Strategic Uses of Information Systems

Strategy and Strategic Moves

 

Strategy

A plan designed to help an organization outperform its competitors

Strategic Information Systems

• Information systems that help seize opportunities
• Can be developed from scratch, or they can evolve from existing ISs 
• Strategic advantage:Using a strategy to maximize strength
• Competitive advantage:The result of the use of a strategic advantage

Increase profits through increased market share 
Innovation results in advantage  
Strategies that no one has tried before 
Example: Dell using the Web to take customer order 
 
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Initiative #1: Reduce Costs

• Lower costs results in lower price
• Bigger Market Share
• Implement automation to become more productive
• The Web has made this possible for many 

Initiative #2: Raise Barriers to Market Entrants

• Patenting 
• High expense of entering industry  
• State Street, Inc. (Pension fund management business)

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Initiative #3: Establish High Switching Costs

• Explicit Switching Costs
• Fixed and nonrecurring
• Implicit Switching Costs
• Indirect costs in time and money of adjusting to a new product 

 

Initiative #4: Create New Products or Services 

• Lasts only until competition offers an identical or similar product or service for a comparable or lower price  
• First Mover: Creates assets
• Brand Name 
• Better Technology
• Delivery Methods
• Critical Mass: body of clients that attracts other client 

Initiative #5: Differentiate Products or Services 

• Product differentiation 
• Brand recognition 
• Examples of brand name success  
• Levi’s jeans 
• Chanel perfumes  Gap clothes 

Initiative #6: Enhance Products or Services

• Examples 
• Auto manufacturers enticing customers with a longer warranty 
• Real estate agents providing useful financing information to potential buyers Charles Schwab moving stock trading services on-line before Merrill Lynch

Initiative #7: Establish Alliances

• Combined service may attract customers 
• Lower cost
• Convenience
• Examples:  
• Travel industryHP and FedEx 

Initiative #8: Lock in Suppliers or Buyers  

• Bargaining Power  
• Purchase volume  
• Strengthen perception as a leader  
• Create a standard

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Strategic Information Systems (SIS) 

•An IS that helps achieve long-term competitive advantage  

•SIS embodies two types of ideas: 

–Potentially-winning business move –How to harness IT to implement that move 

•Two conditions for SIS:  

–Serve an organizational goal 

–Work with the managers of the other functional units

Creating an SIS 

Top management involvement 

From initial consideration through development and implementation 

Must be a part of the overall organizational strategic plan 

 Steps for Considering a new SIS

 

 

Steps to Take in an SIS Idea-Generated Meeting

•  Re-engineering and Organizational Change  
• To implement an SIS and achieve a competitive advantage, organization must rethink entire operation 
• Goal of re-engineering 
• Achieve efficiency leaps of 100% or higher
• Competitive Advantage as Moving Target

 

 

SISs developed as strategic advantages quickly become standard busines

 –Banking industry (ATMs and banking by phone)
Continuous search for new ways of utilizing information technology to their advantage
–SABRE, American Airlines’ reservation system  

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SUMMARY

• Business strategy and strategic moves can give an organization an advantage
• Basic initiatives for gaining a competitive advantage 
• Strategic information systems require fundamental elements Circumstances and initiatives that make one SIS succeed and another fail

-Dharmendra K. Vyas
Hypertechengineering