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Competing with
Information Technology
Chapter
2
Chapter
2
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Identify several basic competitive

strategies and explain how they can use
information technologies to confront the
competitive forces faced by a business.

Identify several strategic uses of Internet

technologies and give examples of how
they give competitive advantages to a
business.
Learning Obectives Learning Obectives
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Learning Obectives Learning Obectives

!ive examples of how business process

reengineering fre"uently involves the strategic
use of Internet technologies.

Identify the business value of using Internet

technologies to become an agile competitor or
to form a virtual company

#xplain how $nowledge management systems

can help a business gain strategic advantages.
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%hy &tudy &trategic IT' %hy &tudy &trategic IT'

Technology is no longer an afterthought in

forming business strategy( but the actual
cause and driver.

IT can change the way businesses

compete.
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&trategic )iew of Information &ystems &trategic )iew of Information &ystems

Information systems are vital competitive

networ$s.

Information systems are a means of

organi*ational renewal.

I& 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.
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Case ,-. /oes IT 0atter' Case ,-. /oes IT 0atter'
What is IT?

1 bunch of networ$s and computers

O2

3ardware plus the software that mediates

and manages human $nowledge or
information
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Case ,-. /oes IT 0atter' Case ,-. /oes IT 0atter'
Charles Fitzgerald, Microsot !e"eral
Ma"ager

The source of competitive advantage in

business is what you do with the
information that technology gives you
access to. 3ow do you apply that to
some particular business problem'
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Case ,-. /oes IT 0atter' Case ,-. /oes IT 0atter'
$a%l &trass'a", or'er CI( o !e"eral
Foods, )ero*, $e"tago", a"d +,&,

Information technology today is a

$nowledge4capital issue.

Loo$ at the business powers 5 most of all

%al40art( but also companies li$e 6fi*er
or 7ed#x. They+re all waging information
warfare.
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Case ,-. /oes IT 0atter' Case ,-. /oes IT 0atter'
-. /o you agree with the argument made
by 8ic$ Carr to support his position that
IT no longer gives companies a
competitive advantage' %hy or why
not'
2. /o you agree with the argument made
by the business leaders in this case in
support of the competitive advantage
that IT can provide to a business' %hy
or why not'
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Case ,-. /oes IT 0atter' Case ,-. /oes IT 0atter'
9. %hat are several ways that IT could provide a
competitive advantage to a business' :se
some of the companies mentioned in this case
as examples. )isit their websites to gather
more information to help you answer.
;. %hat does 0r. &trassman mean by
information warfare'
<. Can information technology give a competitive
advantage to a small business' %hy or why
not' :se an example to illustrate your
answer.
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&trategic Information &ystems &trategic Information &ystems
/efinition.

1ny $ind of information system that uses

information technology to help an
organi*ation gain a competitive
advantage( reduce a competitive
disadvantage( or meet other strategic
enterprise obectives.
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Competitive 7orces and &trategies Competitive 7orces and &trategies
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Competitive 7orces Competitive 7orces
/efinition.

&hape the structure of competition in its

industry.
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6orter+s Competitive 7orces 0odel 6orter+s Competitive 7orces 0odel
To survive and succeed( a business must
develop and implement strategies to effectively
counter the.

2ivalry of competitors within its industry

Threat of new entrants into an industry and its

mar$ets

Threat posed by substitute products which

might capture mar$et share

=argaining power of customers

=argaining power of suppliers

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Competitive &trategies Competitive &trategies

Cost Leadership

/ifferentiation

Innovation

!rowth

1lliance
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Cost Leadership &trategy Cost Leadership &trategy

=ecoming a low4cost producer of products

and services

7inding ways to help suppliers and

customers reduce their costs

Increase costs of competitors

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/ifferentiation &trategy /ifferentiation &trategy

/eveloping ways to differentiate a firm+s

products and services from its
competitors+

2educe the differentiation advantages of

competitors
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Innovation &trategy Innovation &trategy

/evelopment of uni"ue products and services

#ntry into uni"ue mar$ets or mar$et niches

0a$ing 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
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!rowth &trategy !rowth &trategy

&ignificantly expanding a company+s

capacity to produce goods and services

#xpanding into global mar$ets

/iversifying into new products and

services

Integrating into related products and

services
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1lliance &trategy 1lliance &trategy

#stablishing new business lin$ages and

alliances with customers( suppliers(
competitors( consultants( and other
companies
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Competitive &trategy #xamples Competitive &trategy #xamples
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Other Competitive &trategies Other Competitive &trategies

Loc$ing in customers or suppliers by

building valuable new relationships with
them.

