Siyu Chen

Competitive Strategy and Information System
What is Competitive Strategy?

Competitive strategy can be defined as a business plan that managers take to maximize the value of the firm, thereby the firm can compete with its competitors and increase profitability. For example, a company can select a specific business strategy, let's say, a global standardization strategy, to lower their costs by applying economies of scale, learning effects, and location economies, to gain a competitive advantage, and ultimately making profits from it. 

    Firms have to fit in these strategies; they can choose either being the cost leaders or differentiating their products from rivals. In Michael Porter's theory, competitive strategy is determined by the structure of an industry. Once the company selects the strategy, the managers have to employ the information systems that reflect and facilitate the organization's competitive strategy. 



This is the supplementary video that describes what is the five competitive forces that shape strategy:

YouTube Video








How Does Competitive Strategy Determine Information System? 
    Organizations must analyze their industry first and choose a competitive strategy. after this procedure, they generate the value chains and business processes, and therefore the company can design an information system that properly supports these business processes. For instance, if company selects the differentiation strategy, they will use CRM database to track past customers' rental records, as well as an inventory database to control and manage inventories. 



What is Information System?

    According to Using MIS, authored by David M. Kroenke, "Information System (IS) is a group of components that interact to produce information." Information System has five components: computer hardware, software, data, procedures, and people. Information system helps people achieve the goals and objectives of business. 

Five components refer to: 
  • Hardware: the collection of physical elements that comprise a computer system; keyboard, microphone, mouse, image scanner, etc.
  • Software: computer applications like Google Docs & Spreadsheets, Microsoft Groove, Microsoft SharePoint.
  • Data: Documents, Discussion lists, Task lists, Wikis, Blogs
  • Procedures: way to use the software
  • People: the person who runs the information system
Introducing the IS: 

YouTube Video


Actual Example of how information system provides competitive advantage:
    Dell company is an international computer technology manufacturer and retailer. It has already established a successful, effective, and attractive online retailer store. People can purchase computers that satisfy their requirements, at the same time discover more valuable information and culture about the company. By selling computers directly to consumers, In Dell's official website, Dell creates a new service that minimized the cost of distribution and sales. It also sells the same products and technology but they differentiate from competitors by getting closer to the customer (Avery, Simon. "Beyond PCs: Dell, HP Investors Stuck in Waiting Game." The Globe and Mail, May 2, 2012. This information is from http://search.proquest.com/docview/922511951?accountid=10361). They can hear directly from the customers because they eliminate retail stores. Not only they reduce the cost, but also they can receive feedback from customers efficiently. In other words, Dell creates, enhances, and differentiates the products and services just like Kroenke demonstrates in Chapter 3. 
    Besides, directly selling strategy has given Dell a competitive advantage that forces customers cost more if they switch back to traditional personal computer selling method ("Dell Named Global SMB Partner of the Year at VMware Partner Exchange 2012." Targeted News Service, May 2, 2012. Click http://search.proquest.com/docview/922744536?accountid=10361 for more information). This shows how Dell lock in customers by establishing high switching costs. In addition, Dell pay more attention on its suppliers and has a very effective supply chains in the industry. Dell requests its suppliers to have cost competitiveness and to understand Dell’s business strategy. The reason of doing so is that Dell can establish a positive long-term  partnership with their suppliers.
    Dell also needs an advanced inventory and delivery control information system to support its business core that provide cheaper and personalize computer . When Michael Dell established Dell Computer, his strategy was to provide lower-price computer by rejecting unnecessary costs in the transition from manufacturers to end users. Back in those days, manufacturers first produced computers, and then shipped finished goods to wholesalers. Later on, wholesalers shipped to the retail stores. Finally, end users could buy computers from retail stores. All the additional transportation costs and inventory costs would add on the price tag. On the other hand, Dell successfully create a profitable business process that sell computer directly to consumers("About Dell" Dell.com, accessed April 28, 2012, http://content.dell.com/us/en/corp/about-dell.aspx?c=us&cs=19&l=en&s=corp)
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