Hunt-Wesson, for example, developed a computer model to aid it in studying distribution-center expansion and relocation issues. The company, suppliers, and channels can all benefit through better recognition and exploitation of such linkages. Information technology can alter the relationship between competitive scope and competitive advantage. See Gregory L. Parsons, “Information Technology: A New Competitive Weapon,” Sloan Management Review, Fall 1983, p. 3. Assembly workers have bins containing all the parts needed for the particular copier. No Frames Version Achieving Competitive Advantage with Information Systems. • What business objectives does Cemex’s Web site It … The services include arranging travel and close monitoring of individual expenses. For example, General Electric rebuilt its Erie locomotive facility as a large-scale yet flexible factory using computers to store all design and manufacturing data. If the target segment has unusual needs, broad-scope competitors will not serve it well. In addition, the buyer avoids the cost of the journal subscriptions and pays only for the information required. These systems tend to tie companies more closely to their buyers and suppliers. How Do IT Departments Decide What to Adopt, and When? This allows a company to achieve superior margins Operating Margin Operating margin is equal to operating income divided by revenue. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. The collective strength of the five forces varies from industry to industry, as does average profitability. The competitive advantage of a narrow scope comes from customizing the value chain to best serve particular product varieties, buyers, or geographic regions. Can Competitive Advantage through Information Systems Be Sustained? The kink below also talk about Business Strategy and how to achieve Competitive Advantage: CHAPTER 10: Understanding the IT Department: Operations and Projects. How Do Information Systems Support Decision Making? Almost all the other strategies benefit from excellent information. Information technology is generating more data as a company performs its activities and is permitting it to collect or capture information that was not available before. 3. On the West Coast, some fishermen now use weather satellite data on ocean temperatures to identify promising fishing grounds. This information enables the organization to offer products or services that are of value, that Inventory replenishment system sends orders to suppliers when purchase recorded at cash register. Achieving competitive advantage with information system essay. Competitive advantage in either cost or differentiation is a function of a company’s value chain. The banking and newspaper industries have a high information-technology content in both product and process. This article aims to help general managers respond to the challenges of the information revolution. Today the importance of competitive advantage could hardly be greater. This convergence has profound effects on the structure of both industries. A competitive advantage is an attribute that enables a company to outperform its competitors. The physical component includes all the physical tasks required to perform the activity. The information revolution affects all nine categories of value activity, from allowing computer-aided design in technology development to incorporating automation in warehouses (see Exhibit III). It can unlock the power of broader geographic scope to create competitive advantage. The management of information technology can no longer be the sole province of the EDP department. Most of those come through knowledge and information. Chances are that a new definition of the industry may be necessary. Casinos spend up to 20% of revenues on complimentary services for high rollers. This had its origins during his years on the Canal, where good reading material—or, for that matter, any reading material—was scarce. 4. IT applications are mostly used to help organizations to do its day to day work and to gain competitive advantage while reducing competitive disadvantage and to meet other business objectives which organizations need. After surveying a wide range of industries, we find that information technology is changing the rules of competition in three ways. A unique geographic location 4. This service was not needed before the spread of information technology caused a demand for it. Information technology is permeating the value chain at every point, transforming the way value activities are performed and the nature of the linkages among them. Sign in|Recent Site Activity|Report Abuse|Print Page|Powered By Google Sites. This is for educational purposes only. Consumer behaviour is more dynamic than ever. Minimizes inventory at warehouses, operating costs. Information technology can help in the strategy implementation process. It was originally developed by Michael Porter, a professor at the Harvard Business School. 