What extent do you agree that information technology

can confer competitive advantage to a business?

With the demise of the dotcoms corporate scholars and experts perceived the decline of
the information technology edge. These observers have predicted the digital mammoths
as being too quick in achieving too much too soon. As with any business that expands too
quickly based on brittle foundations the dotcoms had been inclined to its inevitable fate.
These observers failed to notice the cause for the fate of the dotcoms had not been
information technology but business models adopted by these organizations. According
to David Stauffer (2005) companies whether young or old achieved success in the 21st
century have not sprung out of nowhere. They all have based their strategies on strong
foundations and business structures. Organizations like Office Depot, Dell, Amazon and
EBay have succeeded not because they have become "online" but because they have
adopted a competitive strategy and gained an edge over their rivals based on competitive
business models.

The following discussion argues that information technology like any business strategic
tools can be used for the benefit of the organization. What organizations that endeavour
to use IT as the basis of organizational restructuring need to understand is that IT can
only confer business competitive advantage to the extent that the organization
integrates it into its operational standards. On its own IT cannot be a competitive
advantage. Scope The discussion aims to explore the issues and debates prevalent among
scholars whether IT does nor does not confer competitive advantage in terms of
operational and business strategies; how IT can benefit the industries and economy alike;
and investigates how firms that have not already integrated IT into their models achieve
competitiveness and competencies. In the process the researcher plans to enumerate on
the various practical and theoretical backgrounds that could be useful for modern
businesspersons and scholars alike. Discussion

Business Strategy and competitive advantage Competitive advantage and IT have often
been misjudged and misinterpreted by management and business strategists. Companies
according to Michael Porter (1998) need competitive advantage in order to achieve its
strategic goals. Competitive advantage can be of two types: a. the cost advantage b. the
differentiation advantage

When firms are able to deliver to their customers at a lower cost than it is said to have
gained a competitive advantage over its rivals (cost advantage). Alternative if its product
features and benefits exceed those offered by its competitors it is said to have a
differentiation advantage. Given these competitive advantage features, one can now move
on to what leads to cost or differentiation advantage. Porter (1998) is of the opinion that a
business model of competitive advantage is based on its ability to manipulate its
resources, create distinctive competencies or capabilities. In this context it is imperative
to note here that during the dot.com bubble most companies did not change their business
models but had become online based on the same structure. They depended on the
uniqueness of the Internet and information technology to give them an edge over rivals
not realizing that information and related technologies does not offer much unless it is
coupled with some kind of integrated organizational strategies. Stauffer (2005) for
example has indicated that companies are successful in today's business environment
because they integrate the clicks (virtual) and bricks (physical). He points out how
organizations must support its physical structure by meticulously strategizing based on
the current resources and utilizing its virtual capabilities to drive operations. Technology
therefore should be the tool for achieving organizational strategies and not be the
differentiation point. It should be used as the means for cost advantage by using it to
structure production, deliver services, and carry out operational functionalities to allow
customers to switch from clicks to bricks and vice versa. Thus Barnes and Noble have
succeeded in gaining a competitive advantage over Amazon not because of its presence
on the Internet but because of its ability to use its extensive database on books available
at its physical stores online and allow the same consumers to choose products
online/offline. Information systems

Information technology in the form of systems for support to create efficiency in daily
operations; to create value; and to achieve differentiation through product deliverance can
offer leverage for companies that adopt it. Suresh Kumar (2005) writes that business
processes require business innovations in making process reengineering meaningful and
worthwhile for the business. Information systems not only facilitate by smoothening the
business reengineering processes through improvement in workflow design, job
requirements, organizational structures and operational efficiencies but also enable
organizational entities such as management to achieve agility in competitive
performance.

