Fundamentals of Strategic Advantage

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Fundamentals of Strategic Advantage

• Lecture 7

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Competitive Strategies

• Competitive Strategies Strategies developed to
  counter threats of competitive forces
• Cost Leadership Strategy
• Differentiation Strategy
• Innovation Strategy
• Growth Strategies
• Alliance Strategies

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How IT can be used to implement competitive
strategies?

• Lower Costs
• Use IT to substantially reduce the cost of
  business processes
• Use IT to lower the costs of customer or supplier
• Reduce inventory (JIT)
• Reduce manpower costs per sale
• Help suppliers or customers reduce costs
• Increase costs of competitors
• Reduce manufacturing costs

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How IT can be used to implement competitive
strategies?

• Differentiate
• Develop new features to differentiate product and
  services
• Use IT features to reduce the differentiation
  advantage of competitors
• Use IT features to focus products and services at
  selected market niches
• Create a positive difference between your
  products/services the competition.
• May allow you to reduce a competitors
  differentiation advantage.

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How IT can be used to implement competitive
strategies?

• Innovate
• New ways of doing business
• Unique products or services
• New ways to better serve customers
• Reduce time to market
• New distribution models
• Create new products and services that include IT
  components
• Develop unique new markets with the help of IT
• Make changes to business processes with IT that
  cut cost, improve quality, efficiency, customer
  service etc.

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How IT can be used to implement competitive
strategies?

• Promote Growth
• Use IT to manage regional and global business
  expansion
• Use IT to diversify and integrate into other
  products and services
• Expand production capacity
• Expand into global markets
• Diversify
• Integrate into related products and services.

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How IT can be used to implement competitive
strategies?

• Develop Alliances
• Use IT to create virtual organizations of
  business partners
• Develop inter enterprise information systems
  linked by Internet and extranets that support
  strategic business relationships with customers,
  suppliers, subcontractors and others.
• Mergers, acquisitions, joint ventures, virtual
  companies
• Marketing, manufacturing, or distribution
  agreements.

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Competitive Strategies

• Locking in customers or suppliers
• Building switching costs
• Raising barriers to entry
• Leveraging investment in IT

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Competitive Advantage Vs Competitive Necessity

• The ability to learn faster than your
  competitors may be the only sustainable
  competitive advantage in the future.

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Strategic Information Systems

• Strategic Information System (SIS) is a system to
  manage information and assist in strategic
  decision making.
• A strategic information system has been defined
  as, "The information system to support or change
  enterprise's strategy."
• SIS can be of any kind of IS i.e. TPS, MIS or DSS.

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Strategic Information Systems

• Strategic information system is different from
  other systems as -
• they change the way the firm competes.
• they have an external (outward looking) focus.
• they are associated with higher project risk.
• they are innovative (and not easily copied).

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Value Chain Concept

• It views 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.
• Primary processes
• Support processes
• Highlight where competitive strategies can best
  be applied in a business

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Value Chain Concept
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Strategic Uses of IT

• Organizations can use information technology in
  many ways
• For example
• Use IT to support efficient everyday operations
• A company emphasizing on strategic business uses
  of information technology
• Would devise business strategy that use IT to
  develop products and services

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Strategic Uses Of Information Technology

• Major competitive differentiator
• Develop a focus on the customer
• Customer value
• Best value
• Understand customer preferences
• Track market trends
• Supply products, services, information anytime,
  anywhere
• Tailored customer service

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Strategic Uses Of Information Technology

• Business Process Reengineering (BPR)
• Rethinking redesign of business processes
• Combines innovation and process improvement
• BPR combines
• Strategy of promoting business innovation
• Strategy of making major improvements to business
  processes
• Eventually making the company stronger and more
  successful competitor in the marketplace
• Success factors
• Organizational redesign
• Process teams and case managers
• Information technology

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Strategic Uses Of Information Technology

• Improve business quality
• Total Quality Management (TQM)
• Quality from customers perspective
• Meeting or exceeding customer expectations
• Commitment to
• Higher quality
• Quicker response
• Greater flexibility
• Lower cost

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Strategic Uses Of Information Technology

• Becoming agile
• Four basic strategies
• Customers perception of product/service as
  solution to individual problem
• Cooperate with customers, suppliers, other
  companies (including competitors)
• Thrive on change and uncertainty
• Leverage impact of people and peoples knowledge

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Strategic Uses Of Information Technology

• The virtual company
• Uses IT to link people, assets, and ideas
• Forms virtual workgroups and alliances with
  business partners
• Interorganizational information systems
• Strategies
• Share infrastructure risk with alliance
  partners
• Link complementary core competencies
• Reduce concept-to-cash time through sharing

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Strategic Uses Of Information Technology

• Strategies (continued)
• Increase facilities and market coverage
• Gain access to new markets and share market or
  customer loyalty
• Migrate from selling products to selling
  solutions

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References

• Management Information Systems, 7th Edition,
  James A. OBrien, George M. Marakas. Chapter 2