5. But the opportunities for savings through coordinating with suppliers and channels go far beyond logistics and order processing. Customers can make purchases at any hour at prices typically 25% to 30% below suggested retail levels. It sells credit-authorization and transaction-processing services to Phillips Petroleum and retail remittance-processing services to Mellon Bank. It also is affecting competitive scope and reshaping the way products meet buyer needs. Many products also process information in their normal functioning. The company makes it so easy for clients to order, receive, and prepare invoices that the customers, in return, are willing to place larger orders. Chapter 3: Achieving Competitive Advantage with Information System (Technology) Title: Technology Helps Starbucks Find New Ways to Compete Question 1 Analyze Starbucks using the competitive forces and value chain models? (See the insert, “Aim: A Competitive Edge,” for further examples.). Using Information Systems to Achieve Competitive Advantage Supermarkets and large retail stores such as Wal- Mart use sales data captured at the checkout counter to determine which items have sold and need to be reordered. A company must resolve such trade-offs, in accordance with its strategy, to achieve competitive advantage. Information systems that cross company lines are becoming common. For example: Industries such as airlines, financial services, distribution, and information suppliers (see the upper right-hand corner of Exhibit IV) have felt these effects so far.6 (See the insert, “Information Technology and Industry Structure,” for more examples.). National Benefit Life reportedly merged with American Can in part to gain access to data on the nine million customers of American Can’s direct-mail retailing subsidiary. The Information Advantage. Buyer needs, in turn, depend not only on the impact of the company’s product on the buyer but also on the company’s other activities (for example, logistics or after-sale services). Will the flexibility of information technology allow broad-line competitors to invade areas that were once the province of niche competitors? As a result, sales expenses have fallen by 10% and sales volume has doubled. A logistics activity, for example, uses information like scheduling promises, transportation rates, and production plans to ensure timely and cost-effective delivery. analysis of events and trends in the … Information technology is also transforming the physical processing component of activities. The strength of each of the five forces can also change, either improving or eroding the attractiveness of an industry.5, Exhibit V Determinants of industry attractiveness. Information technology is also creating many new interrelationships among businesses, expanding the scope of industries in which a company must compete to achieve competitive advantage. Identify and rank the ways in which information technology might create competitive advantage. For example, a magazine distributor offers retailers processing credits for unsold items more efficiently than its competitors. Eastman Kodak recently began offering long-distance telephone and data-transmission services through its internal telecommunications system. On-time delivery requires that operations, outbound logistics, and service activities (installation, for example) should function smoothly together. For example, General Electric’s appliance service data base supports a consumer hotline that helps differentiate GE’s service support from its rivals’. Ten types of motor frames can be accommodated without manual adjustments to the machines. In insurance brokerage, a number of insurance companies usually participate in underwriting a contract. This practice greatly reduces the fishermen’s steaming time and fuel costs. • What business objectives does Cemex’s Web site While managers can use information technology to improve their industry structure, the technology also has the potential to destroy that structure. To speed up order entry, Westinghouse Electric Supply Company and American Hospital Supply have furnished their customers with terminals. Information technology not only affects how individual activities are performed but, through new information flows, it is also greatly enhancing a company’s ability to exploit linkages between activities, both within and outside the company. The cost of computer power relative to the cost of manual information processing is at least 8,000 times less expensive than the cost 30 years ago. The importance of the information revolution is not in dispute. Competitive scope has four key dimensions: segment scope, vertical scope (degree of vertical integration), geographic scope, and industry scope (or the range of related industries in which the company competes). Managers should predict the likely impact of information technology on their industry’s structure. While the term is commonly used for businesses, the strategies work for any organization, country, or individual in a competitive … Competitive advantages, regardless of their origin, do not last forever. Caesar’s Palace lowered its complimentary budget more than 20% by developing a player-rating system for more accurate identification of big spenders. One assignment for pit bosses has always been to keep an eye out for the big spenders. Shelternet, an electronic information exchange offered by First Boston Corporation, allows real estate brokers to determine quickly and easily what mortgage packages are available and whether the buyer will qualify for financing. In this paper, we offer a competency-based view of how information systems (IS) can be used to achieve competitive advantage. The automation of order processing and customer billing has increased rivalry in many distribution industries. October 7, 2018 October 7, 2018 Gabriella Luisa Susanto. Lowering cost. It is a profitability ratio