IT AS COMPETITIVE ADVANTAGE

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McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

THE USE OF INFORMATION TECHNOLOGY (IT) BYFIRMS IN ACHIEVING GLOBAL COMPETITIVE

ADVANTAGE IN FOREIGN MARKETS


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Summary of presentation

Introduction The Concept of Competitive Advantage

Information Technology and CompetitiveAdvantage

Conclusion


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INTRODUCTION

Today, most organizations regardless of theirlocation or sector of industry are fundamentallydependent on Information Technology.

The information revolution continues to sweepthrough the economy and it is impossible to exist asan organization and escape the effects ofInformation Technology.

Many companies regardless the industry aremaking investments into Information Technology inorder to remain innovative and on the cutting edgeof competitive advantage (Porter, 2001).


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Introduction Contd

IT is the study, design, development,application, implementation, support ormanagement of computer-based informationsystems (Proctor and K. Scott, 2011).


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Introduction Contd

Evidences indicate that implementation ofsuccessful business strategies usinginformation technology has led to theimprovement of organizational efficiency

and effectiveness. Positive correlation between the amount of

investment and the sales performance ofthese companies Bloch, M., Pigneur, Y., &Segev, A. (2004).


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The Concept of Competitive Advantage

Competitive advantage theory suggeststhat states and businesses should pursuepolicies that create high-quality goods to sellat high prices in the market (Porter, 1985)

Competitive advantage occurs when anorganization acquires or develops an

attribute or combination of attributes thatallows it to outperform its competitors.


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These attributes include access to naturalresources, highly trained and skilledpersonnel and new technologies includingInformation Technology either to be

included.

The term competitive advantage also refers

to the ability gained through attributes andresources to perform at a higher level thanothers in the same industry or market(Chacarbaghi and Lynch, (1999).


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"A firm is said to have a competitive advantagewhen it is implementing a value creating strategynot simultaneously being implemented by anycurrent or potential player"(Clulow et al.2003).

In simple terms doing what places you abovecompetitors.

Information Technology and Competitive

Advantage To gain competitive advantage using IT, a

company needs to look at its strategy.


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3 important questions-strategy

Where are wenow? Where do wewant to go?

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How can we getthere?


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3 Opportunities that can arise from IT

Helping an organization toimprove the efficiency andeffectiveness of the current

status

Creating a big barrier fornew companies to find it

difficult to enter anindustry

Assisting companies toout-maneuver other

participants in acompetitive rivalry

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Using Information Technologies to gainCompetitive Advantage

Organizations of all sizes are using variousinformation technology tools andapplications in order to become morecompetitive. Michael Porter identified five

strategies for competing in the marketplacesuccessfully:

Overall cost leadership

Differentiation Focus

Innovation

Alliance

O


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Overall Cost Leadership

IT focus of a bottom-line strategy is toimprove efficiency by reducing overall costs.

A top-line strategy focuses on generating

new revenues by offering new products andservices to customers or increasingrevenues by selling existing products and

services to new customers. Antivirus vendors are using the Internet to

distribute software, for a subscription fee ofaround $30, one can download the software

and get updates for a year.


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Overall Cost Leadership

Without the Internet for easy, inexpensivedistribution, vendors couldnt afford to offer software

at such a low price.

Many organizations use enterprise systems, suchas supply chain management, customerrelationship management, enterprise resourceplanning, and collaboration software, to reducecosts and improve customer service. The goal of

these systems is to use information technologies tocreate the most efficient, effective link betweensuppliers and consumers.

Diff i i


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Differentiation

Organizations try to make their products andservices different from their competitors.

Example: Apple has been successful with this

strategy by designing its computers to lookmuch different from PCs and focusing on itscomputers ease of use.

Amazon.com has differentiated its website byusing certain information technologies, suchas personalization technologies torecommend products to customers based

on their previous purchases.


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Differentiation Contd

IT also provides an opportunity for a firm toestablish its brand image. Firms can useWeb sites to reinforce their identities, thedifferentiation of which can help build up

customer loyalty, one of the most powerfulcompetitive weapons in catching market andcustomer share.

F St t i


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Focus Strategies:

Organizations concentrate on a specificmarket segment to achieve a cost ordifferentiation advantage.

Example: Apple has also used this strategy

to target iPhones to consumer users ratherthan business users.

Similarly, Macintosh computers are heavilymarketed to creative professionals such asdesigners, photographers, and writers.

Information technologies could assist thesecompanies in reaching their target market

segments more cost effectively.


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An innovative advantage can make firms to coverproducts and process R&D, purchase and transportraw materials, testing, quality control, marketing,sales, wholesale distribution, and retailing.

IT adoption can offer firms an opportunity to

experiment with new products, services, andprocesses.

IT not only reduces information distribution time, butalso reduces product cycle time. The use of statistical

software such as SPSS, MINITAB and EPIDATA foranalyzing demographic data and frequencies ofpeople in a particular community, also the use ofworkstation softwares for pay roll analysis etc.

innovation


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innovation

The Amazon.com has differentiated itswebsite by using certain informationtechnologies, such as personalizationtechnologies to recommend products to

customers based on their previouspurchases. Amazon.com also uses the one-click system for fast checkout. With thissystem, customers can enter credit card

numbers and addresses once to make apurchase, without having to enterinformation again


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Alliance

IT helps to create many new inter-relationships among businesses andexpanding the scope of industries in which afirm must compete to achieve competitive

advantage. To maintain a successful alliance,

communications between partners play asignificant role.

Sharing relevant information and deliveringon promises are important in managing therelationship.


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Alliance contd

IT in a firm can improve its allianceadvantage by providing an efficient andcheaper communication channel amongalliance partners.

Further, IT provides suitable access toinformation and offers a proposal,independent means for alliance partners toexchange information.


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In all, in order to create sustainablecompetitive advantage through informationtechnology we must know how:

This technology influences the business

and performance of organization. To define business opportunities on the

basis of IT.

To assess technological innovations. To design the new technology in the form of

a business model.

Concl sion


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Conclusion

Information Technology can be used tocreate a competitive advantage once abusiness can effectively and efficientlyutilize it to achieve its goals.

IT must be utilized to reduce the cost ofproducts and services and, if designedcorrectly, assist with differentiation andfocus strategies, too.

Gaining a competitive advantage is not onlyabout purchasing the technology but findingwhat technology can be used to help in

production and marketing and works best


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Conclusion

Even if the technology is used all over, itmust be utilized by the business in such away that it has a competitive advantage.Further, a firm adopting IT can also enjoy

innovation, growth, cost reduction, alliance,and differentiation advantages generated bythe IT.

IT enhances information processing,

communication and alliance patterns. Thesecharacteristics could improve organizationscompetitiveness in local and internationalmarkets as well as facilitate relationshipswith other firms within the same value chain.


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IT AS COMPETITIVE ADVANTAGE