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Chapter 12
Information Systems for Strategic Advantage

V. LECTURE NOTES

SECTION I: Fundamentals of Strategic Advantage

Information technology can change the way businesses compete. For this reason, you should view information systems strategically, that is, as vital competitive networks, as a means of organizational renewal, and as a necessary investment in technologies that help an enterprise achieve its strategic objectives.

Analysing GATX Capital

We can learn a lot about the strategic use of information technology for competitive advantage from the Real World Case of GATX Capital.

Take a few minutes to read it, and we will discuss it (See GATX Capital City in section XI).

12-1Competitive Strategy Concepts: [Figure 12.2]

The strategic role of information systems involves using information technology to develop products, services, and capabilities that give a company strategic advantages over the competitive forces it faces in the global marketplace. This creates strategic information systems, information systems that support or shape the competitive position and strategies of an enterprise. So a strategic information system can be any kind of information system (TPS, MIS, DSS, etc.) that helps an organization: 1.Gain a competitive advantage

2.Reduce a competitive disadvantage
3.Meet other strategic enterprise objectives

According to Michael Porter, a firm can survive and succeed in the long run if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry. These include: 1. Rivalry of competitors within its industry

2. Threat of new entrants
3. Threat of substitutes
4. Bargaining power of customers
5. Bargaining power of suppliers

A variety of competitive strategies can be developed to help a firm confront these competitive forces. These include [Figure 12.3]:

Cost Leadership Strategy- Become a lowcost producer of products and services - Find ways to help suppliers or customers reduce their costs - Increase the costs of competitors.

Differentiation Strategy-Develop ways to differentiate products and services from competitors. - Reduce the differentiation advantages of competitors.

Innovation Strategy- Find new ways of doing business:
a) develop new products & services
b) enter new markets or marketing segments.
c) establish new business alliances
d) find new ways of producing products/services
e) find new ways of distributing products/services

Growth Strategies-Significantly expand the company=s capacity to produce goods and services. - Expand into global markets
- Diversify into new products and services - Integrate into related products and services.

Alliance StrategiesEstablish new business linkages and alliances with customers, suppliers, competitors, consultants and other companies (mergers, acquisitions, joint ventures, forming virtual companies, etc.).

12-2Strategic Roles for Information Systems:

How can the preceding competitive strategy concepts be applied to the strategic role of information systems? Information technology can be used to implement a variety of competitive strategies. These include the five basic competitive strategies (differentiation, cost, innovation, growth, alliance), as well as other ways that companies can use information systems strategically to gain a competitive edge. For example: 1.Lower Costs

2.Differentiate
3.Innovate
4.Promote Growth
5.Develop Alliances
6.Improve quality and efficiency
7.Build an IT platform

8.Other strategies
- use interorganizational information systems to create switching costs that lock in customers and suppliers. - use investments in IT to build barriers to entry...
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