Contribution of Information Systems to Pursue Competitive Strategies
Information systems may help businesses gain a competitive advantage in various ways. For starters, they can improve operational effectiveness by automating procedures and lowering the time and assets needed to execute operations. This can result in cost savings and increased production, giving a firm an advantage over its competitors. Secondly, information systems may help managers make more informed decisions by providing fast and reliable information. This allows them to make better judgments and respond faster to market developments. Third, information systems may help businesses stand out from the crowd by offering distinctive goods or services. Companies, for example, might utilize data analytics to learn about their customers' tastes and create tailored goods or services that match their demands. Ultimately, computerized systems can improve customer service offering quicker and more tailored help. This can lead to higher client satisfaction and loyalty, giving a business a competitive advantage. Overall, information systems may give an array of benefits that can help businesses obtain a competitive advantage in the market.
That is very dependent on the scope of the firm and the market in which you operate. But, at its foundation, information is critical to making sound business judgments.
Large corporations can gather client information, acquire more data, and use industry/market research. Then, using data mining and predictive analytics, they may modify marketing presentations and identify those that are most profitable or appealing to consumers. Sell more/additional items and services to existing clients, potential new consumers, or both.
Small businesses may accomplish comparable things at a more modest scale. At the very least, you ought to understand who your customers are, who comes late (if you bill instead of collecting at the point of sale), and so on. You may keep records of who purchased what so that you can target further sales to them more effectively.
But, of course, all of this builds on the fundamental operational assistance that a competent information system provides: understanding what is lucrative and what hasn’t been a cash flow pattern, and so on. It would enable you to determine how often you pay your suppliers, whether they bill you as well, how your expenditures scale aboutrevenue growth, how hazardous it would be to increase your premises, and so on.
The informational revolution is spreading over our economy. No organization can avoid its consequences. The cost of getting, processing, and delivering information has dropped dramatically, transforming the way people do business.
Most general managers are aware that the transformation is underway, and few question its significance. As executives devote a growing amount of their time and financial money to information software and its impacts, they are becoming increasingly conscious that technology cannot be limited to EDP or IS departments. As they observe how their competitors utilize information to gain a competitive edge, these executives grasp the need to become personally involved in the administration of new technologies. They are unsure how to deal with fast change.
Advantages of Strategic Information Systems
The majority of approaches lack an information system, but firms are increasingly able to develop and implement strategies such as customer management, cost reduction, and increased sales to gain a competitive edge over their competitors. Creative utilization of information systems assists firms in establishing and maintaining a stronger market position and maximizing their strengths. A corporation can benefit from the strategic use of information systems. Strategic information systems help organizations gain a competitive advantage in various ways and expand their market share. Turban offers these seven variables to demonstrate the relevance of a strategic information system.
Reduced Expenses
Based on information technology research, information technology, and the internet lower the cost of procedures and communication while also changing the business themefound that information technology lowers the cost of advertising, distribution, and communication. Furthermore, cost reductions in distribution routes allow firms to cut inventory costs. Because of the advancement of information technology, firms may attain cost reduction objectives by delivering breakthrough solutions.Consumers pay a premium for a specific level of quality and want higher quality or greater value at cheaper pricing. A product or service is a set of benefits that a company provides in return for something else. "Consumer perceives value" refers to a consumer's appraisal of all the advantages and costs connected with items, as well as their perception of alternatives. If a corporation provides a product or service of competitive quality at a cheap cost, the consumer believes the value to be high.
Lowering pricing is one of the best ways to expand market share, and we can do it via cost reduction and economies of scale. The only option to convey the advantage of cost savings to customers is process automation. Japanese manufacturing lines employ robots for the first time to cut costs and increase productivity. Until their competitors used automation technology in their operations, Japanese firms enjoyed a competitive edge, providing high-quality products at lower rates. Companies employ information systems to enhance their offerings. Domain names allow businesses to convey precise information about their services while also granting customers access to the majority of those services. Consumers may execute most of their chores using information systems, such as ATMs and Internet Banking in the banking industry, tracking systems in courier services, and so on. It allows companies and consumers to engage effortlessly. Information systems enable firms to give services to their customers seven days a week, twenty-four hours a day, without the need for physical labour.
Obstacle to Entry
Profitable industries attract new investors. When the number of rivals rises, competition shifts to price and profit margins shrink (Porter, M. E. 1980). As a result, firms may obtain a competitive edge by providing services that are difficult to reproduce. By utilizing core capabilities and key technologies that may be costly and difficult to manage for others, the organization gains a sustained competitive edge. Companies build barriers in a variety of ways, including patents and trademarks, copyright, domain names, business models, business processes, supply chains, distribution channels, firm size, cost advantages independent of size, product differentiation, and so on. New entrants pay a hefty price to enter the market. For example, DELL's supply chain management is integrated with an information system that manages the majority of their duties including information, materials, and money. They use a system known as just-in-time inventory (JIT) to eliminate the intermediary in their distribution channel, resulting in lower inventory costs and distributor commissions. With the information system, they provide their consumers with low-cost, cutting-edge computers. DELL Inc.'s supply chain management presents difficulties for new enterprises.
