Competing with Information Technology Lecture 7 By Dr. Sadaf Sajjad.

Competingwith

Information Technology

Lecture 7 By

Dr. Sadaf Sajjad

Chapter Objectives• Identify several basic competitive

strategies and explain how they can use information technologies to confront the competitive forces faced by a business.

• Identify several strategic uses of information technology for electronic business and commerce, and give examples of how they give competitive advantages to business.

• Give examples of how business process reengineering frequently involves the strategic use of e-business technologies.

Chapter Objectives

• Identify the business value of using e-business technologies for total quality management, to become an agile competitor, or to form a virtual company.

• Explain how knowledge management systems can help a business gain strategic advantages.

The Competitive EnvironmentThreat of

NewEntrants

Rivalry AmongExisting

Competitors

Bargaining Powerof Customers

Bargaining Powerof Suppliers

Threat ofSubstitutes

• A firm can survive in the long run if it successfully develops strategies to confront five generic competitive forces that operate in the firm's relevant environment. As illustrated on the above slide these forces include:

• Threat of New Entrants. Many threats to long run survival come from companies that do not yet exist or have a presence in a given industry or market. The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.

This is especially true as the effects of globalization increase the likelihood that previously "domestic only" competition will encounter new international competitors.

Bargaining Power of Suppliers. Suppliers with access to key or limited resources, or who dominate their industries, may exert undue influence on the firm. Many firms seek to reduce their dependence on a single firm to limit the suppliers' bargaining power.

Rivalry Among Existing Firms. In mature industries, existing competitors are not much of the threat: typically each firm has found its "niche". However, changes in management, ownership, or "the rules of the game" can give rise to serious threats to long term survival from existing firms.

For example, the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt.

Bargaining Power of Customers. Customers can grow large and powerful as a result of their market share. For example, Wal-Mart is the largest customer for consumer package goods and often dictates terms to the makers of those goods -- even a giant like Procter & Gamble.

Threat of Substitutes. To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.

Fundamental Competitive Strategies - Cont.

Differentiation StrategiesDifferentiation Strategies

Innovation StrategiesInnovation Strategies

Growth StrategiesGrowth Strategies

Alliance StrategiesAlliance Strategies

Cost Leadership StrategiesCost Leadership Strategies

Competitive Advantage is created or maintained with the company succeeds in performing some activity of value to customers significantly better than does its competition. According to Porter, competitive advantage can be developed by following one or more of these strategies:

Cost Strategies. Becoming a low-cost producer in the industry allows the company to lower prices to customers. Competitors with higher costs cannot afford to compete with the low-cost leader on price.

Differentiation Strategies. Some companies create competitive advantage by distinguishing their products on one or more features important to their customers. Unique features or benefits may justify price differences and/or stimulate demand.

Innovation Strategies. Unique products or services or changes in business processes can cause fundamental changes in the way an industry does business.

Growth Strategies. Significantly expanding production capacity, entering new global markets, diversifying into new areas, or integrating related products or services can all be a springboard to strong company growth.

Teaching Tip: For example, Intel has increased its capacity (and lowered its costs) just as competitors were close to matching its previous technology in integrated chip manufacturing and design.

Alliance Strategies. Establishing new business linkages and alliances with customers, suppliers, former competitors, consultants, and others can create competitive advantage

Strategic Uses of Information TechnologyImproving

BusinessProcess

PromoteBusinessInnovation

Locking in Customers and Suppliers

Use IT to reduce costs of doing business

•Use IT to improve quality•Use IT to link business to customers and suppliers

Use IT to create new products or services

EnhanceEfficiency

Create NewBusiness Opportunities

Maintain ValuableCustomers and Relationships

Strategy

IT Role

Outcome

•Develop interprise information systems whose convenience and efficiency create switching costs that lock in customers or suppliers.

•Make major investments in advanced IT applications that build barriers to entry against industry competitors or outsiders.

•Include IT components in products and services to make substitution of competing products or services more difficulty.

•Leverage investment in IS people, hardware, software, databases, and networks from operational uses into strategic applications.

The Value Chain Concept developed by Michael Porter views a firm as a series of basic activities (the "chain") that add value to its products and services that support a profit margin for the firm. In the value chain concept, some business activities are primary activities and others support activities. For each activity, the role of strategic information systems (SIS) can contribute significantly to that activity's contribution to the value chain:

Support Activities. Support activities create the internal infrastructure that provides direction to and support for the specialized work of primary activities:

•

•Management and Administrative Services. The key role of SIS here is in automated office systems.

