Information System for competitive advantage

Business can use strategic information system to gain an edge over there competitive .The strategic role of information system involves using information technology to develop products ,services and capabilities that give company major or competitive advantage over the competitive forces it faces in the global market places. Information system can be used to support strategy at the business , firm and industrial level .At the business level of strategy ,information system can be used to help firms ,become the low cost producers, differentiate product and services ,or serve new markets. Information system can also be used to lock in customers and suppliers using efficient customers response and supply chain management application .Values chain analysis is useful at a business level to highlight specific activities in the business where information system are more likely to have a strategic impact .At the firm level ,information system can be used to achieve efficiencies or to enhance services by tying together the operation of incongruent business units so they can function as the whole or promoting the sharing of knowledge across business unit .At the industry level system can promote competitive advantage by facilitating corporation with other forms in the industry ,creating consortiums or communities for sharing information ,exchanging transaction or coordinating activities .The competitive forces model ,information partnership ,and network economies are useful concepts for indentifying strategic opportunities for system at the industry level .

ROLE OF INFORMATION SYSTEM IN COMPETITIVE ENVIRONMENT

There are many ways that organisations may view and use information systems. For example companies may choose to use information systems strategically, or they may be content to use IT to support efficient everyday operations. But if a company emphasized strategic business uses of information technology, its management would view as a major competitive differentiator. It would then devise business strategies that would use IT to develop products, services and

capabilities that would give the company major advantage in the markets in which it competes. MIS plays an important role in the present competitive scenario. The following changes have altered the business environment:-

EMERGENCE OF THE GLOBAL ECONOMY:A growing percentage of the Indian economy and other advanced industrial economies in the Europe and Asia depends on imports and exports. Companies are distributing core business functions in product design manufacturing, finance and customer support to location in other countries where the work can be performed more cost effectively. The success of firms today and in the future depends on their ability to operate globally. Today, MIS provide the communication and logical power that firms need for conducting trade and managing business on a global scale Controlling the wide spread global corporation ,communicating with distributors and suppliers ,operating 24 hours per day in different national environment s, coordinating global work teams and servicing local and international reporting needs is a major business challenge that requires powerful information system responses . Globalisation and IT also bring new threats to domestic business firms .Because of global communications and management system ,costumer now can shop in a worldwide market place ,obtaining price and qualities information reliably every time to become competitive participants in international market ,firms need powerful in information and communication system.

TRANSFORMATION OF INDUSTRIAL ECONOMIES

The India ,US, Japan ,Germany and other major industrial powers are being transformed from industrial economies to knowledge and information based service ,economies ,whereas manufacturing has been moving to low wage country. In a knowledge and information based economies , knowledge and information are key ingredients in creating wealth. By 1974, the number of Indian white collar workers employed in

offices surpassed the number of firm workers, service workers and blue colour workers and employed in manufacturing. Today, most people know longer work on firm or and factory buy instead are found in sales ,education ,health care ,insurance firm and law firms. They also provide business services like computer programming .These jobs primarily involve working with, distributing or creating new knowledge and information . Across all industries ,information and the technology that delivers it have become critical strategic assets for business firms and there managers .Information system are needed to optimize the flow of information and knowledge within the organization and to help management maximize the firms knowledge resources .because employs productivity depends on the quality of the system serving them, management decision about IT are critically problems important to the firms prosperity and endurance .

TRANSFORMATION OF BUSINESS ENTERPRISE

There has been a transformation in the possibilities for organising and managing the business enterprise. Some firms have begun to take advantage of these new possibilities. The traditional business firms were hierarchical, centralised, structured arrangement of specialists that typically relied on a fixed set of standard operating procedures to deliver a mass produced product. The new style of business firm is a flattened, decentralized, flexible arrangements of generalists who rely on nearly instant information to deliver mass-customised products and services uniquely suited to specific customers. The traditional management group relied and still relies on formal plans, a rigid division of labour and formal rules .The new manager relies on informal commitments and networks to establish goals, a flexible arrangement of teams and networks to establish goals (rather than formal planning ),a flexible arrangement of teams and individuals working in task ,and a customer orientation to achieve coordination among employees .The new managers appeals to the knowledge ,learning and decision making of individual employees to ensure proper operation of the firm .Once again ,information technology makes this style of management possible .

THE EMERGING DIGITAL FIRM

Intensive use of IT in business firm since the mid 90s ,coupled with equally significant organizational redesign ,has created the condition for a new phenomenon in industrial society the fully digital firm. The digital firm can be defined along several dimensions. A digital firm is one where nearly all of the organizations significant business relationships with customers ,suppliers and employees are digitally enabled and connected . Core business process are accomplished through digital networks spanning the entire organization or linking multiple organization .Business processes refer to the unique manner in which work is organised ,coordinated and focused to produced a valuable product and service. Develop a new , generating and fulfilling an order ,or hiring an employee are example of business process ,and the way of organization accomplish their business processes can be a source of competitive strength. Some of the firms such as Cisco System or Dell computer Corporation are close to becoming fully digital firms ,using the Internet to derive every aspects of their business .In most other companies ,a fully digital firm is still more vision than reality but this vision is driving them towards digital integration only dot com business ,firms are continuing to invest heavily in information system that integrate internal business processes and built closer links with supplies and customers .

