
innovative provider of high-quality products and services , as
well as a very strong competitor in the marketplace.
Questions ..
Resources ..
Read from Chapter 2 (Section 1,2)