Information system strategies

Information system strategies

There are four generic strategies used to manage competitive forces, each of which often is allowed by using information technology and systems:

1. Low-cost leadership: There is use of information system in order to get the lowest operational cost accompanied by the lowest prices. For example, a supply chain management system can include an efficient customer response system for directly linking consumer behavior to distribution, production and supply chains by helping lower inventory and distribution costs.
2. Product differentiation: There is use of information systems to permit new products and services or amazingly change the customer’s convenience in bringing your existing products and services for use. For example, Land's End uses mass customization which offers individually customized products or services by using the same production resources like mass production, to custom-tailor clothing for individual customer specifications.
3. Focus on market niche: There is use of information system for enabling a specific market focus and serving this narrow target market comparatively better than competitors. Information systems also support this strategy by producing and evaluating data for finely adjusted sales and marketing techniques. For example, The Hilton Hotel uses a customer information system along with detailed data about present guests to give tailored services and reward profitable customers with extra concern, privileges, and attention.
4. Strengthen customer and supplier intimacy: There is use of information system to secure linkage with suppliers and develop relations with customers. For example, Chrysler Corporation has adopted information systems to avail direct access from suppliers to production routines, and even allows suppliers to decide how and when to ship suppliers to Chrysler’s factories. This allows suppliers longer lead time in producing goods. Strong linkages to customers and suppliers add switching costs (the cost of switching from one product to its competing product) and loyalty to your company.

Internet's impact on competitive advantages

The Internet has nearly ruined some industries and has critically threatened more. The Internet has also created whole new market and established the basis for thousands of new businesses.

Because of the development of internet, the conventional competitive forces are still at work, but competitive variance has become much deeper. Internet technology is based on universally set standards, making it comfortable for rivals to compete on the price alone and also for the new competitors to get into the market. Since information is available to everyone, the Internet uplifts the bargaining power of the customers, who can promptly find the lowest-cost provider on the world wide web. Some industries like the travel industries and the financial services industries have been more influenced than others. However, the Internet also generates new opportunities for establishing brands and building very huge and loyal customer bases such as Yahoo!, eBay, and Google.

Business value chain model (BVCM)

The value chain model foregrounds specific activities in the business in which fierce competitive strategies can best be implemented and where information systems are most probably to have a strategic impact. The value chain model observes the firm as a series of fundamental activities that pile a margin of merit to a firm's products or services. These activities can be classified as either primary activities or support activities.

1. Primary activities are most straightly linked to the production and distribution of the firm's products and services, which forms value for the customer. Primary activities consist of inbound logistics, operations, outbound logistics, sales and marketing, and service.
2. Support activities create the supply of the primary activities possible and include organization infrastructure, human resources, technology, and procurement.

Note:

1. Benchmarking: It is the process of comparing the efficiency and effectiveness of our business process against strict standard and  then measuring performance against those standards.
2. Industry based policies: It is usually identified by consulting companies, research organization, government agencies, industries association as the most successful solution or problem-solving method for consistently and effectively gaining business objectives.

Extended value chain model

Internet technology has made it possible to form highly coordinated industry value chains known as value webs. A value web is defined as collection of independent firms which use information technology to assemble their value chains to generate a product or service for a market jointly. It is highly customer-driven and functions in a less straight fashion than the conventional value chain.

Improve overall performance of business units

A large corporation is particularly a collection of businesses. Information systems can make the overall performance of these business units better by enhancing synergies and the core competencies.

1. Synergy: Synergy refers to the combined effect produced by two or more parts, elements or individuals. Synergy results when the whole is greater than the sum of the parts. In synergies, the result of some units can be utilized as inputs to other units, or two organizations join markets and also expertise, and such relationships decrease costs and generate profits. Use of IT in this synergy condition is to join together the operation of distinct business units to that they can act as a single.
2. Core competency: A core competency is termed as an activity for which a firm is supposed to be a world-class leader exactly like being the world's best small scaled parts designer. A core competency depends on knowledge that is gained through experience as well external knowledge. Any information system that focuses on the sharing of knowledge across business units promotes competency.
3. Network based strategy: This strategy includes the use of:

• Network economics: In network economics, the marginal costs of summing another participant or creating some other product are negligible, whereas the marginal profit is much larger. For example, the more the products are offered on eBay, the more worthy the eBay site is to everyone because more products are enlisted, and more competition between suppliers ultimately lowers prices.

• Virtual company model: Another network-based strategy is the virtual company, or virtual organization, which makes the use networks to connect people, resources, and ideas, allowing it to share with other companies to produce and distribute products and services without being confined by traditional organizational territories or physical locations. One company can make use of the capabilities of another company by not being physically connected to that company.
• Business ecosystem: It is defined as the network of organization including suppliers, distributors, and customers, government agencies- involved in delivering specific product or services through both competition and co-operation. In the ecosystem model, multiple firms work together to deliver value to the customer and IT plays an important role in enabling a dense network of interaction among the participating firms.

Reference

Laudon, Laudon, "Management Information Systems Managing the Digital Firm", twelfth edition