Is A Service Firm A Merchandising Company

Using Information Systems to Achieve Competitive Advantage

Firms with a competitive reward over others typically have admission to special resources that others do not or are able to utilize resource more efficiently, resulting in college revenue growth, profitability, or productivity growth (efficiency), all of which ultimately in the long run translate into college stock market place valuations than their competitors.

Michael Porter's competitive forces model describes five competitive forces that shape the fate of the firm.

1. Traditional competitors: Existing firms that share a house'south market space
2. New market entrants: New companies have certain advantages, such every bit not being locked into old equipment and high motivation, besides equally disadvantages, such as less expertise and little brand recognition. Some industries have lower barriers to entry, ie: price less for a new company to enter the field.
3. Substitute products and services: These are substitutes that your customers might use if your prices get too high. For example, Net telephone service can substitute for traditional telephone service. The more than substitute products and services in your manufacture, the less y'all can control pricing and enhance your profit margins.
4. Customers: The ability of customers grows if they tin easily switch to a competitor's products and services, or if they tin can strength a concern and its competitors to compete on price alone in a transparent marketplace where at that place is little product differentiation and all prices are known instantly (such as on the Cyberspace).
5. Suppliers: The more different suppliers a firm has, the greater control it can exercise over suppliers in terms of cost, quality, and commitment schedules.

Figure 3-10

FIGURE three-ten PORTER�S COMPETITIVE FORCES MODEL In Porter�southward competitive forces model, the strategic position of the firm and its strategies are determined not merely by contest with its traditional directly competitors but also past iv forces in the manufacture�due south environs: new market place entrants, substitute products, customers, and suppliers.

There are four generic strategies used to manage competitive forces, each of which frequently is enabled by using information technology and systems:

1. Low-cost leadership: Utilize information systems to achieve the lowest operational costs and the everyman prices. For example, a supply concatenation direction system can comprise an efficient client response system to directly link consumer beliefs to distribution and production and supply chains, helping lower inventory and distribution costs.
2. Production differentiation: Use information systems to enable new products and services, or greatly change the client convenience in using your existing products and services. For example, Land'southward End uses mass customization, offering individually tailored products or services using the same production resources equally mass product, to custom-tailor wear to individual customer specifications.
3. Focus on market niche: Use information systems to enable a specific market focus and serve this narrow target market better than competitors. Information systems back up this strategy by producing and analyzing data for finely tuned sales and marketing techniques. Hilton Hotels uses a customer information system with detailed information about active guests to provide tailored services and reward profitable customers with extra privileges and attention.
4. Strengthen customer and supplier intimacy: Utilise information systems to tighten linkages with suppliers and develop intimacy with customers. Chrysler Corporation uses data systems to facilitate direct admission from suppliers to production schedules, and even permits suppliers to decide how and when to ship suppliers to Chrysler factories. This allows suppliers more lead fourth dimension in producing appurtenances. Strong linkages to customers and suppliers increase switching costs (the toll of switching from one product to a competing production) and loyalty to your house.

   The Internet has almost destroyed some industries and has severely threatened more. The Internet has also created entirely new markets and formed the basis for thousands of new businesses.

   Considering of the Internet, the traditional competitive forces are nevertheless at piece of work, but competitive rivalry has become much more intense. Cyberspace engineering science is based on universal standards, making it easy for rivals to compete on price lone and for new competitors to enter the market. Because information is available to everyone, the Internet raises the bargaining power of customers, who can quickly find the lowest-cost provider on the Web. Some industries, such as the travel manufacture and the financial services industry, have been more impacted than others. Yet, the Internet also creates new opportunities for building brands and building very large and loyal customer bases, such as Yahoo!, eBay, and Google.

   The value concatenation model highlights specific activities in the business where competitive strategies can best exist applied and where information systems are nearly likely to accept a strategic bear on. The value chain model views the firm as a series or chain of basic activities that add a margin of value to a business firm'south products or services. These activities can be categorized as either primary activities or support activities.

• Principal activities are most direct related to the production and distribution of the firm'southward products and services, which create value for the client. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service.
• Support activities make the delivery of the master activities possible and consist of organisation infrastructure (assistants and direction), man resources (employee recruiting, hiring, and grooming), engineering science (improving products and the production procedure), and procurement (purchasing input).

