The strength of each of the five forces can also change, either improving or eroding the attractiveness of an industry.5, Exhibit V Determinants of industry attractiveness. You’ll have a much harder time accomplishing your objectives if you let project managers allocate your developers like consultants. Not only is each force likely to change but industry boundaries may change as well. According to some projections, by the mid-1990s, 75% of U.S. households will have access to such services. Each company wants to stand out. When you do what you do very well, you gain a competitive advantage over those doing it the longer and slower way. Linkages often create trade-offs in performing different activities that should be optimized. Smith got the job. Many products also process information in their normal functioning. Advantages of Information Technology. Related: The Greatest Competitive Advantage Is How Hard You Work Before the Game Begins For example, convenient, accessible information on maintenance and service procedures is an important buyer criterion in consumer appliances. Finally, the information revolution is spawning completely new businesses. A company can create competitive advantage by optimizing or coordinating these links to the outside. The parties can make preliminary commitments within 30 minutes. It can unlock the power of broader geographic scope to create competitive advantage. Competitive scope is a powerful tool for creating competitive advantage. After installation of a “smart” manufacturing system, BMW can build customized cars (each with its own tailored gearbox, transmission system, interior, and other features) on the normal assembly line. Your competition is other employees and technology. The use of Big Data is becoming common these days by the companies to outperform their peers. When selecting priority areas, remember the breadth of information technology—it involves more than simple computing. Your automated programs can track numbers of sales, customers, and transaction details. Using automation, for instance, Sulzer Brothers has increased from five to eight the number of cylinder bore sizes of new low-speed marine diesel engines. Of course, once you have identified your competitive advantage(s), you're not done. Reporting systems can track progress toward milestones and success factors. Such industries were naturally among the first and most enthusiastic users of data processing. Whether or not the infirmary story is apocryphal, it is clear that in his Canal experience he acquired a taste for and an understanding of demographic and economic statistics that stayed with him for the rest of his life. Assess information intensity. Today, information technology must be conceived of broadly to encompass the information that businesses create and use as well as a wide spectrum of increasingly convergent and linked technologies that process the information. In the trucking industry, Intermodal Transportation Services, Inc. of Cincinnati has completely changed its system for quoting prices. Data mining provides a competitive advantage Managers must look carefully at the structural implications of the new technology to realize its advantages or to be prepared for its consequences. A.J. This problem creates new uses of information technology to store and analyze the flood of information available to executives. Each company is successful in its own market. Compustat’s customers have access to corporate financial data filed with the Securities and Exchange Commission, and many companies have sprung up to perform energy use analyses of buildings. Now the pace of technological change is reversed. If you want to monitor and improve the online presence of your business, then, big data tools can help in all this. For a business to enjoy competitive advantage it has to design a new concept that is catchy, unique and different from what is already on ground. Systems that connect buyers and suppliers are spreading. Importance of information systems IT systems can produce: Leverage can change your life and business, but only if you take full advantage of it. After surveying a wide range of industries, we find that information technology is changing the rules of competition in three ways. Give your internal clients the freedom to adopt. The question is not whether information technology will have a significant impact on a company’s competitive position; rather the question is when and how this impact will strike. Information technology can alter the relationship between competitive scope and competitive advantage. It could be your products, service, reputation, or even your location. The result: drilling time is reduced and some well-logging steps are eliminated. The number of variables that a company can analyze or control has grown dramatically. Will information technology provide the leverage to expand the business globally? Whatever the reasons, the advantages are compelling. Canon, for example, built a low-cost copier assembly process around an automated parts-selection and materials-handling system. Information technology is changing the way companies operate. That extra layer of information technology can give you a competitive edge against other businesses in your field. Organizations must understand how they want to differentiate themselves and then use al… The result is a lower fare structure than might otherwise exist. If you are an employee, work as if you were in business for yourself. For example, a more costly product design and more expensive raw materials can reduce after-sale service costs. The services include arranging travel and close monitoring of individual expenses. The then managements of Sears and Ward’s alike failed to grasp the significance of these new developments. Of the many opportunities for investment in information technology, which are the most urgent? Information technology increases the power of buyers in industries assembling purchased components. Although a trend toward information intensity in companies and products is evident, the role and importance of the technology differs in each industry. Without a competitive advantage, your business has no unique method of drawing in customers. This is a huge competitive advantage. In some cases, the boundaries of industries themselves have changed.7. This had its origins during his years on the Canal, where good reading material—or, for that matter, any reading material—was scarce. Cost competitive advantages can easily disappear with the introduction of a new competitor or new technology. In the past, each local office set prices using manual procedures. After surveying a wide range of industries, we find that information technology is changing the rules of competition in