Strategic Uses of Information Technology

Strategic Uses of Information Technology

INFORMATION TECHNOLOGY

Refers to the advancement of hardware, software capabilities, telecommunications, database management, and other information processing technologies used in computer-based information.

A firm can survive and succeed in long run if it successfully develop strategies to confront the five competitive forces that shape the structure of competition in its industry;
-          Threat of new entrants
-          Rivalry of competitors within the same industry
-          Threat of substitutes
-          The bargaining power of customers
-          Bargaining power of suppliers

·         Competitive strategies
-          Cost leadership; becoming a low-cost producer of products and services
-          Differentiation strategy; develop ways to differentiate firm’s products and services
-          Innovation strategy; finding new ways of doing business: unique products and services
-          Growth strategy; expanding a company’s capacity to produce goods and services, expanding into global markets etc.
-          Alliance strategy; establishing new business linkages and alliances with customers, suppliers, competitors, consultants and other companies. E.g. mergers, acquisitions, joint ventures, etc.

Strategic uses of information technology:
-          Lower costs
o   Use IT to reduce businesses processes
o   Use IT to lower the costs of customers or suppliers
-          Differentiate
o   Develop new IT features to differentiate products and services
-          Innovate
o   Create new products and services that include IT components
o   Develop unique new markets or markets niches with the help of IT
-          Promote Growth
o   Use IT to manage regional and global business expansion
-          Develop alliance
o   Use IT to create organisation of business partners

Example;
Strategy
Company
Strategic IS
Benefit
CL
Buy.com
Online price adjustment
Lowest price guarantee
DFRTN
AVNET Marshall
Customer/supplier ecommerce
Increase in market share
INVSN
Charles Schwab & co
Online discount stock trading
Market leadership
Growth
Citicorp
Global intranet
Increase in global market
Alliance
Walmart
Automatic inventory replenishment by supplier
Reduced inventory costs/increased sales



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