Chapter 2 : Competing with Information Technology

• Strategic Uses of Information Technology. Information technologies can support many competitive strategies. They can help a business cut costs, differentiate and innovate in its products and services, promote growth, develop alliances, lock in customers and suppliers, create switching costs, raise barriers to entry, and leverage its investment in IT resources. Thus, information technology can help a business gain a competitive advantage in its relationships with customers, suppliers, competitors, new entrants, and producers of substitute products. Refer to Figures 2.3 and 2.5 for summaries of the uses of information technology for strategic advantage. in supporting innovative changes in the design of workflows, job requirements, and organizational structures in a company.
• Becoming an Agile Company. A business can use information technology to help it become an agile company. Then it can prosper in rapidly changing markets with broad product ranges and short model lifetimes in which it must process orders in arbitrary lot sizes, and can offer its customers customized products while maintaining high volumes of production. An agile company depends heavily on Internet technologies to help it be responsive to its customers with customized solutions to their needs and cooperate with its customers, suppliers, and other businesses to bring products to market as rapidly and cost-effectively as possible.
• Creating a Virtual Company. Forming virtual companies has become an important competitive strategy in today's dynamic global markets. Internet and
• Building a Customer-Focused Business. A key strategic use of Internet technologies is to build a company that develops its business value by making customer value its strategic focus. Customer-focused companies use Internet, intranet, and extranet e-commerce websites and services to keep track of their customers' preferences; supply products, services, and information anytime, anywhere; and provide services tailored to the individual needs of their customers.
• Reengineering Business Processes. Information technology is a key ingredient in reengineering business operations by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness. Internet technologies can play a major role other information technologies play an important role in providing computing and telecommunications resources to support the communications, coordination, and information flows needed. Managers of a virtual company depend on IT to help them manage a network of people, knowledge, financial, and physical resources provided by many business partners to quickly take advantage of rapidly changing market opportunities.
• Building a Knowledge-Creating Company. Lasting competitive advantage today can only come from innovative use and management of organizational knowledge by knowledge-creating companies and learning organizations. Internet technologies are widely used in knowledge management systems to support the creation and dissemination of business knowledge and its integration into new products, services, and business processes.

Chapter 2 Questions & Answers

1.  Suppose you are a manager being asked to develop e-business and e-commerce applications to gain a competitive advantage in an important market for your company.  What reservations might you have about doing so?  Why?

Unless the individual is familiar with the tools involved in information technology, and how to effectively use these tools to accomplish the given task, there is always a high level of apprehension.  Reservations would be the fear of being totally out of the realm of this dynamic field of technology, and the feeling of helplessness and dependence on others.

2.  How could a business use information technology to increase switching costs and lock in its customers and suppliers?  Use business examples to support your answers.

Switching Costs: Investment in IT can make customers or suppliers depend on the continued use of your system, therefore, they are reluctant to pay the cost in time, money, effort, and inconvenience that it would take to change to another firm.

Lock in customers and suppliers: Investment in IT can lock in customers and suppliers by building valuable relationships with them, where both parties are experiencing mutual benefits; therefore they are reluctant to go to another firm.

3.  How could a business leverage its investment in information technology to build strategic IT capabilities that serve as a barrier to entry by new entrants into its markets?

The cost of building and maintaining a strategic IT platform can be very expensive.   Businesses may look to leverage some of these costs to their customers, thereby building IT platforms that can be utilized by their customers and suppliers.  Initially, both the company and the customer are experiencing mutual benefits from the new system; however, as time goes by the customers become dependent on using the platform. In the long run, the company’s investment in IT results in locking in their customers and suppliers, creates switching costs, and creates barriers to entry from competitors.

4. Refer to the Real World Case of GE, Dell, Intel, and Others in the chapter. Can information technology give a competitive advantage to a small business? Why or why not? Use an example to illustrate your answer.

  Reasons could include:

·        A small business can use the level of technology that it can afford to make improvements in its value chain.

·        A business of any size can adopt a strategic plan for the use of IT that will enable it to improve its competitive status whether through the creation of a Web-based e-commerce or e-business feature, or through the improvement of its relationship with its customers and suppliers.

·        IT can enable even small businesses to reengineer its business processes.

·        IT can enable even small businesses to built at its level of affordability a knowledge-based company.

5.  What strategic role can information technology play in business process reengineering and total quality management?

Information technology can play a vital role in BPR and TQM.  Using the technology involved in BPR, an organization can achieve dramatic improvements in areas such as cost, quality, speed and service.  Information technology can also be used to enable a firm to recognize improvements in quality, productivity, flexibility, timeliness, and customer responsiveness.  Thus, technology in BPR and TQM can be used as tools and methods to improve the current way of doing business.

6.  How can Internet technologies help a business form strategic alliances with its customers, suppliers, and others?

Information technology can help a business form strategic alliances with its customers, suppliers, and others as they are able to communicate, collaborate, and share information in ways that were never before possible.  By establishing strategic alliances, organizations are able to provide better quality products and services to their customers in a more efficient manner.

7.  How could a business use the Internet technologies to form a virtual company, or become an agile competitor?

Companies can use the Internet to publish information about themselves and their products.  Through their presence on the Internet, organizations can seek quick access to new markets, and allows them to create virtual companies and to be agile competitors.  The Internet promises to be a cost-efficient way for companies to develop strategic collaboration, operations, marketing, and alliances in global markets.  Through the Internet, organizations can break time, geographic, cost, and structural barriers.

8. Refer to Real World Case on Intec Engineering in the chapter. Will Intec’s knowledge management systems help them become a knowledge-creating company? A learning organization? Why or why not?

  Ways in which knowledge management systems might help could include:

·        Accessing and retrieving documents stored online.

·        Capturing and distributing expert stories.

·        Real-time information management

·        Communication and collaboration.

·        New content creation.

·        Leveraging organization “know-how.”

·        Performance support.

·        Interacting with operational databases

·        Building expert networks.

9.  Information Technology can’t really give a company a strategic advantage, because most competitive advantages don’t last more than a few years and soon become strategic necessities, which just raise the stakes of the game.  Discuss.

Students’ responses will vary.  However, information technology for early innovators certainly can give a company a competitive advantage.  Although technology is changing at a rapid pace, the first company to gain acceptance stand to capture a substantial market share before the competitors can catch up.  By the time that other organizations catch up, the originator has potentially realized a large market share, and captured substantial customer loyalty.

10. MIS author and consultant Peter Keen says: “We have learned over the past decade that it is not technology that creates a competitive edge, but the management process that exploits technology.”  What does he mean?  Do you agree or disagree? Why?

Students’ responses will vary.  Technology and its related applications are developing at a rapid pace.  If organizations are to compete successfully in today’s marketplace, they have little choice but to be behind the eight ball.  The management of the technology and the development of innovative ideas are the ingredients that make companies successful today.