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1

Chapter

Competing
with
Information Technology

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Objectives
Identify

basic competitive strategies and


explain how IT may be used to gain
competitive advantage.

Identify

strategic uses of information


technology.

How

does business process engineering


frequently use e-business technologies for
strategic purposes?

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(Objectives continued)

Identify

the business value of using e-business


technologies for total quality management, to
become an agile competitor, or to form a
virtual company.

Explain

how knowledge management systems


can help a business gain strategic advantage.

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Section I

Fundamentals of Strategic Advantage

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Fundamentals of Strategic Advantage


Competitive

Forces (Porter)
Bargaining power of customers
Bargaining power of suppliers
Rivalry of competitors
Threat of new entrants
Threat of substitutes

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Competitive Strategies & the Role of IT


Cost

Leadership (low cost producer)


Reduce inventory (JIT)
Reduce manpower costs per sale (see Real
World Case 1)
Help suppliers or customers reduce costs
Increase costs of competitors
Reduce manufacturing costs (process
control)

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Competitive Strategies & the Role of IT (continued)

Differentiation
Create

a positive difference between your


products/services & the competition.
May allow you to reduce a competitors
differentiation advantage.
May allow you to serve a niche market.

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Competitive Strategies & the Role of IT (continued)

Innovation
New

ways of doing business


Unique products or services
New ways to better serve customers
Reduce time to market
New distribution models

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Competitive Strategies & the Role of IT (continued)

Growth
Expand

production capacity
Expand into global markets
Diversify
Integrate into related products and services.

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Competitive Strategies & the Role of IT (continued)

Alliance
Broaden

your base of support


New linkages
Mergers, acquisitions, joint ventures,
virtual companies
Marketing, manufacturing, or distribution
agreements.

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Competitive Strategies & the Role of IT (continued)

Other

Competitive Strategies
Locking in customers or suppliers
Build value into your relationship
Creating switching costs
Extranets
Proprietary software applications

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Competitive Strategies & the Role of IT (continued)

Other

Competitive Strategies (continued)


Raising barriers to entry
Improve operations or promote innovation
Leveraging investment in IT
Allows the business to take advantage of
strategic opportunities

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The Value Chain


Views

a firm as a series, chain, or network of


activities that add value to its products and
services.
Improved administrative coordination
Training
Joint design of products and processes
Improved procurement processes
JIT inventory
Order processing systems

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Value Chain (continued)

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Section II

Using Information Technology


for Strategic Advantage

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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 IT (continued)

Business

Process Reengineering (BPR)


Rethinking & redesign of business processes
Combines innovation and process
improvement
There are risks involved.
Success factors
Organizational redesign
Process teams and case managers
Information technology

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Strategic Uses of IT (continued)

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 IT (continued)

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 IT (continued)

The

virtual company
Uses IT to link people, assets, and ideas
Forms virtual workgroups and alliances
with business partners
Interorganizational information systems

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The Virtual Company (continued)

Strategies
Share

infrastructure & risk with alliance


partners
Link complementary core competencies
Reduce concept-to-cash time through
sharing

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The Virtual Company (continued)

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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Learning Organizations
Exploit

two kinds of knowledge


Explicit
Tacit

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Learning Organizations (continued)

Knowledge

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Management

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Learning Organizations (continued)

Knowledge

management systems
Help create, organize, and share business
knowledge wherever and whenever needed
within the organization

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Discussion Questions
You

have been asked to develop e-business &


e-commerce applications to gain competitive
advantage. What reservations might you have
about doing so?

How

could a business use IT to increase


switching costs and lock in its customers and
suppliers?

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Discussion Questions (continued)

How

could a business leverage its investment


in IT to build strategic IT capabilities that
serve as a barrier to entry by new entrants
into its markets?

What

strategic role can information


technology play in business process
reengineering and total quality management?

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Discussion Questions (continued)

How

can Internet technologies help a business


form strategic alliances with its customers,
suppliers, and others?

How

could a business use Internet


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

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Discussion Questions (continued)

IT

cant really give a company a strategic


advantage, because most competitive
advantages dont last more than a few years &
soon become strategic necessities that just raise
the stakes of the game. Discuss.

MIS

author & consultant Peter Keen says:


We have learned that it is not technology that
creates a competitive edge, but the
management process that exploits technology.
What does he mean?

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Real World Case 1 WESCO International, Inc.


Business-to-Business

Describe

WESCOs original system.

Describe

WESCOs new system.

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Real World Case 1 (continued)

What

are the business benefits to WESCO and


its suppliers of its new e-procurement system?

Is

WESCOs new system a strategic use of IT?

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Real World Case 1 (continued)

Does

WESCOs new system give the company


a competitive advantage?

What

other strategic moves could WESCO


implement to gain competitive advantage?

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Real World Case 2 Staples, Inc.


What

is the strategic business value to Staples


and their large business clients of the new webbased procurement system?

What

is the strategic business value to Staples


and the value proposition to their customers of
their new clicks and bricks capabilities?

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Real World Case 2 (continued)

Is

an integrated clicks and bricks strategy the


Internet strategy that most businesses, large
and small, should adopt?

What

competitive strategies is Staples


pursuing?

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Real World Case 2 (continued)

What

other e-business or e-commerce strategy


would you recommend to Staples to help them
gain a competitive advantage in their
industry?

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Real World Case 3 Enron Corp.


What

mistakes did Enron make in the use or


management of IT?

Did

those mistakes play a part in the failure of


Enron?

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Real World Case 3 (continued)

Is

it time to go back to the days when IT


supported the business rather than became the
business? Explain your position.

What

are the major lessons for the future use


of IT in business that you gained from this
case?

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Real World Case 3 (continued)

How

would you apply one of the lessons from


this case in your present job or in your future
business career?

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Real World Case 4 Delta Technology & FirstHealth Group


What

are Delta Technologys new


requirements for IT investments?

What

is the business value of Deltas new


requirements?

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Real World Case 4 (continued)

Explain

FirstHealths return on opportunity


guidelines.

Is

FirstHealths return on opportunity


guideline for IT investments a good way to
evaluate investments in IT?

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Real World Case 4 (continued)

What

should be the role of ROI in IT decisionmaking?

Are

the IT investment guidelines of Delta and


FirstHealth applicable to other companies,
including small businesses?

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Real World Case 5 Ford, Dow Chemical, IBM, et al.


What

is Six Sigma?

What

do critics of Six Sigma see as its


shortcomings?

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Real World Case 5 (continued)

Is

Six Sigma an enterprise-wide business


strategy?

What

role does information technology play in


Six Sigma business initiatives?

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Real World Case 5 (continued)

What

are the benefits and limitations of Six


Sigma as a business strategy?

Can

Six Sigma make up for poor management


and faulty vision?

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