Compiled By: Kwamed2k
An organization strategy is a broad-based formula for how a business is going to compete, what its goals should be and what plans and policies will be needed to implement and accomplish these goals. Information systems are viewed as potential means to achieve the objectives of businesses and competitive advantage.
According to Earl (2001), competitive advantage is only one of four uses of strategic information systems planning. The other uses (all of which are key components of business strategies) are:
• To improve performance,
• To enable new ways of managing and
• To develop new businesses.
The term information systems is referred to as management of the organizational function in charge of planning, designing, developing, implementing and operating the systems and provide services. The information systems of your organization, therefore must comprise information technology infrastructure, data, application systems and personnel that employ IT to deliver information and communication services in your organization.
Why you must implement strategic information systems (SIS) in your business
Implementation of SIS in your business in times like this will greatly aid you in exploiting the above tangible and intangible resources in the planning of the future of the organization such that the operational excellence demonstrated by the achievement of low cost production or quality and differentiation and high profit is achieved.
Objectives of information systems
The most important objective of information systems for your business must be to create and improve relationships between your customers and suppliers. If your business can use information systems to learn more about its customers, serve them better and ensure that they continue to come back for more products and services, your business can increase revenue remarkably.
On the other side of the equation, the business can use IS for better and timelier information about its own needs that can lead to lower costs of operations which will help to improve business and to increase satisfaction levels. IS and technologies are more valuable in achieving your business objectives especially when they are combined with changes in business practices and management behavior.
Customer intimacy is the of understanding your customers and providing them with the products and services they demand. It is true that IS help companies to establish entirely different business models.
Management objectives in investment in Information Systems
Technology is impacting on our world and lives. Technological advancements are effecting all aspects of our careers and work.
Entrepreneurs and Business executives are now investing as much monies as possible in technology in modern business organizations.
The main objectives for these investments in business information systems are in six main folds:
Operational excellence: The way and manner managers will achieve improved productivity and value for money in their operational activities. Value for money, simply means the sum total of economy, efficiency and effectiveness in business operational activities in the work place.
Innovation and creation of new products or services.
Creation and improving relationships between the business and its customers and suppliers.
New managerial tools: Investing in IS will avail to managers and workers the tools necessary to make better decisions.
Achieving competitive advantage: Increasing the business’s advantage over its competitors in the market and
Sustainability: Ensuring the survival of the business. The objective is to ensure that data is effectively updated so that better, reliable and timelier information is provided to business partners at a lower cost and in an improved process.
Value proposition and Diversity of competitive information
What you must really do to succeed in the environment which you compete
A key element in any organization’s IS is identifying its target customers and delivering what those target customers want. What the organization tries to deliver to its customers is called its value proposition.
Value proposition is a clear and short statement of competitive value that your organization must deliver to its target customers, thus how you will compete for or satisfy your customers that will be distinctive from your competitors.
Below are the four elements of Value Proposition:
• Cost: The price paid by the customer, given by the product features and competitors’ price.
• Quality: The degree of conformance between what the customer is promised by you and what the customer really receives from you. For example, a defect-free smart phone that performs as promised by your salesman.
• Functionality and Features: The performance of a product. Example a meal in a restaurant that provides the dinner with the level of satisfaction expected for the price paid or a new mobile phone that provides the user with Palm-Top Computer functionality for the same price of the mobile phone.
• Services: All the other elements of the product relevant to the customer. For example, for a Car, service might include how customer are treated as the car bought in addition to the degree and form of after-sales-services.
Achieving Operational Excellence
Good supply chain management and customer service are critical in achieving operational excellent. Enterprise systems will help your management team to make better decisions by giving them more complete information.
Enterprise softwares incorporate the best practices of an industry helping it to conform its business process more easily, more efficiently and effectively.
The basis of today’s (millennial) competition has changed from who sells the most to who owns the customer and has the best customer relationship.
A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a low cost (cost advantage), or deliver benefits that exceeds those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.
The goal of much strategy is to achieve a sustainable competitive advantage.
Using Michael Porter’s two basic types of competitive advantage;
1, Cost advantage and
2, Differentiation advantage
Both advantages can be more broadly approached (or narrowly approached), which results in the third viable competitive strategy: FOCUS.
The common ways of thinking about gaining competitive advantage as above are:
1, Deliver a product or a service at lower cost
This does not necessary mean the lower cost, but simply a cost related to the quality of the product or service that will be both attractive in the marketplace and will yield sufficient return on investment. The cost considered is not simply the data processing cost, but is the overall cost of all corporate activities for the delivery of that product or service.
There are many computer systems that have given internal cost saving and other internal advantages, but they can not be thought of as strategic until those savings can be translated to a better competitive position in the market.
2, Deliver a product or service that is Differentiated
Differentiation means the addition of unique features to a product or service that are competitively attractive in the market. Generally such features will cost something to produce, and so they will be setting point, rather than the cost itself.
Seldom does a lowest cost product also have the best differentiation. A strategic system helps customers to perceive that they are getting some extra benefits or utility for consuming same product or service.
3, Focus on specific market segment
The idea is to identify and create market niches that have not been adequately filled. Information technology is frequently able to provide the capabilities defining, expanding and filling a particular nich or segment. The application would be quite specific to the industry.
Develop products or services through the use of computer that are new and appreciably from other available offerings. Example of these are automatic credit card handing at service stations and automated teller machines at banks. Such innovative approaches do not only give opportunities to attract new customers, but also open up entirely new fields of businesses so that their use have very elastic demand.
Analysis of Porter’s Competitive advantage
Porter’s competitive advantage can be summed up in two viewpoints:
1, Cost and differentiation – these advantages are viewed as positional advantages since they describe the firm’s position in the industry as a leader in either cost or differentiation.
2, A source-based – this view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately result in superior value creation.
Resources and Capabilities
According to the resource-based view, in order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Without this superiority, the competitors could simply replicate what the firm was doing and any advantage quickly would disappear.
Resources are the firm’s specific assets useful for creating a cost or differentiation advantage and that few competitors can acquire easily. The following are some examples of such resources that your business must have:
Information technology infrastructure:
- Powerful PCs and Robotics
- Database and Network
- A vibrant website
- Strong organization (knowledge base)
- Patents and trademarks
- Proprietary know-how
- Installed customer base
- Reputation of the firm and
- Brand equity
This refers to your firm’s ability to utilize your resources, as above, effectively. An example of a capability is the ability to bring a product to the market faster than your competitors, i.e. through website ordering and payment systems. Such capabilities must be embedded in the routines of your organization and are not easily documented as procedures and thus are difficult to be cloned by your competitors.
The firm’s resources and capabilities together form its distinctive competencies.
These competencies enable renovation, efficiency, quality and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.
These are the most significant value-creating skills within your organization and key areas of expertise which are distinctive to your company and critical to the companies long-term growth.
Your company’s core competencies are the things that you can do better than your competitors in the critical, central areas of your company where the most value is added to your products. These areas of expertise may be in any area, from product development to employees dedication.
A competence that is central to your business’s operations but which is not exceptional in some way should not be considered as a core competence, as it will not generate a differentiated advantage over rival businesses. It follows from the concept of Core Competencies that resources that are standardized or easily available will not enable a business to achieve a competitive advantage over its rivals.