measuring revenue after covering operating and non-operating expenses of a business. For example, information systems now permit the airline industry to alter fares frequently and to charge many different fares between any two points. In the trucking industry, Intermodal Transportation Services, Inc. of Cincinnati has completely changed its system for quoting prices. It is affecting the entire process by which companies create their products. A model that highlights specific activities where competitive strategies can best be applied is known as the: Managers should consider opportunities to create new businesses from existing ones. How Do Information Systems Support Business Processes? Describe how linking information systems across organizations helps companies achieve competi-tive advantage. Today information technology is spreading throughout the value chain and is performing optimization and control functions as well as more judgmental executive functions. Organizational changes that reflect the role that the technology plays in linking activities inside and outside the company are likely to be necessary. It … Highly skilled labor 3. Please note that this is an example. Successfully using information systems to achieve a competitive advantage requires close coordination among organizations, people, and : suppliers. The new information technology makes it possible to customize products. Using Information Systems to Achieve Competitive Advantage • Discuss the role that the competitive forces model played in the transformation of Cemex. At the same time, general managers must be involved to ensure that cross-functional linkages, more possible to achieve with information technology, are exploited. As we have seen in the previous section, it is about the innovative use of technology integrated into your business processes that bring about competitive advantage. Assess information intensity. Copyright © 2020 Harvard Business School Publishing. Despite the growing use of information technology, industries will always differ in their position in Exhibit IV and their pace of change. Information technology is an increasingly important avenue for corporate diversification. Automation and flexibility are achieved simultaneously, a pairing that changes the pattern of rivalry among competitors. The story is told that once, while confined to the infirmary with a minor ailment, the only thing Wood could find to read was the Statistical Abstract of the United States, which he began perusing simply to pass the time but soon came to study avidly. 7. Integration of information technology in running the affairs of the business increases it chances of achieving a competitive advantage. Every value activity creates and uses information of some kind. Every activity employs purchased inputs, human resources, and a combination of technologies. Information technologies requiring large investments in complex software have raised the barriers to entry. One can utilise information systems for competitive advantage by identifying how the systems can enhance core competencies. Unlike comparative advantage, which is determined by largely unchangeable factors, competitive advantage can be created. 1. There are no longer mature industries; rather, there are mature ways of doing business. PLAY. Sustainable competitive advantage is the key to business success. Banking and insurance, for example, have always been information intensive. Linkages exist when the way in which one activity is performed affects the cost or effectiveness of other activities. A company can create competitive advantage by optimizing or coordinating these links to the outside. This optimization may require trade-offs. How Do Information Systems Provide Competitive Advantage? One example is Western Union’s EasyLink service, a sophisticated, high-speed, data-communications network that allows personal computers, word processors, and other electronic devices to send messages to each other and to telex machines throughout the world. To identify the types of systems that would provide a strategic advantage … Achieving Competitive Advantage with Information Systems 1 LEARNING TRACK 1: CHALLENGES OF INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE. Not only is each force likely to change but industry boundaries may change as well. Firms throughout the world face slower growth as … First mover advantage. A company’s value activities fall into nine generic categories (see Exhibit I). The merging of computer and telecommunications technologies is an important example. 2.0 How Competitive Advantage Can Achieve and Performed in Information System 2.1 Target Market 2.2 Customer Demand 2.3 Using Database Marketing THE ROLE COMPETITIVE ADVANTAGE IN INFORMATION SYSTEM 3.0 How Information System Improve Competing on Quality and Design in Competitive Advantage in Sime Darby 4.0 Ways Competitive Advantage Can Improve Decion Making in Information System … In addition to computers, then, data recognition equipment, communications technologies, factory automation, and other hardware and services are involved. According to some projections, by the mid-1990s, 75% of U.S. households will have access to such services. Can the company embed information technology in it? Information System and Information Technology (IS/IT) has become the core feature for many business successes in the globe. The value chain for a company in a particular industry