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CHAPTER 5

Organizational Strategy, Competitive


Advantage, and Information Systems

Brahm White-Gluz
Chapter 5 Outline
1. Competitive Advantage

2. Business Pressures

3. Organizational Responses involving IT Support

4. Competitive Advantage and Strategic Information Systems


1. Competitive Advantage

Competitive Advantage: any assets that provide an organization with


an edge against competitors in some measure such as
• Cost
• Quality
• Speed

Strategic Information Systems (SISs): Information systems that help


an organization gain a competitive advantage by supporting its strategic
goals and/or increasing performance & productivity
2. Business Pressures
Market Pressures: business pressures generated by
– Globalization & its impact on increased competition
– powerful customers

Technology Pressures: business pressures caused by


– technological innovation and
– information overload

Societal/Political/Legal Pressures: business pressures related to:


– social responsibility,
– government regulation/deregulation
– ethics
2.1 Market Pressures

Globalization: rapid advances in IT facilitate the integration and


interdependence of economic, social, cultural, and ecological aspects
of life

Powerful Customers: consumer sophistication and expectations


increase as customers use the Internet and become more
knowledgeable about the products and services they acquire
2.2 Technology Pressures

Technological Innovation and Obsolescence: today’s state-of-


the-art products may be obsolete tomorrow due to innovation
using IT

Information Overload: Through the use of the Internet and


other telecommunications networks, managers are provided with
vast amounts of data, information, and knowledge while trying to
make decisions effectively and efficiently
2.3 Societal/Political/Legal Pressures

• Social Responsibility
• Compliance with Government Regulations
• Ethical Issues
3. Organizational Responses

• Customer Focus
• e-Business and e-Commerce
4. Competitive Advantage and Strategic
IS’s

1. Porter’s Competitive Forces Model


2. Porter’s Value Chain Model
3. Strategies for Competitive Advantage
4. Business – Information Technology Alignment
4.1 Porter’s Five Forces Model

1. The threat of entry of new competitors


2. The bargaining power of suppliers
3. The bargaining power of customers (buyers)
4. The threat of substitute products or services
5. The rivalry among existing firms in the industry
Figure 2.2: Porter’s Competitive Forces
Model
4.2 Porter’s Value Chain Model

Value Chain Model: A sequence of activities that transform


the organization’s inputs into outputs

Categories of Activities in the Value Chain:


– Primary Activities: create value for which customers
are willing to pay by producing and distributing the firm’s
products and services
– Support Activities: support the primary activities, but
do not add value directly to the firm’s products or
services
Primary Activities

• Inbound logistics
• Operations
• Outbound logistics
• Marketing and sales
• Services
4.3 Strategies for Competitive Advantage

1. Cost leadership strategy


2. Differentiation strategy
3. Innovation strategy
4. Organizational effectiveness strategy
5. Customer orientation strategy
Figure 2.4: Strategies for Competitive
Advantage