• Human Resources Management. SIS role: Employee Skills Database.

• Technology Development. SIS role: Computer-Aided Design.

• Procurement of Resources. SIS role: EDI with suppliers.

Primary Activities. These activities directly contribute to the transformation process of the organization.

• Inbound Logistics. SIS role: Automated Warehousing, JIT.

• Operations. SIS role: Computer-Aided Manufacturing.

• Outbound Logistics. SIS role: Online Data Entry.

• Marketing and Sales. SIS role: Market Analysis.

• Service. SIS role: Diagnostic Expert System.

The Value Chain

Administrative Coordination & Support Services

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

Procurement of ResourcesProcurement of Resources

InboundLogisticsInboundLogistics OperationsOperations Outbound

LogisticsOutboundLogistics

Marketingand

Sales

Marketingand

Sales

CustomerServiceCustomerService

Com

petit

ive

Adv

anta

ge

Value chains can be used to strategically position a company’s Internet-based applications to gain competitive advantage.

1. This value chain model outlines several ways that a company’s Internet connections with its customers could provide business benefits and opportunities for competitive advantage. Example: Company-managed Internet newsgroups, chat rooms, and e-commerce websites are powerful tools for market research and product development, direct sales, and customer feedback and support.

2. Company Internet connections with its suppliers could be used for competitive advantage.Example: Online auctions and exchanges at suppliers’ e-commerce websites and online shipping, scheduling, and status information at an e-commerce portal that gives employees immediate access to up-to-date information from a variety of vendors. This can substantially lower costs, reduce lead times, and improve the quality of products and services.

The Internet Value ChainMarketing andProductResearch

Sales andDistribution

Support and Customer Feedback

Data for market research, establishes consumer responses

•Access to customer com-ments online•Immediate re-sponse to customer problems

•Low cost distribution•Reaches new customers •Multiplies contact points

Increase Market Share

Lower Cost Margins

Enhanced Customers Satisfaction

InternetCapability

Benefitsto

Company

Opportunityfor

Advantage

Strategic Positioning of Internet Technologies

Global MarketPenetration

E-Commerce WebsiteValue-added IT Services

Product and ServicesTransformation

E-Business; ExtensiveIntranets and Extranets

Cost andEfficiency Improvements

E-Mail, Chat Systems

Performance Improvements inBusiness Effectiveness

Intranets and Extranets

Strategy

Solution

Low

High

High

Cus

tom

er C

ompe

titi

on C

onne

ctiv

ity

E-Business Processes ConnectivityInternal Drivers

Ext

erna

l Dri

vers

For Internet technologies to be used strategically applications must be correctly positioned. The strategic positioning matrix shown can be used to help a company optimize the strategic impact of Internet Technologies.

The matrix recognizes two major drivers:

Internal Drivers. The amount of connectivity, collaboration and use of IT within a firm.

External Drivers. The amount of connectivity, collaboration and use of IT by customers, suppliers, business partners, and competitors.

Cost and Efficiency Improvements. When there is a low amount of connectivity, collaboration and use of IT within the company and by customers and competitors, a firm should focus on improving efficiency and lowering costs by using Internet technologies to enhance communications between the company and its customers and suppliers.

Performance Improvement in Business Effectiveness. When there is a high amount of internal connectivity, but external connectivity by customers and competitors is still low, a firm should focus on using Internet technologies like intranets and extranets to make major improvements in business effectiveness.

Global Market Penetration. When there is a high degree of connectivity by customers and competitors and low internal connectivity, a firm should focus on developing Internet-based applications to optimize interactions with customers and build market share.

Product and Service Transformation. When a company and its customers, suppliers, and competitors are extensively networked, Internet technologies should be used to develop and deploy products and services that strategically reposition it in the marketplace.

Customer-Focused e-Business

Let customersplace orders thrudistributionpartners

TransactionDatabase

Link Employees and distributionpartners

Let customers check order history and delivery status

Let customers place orders directly

CustomerDatabase

Build acommunityof customers,employees,and partners

Give allemployees acomplete viewof customers

There are other key strategies enabled by IT that can be used to enable a business to become successful and to maintain their success. These will be discussed on the next slides.

A key strategy for becoming a successful e-business is to maximize customer value. This strategic focus on customer value recognizes that quality rather than price becomes the primary determinant in a customer’s perception of value. A Customer-Focused e-business, then, is one that uses Internet technologies to keep customer loyal by anticipating their future needs, responding to concerns, and providing top quality customer service.