is embedded in a larger stream of activities that we term the “value system” (see Exhibit II). Other firms have achieved operational excellence and much What is a Competitive Advantage? (For example, Boeing engineers work on designs on-line with foreign suppliers.) What Is the Relationship between Organizational Strategy and Information Technology Planning. With the coming of the automobile and good roads, rural America rapidly became less isolated, and the kinds of merchandise of interest to the farm family came more and more to be the kinds of merchandise of interest to city dwellers as well. By taking a careful look, managers can identify the value activities that are likely to be most affected in terms of cost and differentiation. First, advances in information technology are changing the industry structure. What Are the Purposes and Components of a Data Warehouse? So pervasive is the impact of information technology that it confronts executives with a tough problem: too much information. Initially, companies used information technology mainly for accounting and record-keeping functions. Such industries were naturally among the first and most enthusiastic users of data processing. Finally, the information revolution is spawning completely new businesses. According to Mark Davis (2005) business intelligence is the source for achieving competitive advantage because legitimate innovations support business functions. The new system gives the company the capacity to introduce a new pricing policy to offer discounts to national accounts, which place their orders from all over the country. Building on the resource-based research that links distinctive organizational competencies to sustainable competitive advantage, we argue that the potential contributions of IS to competitive advantage can be understood in terms of their impact on the … Users drastically reduce the time spent in literature searches. These changes do not mean that a central information-technology function should play an insignificant role. The technology is creating new linkages between activities, and companies can now coordinate their actions more closely with those of their buyers and suppliers. They also aim to All rights reserved. Using Information Systems to Achieve Competitive Advantage Using Information Systems to Achieve Competitive Advantage Figure 3-2 This figure provides examples of systems for both primary and support activities of a firm and of its value partners that would add a margin of value to a firm’s products or services. For a discussion of the two basic types of competitive advantage, see Michael E. Porter, Competitive Strategy (New York: Free Press, 1980), Chapter 2. As we have seen, information technology can alter a company’s costs in any part of the value chain.8 The technology’s historical impact on cost was confined to activities in which repetitive information processing played a large part. Can Information Systems Improve Productivity? Most general managers know that the revolution is under way, and few dispute its importance. There are many ways in achieving competitive advantage, either it is on a company or a … A competitive advantage is what makes an entity's goods or services superior to all of a customer's other choices. The information revolution is creating interrelationships among industries that were previously separate. The model enabled the company to evaluate many more different variables, scenarios, and alternative strategies than had been possible before. By the early 1920s, however, the “buyer for the American farmer” concept had begun to lose its relevance to economic and social realities. Computer-controlled machine tools are faster, more accurate, and more flexible in manufacturing than the older, manually operated machines. Similarly, advances in microelectronics made personal computing possible. Finally, the product becomes a purchased input to the value chains of its buyers, who use it to perform one or more buyer activities. Primary activities are those involved in the physical creation of the product, its marketing and delivery to buyers, and its support and servicing after sale. Using Information Systems to Achieve Competitive Advantage • Discuss the role that the competitive forces model played in the transformation of Cemex. Exhibit IV, which relates information intensity in the value chain to information content in the product, illuminates the differences in the role and intensity of information among various industries. What Are the Fundamental Types of IS within Organizations? Environmental scanning. Starbucks offers a unique experience that are high-end specialty coffees and beverages, friendly and knowledgeable servers and customer-friendly coffee shop. Using Information Systems to Achieve Competitive Advantage. As more and more of their time and investment capital is absorbed in information technology and its effects, executives have a growing awareness that the technology can no longer be the exclusive territory of EDP or IS departments. Competitive advantage. Competitive advantage is the service or product, which the customers of a business enterprise value greatly than the similar offerings from its rivals. Of the many opportunities for investment in information technology, which are the most urgent? Of niche competitors hence, industry attractiveness as well the pattern of industry.! 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