Figure 3-11

Figure 3-xi THE VALUE Chain MODEL This figure provides examples of systems for both primary and support activities of a house and of its value partners that can add a margin of value to a firm�s products or services.

Yous can use the business concern value concatenation model to place areas where data systems volition amend business processes. You lot can also criterion your business processes confronting your competitors or others in related industries, and identify and implement industry best practices.

• Benchmarking involves comparing the efficiency and effectiveness of your business concern processes against strict standards and and then measuring performance against those standards.
• Industry all-time practices are usually identified by consulting companies, inquiry organizations, government agencies, and industry associations as the most successful solutions or problem-solving methods for consistently and effectively achieving a business objective.

A house's value chain is linked to the value chains of its suppliers, distributors, and customers.

Data systems tin can be used to achieve strategic advantage at the manufacture level past working with other firms to develop industry-wide standards for exchanging information or concern transactions electronically, which forcefulness all market participants to subscribe to like standards. Such efforts increase efficiency, making product substitution less probable and perchance raising entry costs.,

Cyberspace engineering has fabricated information technology possible to create highly synchronized industry value chains called value webs. A value spider web is a drove of independent firms that use it to coordinate their value chains to produce a production or service for a market collectively. It is more customer-driven and operates in a less linear mode than the traditional value chain.

Figure 3-12

FIGURE 3-12 THE VALUE WEB The value web is a networked system that can synchronize the value bondage of business organisation partners within an industry to respond rapidly to changes in supply and demand.

A large corporation is typically a collection of businesses. Data systems tin can improve the overall operation of these business organization units by promoting synergies and cadre competencies.

• In synergies, the output of some units can exist used as inputs to other units, or 2 organizations puddle markets and expertise, and these relationships lower costs and generate profits.
• A core competency is an activity for which a firm is a world-class leader, such as existence the world'due south best miniature parts designer. A cadre competency relies on knowledge that is gained through experience as well equally incorporating new, external knowledge. Whatever information system that encourages the sharing of knowledge across business units enhances competency.

Concern models based on a network may help firms strategically by taking advantage of network economics . In network economic science, the marginal costs of calculation another participant or creating some other product are negligible, whereas the marginal proceeds is much larger. For example, the more people offering products on eBay, the more than valuable the eBay site is to everyone considering more than products are listed, and more competition among suppliers lowers prices.

Another network-based strategy is the virtual visitor , or virtual organization, which uses networks to link people, avails, and ideas, enabling it to marry with other companies to create and distribute products and services without being limited past traditional organizational boundaries or physical locations. One company can use the capabilities of another company without existence physically tied to that visitor.

The traditional Porter model of competitive forces assumes a relatively static manufacture surround; relatively clear-cut industry boundaries; and a relatively stable gear up of suppliers, substitutes, and customers. With the emergence of the digital firm and the Internet, some modifications to the original competitive forces model are needed. Some of today's firms are much more aware that they participate in business organization ecosystems, loosely coupled but interdependent networks of suppliers, distributors, outsourcing firms, transportation service firms, and technology manufacturers. In a business ecosystem , cooperation takes place across many industries rather than many firms.

Figure 3-thirteen

FIGURE three-13 AN ECOSYSTEM STRATEGIC MODEL The digital firm era requires a more dynamic view of the boundaries amidst industries, firms, customers, and suppliers, with competition occurring among industry sets in a business ecosystem. In the ecosystem model, multiple industries piece of work together to deliver value to the customer. Information technology plays an important role in enabling a dense network of interactions among the participating firms.

Business ecosystems can be characterized equally having one or a few keystone firms that dominate the ecosystem and create the platforms used by other niche firms. Keystone firms in the Microsoft ecosystem include Microsoft and engineering producers such as Intel and IBM. Niche firms include thousands of software application firms, software developers, service firms, networking firms, and consulting firms that both support and rely on the Microsoft products.

Source: https://paginas.fe.up.pt/~als/mis10e/ch3/chpt3-3bullettext.htm

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