INFORMATION ADVANTAGE

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COMPETITIVE

Information system can allow a business to lock in customers and suppliers and lock out competition by building valuable new relationship with them .This can dissuade both customers and suppliers from discarding a firm for its competitors or daunting a firm into accepting less profitable relationship .Early attempts to use information system technology in these relationship focused on significantly improving the quality of service to customers and suppliers in a firms distribution ,marketing ,sales ,and service activities .Then business moved to more innovative uses of information technology.

Companies like Wal Mart began to expand their networks to their customers and suppliers in order to built innovative continuous inventory replenishment ,system that would lock in their business .This creates inter enterprise information systems in which the Internet ,extranets ,other networks electronically link the computers of businesses with the customers and suppliers ,resulting in new business alliances a partnership .Extranets between businesses and their suppliers are a prime example of such strategic linkages. An even stronger e-business link formed by stockless inventory replenishment system such as those between Wall-mart and Procter and gamble .And that System ,Procter and Gamble automatically replenishes Wall-mart stocks of Procter and gamble products. The shifting winds of change in todays business environment be made information system and IT imperial components that help keep an enterprise on target to meet its business goals .IT has been become an essential constituent in several strategic thrusts that business have initiated to meet the challenge of change .These include globalisation ,business process reengineering and using IT for competitive advantage. Using IT for globalisation and business process reengineering frequently results in the development of information system that help give a company a competitive advantage in the market place. These forces include not only of firm competitors but also its customers and suppliers, potential new entrants into its industry and companies offering substitutes for its products and services. IT can be used to implement a variety of competitive strategies to confront these competitive forces. these strategies are discussed as follows: 1. Cost leadership strategy: Produce products and/or services at the lowest cost in the industry. A firm achieves cost leadership in its industry by thrifty buying practices, efficient business processes, forcing up the prices paid by competitors, and helping customers or suppliers reduce their costs. A cost leadership example is the Wal-Mart automatic inventory replenishment system. This system enables Wal-Mart to reduce storage requirements so that Wal-Mart stores have one of the highest ratios of sales floor space in the industry. Essentially Wal-Mart is using floor space to sell products, not store them, and it does not have to tie up capital in inventory. Savings from this system and others allows

Wal-Mart to provide low-priced products to its customers and still earn high profits. 2. Differentiation strategy: Offer different products, services, or product features. By offering different, better products companies can charge higher prices, sell more products, or both. Southwest Airlines has differentiated itself as a low-cost, short-haul, express airline, and that has proven to be a winning strategy for competing in the highly competitive airline industry. Dell has differentiated itself in the personal computer market through its mass-customization strategy. 3. Growth strategy: Increase market share, acquire more customers, or sell more products. Such a strategy strengthens a company and increases profitability in the long run. Web-based selling can facilitate growth by creating new marketing channels, such as electronic auctions. An example is Dell Computer (dellauction.com), which auctions both new and used computers mainly to individuals and small businesses. 4. Alliance strategy: Work with business partners in partnerships, alliances,joint ventures, or virtual companies. This strategy creates synergy, allows companies to concentrate on their core business, and provides opportunities for growth. Alliances are particularly popular in electronic commerce ventures.For example, in August 2000 Amazon.com and Toysrus.com launched a cobranded Web site to sell toys, capitalizing on each others strengths. In spring 2001 they created a similar baby-products venture. Of special interest are alliances with suppliers, some of whom monitor inventory levels electronically and replenish inventory when it falls below a certain level (e.g., Wal-Mart, Master Builders). Alliances can also be made among competitors in a strategy known as co-opetition (cooperation + competition). For example, airlines in global alliances such as OneWorld and the Star Alliance compete for ticket sales on some routes, but once the ticket is sold they may cooperate by flying passengers on competitors planes to avoid half-full planes. 5. Innovation strategy: Introduce new products and services, put new features in existing products and services, or develop new ways to produce them. Innovation is similar to differentiation except that the impact is much more dramatic. Differentiation tweaks existing products and services to offer the customer something special and different. Innovation implies something so new and different that it changes the nature of the industry. A classic example is the introduction of automated teller machines (ATM) by Citibank. The convenience and cost-cutting

features of this innovation gave Citibank a huge advantage over its competitors. Like many innovative products, the ATM changed the nature of competition in the banking industry so that now an ATM network is a competitive necessity for any bank. In the late 1990s innovation became almost synonymous with electronic commerce. The Internet, especially, enabled dot-com entrepreneurs to create innovative Web-based business models, such as Pricelines name-your-own price model, Auto-by-Tels informediary model, and Amazon.coms affiliate program. A key consideration in introducing innovation is the need to continually innovate. When one company introduces a successful innovation, other companies in the industry need to respond to the threat by attempting to duplicate or better that innovation. Especially in electronic commerce, the visibility of technologies on the Web makes keeping innovations secret more difficult.