=uilding switching costs so a firm+s

customers or suppliers are reluctant to
pay the costs in time( money( effort( and
inconvenience that it would ta$e to switch
to a company+s competitors.
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Other Competitive &trategies Other Competitive &trategies

2aising barriers to entry that would

discourage or delay other companies from
entering a mar$et.

Leveraging investment in information

technology by developing new products
and services that would not be possible
without a strong IT capability.
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1dvantage vs. 8ecessity 1dvantage vs. 8ecessity

Competitive 1dvantage 5 developing

products( services( processes( or
capabilities that give a company a
superior business position relative to its
competitors and other competitive forces

Competitive 8ecessity 5 products(

services( processes( or capabilities that
are necessary simply to compete and do
business in an industry
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Customer47ocused =usiness Customer47ocused =usiness
1 business that.

can anticipate customers+ future needs.

responds to customer concerns.

provides top4"uality customer service.

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I& in a Customer47ocused =usiness I& in a Customer47ocused =usiness
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)alue Chain )alue Chain
/efinition.

)iew of a firm as a series( chain( or

networ$ 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.
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)alue Chain )alue Chain
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)alue Chain )alue Chain
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Case ,2. :sing IT to tap #xpert >now43ow Case ,2. :sing IT to tap #xpert >now43ow
-. %hat are the $ey business challenges
facing companies in supporting their
global mar$eting and expansion efforts'
3ow is the 1s$0e $nowledge
management system helping to meet
this challenge' #xplain.
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Case ,2. :sing IT to tap #xpert >now43ow Case ,2. :sing IT to tap #xpert >now43ow
2. 3ow can the 1s$0e system help to
identify wea$nesses in global business
$nowledge within the /epartment of
Commerce'
9. %hat other global trade situations could
the 1s$0e system provide information
about' 6rovide some examples.
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Case ,2. :sing IT to tap #xpert >now43ow Case ,2. :sing IT to tap #xpert >now43ow
;. Is the 1s$0e system intended to help
the /OC become a $nowledge4creating
organi*ation' %hy or why not'
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=usiness 6rocess 2eengineering =usiness 6rocess 2eengineering
/efinition.

7undamental rethin$ing and radical

redesign of business processes to
achieve dramatic improvements in cost(
"uality( speed( and service.
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=62 vs. =usiness Improvement =62 vs. =usiness Improvement
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Cross47unctional 6rocesses Cross47unctional 6rocesses
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1gility 1gility
/efinition.

The ability of a company to prosper in

rapidly changing( continually fragmenting
global mar$ets for high4"uality( high
performance( customer4configured
products and services.
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1gile Company 1gile Company
/efinition.

1 company that can ma$e a profit in

mar$ets with broad product ranges and
short model lifetimes( and can produce
orders individually and in arbitrary lot
si*es.
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0ass Customi*ation 0ass Customi*ation
/efinition.

6roviding individuali*ed products while

maintaining high volumes of production
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1gile Competitor 1gile Competitor
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)irtual Company )irtual Company
/efinition.

1n organi*ation that uses information

technology to lin$ people( organi*ations(
assets( and ideas.
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Interenterprise Information &ystems Interenterprise Information &ystems
/efinition.

Information systems implemented on an

extranet among a company and its
suppliers( customers( subcontractors( and
competitors with whom it has formed
alliances.
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)irtual Company )irtual Company
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)irtual Company &trategies )irtual Company &trategies

&hare infrastructure and ris$ with alliance

partners.

Lin$ complementary core competencies.

2educe concept4to4cash time through

sharing.
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)irtual Company &trategies )irtual Company &trategies

Increase facilities and mar$et coverage.

!ain access to new mar$ets and share

mar$et or customer loyalty.

0igrate from selling products to selling

solutions.
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>nowledge4Creating Companies >nowledge4Creating Companies
/efinition.

Consistently creating new business

$nowledge( disseminating it widely
throughout the company( and "uic$ly
building the new $nowledge into their
products and services.
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Types of >nowledge Types of >nowledge

#xplicit >nowledge 5 data( documents(

things written down or stored on
computers

Tacit >nowledge 5 the ?how4tos@ of

$nowledge( which reside in wor$ers
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>nowledge 0anagement >nowledge 0anagement
/efinition.

Techni"ues( technologies( systems( and

rewards for getting employees to share
what they $now and to ma$e better use of
accumulated wor$place and enterprise
$nowledge.
>nowledge 0anagement &ystems 5
manage organi*ational learning and
business $now4how
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Levels of >nowledge 0anagement Levels of >nowledge 0anagement
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&ummary &ummary

Information technologies can support many

competitive strategies including cost leadership(
differentiation( innovation( growth and alliance.

IT can help

=uild customer4focused businesses

2eengineer business processes

=usinesses become agile companies

Create virtual companies

=uild $nowledge4creating companies

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#nd of Chapter
Chapter
2
Chapter
2