Information Systems and CompInformation Systems and Competitive Advantageetitive Advantage

Topic.3. Information Systems & Competitive AdvantageTopic.3. Information Systems

& Competitive Advantage

Value Chain

Information Systems in Value Chain - 1

Information Systems in Value Chain - 2

Information Systems create Value Web

• A firm’s value chain is linked to the value chains of its

suppliers, distributors, and customers

• A value web is a collection of independent firms that use

information technology to coordinate their value chains to

produce a product collectively

• Value webs are flexible and adapt to changes in supply and

demand

Role of IS in Value Web

Types of Competitive Advantages

Competitive Forces

Competitive Strategies

Cost Leadership

• eProcurement: Use of IS to reduce Procurement Costs

• Direct Marketing: Reduce marketing costs through

disintermediation

• Customer Relationship Management: Reduce selling

costs through retention and extension.

• Supply Chain Management: Reduce inventory costs.

Differentiation

• Levi Strauss, Nike, Dell etc. allow the Customers to

customize their products when they shop online. This

enables them to offer a differentiated product.

• Hilton hotels facilitate their hotel staff to access their

Customer Profiles in real time, that enables them to

develop / offer a differentiated service or a product to the

customer.

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Growth

–Expand production capacity

–Expand into global markets

–Diversify

– Integrate into related products and services.

Colloborate

• CISCO has built a virtual Value Chain by collaborating online with key

stakeholders such as Jabil Circuit and Hamilton Standard. This enables

CISCO to bring in newer products to the market faster while

significantly lowering its fixed costs.

• Wal-Mart collaborates with key suppliers such as Procter & Gamble to

manage their Inventories. Walmart’s enterprise information systems link

the business processes of the company electronically with its suppliers,

resulting in close business alliances.

Strategic uses of IS - 1

Innovative applications: Create innovative applications that

provide direct strategic advantage to organizations.

Competitive weapons: Information systems themselves are

recognized as a competitive weapon

Changes in processes: IT supports changes in business

processes that translate to strategic advantage

Links with business partners: IT links a company with its

business partners effectively and efficiently.

Strategic uses of IS - 2

Cost reductions: IT enables companies to reduce costs.

Relationships with suppliers and customers: IT can be used

to lock in suppliers and customers, or to build in switching costs.

New products: A firm can leverage its investment in IT to

create new products that are in demand in the marketplace.

Competitive intelligence: IT provides competitive (business)

intelligence by collecting and analyzing information about

products, markets, competitors, and environmental changes .

Strategic Use of IT in FedEx

Strategic Use of IT in GE

Strategic Use of IT in Zara