three ways. Without a competitive advantage, your business has no unique method of drawing in customers. It also is affecting competitive scope and reshaping the way products meet buyer needs. Support activities provide the inputs and infrastructure that allow the primary activities to take place. Senior executives can follow five steps to take advantage of opportunities that the information revolution has created. higher profit margin, greater return on assets, valuable resource such as brand reputation or unique competence in producing jet engines. Conclusion: Big Data-A Competitive Advantage for Businesses . Information technology really does let you work smarter, faster, and with a lower cost. For example, two business units may share one sales force to sell their products, or the units may coordinate the procurement of common components. One of Wood’s interesting personal traits was a fascination with census data. Large-scale production is no longer essential to achieve automation. Sears found the answer first—fortuitously. This article focuses on ways to recognize and exploit the competitive significance of change. By using information systems, companies can measure their activities more precisely and help motivate managers to implement strategies successfully.9. Information technology has had a particularly strong impact on bargaining relationships between suppliers and buyers since it affects the linkages between companies and their suppliers, channels, and buyers. One of the primary advantages of information technology in business lies in its ability to process complex data. The company makes it so easy for clients to order, receive, and prepare invoices that the customers, in return, are willing to place larger orders. Similarly, a manufacturer of automotive parts, A.O. A competitive advantage is a way in which you can create value for your customers that your competitors cannot. Information technology can help you do all of that. Maintaining profitability gives you the opportunity to invest in further activities to strengthen your cost advantage or implement other growth strategies, such as developing new products or increasing your marketing budget. But while providing free WiFi access makes waiting customers happy, there is even more that this technology can do for your business. The technology increases a company’s ability to coordinate its activities regionally, nationally, and globally. First, advances in information technology are changing the industry structure. One of the major 5 advantages of information technology is its ability to keep money in your company’s bank account. These systems tend to tie companies more closely to their buyers and suppliers. The costs of documenting each company’s participation are high. 6. Knowing this information allows you to give the customer’s exactly what they want, which … 9. See Gregory L. Parsons, “Information Technology: A New Competitive Weapon,” Sloan Management Review, Fall 1983, p. 3. Investigate how information technology might spawn new businesses. They knew that their companies had problems; sales were increasingly difficult to get and profits were slipping. As a result, entry barriers in a number of industries are falling. The company’s product often passes through its channels’ value chains on its way to the ultimate buyer. Initially, companies used information technology mainly for accounting and record-keeping functions. Historically, a product’s physical component has been more important than its information component. Learning from others can be helpful in identifying your own competitive advantage. A company’s value activities fall into nine generic categories (see Exhibit I). © 2020 Career Advancement Blog. Automation and flexibility are achieved simultaneously, a pairing that changes the pattern of rivalry among competitors. Learn how to brand, study your competition, identify customers and their preferences, create pricing strategies and much more. The information revolution is creating interrelationships among industries that were previously separate. Your target market is your employer. A company’s search for competitive advantage through information technology often also spreads to affect industry structure as competitors imitate the leader’s strategic innovations. A company’s search for competitive advantage through information technology often also spreads to affect industry structure as competitors imitate the leader’s strategic innovations. to the business world, and information technology gives your company the resources it needs to communicate quickly and effectively. We use cookies to ensure that we give you the best experience on our website. They can also sell this data to market research companies and to food processors. During his mature years, there was a widely circulated myth (probably grounded in fact) that the Statistical Abstract was his favorite bedside reading. The structure of an industry is embodied in five competitive forces that collectively determine industry profitability: the power of buyers, the power of suppliers, the threat of new entrants, the threat of substitute products, and the rivalry among existing competitors (see Exhibit V). Competing nationally or globally with a coordinated strategy can yield a competitive advantage over local or domestic rivals. Determine the role of information technology in industry structure. The information revolution affects all nine categories of value activity, from allowing computer-aided design in technology development to incorporating automation in warehouses (see Exhibit III). How information technology gives you competitive advantages of your business? The new technology raises fixed costs at the same time as it displaces people. Information technology is an increasingly important avenue for corporate diversification. Use IT to protect the confidential information of your customers and employees. Adoption of information technology resources allows companies to maintain a competitive advantage over their rivals. No company can escape its effects. Even the simplest use of technology can dramatically improve your business' productivity and efficiency. It spawns whole new businesses, often from within a company’s existing operations. Exhibit IV, which relates information intensity in the value chain to information content in the product, illuminates the differences in the role and intensity of information among various industries. In the search for competitive advantage, companies often differ in competitive scope—or the breadth of their activities. How will advances in information technology affect competition and the sources of competitive advantage? Linkages also require activities to be coordinated. A competitive advantage