Chapter 2

Competing with
Information Technology

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives

 Identify several basic competitive

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

 Identify several strategic uses of

Internet technologies and give
examples of how they can help a
business gain competitive advantages.

2-2
Learning Objectives
 Give examples of how business
process reengineering frequently
involves the use of Internet
technologies.
 Identify the business value of using
Internet technologies to become an
agile competitor or form a virtual
company.
 Explain how knowledge management
systems can help a business gain
strategic advantages.
2-3
 Section 1

Fundamentals of Strategic Advantage

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I. Strategic IT

 Technology is now the actual cause and

driver of business strategies

 Technology is no longer an afterthought in

forming business strategies

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II. Competitive Strategy Concepts

 Strategic Information Architecture – the

collection of strategic information systems
that shape/support the competitive
position/strategies of a firm

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II. Competitive Strategy Concepts

 Competitive Forces (Porter)

 Rivalry of Competitors
 Threat of New Entrants
 Threat of Substitutes
 Bargaining Power of Customers
 Bargaining Power of Suppliers

 Competitive Strategies
 Cost Leadership Strategy
 Differentiation Strategy
 Innovation Strategy
 Growth Strategy
 Alliance Strategy
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II. Competitive Strategy Concepts

2-8
III. Strategic Uses of Information Technology

 Other Strategic Initiatives

 Locking by Building Relationships
 Lock In Customers
 Lock In Suppliers
 Lock Out Competitors

 Switching Costs – make customers/supplier

dependent on mutually beneficial inter-enterprise
information systems

 Raise Barriers to Entry – discourage or delay

other firms from entering a market

 Leverage Investment in IT – develop new

products and services that are not possible
without strong IT capabilities
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II. Competitive Strategy Concepts

2-10
II. Competitive Strategy Concepts

2-11
II. Competitive Strategy Concepts

2-12
Air Asia: Saving Big by Cutting Imaging
Costs

 How much was Air Asia spending on

annual imaging services costs?

 What did they do to solve this

problem?

 How much did they save annually by

making these changes?

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 Competitive Advantage and
Competitive Necessity

 What is Competitive Advantage?

 What is the problem with competitive
advantage?

 What is Competitive Necessity?

 What is the relationship between

Competitive Advantage and
Competitive Necessity?
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 Competitive Advantage and
Competitive Necessity

( maket kemampuan yang

qualifier) ( diperoleh melalui
produk, layanan, karakteristik dan
proses, atau sumber daya suatu
kapabilitas perusahaan untuk
tertentu yang memiliki kinerja yang
harus ada untuk lebih tinggi
dapat bersaing dibandingkan
dan melakukan perusahaan lain pada
bisnis dalam industri atau pasar
suatu industri yang sama

2-15
IV. Building A Customer-Focused
Business – Strategic Focus on
Customer Value

 Recognizing that Quality, not

Price, has become the primary
factor in a customer’s
perception of value

 Internet
technologies can make
customers the focal point of e-
business applications
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IV. Building A Customer-Focused
Business – Strategic Focus on
Customer Value

2-17
Universal Orlando: IT Decisions Driven
by Customer Data

 What does McKenna see as the way to

fulfill her contribution to decision making?

 According to McKenna, it’s more critical

than ever for CIOs to do what?

 Why Is Universal interested in drill down?

2-18
V. The Value Chain and Strategic IS
 Value Chain – the series/chain/network of
activities that add value to
products/services
 Primary Processes – directly related to
manufacture of products or delivery of
services

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V. The Value Chain and Strategic IS

 Support Processes – business activities

that that support daily operations of the
firm and indirectly contribute to
products/services

 Value Chain Examples

 The Value Chain Concept can help identify

where and how to apply strategic
capabilities of IT

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 Section 2
Using Information Technology for
Strategic Advantage

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I. Strategic Uses of IT

 Support everyday operations (non-

strategic)
 Use IT as a major competitive
differentiator (strategic)

2-22
II. Reengineering Business Processes
 Business Process Reengineering
(BPR)
 High Potential Payback, but High Risk of
Failure
 Organizational Redesign
 Process Teams
 Case Managers

 The Role of Information Technology –

IT plays a major role in BPR

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II. Reengineering Business Processes

2-24
To Build or to Buy – Is That Really the Question?

 What is the traditional answer?

 Why might reality be more complicated?

 Why does VISA custom build in-house?

 Why does VISA busy of-the-shelf?

2-25
III. Becoming An Agile Company

 Business today is changing from mass

market products/services that were
standardized, long-lived, information-
poor, exchanged in one-time
transactions to global competition with
niche markets that are individualized,
short-lived, information-rich,
exchanged on an ongoing basis with
customers

2-26
III. Becoming An Agile Company

 4 Basic Strategies:
 Customer Perception of Goods and Services
 Partnering with Customers, Suppliers, and Even
Competitors
 Organize to Thrive on Change and Uncertainty
 Leverage Impact of Personnel and Their
Knowledge

 Types of Agility
 Customer
 Partnering
 Operational

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III. Becoming An Agile Company

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IV. Creating A Virtual Company
 Virtual Company – Uses the Internet,
intranets and extranets to create virtual
workgroups and support alliances with
business partners

 Virtual Company Strategies

 Share infrastructure and risk with alliance partners
 Link complimentary 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
 Migrate from selling products to selling solutions

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IV. Creating A Virtual Company

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IV. Creating A Virtual Company

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Sysco: Transforming a Company with
the Help of IT

 What is Sysco’s new project?

 What do they hope to accomplish with

this?

 What is the most important key to a

project of this scope?

 Why SAP?

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V. Building a Knowledge-Creating
Company
 One sure Source of Competitive
Advantage is Knowledge

 The Business of a “Knowledge-

Creating” company is Continuous
Innovation

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V. Building a Knowledge-Creating
Company
 Explicit Knowledge – written down or
stored on computers

 Tacit Knowledge – “how-to”

knowledge residing in the workers;
very important but little incentive to
share this information so it is never
written down

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V. Building a Knowledge-Creating
Company
 Knowledge Management – 3 levels:
 Enterprise Knowledge
 Information Creation, Sharing, and Management
 Document Management

2-35
VI. Knowledge Management Systems

 Making personal knowledge available

is the central activity of a knowledge-
creating company

 This takes place continuously at all

levels of the organization

 Knowledge management has become

a major strategic use of information
technology
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VI. Knowledge Management Systems

 Goal of Knowledge Management – to create,

organize, and disseminate important
business knowledge whenever and wherever
it is needed in the organization

 Knowledge Management systems:

 Facilitate organizational learning and knowledge
creation
 Provide rapid feedback top knowledge workers
 Encourage employee behavioral change
 Significantly improve business performance

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 Goodwin Proctor Makes a Strong Case
for Knowledge Management

 What were G.P.’s attorneys spending their

time doing?
 What is the Matter Page System?
 In what way does Matter Pages help an
attorney?
 What other technologies are being
incorporated into the system?
 How will these technologies assist users?

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