This view is consistent with those presented by Davenport in "Enterprise Information

Systems (2005) in which he argues how information systems have become an integral
part of how organizations work and compete in today's business environment. He is of
the opinion that without information systems, that is to say systems that support business
activities, organizations would be setback in managing customers, procurements, supplies
and inventory, and even managing its employees. Especially in organizations that have
branches and units spread far and wide across the globe, it is critical to have integrated
information systems that would help to collaborate the various departments through
integration such as:

- "accounting and financial - human resources management - sales and order management
- logistics and supply chain - manufacturing - inventory management - customer
relationship management" (Davenport 2005)

Not only are this but information systems useful in reducing business transaction
activities which in turn affect costs. Firms such as SAP, Oracle and PeopleSoft have
concentrated on creating value through supply chain software because they realize
organizational needs and because their products have been designed to address the
complexities in processes, choices, uses and users inherent in dynamic organizations
(Davenport 2005). However, this is not to say that such information systems are fault-
proof. Despite enterprise systems uses and supports, the key challenge is for management
to identify what they consider changeable, what is dynamic and which aspects of their
organizations can incorporate change. Of course having a flexible organizational
structure helps but it does not negate misinterpreting opportunities, misjudging the usage
of the information systems; and misuse of technology for wrong purposes etc. Business
intelligence

The purpose of information technology is to create business intelligence a concept

derived from the Japanese which the Western world has been slow to adopt. According to
Mark Davis (2005) business intelligence is the source for achieving competitive
advantage because legitimate innovations support business functions. Information
technology too have the important role of transforming business functions to intelligent
functions and help in establishing competitive advantage. For example imagine a web site
that offers a list of car models available for sale. The function of the website thus would
only be that of a brochure listing and offering information on the car models. Competitive
functionality would be if the website offers interactivity in terms of allowing users to
choose, make choices and make the purchase decision online. This functionality would
therefore create value for the user by saving time, efforts and resources. Furthermore,
Davis writes intelligent business information systems would be one that allows
organizations to: "track current and potential competitors, analyse markets, develop
profitable new products, determine likely candidates for acquisition or merger, monitor
technological developments, and keep abreast of a broad range of political, economic,
social and legislative trends with significant impact on a company's future" (Davis 2005)
Not only this but usefulness of information technology would be if organizations identify
business processes that could be made intelligent, integrate it for providing focussed and
directional support to enhance commercial processes. Intelligent processes serve the
purpose of inquiry and analysis which in turn support competitive advantage. Core
competencies in Business Web

Davis' theory thus support the cost advantage. Don Tapscott (2005) furthers this ideology
by outlining that transaction costs have been in existence ever since man has learned of
trade. Corporate agility, efficiency and resources are useless if they are not aimed at
minimizing transaction costs. This may comprise of: a. search costs for finding resources,
suppliers and intermediaries for distributing products; b. Contracting costs for exchange
and negotiation with contractors. c. coordination costs which involve the cost of
coordinating resources and processes.

Any change in the organization like process reengineering or structuring of organizations

have to bear in mind how the activities impact transaction costs. Consistent with this
ideology, Tapscott is of the opinion that "a firm will expand until the costs of organizing
an extra transaction within the firm become equal to the costs of carrying out the same
transaction to the open market." Yet despite this fact it has been observed that businesses
have expanded to the internet using its framework for modelling their businesses and
expect miraculous successes. Tapscott thinks that such businesses negate their focus on
core competencies and how these competencies such as employees, resources and
suppliers will adversely affect (or do not) the transaction costs. Eventually they will
realize that some resources are difficult to mobilize which add costs to mobilization while
other resources can be acquired instantly from the places where they are ordered
therefore decreases the transaction costs. In sum technology may and may not be the
basis for formulating core competency, other resources may do. Operational Standard

In the above context it can be said that transaction cost is the essence of strategic
development. Contemporary organizations must understand the importance of strategic
development, alliances and management. Information technology is merely a tool that
supports all of these aspects but it cannot be used as the sole resource for achieving them.
Michael Cunningham (2005) in his work "Making B2B Your Operational Standard"
realizes the importance of collaborative commerce systems and indicates that enterprise
benefit from across the supply chain productivity as it reduces costs and offers cost and
process differentiation advantage. Technology in this regard helps out by minimizing the
chain through instant access and reduce response time for users. This theory is also
supported by Nirenburg (2005) who is of the view that developing an internet era mindset
throughout the organization may not be as different as physical organizations because the
basis for the relationship between the business models are the same. At the end of the day
the virtual world and the brick world have to collaborate to achieve satisfaction from
suppliers, companies and customers. Thus integration of information technology is more
of developing core competencies through collaboration rather than using it as a single
source for strategic development. Virtual Collaboration