is a way in which you can create value for your customers that your competitors cannot. Here are some advantages of technology in our lives: 1. When a bank consortium went looking for a contractor to run a network of automated teller machines, A.O. Let us look at an example of competitive advantage, Tesla Incorporation. (See the insert, “Aim: A Competitive Edge,” for further examples.). This dramatically reduces the time required to fill orders and increases accuracy—which enhances Digital’s image as a quality provider. Having a competitive edge is simply giving your customers a reason to buy your product over other people’s products. This improves the position of both brokers and homebuyers in shopping for mortgages. Can information technology help the company serve new segments? While managers can use information technology to improve their industry structure, the technology also has the potential to destroy that structure. Of course, when you talk about eliminating steps in business, there is the possibility of saving money. Analyze performance: Data is a highly valued asset in today’s connected world and is growing in volume like never before. On the other hand, physical processing will continue to dominate in industries that produce, say, cement, despite increased information processing in such businesses. Customers can make purchases at any hour at prices typically 25% to 30% below suggested retail levels. Or, can the technology help a company create competitive advantage by narrowing its scope? It’s vital that your company outshine other similar companies in order to maintain market share. In their study, they draw three conclusions: Information systems can be used for competitive advantage, but they must be used strategically. The cost of developing software, now a key constraint, will fall as more packages become available that are easily tailored to customers’ circumstances. That extra layer of information technology can give you a competitive edge against other businesses in your field. Competitive scope has four key dimensions: segment scope, vertical scope (degree of vertical integration), geographic scope, and industry scope (or the range of related industries in which the company competes). Madison started as a simple store in Brooklyn New York, selling to locals. Advantages Of Information Technology Information Technology Essay. Segmenting your business database allows you to identify the right information like promotions, messages, and specific emails that go with the right audience and meets their needs. 3. Information technology impacts every aspect of a company’s processes and decision making. So pervasive is the impact of information technology that it confronts executives with a tough problem: too much information. - 6809302 Every value activity creates and uses information of some kind. Victor E. Millar, “Decision-Oriented Information,” Datamation, January 1984, p. 159. Many companies are partly in control of the nature and pace of change in the industry structure. Though it is possible to identify functional areas for competitive […] With your unique website you can differentiate your products from your competitors. Develop a plan for taking advantage of information technology. American Express has developed differentiated travel services for corporate customers through the use of information technology. Companies also are increasingly able to create and sell to others information that is a by-product of their operations. The management of information technology can no longer be the sole province of the EDP department. Most products have always had both a physical and an information component. As we have seen, information technology can alter a company’s costs in any part of the value chain.8 The technology’s historical impact on cost was confined to activities in which repetitive information processing played a large part. Lowering cost. 5. Therefore, you can get feedback about who is saying what about your company. Managers should consider opportunities to create new businesses from existing ones. 4. Finally, the product becomes a purchased input to the value chains of its buyers, who use it to perform one or more buyer activities. The technology is creating new linkages between activities, and companies can now coordinate their actions more closely with those of their buyers and suppliers. 3. Banking and insurance, for example, have always been information intensive. The new technology is also making it increasingly possible to offer products with no physical component at all. Q1:->How can information technology support a company’s business processes and decision making, and give it a competitive advantage?Give examples to illustrate your answer Ans.1. Sophisticated information systems segment your list so you can target new buyers and big spenders and spend little time on “lookers.”. In the face of rapid change, however, they don’t know how. James L. McKenney and F. Warren McFarlan, “The Information Archipelago—Maps and Bridges,” HBR September–October 1982, p. 109. Equally important is the possibility that new linkages among activities are being made possible. We call these “value activities.” The value a company creates is measured by the amount that buyers are willing to pay for a product or service. It is considered the basis for profitability in a competitive market. You should be able to state your competitive advantage succinctly, both in your strategic plan and when talking to others about your business. A company with information processing embedded in its value chain may have excess capacity or skills that can be sold outside. The new information technology is enhancing product performance and is making it easier to boost a product’s information content. Some people are scared off by the notion of IT because of the upfront costs that sometimes feel overwhelming. Information technology (IT) can be defined in various ways, but is broadly considered to encompass the use of computers and telecommunications equipment to store, retrieve, transmit and manipulate data. 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Business take the competitive advantage by giving com- panies new ways to outperform their peers a system! `` technology and business, there is no one answer about what advantages and disadvantages bring... Ocean temperatures to identify promising fishing grounds implement strategies successfully.9 work more efficiently and food... The costs of documenting each company ’ s structure project managers allocate your developers like consultants to..., adjustment, upgrading, and information technology will be in control of the disruption and retraining required competitive.
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