As the slide indicates, such technologies like intranets, the Internet, and extranet websites create new channels for interactive communications within a company, with customers, and with suppliers, business partners, and others in the external business environment. Thereby, encouraging cross-functional collaboration with customers in product development, marketing, delivery, service and technical support.

A successful Customer-Focused e-business attempts to ‘own’ the customer's total business experience through such approaches as:

•Letting the customer place orders directly, and through distribution partners

•Building a customer database that captures customers' preferences and profitability, and allowing all employees access to a complete view of each customer.

Business Reengineering and Quality Management

Business QualityImprovement

Business QualityImprovement

BusinessReengineering

BusinessReengineering

DefinitionDefinition

TargetTarget

PotentialPaybackPotentialPayback

RiskRisk

What Changes?What Changes?

PrimaryEnablersPrimaryEnablers

Incrementally Improving Existing ProcessesIncrementally Improving Existing Processes

Radically Redesigning Business SystemsRadically Redesigning Business Systems

Any ProcessAny Process Strategic Business ProcessesStrategic Business Processes

10%-50% Improvements10%-50% Improvements 10-Fold Improvements10-Fold Improvements

LowLow HighHigh

Same Jobs - More EfficientSame Jobs - More Efficient Big Job Cuts; New Jobs; Major Job RedesignBig Job Cuts; New Jobs; Major Job Redesign

IT and Work SimplificationIT and Work Simplification IT and Organizational RedesignIT and Organizational Redesign

One of the most important competitive strategies today is business process reengineering (BPR) most often simply called reengineering. Reengineering is more than automating business processes to make modest improvements in the efficiency of business operations. Reengineering is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service. BPR combines a strategy of promoting business innovation with a strategy of making major improvements to business processes so that a company can become a much stronger and more successful competitor in the marketplace.

However, while many companies have reported impressive gains, many others have failed to achieve the major improvements they sought through reengineering projects.

Business quality improvement is a less dramatic approach to enhancing business success. One important strategic thrust in this area is called Total Quality Management (TQM). TQM emphasizes quality improvement that focuses on the customer requirements and expectations of products and services. This may involve many features and attributes, such as performance, reliability, durability, responsiveness etc.

TQM uses a variety of tools and methods to provide:

•More appealing, less-variable quality of products or services

•Quicker less-variable turnaround from design to production and distribution

•Greater flexibility in adjusting to customer buying habits and preferences

Lower costs through rework reductions, and non-value-adding waste elimination.

The Customer- Focused Agile Competitor

Leverage theImpact of People and IS Resources

Acc

essi

bilit

yD

eliv

ery

Tim

eC

usto

mer

’stim

e to

mar

ket

Anticipation offuture needs

Customization

Conformance

Cost of

Transaction

Cost of

Value-added

Services

Give Customers Solutions

to Problems

Give Customers Solutions

to Problems

Cooperate with Business Partnersand Competitors

Cooperate with Business Partnersand Competitors

Organize toMasterChange

Organize toMasterChange

Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services. Agile companies depend heavily on information technology to support and manage business processes. The four fundamental strategies of agile competition are:

Enrich Customers. Agile companies enrich customers with solutions to their problems. Long term value-added products and services succeed when they solve problems based on customer needs. As conditions change, the agile competitor establishes a relationship based on the ability and willingness to change to meet new customer problem situations.

Cooperate. Agile companies cooperate to enhance competitiveness. This means internal cooperation and, where necessary, cooperation with competitors in order to bring products and services to market more quickly.

Organize. Agile companies organize to master change and uncertainty. This is a key component of agile competition because it seeks development of the anticipation and rapid response to changing conditions, not an attempt to stifle change itself.

Leverage People and Information. Agile companies leverage the impact of people and information by nurturing an entrepreneurial spirit and providing incentives to employees to exercise responsibility, adaptability, and innovation.

The Free.Perfect.Now model developed by AVNET Marshall embodies these principles into a succinct model for serving its customers in the most agile and responsive way.

Free Dimension. Emphasizes that most customers want the lower cost for value received, but are willing to pay more for a value-added service.

Perfect Dimension. Emphasizes that products and services should not only be defect free, but should be enhanced by customization, added features and should further anticipate future customer needs.

Now Dimension. Emphasizes that customers want 24x7 accessibility to products and services, short delivery times, and consideration of the time-to-market for their own products.

