Fundamental IT Strategies for Competitive Advantage

Topics: Strategic management, Customer relationship management, Knowledge management Pages: 18 (3355 words) Published: September 25, 2014


MANAGEMENT INFORMATION SYSTEM:
FUNDAMENTALS OF STRATEGIC ADVANTAGE

Submitted by:

Catherine M. Erquiza
Erwin R. Gentiles
Jumar Daves

Strategic IT
Information technology is vital in businesses. It is important that we change our perspective of information systems as more than a set of technologies supporting business operations. We should view information systems strategically. This helps the business or the company to adopt strategies and processes in able to survive in a competitive environment and fast growing technologies. Competitive Strategy Concepts

The strategic role of information systems involves using information technology to develop the company’s products or services that give a company many advantages over the competitive forces around. Therefore this creates strategic information systems. As a definition, these are information systems that support or shape the competitive position and strategies of a business. There are different kinds of information systems like TPS (Transaction Processing System), MIS (Management Information System), DSS (Decision Support System), etc. These systems aid the business to gain competitive advantages. Any business that aims to survive and succeed must develop and implement strategies. There are five competitive forces that shape the structure of competition in the industry. The five competitive forces are: (1) the rivalry of competitors within its industry

(2) the threat of new entrants
(3) the threat of substitutes
(4) the bargaining power of customers
(5) the bargaining power of suppliers
Given the competitive forces, there are five basic competitive strategies to counter the threats of competitive forces. The five competitive strategies are: (1) Cost Leadership Strategy
(2) Differentiation Strategy
(3) Innovation Strategy
(4) Growth Strategies
(5) Alliance Strategies
The figure below describes that businesses can counter the threats of competitive forces by implementing the competitive strategies.

Figure 1: Business can develop competitive strategies to counter the actions of the competitive forces they confront in the market place.

Strategic Uses of Information Technology
Cost Leadership
Companies can use information systems to fundamentally shift the cost of doing business or reduce the costs of business processes and lower costs of customers or suppliers, i.e., using online business to consumer and business to business models and e-procurement systems to reduce operating costs. Differentiation

Companies can use information systems to develop differentiated features, i.e., using online communication or social networks to understand and serve customers. It also uses information systems to offer value-added service and improve customer service. Innovation

Companies use information systems to identify, create and develop new products and services. It can also work on new initiatives of establishing pure online business operations. The internet and telecommunication networks provide better capabilities and opportunities for innovation. Growth

Companies can use information systems to expand in local and international operations or market and to diversify into other products and services, i.e., establishing global intranet and global operation platform. Alliance

Companies can use information systems to create and enhance relations with partners such as developing virtual organizations and inter-organizational information systems. Other Competitive Strategies

There are other competitive strategies aside from the five basic strategies mentioned. These are locking in customers or suppliers, building switching costs, raising barriers to entry, and leveraging investment in information technology. Locking in customers or suppliers by enhancing relations and building valuable new relationships via customer relations management system, i.e., providing your customers...
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