Changing Cost
Stopping buying from one company and switching to another is an expensive proposition (Barringer, B. R. 2008). The cost a business suffers in its state of abundance is known as explicit cost, but the expense that a firm faces in that form that time and resources spent on adjustment is known as implicit cost. Many providers offer Order Processing Systems to their customers to manage ordinary orders. Switching from one supplier to another may incur financial and time costs due to the need to master new information systems.
Develop Unique Services and Goods
Organizations can use information technology to experiment with new products, services, and procedures. The creation of new products and services gives significant competitive advantages. The competitive advantage endures until other companies in the sector produce an equivalent and identical item at comparable pricing. Lotus was the market leader until Microsoft Excel introduced superior features. Microsoft Excel became the market leader not just via strong marketing, but also because of its capabilities. Other examples include eBay. The company is a leading participant in Internet auctions. The firm gained first-mover advantage and became extremely popular in online auctions. First Move Advantage business collects subscriber numbers. And they currently have millions of active users, making it harder for competitors to replicate the services and operations. However, first mover advantage does not necessarily ensure long-term competitive advantage. Netscape was a pioneer in online browsing, but once Microsoft introduced a built-in version of the Internet Explorer browser, Netscape's market share declined.
Differentiation of Products
Information technology enables firms to differentiate themselves not only via pricing, but also through innovation, customer service, and operations. Furthermore, Smith describes information technology as a competitive weapon against rivals by establishing a strong brand image. Product differentiation refers to making a product superior to rivals. It gives higher value than the consumer. It does not only refer to values in terms of quality, but also to characteristics, status, ingredients, brand names, and everything else that distinguishes the product. Consumers rated brands in their thoughts based on distinction, allowing them to purchase brands based on their preferences.Companies differentiate themselves based on procedures and service delivery. Most businesses use technology to manage their supply chains successfully and efficiently. Dell uses a strategic information system to make its business processes as well as its supply chains more strategic.
Product/Market Improvement
A firm's growth strategy comprises market and product expansion to enhance market share, and information technology helps firms expand. Firms can target intermarket segments and operate worldwide by leveraging information technology. Organizations may improve their products and services more effectively by using a strategic information system. For example, the National Databases and Registering Authority (NADRA, also) was established to handle the Computerized National Identity Card (CNIC), but with the help of the Strategic Information System (SIS), NADRA has been able to expand its services to include weapon registration, e-Toll Motorway service, motor vehicle registration, Afghan enrolment, and dozens of other projects. NADRA provides its services to all banks in Pakistan. Amazon began by selling books but has now expanded to offer laptops, jewellery, garden equipment, groceries, health items, and industrial products.
Create Alliances
When a company expands globally, information technology benefits the business in a variety of ways. Information technology enables firms to maintain inter-relationships to gain a competitive edge. Companies used to operate alone, but today they work with alliances using strategic information systems, similar to the airline sector. Now, the airline sector has joined goods with car rental companies and hotel chains to provide a package of services. Banks that partner with VISA allow their customers to purchase things abroad and online without problem. Walmart is the world's largest retailer, with over 8,000 outlets in around fifteen nations. P&G forms strategic relationships with Walmart to retain product inventories. When the record of inventory reached the P&G maintains its inventory based on the location and demand. The track system aids Walmart in reducing the stress of inventory management.
Importance of Information Technology in Strategic Information Systems
Due to the rise of information technology, a lot of organizations were forced to restructure their business models and convert to an information technology-oriented business model to gain a competitive edge. We should examine the function of information technology in strategic information systems and business models using the case study of DELL Inc. from the book "Entrepreneurship: Successfully Launching New Businesses by Bruce R Barringer". DELL, a computer industry behemoth, was founded by a college lad named Michael Dell in his dorm room. At the time, computers were provided in models, and customers did not have the option of customizing them. Michael Dell introduced customized personal computers to the market in 1985 by selling "Built to order". Very next in the first year, the firm produced millions in revenue, which increased to millions over the next five. In the year 2000, revenues were billion. Sales increased owing to various strategies Dell implemented in their distribution channel as well as supply chain management, rather than customized machines.
Examples of information systems
Information systems may benefit almost every corporate process; however here are a few practical applications.
Expert Systems
Artificial intelligence is growing more powerful by the day, and it is used in systems of information to replicate human-solving issues (think Siri!). Expert systems employ knowledge that a subject matter expert would normally supply to solve issues and make judgments. In the corporate world, it may fix accounting difficulties or detect viruses.
Automated Office Systems
Automation saves numerous hours that could have been spent on routine chores. Office automation systems bring together computer and communication technologies with human resources to implement more efficient operations. For instance, a COO may send out quarterly across the organization email updates that incorporate AI-generated status reports.
Process Management Systems
If you want to apply technology to product production, systems for process control are the answer. They create specified outputs based on sensor inputs and are typically used to confirm that a product fulfils certain standards. A thermostat is a basic example: when the temperature drops below a set threshold, the heat kicks on. If you manufacture a tangible product that is frequently criticized by clients, you may wish to adjust you have control over your processes.
Conclusion
In conclusion, Managers nowadays must deal with a large amount of information while making business decisions. A Strategic Information System (SIS) enables managers to channel information systematicallyto make strategic choices. Furthermore, the approach enables firms to reap the long-term benefits of competitive advantages. Furthermore, to survive in a competitive climate, organizations must prioritize the installation of strategic information systems, since they will be critical to the organization's future existence.