Borderless

Technology

Excellence

Trust-Based

Adaptability

Opportunism

SixCharacteristics

of VirtualCompanies

Virtual Corporations

A Virtual Company (also called a virtual corporation or virtual organization) is an organization that uses information technology to link people, assets, and ideas. People and corporations are forming virtual companies in order to take advantage of strategic opportunities that require time, people competencies and information technologies resources that may not exist within a single company. By making strategic alliances with other companies and quickly forming a virtual company of all-star partners, the virtual company is best able to assemble the components needed to provide a world-class solution for customers and capture the opportunity.

To succeed the virtual company must possess six characteristics:

Adaptability: Able to adapt to a diverse, fast-changing business environment. Virtual companies must further reduce concept-to-cash time through sharing.

Opportunism: Created, operated, and dissolved to exploit business opportunities when they appear. They must gain access to new markets and share market or customer loyalty, while increasing facilities and market coverage.

Excellence: Possess all-star, world-class excellence in the core competencies that are needed. These competencies must be seamlessly linked through the use of Internet technologies.

Technology: Provide world-class information technology and other required technologies in all customer solutions. They must migrate from selling products to selling solutions.

Borderless: Easily and transparently synthesize the competencies and resources of business partners into integrated customer solutions.

Trust-Based: Members are trustworthy and display mutual trust in their business relationships. They must be willing to share infrastructures and risks.

Knowledge Management SystemsSolution

Knowledge

DevelopmentEngineers

TechnicalSupportStaff

ProductManagers Other

Vendors

Customers

The Internet

Intranet

Knowledge Management has become one of the major strategic uses of information technology. Knowledge Management Systems (KMS) are systems that are used to manage organizational learning and business know-how. The goal of knowledge management systems is to help knowledge workers create, organize, and make available important business knowledge, whenever, and wherever its needed. Such knowledge may include explicit knowledge like reference works, formulas, and processes, or tacit knowledge like “best practices”, and fixes. Internet and intranet technologies, along with such other technologies like GroupWare, data mining, and online discussion groups are used by KMS to collect, edit, evaluate and disseminate knowledge within the organization.

Why Study Strategic IT?

• Technology is no longer an afterthought in forming business strategy, but the actual cause and driver.

• IT can change the way businesses compete.

35

Strategic View of Information Systems

• Information systems are vital competitive networks.• Information systems are a means of organizational

renewal.• IS are a necessary investment in technologies that

help a company adopt strategies and business processes that enable it to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment.

36

Case #1: Does IT Matter?

Nicholas Carr:

• It is simply the infrastructure of modern business.• It’s equivalent to railroads, electricity, and internal

combustion engineering.• Once innovative applications of IT have become

simply the cost of doing business.

37


How important is IT to GE?

– Business imperative– Lifeblood for productivity– 20% return on technology investments and GE

invests $2.5 to $3 billion a year

38


Nicholas Carr:

Today’s main risk is not under using IT but overspending on it.

39


Michael Dell, CEO of Dell Computers

• Anything in business can be either a sinkhole or a competitive advantage if you do it really, really bad or you do it really, really well.

• You’ve got a lot of people who don’t know what they’re doing and don’t do it very well.

40


Andy Grove, Chairman of Intel Corp.

• Commercial-transaction processing in the United States and some parts of Europe has reach maturation but that’s only one segment of IT.

41


• A bunch of networks and computersOR• Hardware plus the software that mediates

and manages human knowledge or information

42


Charles Fitzgerald, Microsoft General Manager

• The source of competitive advantage in business is what you do with the information that technology gives you access to. How do you apply that to some particular business problem?

43


Paul Strassman, former CIO of General Foods, Xerox, Pentagon, and NASA

• Information technology today is a knowledge-capital issue.

• Look at the business powers – most of all Wal-Mart, but also companies like Pfizer or FedEx. They’re all waging information warfare.

44


1. Do you agree with the argument made by Nick Carr to support his position that IT no longer gives companies a competitive advantage? Why or why not?

2. Do you agree with the argument made by the business leaders in this case in support of the competitive advantage that IT can provide to a business? Why or why not?

45


3. What are several ways that IT could provide a competitive advantage to a business? Use some of the companies mentioned in this case as examples. Visit their websites to gather more information to help you answer.

4. What does Mr. Strassman mean by information warfare?

5. Can information technology give a competitive advantage to a small business? Why or why not? Use an example to illustrate your answer.

