How Did Reformers Try To Make Businesses More Efficient And Profitable

Using Information Systems to Achieve Competitive Advantage

Firms with a competitive reward over others typically take admission to special resource that others practice not or are able to use resources more efficiently, resulting in higher 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'southward competitive forces model describes five competitive forces that shape the fate of the firm.

1. Traditional competitors: Existing firms that share a firm'due south market space
2. New market entrants: New companies have sure advantages, such every bit non being locked into former equipment and high motivation, besides as disadvantages, such as less expertise and little brand recognition. Some industries accept lower barriers to entry, ie: toll less for a new company to enter the field.
3. Substitute products and services: These are substitutes that your customers might utilise if your prices get too high. For case, Net phone service can substitute for traditional telephone service. The more substitute products and services in your manufacture, the less you tin can control pricing and raise your turn a profit margins.
4. Customers: The power of customers grows if they tin can easily switch to a competitor'south products and services, or if they can strength a business and its competitors to compete on cost alone in a transparent market place where in that location is picayune production differentiation and all prices are known instantly (such as on the Internet).
5. Suppliers: The more than different suppliers a business firm has, the greater control information technology tin can do over suppliers in terms of price, quality, and delivery schedules.

Effigy 3-x

FIGURE iii-10 PORTER�S COMPETITIVE FORCES MODEL In Porter�due south competitive forces model, the strategic position of the firm and its strategies are adamant non only by competition with its traditional directly competitors just also by four forces in the industry�s environment: new market entrants, substitute products, customers, and suppliers.

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

1. Low-cost leadership: Use information systems to reach the everyman operational costs and the lowest prices. For case, a supply concatenation management arrangement can incorporate an efficient customer response system to directly link consumer behavior to distribution and product and supply chains, helping lower inventory and distribution costs.
2. Production differentiation: Use information systems to enable new products and services, or profoundly change the customer convenience in using your existing products and services. For instance, Land's End uses mass customization, offering individually tailored products or services using the aforementioned product resources as mass production, to custom-tailor clothing to individual customer specifications.
3. Focus on market niche: Use information systems to enable a specific marketplace focus and serve this narrow target marketplace better than competitors. Data systems back up this strategy by producing and analyzing data for finely tuned sales and marketing techniques. Hilton Hotels uses a customer information organization with detailed data about agile guests to provide tailored services and reward profitable customers with extra privileges and attending.
4. Strengthen client and supplier intimacy: Utilise data systems to tighten linkages with suppliers and develop intimacy with customers. Chrysler Corporation uses information systems to facilitate directly access from suppliers to production schedules, and fifty-fifty permits suppliers to decide how and when to ship suppliers to Chrysler factories. This allows suppliers more lead time in producing goods. Strong linkages to customers and suppliers increase switching costs (the cost of switching from one product to a competing production) and loyalty to your house.

   The Cyberspace has most 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.

   Because of the Cyberspace, the traditional competitive forces are still at piece of work, merely competitive rivalry has become much more intense. Internet technology is based on universal standards, making it easy for rivals to compete on toll alone and for new competitors to enter the market place. Considering information is bachelor to everyone, the Internet raises the bargaining ability of customers, who can quickly observe the lowest-cost provider on the Spider web. Some industries, such as the travel industry and the financial services manufacture, have been more impacted than others. However, the Internet also creates new opportunities for building brands and edifice very large and loyal customer bases, such equally Yahoo!, eBay, and Google.

   The value chain model highlights specific activities in the business organisation where competitive strategies tin can best exist applied and where information systems are most likely to accept a strategic touch. 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's products or services. These activities can be categorized as either main activities or support activities.

• Master activities are most directly related to the product and distribution of the firm's products and services, which create value for the customer. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service.
• Support activities make the delivery of the main activities possible and consist of system infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production procedure), and procurement (purchasing input).

Figure 3-eleven

Effigy 3-11 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 together a margin of value to a firm�due south products or services.

You tin apply the business organisation value chain model to place areas where information systems volition meliorate business processes. You can also benchmark your business processes against your competitors or others in related industries, and identify and implement industry best practices.

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

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

Information systems can be used to achieve strategic reward at the industry level past working with other firms to develop industry-broad standards for exchanging information or business organisation transactions electronically, which force all market participants to subscribe to similar standards. Such efforts increase efficiency, making production commutation less likely and perhaps raising entry costs.,

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

Figure three-12

Figure 3-12 THE VALUE WEB The value web is a networked system that tin can synchronize the value bondage of business partners inside an industry to reply rapidly to changes in supply and demand.

A large corporation is typically a drove of businesses. Information systems can improve the overall performance of these business units by promoting synergies and core competencies.

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

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

Another network-based strategy is the virtual company , or virtual organization, which uses networks to link people, avails, and ideas, enabling information technology to ally with other companies to create and distribute products and services without beingness limited by traditional organizational boundaries or physical locations. One company tin can apply the capabilities of another visitor without existence physically tied to that company.

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

Figure three-13

Figure 3-13 AN ECOSYSTEM STRATEGIC MODEL The digital firm era requires a more dynamic view of the boundaries among industries, firms, customers, and suppliers, with contest occurring among industry sets in a business ecosystem. In the ecosystem model, multiple industries work together to evangelize value to the customer. IT plays an important role in enabling a dense network of interactions amongst the participating firms.

Business ecosystems can be characterized every bit having one or a few keystone firms that dominate the ecosystem and create the platforms used past other niche firms. Keystone firms in the Microsoft ecosystem include Microsoft and engineering science 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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