Information Systems and Business Strategy
Strategic information systems, computer systems are used to change the target level of the organization, operations, products, services, or environmental relationships to help organizations achieve competitive advantage.
The decision of the company’s business strategy depends on:
* Products and services produced by firms
* Industries in which companies compete
* Competitors, suppliers, and customers of the company
* The long term objectives of the company
Business-level strategy: Value Chain Model
The most common strategy for this level are:
1. be producing products with low production costs
2. differentiate products and services
3. change the scope of competition either by expanding the market to the global market and by narrowing the market.
Value chain model, the model pays attention to the primary and support activities that add value to products and services company which is best applied information systems to gain competitive advantage.
Primary activity is the activity that directly relates to the production and distribution company’s products or services. While support activities are activities that allow execution of primary activities. Consists of organizational infrastructure, human resources, technology, and procurement.
Web refers to the value of customer-controlled network in companies that utilize information technology to coordinate its value chain in order to collectively produce products or services to market.
Products and Services Information System
System that creates product differentiation:
* Companies can use IT to develop different products.
* Creating brand loyalty by developing a unique and new products and services
* Products and services not easily duplicated by competitors. For example, Dell Corporation.
Systems that Support Market Niche
Intensive analysis using customer data to support new ways to contact and serve customers which allows to develop new niche markets for specific products or services. For example, frequent guest program Wyndam Hotel
Supply Chain Management and Efficient Customer Response System
System that connects the company’s value chain to value chain of suppliers and consumers. Systems that directly connect back to the distributor of consumer behavior, production, and supply chain. Example: Wal-Mart purchases directly connect customers to the suppliers almost immediately. work of suppliers is to ensure the products delivered to the store to replace the product purchased.
IT at the organizational level is used to avoid the shift of customers to other suppliers and bind them to the company. The replacement cost is the cost incurred by the customer or the company for the time and resources are wasted when switching from one supplier or to the system supplier or a competitor’s system. For example, Baxter International.
Corporate-level strategy and Information Technology
Extending the core competencies, the activities in which the company excels as a world-class leader. Information systems encourage knowledge sharing across business units and therefore increase the company’s competence.
Industry-level strategy and Information Systems: competitive forces and the network economy. The company operates in a larger environment consisting of other companies, governments, and nations. Information partnerships, alliances of cooperation carried out by two or more companies which aims to share information to gain strategic advantage. Help companies get access to new customers, creating new opportunities for cross-selling and targeting products.
Porter’s five forces model
In larger environments, there are five main force or threats:
1. New market entrants
2. Substitute products and services
3. Suppliers
4. Customer
5. Other companies that compete directly
Competitive forces model, the model is used directly to explain the interaction of external influences, specifically threats and opportunities, and strategies that affect the organization’s ability to compete. Internet technology has affected the industrial structure with
* Provide the technology that makes the competitors to compete in terms of price and new players on the market.
* Boost the information available to customers in terms of price thereby increasing the bargaining power.
* Lowering the power supplier
* Items substitution
Business ecosystem
IT plays a strong role in creating new forms of business ecosystem products. Business ecosystem is a network of suppliers, distributors, outsourcing firms, transportation service companies, and manufacturing technologies that are interrelated. For example, Microsoft: 1 billion PCs around the world and hundreds of thousands of businesses rely on Microsoft platforms. EBay: Millions of people and thousands of businesses using this platform. Wal-Mart: Enterprise systems used by suppliers to improve efficiency
Network Economics
IT products and services showed strong network effects and potentially create a situation of “winner take all”. Tissue causing the cost to add a zero or a few other participants, otherwise the benefits could be even greater. Contrary to the law of profit decline in industrial and agricultural products. For example, the value of the Internet grows exponentially with linear increase in users. Because the particular software can be a standard (such as the Windows operating system or Windows Office), people can lock into the standard and value of Windows grew as more and more people are using it.
Good strategy, using IT to build products and services that lead to network effects. Opportunity management, the Company is exposed to the development of IT-based opportunities to gain strategic advantage.
Management challenges
* Some companies face major hurdles in implementing contemporary systems.
* After the gains achieved, there are difficulties in maintaining excellence.
* Organizations are often unable to change to accommodate new technologies fast enough
Guidelines for Completion of strategic systems analysis
* Understand the structure and dynamics of industrial competition in which firms operate.
* Understand the business value chain, companies, and industry
* Consider how companies can manage “strategic shift” in an effort to implement systems that provide a competitive advantage.
