Achieving Competitive Advantage Part 1

Essentials of Management Information Systems Chapter 3 Achieving Competitive Advantage with Information Systems Learning Objectives 3.1 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage? 3.2 How do information systems help businesses compete globally? 3.3 How do information systems help businesses compete using quality and design? 3.4 What is the role of business process management (BPM) in enhancing competitiveness? 3.5 How will M I S help my career? Porter’s Competitive Forces Model • Five competitive forces shape fate of firm – – – – – Traditional competitors New market entrants Substitute products and services Customers Suppliers The Five Forces 1- Information System Strategies for Dealing with Competitive Forces (1 of 5) • Basic strategy: Align I T with business objectives – – – – – Identify business goals and strategies Break strategic goals into concrete activities and processes Identify metrics for measuring progress Determine how IT can help achieve business goals Measure actual performance Information System Strategies for Dealing with Competitive Forces (2 of 5) • Low-cost leadership – Use information systems to achieve the lowest operational costs and the lowest prices – E.g. Walmart  Inventory replenishment system sends orders to suppliers when purchase recorded at cash register  Minimizes inventory at warehouses, operating costs  Efficient customer response system Information System Strategies for Dealing with Competitive Forces (3 of 5) • Product differentiation – Use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services – E.g., Google's continuous innovations, Apple's i Phone – Use information systems to customize, personalize products to fit specifications of individual consumers  E.g., Nike's NIKE iD program for customized sneakers Information System Strategies for Dealing with Competitive Forces (4 of 5) • Focus on market niche – Use information systems to enable specific market focus, and serve narrow target market better than competitors.  Analyzes customer buying habits, preferences  Advertising pitches to smaller and smaller target markets – E.g., Hilton Hotel’s On Q System  Analyzes data collected on guests to determine preferences and guest's profitability Information System Strategies for Dealing with Competitive Forces (5 of 5) • Strengthen customer and supplier intimacy. – Strong linkages to customers and suppliers increase switching costs and loyalty – Toyota: uses IS to facilitate direct access from suppliers to production schedules  Permits suppliers to decide how and when to ship supplies to plants, allowing more lead time in producing goods – Amazon: keeps track of user preferences for purchases, and recommends titles purchased by others Competitive Advantage using VRIO 1. Valuable: Does it provide customer value and competitive advantage? 2. Rareness: Do no other competitors possess it at the same level? 3. Imitability: Do the competitors have the financial ability to imitate? 4. Organization: Is the firm organized to exploit the resource? VRIO Analysis The Internet’s Impact on Competitive Advantage • Enables new products and services • Encourages substitute products • Lowers barrier to entry • Changes balance of power of customers and suppliers • Transforms some industries • Creates new opportunities for creating new markets, building brands, and large customer bases • Smart products and the Internet of Things