The essence of Nirenburg and Cunningham's views are more pervasive. No doubt in their
own right they have been accurate in predicting a collaborative framework for business
operations but they have not enumerate on how these could be achieved. For this purpose
one can refer to Clegg, Hermens and Porras (2005) Virtual Collaboration. In this they
discuss how organizations need to collaborate for the purpose of responding to customers
fast, add value to the organizational model and allow partners to bring together resources
and to win over customers. It is only through corporate alliances and governance that one
can achieve competitive edge over rivals. And because technologies like the Internet,
telecommunications and computers enable organizations to become knowledgeable it is
likely that businesses achieve effectiveness and competitiveness. However, businesses on
their own cannot achieve this unless the organizational processes, activities and
management becomes attune to the requirements of information technology - that is
organizations must involve people to learn, imagine, develop, innovate and internalize
knowledge before they can effectively use it for the purpose of achieving competitive
advantage. As Clegg, Carter and Kornberger (2004) indicate organizations must eliminate
the seven gaps of strategic planning before they can effectively achieve their desired
goals: (i) "the gap between managerial fantasy and organizational capabilities; (ii) the gap
between actual, clear goals and possible, unpredictable futures; (iii) the gap between
planning and implementing; (iv) the gap between planned change and emerging
evolution; (v) the gap between means and ends; (vi) the gap between a planning head
(management) and a planned body (organization); and finally, (vii) the gap between order
and disorder" (Clegg, Carter and Kornberger 2004). Summary and conclusion

From the above discussion one learns that competitive advantage in organizations is the
result of cost advantage or differentiation advantage. In this sense information technology
as a tool does not facilitate advantage but management can utilize it to achieve it.
Successful companies that uses information technology in their business model after
having identified their key competencies with respect to the operating environment and
not because information technology would differentiate their business model. Instead
technology can help support firms operations by creating value, and achieving
differentiation through product deliverance. It can help organizations in innovating its
business processes which in turn affect its bottom-line costs and thereby help in gaining a
competitive cost advantage over rivals. In any of the processes within the organization,
information technology can be integrated to help to achieve bottom-line successes
whether it is human resources, financial resources or customer relationship management.
The challenge however for organization is to identify which processes will be most
affected by the change. Change is necessary because organizations need to be dynamic
and intelligent in order to improve functions and increase value to the consumers. Not
only this but intelligent business processes help in strategic thinking and development of
strategies for organizational goal achievements. More importantly it allows the
organization to achieve core competencies by allowing it to collaborate within its units,
suppliers, other organizations by creating a network of businesses. the bottom-line is to
achieve organizational, customers and employees satisfaction. The key is not inherent in
information technology but in the ability of the management to use it to develop
competitive advantage. Thus information technology in terms of the above confer to
business competitive advantage by allowing businesses to become flexible; collaborate;
innovate; efficient; and eventually differentiate and reduce costs. Information technology
on its own is not a competitive advantage but rather it is a tool by which organizations
can extend their competencies. Despite many claims and perceived notions, information
technology cannot be engaged with the view to add advantage. As Clegg, Carter and
Kornberger (2004) indicate unless businesses learn to eliminate the gaps between its
processes elements integrating expensive information systems would not mitigate costs
neither would it help in achieving competitive advantage. The essence of business as
discussed earlier is in strategic development and integrating business intelligence in the
processes. This can be achieved by integrating information systems but the fact remains
that businesses depend on its modulation to the environment; it depends on the effective
use of resources; it relies on management strategies; and it requires constant change to
remain dynamic within its operational environment. Information technology allows
organizations flexibility and the ability to respond fast to change but it does not
necessarily guarantee success.