46

Strategic Information Systems

Definition:• Any kind of information system that uses

information technology to help an organization gain a competitive advantage, reduce a competitive disadvantage, or meet other strategic enterprise objectives.

47

Mission and Competitive Strategies

• Corporate Mission or Objective• Competitive Strategy - Major policies to

support the company to compete with other companies so it can survive in the long run

48

Competitive Forces and Strategies

49

Competitive Forces

Definition:• Shape the structure of competition in its

industry.

50

Porter’s Competitive Forces Model

To survive and succeed, a business must develop and implement strategies to effectively counter the:

• Rivalry of competitors within its industry• Threat of new entrants into an industry and its

markets• Threat posed by substitute products which might

capture market share• Bargaining power of customers• Bargaining power of suppliers

51

Competitive Strategy• Cost Leadership Strategy• Differentiation Strategy• Innovation Strategy• Growth Strategy

– Significantly expanding a company’s capacity to produce goods and services

• Alliance Strategy

52

Cost Leadership Strategy

• Becoming a low-cost producer of products and services

• Finding ways to help suppliers and customers reduce their costs

• Increase costs of competitors

53

Differentiation Strategy

• Developing ways to differentiate a firm’s products and services from its competitors’

• Reduce the differentiation advantages of competitors

54

Innovation Strategy

• Development of unique products and services• Entry into unique markets or market niches• Making radical changes to the business processes

for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industry

55

Growth Strategy

• Significantly expanding a company’s capacity to produce goods and services

• Expanding into global markets• Diversifying into new products and services• Integrating into related products and

services

56

Alliance Strategy

• Establishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companies

57

Competitive Strategy Examples

58

Other Competitive Strategies

• Locking in customers or suppliers by building valuable new relationships with them.

• Building switching costs so a firm’s customers or suppliers are reluctant to pay the costs in time, money, effort, and inconvenience that it would take to switch to a company’s competitors.

59

Other Competitive Strategies

• Raising barriers to entry that would discourage or delay other companies from entering a market.

• Leveraging investment in information technology by developing new products and services that would not be possible without a strong IT capability.

60

Advantage vs. Necessity

• Competitive Advantage – developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forces

• Competitive Necessity – products, services, processes, or capabilities that are necessary simply to compete and do business in an industry

61

Customer-Focused Business

A business that:

• can anticipate customers’ future needs.• responds to customer concerns.• provides top-quality customer service.

62

IS in a Customer-Focused Business

63

Value Chain

Definition:• View of a firm as a series, chain, or network of

basic activities that add value to its products and services, and thus add a margin of value both to the firm and its customers.

64

Value Chain

65

Value Chain

66

Case #2: Using IT to tap Expert Know-How

U.S. DOC AskMe Knowledge Management System

• Automated best practices• Automated experts’ profile creation• Addition of numerous methods for accessing and

delivering knowledge• Integrated real-time collaborative services• Comprehensive analytic capabilities

67


Benefits• Experts’ knowledge is organized• Experts’ are more easily contacted• Information is reusable saving 750 hours of

repetitive work• Return on investment is tracked• Popular topics are identified so DOC can beef

up its expertise in those areas

68


1. What are the key business challenges facing companies in supporting their global marketing and expansion efforts? How is the AskMe knowledge management system helping to meet this challenge? Explain.

69


2. How can the AskMe system help to identify weaknesses in global business knowledge within the Department of Commerce?

3. What other global trade situations could the AskMe system provide information about? Provide some examples.

70


4. Is the AskMe system intended to help the DOC become a knowledge-creating organization? Why or why not?

71

Business Process Reengineering

Definition:• Fundamental rethinking and radical redesign

of business processes to achieve dramatic improvements in cost, quality, speed, and service.

72

73

Value Chain Analysis - Disintermediation to the Consumer

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/

Sweater

$48.50

$40.34

$20.45

BPR vs. Business Improvement

74

75

Stockless Inventory Compared to Traditional and Just-in-time Supply Methods

Cross-Functional Processes

76

Agility

Definition:• The ability of a company to prosper in rapidly

changing, continually fragmenting global markets for high-quality, high performance, customer-configured products and services.

77

Agile Company

Definition:• A company that can make a profit in markets

with broad product ranges and short model lifetimes, and can produce orders individually and in arbitrary lot sizes.

