Competing With
Information Technology
Chapter 2
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Learning Objectives:

Identify several basic competitive strategies
and explain how they can use information
technology to confront the competitive forces
faced by a business.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Competitive Strategies:
Competitive
Strategies
Cost
Leadership
Differentiation
Other
Strategies
Innovation
Growth
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
Alliance
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Competitive Forces:
Competitive
Forces
Rivalry Of
Competitors
Threat Of
New
Entrants
Bargaining
Power Of
Customers
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
Bargaining
Power Of
Suppliers
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Businesses Can Develop Competitive
Strategies
Cost Leadership
Differentiation
Innovation
COMPETITIVE
STRATEGIES
Growth
Alliance
Other strategies
Rivalry of
competitors
Threat of new
entrants
Threats of
substitutes
Bargaining
power of
customers
Bargaining
power of
suppliers
COMPETITIVE FORCES
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Competitive Strategies

Cost leadership strategy:
becoming a low cost producer of products and
services in the industry.

Differentiation strategy:
developing ways to differentiate a firm’s
products and services from its competitors.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Competitive Strategies (continued)

Innovation strategy:
Finding new ways of doing business.

Growth strategies:
Significantly expanding a company’s capacity to produce
goods and services.

Alliance strategies:
Establishing new business linkages and alliances with
customers, suppliers, competitors, consultants, and other
companies.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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A Summary Of How Information Technology Can Be Used To
Implement The Five Basic Competitive Strategies
BASIC STRATEGIES IN THE BUSINESS USE OF INFORMATION TECHNOLOGY
Lower Costs
 use IT to substantially reduce the cost of business processes.
 use IT to lower the costs of customers or suppliers.
Differentiate
 develop new IT features to differentiate products and services.
 use IT features to reduce the differentiation advantages of competitors.
 use IT features to focus products and services at selected market.
Innovate
 create new products and services that include IT components.
 develop unique new markets with the help of IT.
 make radical changes to business processes with IT that dramatically cut costs, improve quality,
efficiency, customer services.
Promote growth
 use IT to manage regional and global business expansion.
 use IT to diversity and integrate into other products and services.
Develop alliance
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
 use IT to create virtual organizations of business partners.
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Building A Customer Focused
Business

Strategic focus on “customer value”:
recognizes that quality, rather than price has
become the primary determinant in a
customer’s perception of value.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Building A Customer Focused Business (continued). How A
Customer Focused Business Builds Customer Value And Loyalty
Using Internet Technologies
Let customers
place orders
through
distribution
partners
Let customers
place orders
directly
Transaction
Database
Customer
Database
Give all
employees a
complete view of
each customer
Make loyal
customers feel
special with website
personalization
Let customers
check order history
and delivery status
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
Link employees and
distribution partners
to database and
customers
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Becoming An Agile Company:

Can make profit in markets with broad
product ranges and short model lifetimes.

Depend heavily on internet technologies.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Becoming An Agile Company
(continued)

Business must implement four basic strategies:
1. customers must perceive the products and services
an agile company as solutions to their individual
problems.
2. an agile company cooperates with:
customers,
suppliers,
competitors,
and other companies.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Becoming An Agile Company
(continued)
Business must implement four basic
strategies (continued):
3. An agile company organizes so that it thrives
on change.

4. An agile company leverages the impact of its
people and the knowledge they posses.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Becoming An Agile Company (continued). How Information Technology Can
Help A Company Be An Agile Competitors With The Help Of Customers And
Business Partners
Type Of
Agility
Description
Role Of IT
Customer
Ability to co opt customers in the
exploitation of innovation opportunities
 as sources of innovation ideas
 as co creators of innovations
Technologies for building
and enhancing virtual
customer communities for
product design, feedback,
and testing
Partnering
Ability to leverage assets, knowledge,
and competencies of suppliers,
distributors in the exploration and
exploitation of innovation opportunities
Technologies facilitating
inter firm collaboration,
such as collaborative
platforms and portals
Operational
Ability to accomplish speed, accuracy,
and cost economy in the exploitation of
innovation opportunities.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
Technologies for
modularization and
integration of business
process
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Creating A Virtual Company

A virtual company:
an organization that uses information
technology to link people, organizations,
assets, and ideas.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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A Virtual Company Uses The Internet, Intranets, And Extranets
To Form Virtual Workgroups And To Support Alliances With
Business Partners
Alliance with
subcontractors
Customer response
and order
fulfillment teams
Alliance with a major
suppliers
Alliance with a major
customer
Extranets
Manufacturing
teams
Alliance with small
suppliers
Engineering
teams
Alliance with a
competitor
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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The Basic Business Strategies Of
Virtual Companies
Strategies Of Virtual Companies
* Share infrastructure and risk with alliance partners
* 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
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Real Word Case 2: GE Energy, Using Information
Technology To Create Strategic Customer Relationships
Look at General Electric (GE)’s power turbine
business. Its customer are major utilities, and
they have good reason to hate equipment
failures. At the least, any downtime creates huge
opportunity costs for the customers; often it
means they have to pay hefty regulatory
compliance fines.
To reduce the risk, GE (and its competition) invests heavily
information technologies for remote monitoring and diagnostics
so it can deploy a technician or engineer ahead of a failure,
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Real Word Case 2: GE Energy, Using Information Technology To
Create Strategic Customer Relationships (continued)
as opposed to doing so based upon a planned schedule, or
assumptions about the maintenance needed by each type of
turbine, or, even worse, after turbine fails and the power has gone
off.
This strategic investment in IT has a dramatic effect on the
profitability of GE’s maintenance services. Most manufactures
cannot charge more than $ 90 to $ 110 per hour for their technical
support because of price and benefit pressures from local
competitors. But GE Energy, because of its efficient network
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Real Word Case 2: GE Energy, Using Information Technology To
Create Strategic Customer Relationships (continued)
Enabled remote servicing, can charge $ 500 to $ 600 per hour for
the same technician. Even more important, the information
generated by its continual monitoring allows GE to take an
additional tasks, such as managing a customer’s spare parts
inventory or providing the customer’s and GE’s service and
support personnel with complete access to unified data and
knowledge about the status of the equipment.
Customer now look to GE not just for high quality energy
equipment but also for help in optimizing their ability to supply
consistent and high quality power to their customers.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Real Word Case 2: GE Energy, Using Information Technology To
Create Strategic Customer Relationships (continued)
So in fact, GE has created a significant amount
of customer dependency for its services. This
has allowed GE to tie its pricing to the business
benefits it provides (power by the hour), for
instance, rather than the products themselves.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Real Word Case 2: GE Energy, Using Information Technology To
Create Strategic Customer Relationships (continued)

What are the business benefits of using information
technology to build strategic customer relationships
for GE?
What are the business benefits for their customers?

How could other companies benefit from the use of
IT to build strategic customer relationships? Provide
or purpose several examples of such uses.
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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Discussian Questions:

MIS author and consultant Peter Keen says:
“We have learned that it is not technology that
creates a competitive edge, but the
management process that exploits
technology.”
What does he mean?
Do you agree or disagree? Why?
Ir. Muhril Ardiansyah, M.Sc., Ph.D.
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