78

Becoming an Agile Company

Dell Computer – Agility in Action

• Customer-Focused Company• Champion of Mass Customization• Build-to-Order Business Model• 25,000 on a Typical Day• Tight Supply Chain Management• Rarely More than Two Hours Worth of Parts

Inventory

79

Mass Customization

Definition:• Providing individualized products while

maintaining high volumes of production

80

Agile Competitor

81

Virtual Company

Definition:• An organization that uses information

technology to link people, organizations, assets, and ideas.

82

Inter-enterprise Information Systems

Definition:• Information systems implemented on an

extranet among a company and its suppliers, customers, subcontractors, and competitors with whom it has formed alliances.

83

Virtual Company Strategies

Cisco Systems: Virtual Manufacturing Alliances• Alliances Create a Virtual Manufacturing

Company• Three Companies Involved in the Alliance• Provides and Agile Build-to-Order Capability in

Fiercely Competitive Industry

84

Virtual Company

85


• Share infrastructure and risk with alliance partners.

• Link complementary core competencies.• Reduce concept-to-cash time through

sharing.

86


• Increase facilities and market coverage.• Gain access to new markets and share

market or customer loyalty.• Migrate from selling products to selling

solutions.

87

Knowledge-Creating Companies

Definition:• Consistently creating new business

knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.

88

Types of Knowledge

• Explicit Knowledge – data, documents, things written down or stored on computers

• Tacit Knowledge – the “how-tos” of knowledge, which reside in workers

89

Knowledge Management

Definition:• Techniques, technologies, systems, and

rewards for getting employees to share what they know and to make better use of accumulated workplace and enterprise knowledge.

Knowledge Management Systems – manage organizational learning and business know-how

90

Levels of Knowledge Management

91

Case #3: Shareware Grows Up

How a software cooperative works• Companies pay a membership which entitles

them to use any of the intellectual property of the co-op.

• Member companies will donate intellectual property, cooperate in adapting it for other companies, help troubleshoot problems and form sub-groups to develop needed niche software for the library.

92


Benefits• Decrease in the total cost of ownership of

software• Co-op becomes responsible for assets and also

ensure that there’s a clear title so member companies can’t be sued later

• The larger the installation base, the lower the cost of ongoing maintenance

93


Challenge• Getting members to really collaborate

94


1. Organizations are constantly striving to achieve competitive advantage, often through their information technologies. Given this constant, why does Hansen suggest that competition among members shouldn’t be an issue because the shared assets don’t bring competitive advantage? Explain.

95


2. What do you see as the potential risks associated with the Avalanche approach? Provide some examples.

3. How could other companies apply the cooperative model used by Avalanche to achieve efficiencies in areas other than software support? Explain.

96

Case #4: Customer-Loyalty Systems

Satisfaction vs. Loyalty• A satisfied customer is one who sees you as

meeting expectations.• A loyal customer, on the other hand, wants to

do business with you again and will recommend you to others.

97


• A good loyalty program combines customer feedback and business information with sophisticated analytics to produce actionable results.

• With good customer loyalty technology, IT can wire the voice of the customer back into the enterprise.

98


How can IT help?• Gathering customer experience data by e-mail rather

than telephone dramatically reduces survey cycle times

• Can build in validated, multivariate measures of loyalty into the software

• Software-generated models can accurately predict customer’s purchasing behavior

• IT can be used to deliver rewards to customers based on predictive analysis

99


1. Does CDW’s customer loyalty program give them a competitive advantage? Why or why not?

2. What is the strategic value of Harrah’s approach to determining and rewarding customer loyalty?

3. What else could CDW and Harrah’s do to truly become a customer-focused businesses? Visit their websites to help you suggest several alternatives.

100

Summary

• Information technologies can support many competitive strategies including cost leadership, differentiation, innovation, growth and alliance.

• IT can help– Build customer-focused businesses– Reengineer business processes– Businesses become agile companies– Create virtual companies– Build knowledge-creating companies

101

Chapter Summary

• Information systems can play several strategic roles in business.

• The Internet, intranets, extranets, and other Internet-based technologies can be used strategically for e-business and e-commerce that provide a competitive advantage.

• A key strategic use of Internet technologies is to build an e-business which develops its business value by making customer value its strategic focus.

Chapter Summary (cont)

• IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness.

• IT can be strategically used to improve the quality of business performance.

• A business can use IT to help it become an agile company, that can respond quickly to changes in its environment.

Chapter Summary (cont)• Forming virtual companies has become

an important competitive strategy in today’s dynamic global market.

• Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations.

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Competing with Information Technology Lecture 7 By Dr. Sadaf Sajjad.

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