Final_Exam_Bank_Questions-3160 - 1 How does organizational...

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1) How does organizational strategy determine information technology systems and how do IT/IS provide competitive advantages? Can competitive advantages through IT systems be sustained? Organizational strategy is when managers decide what goals and objectives they need to meet and look at the related resources and organizational hierarchy required to meet the objectives. In setting these goals managers or owners consider many factors, including the competition in the industry and then develop a related competitive strategy. This competitive strategy is usually from one of the four competitive strategies identified by porter: cost leadership across the industry, cost leadership focused on a particular industry segment, differentiation across industry and differentiation focused on a particular industry segment. Trying to meet the goals and following a specific competitive strategy helps create the value chain for the firm. From looking at the goals and objectives of the firm, management should be able to decide on the structure, features and functions required of their IT systems. If managers and IT staff have a meeting and discuss the strategy and competitive advantage the firm wants to gain and select and use the correct system a competitive advantage can be gained. A firm could use an IT system to help gain a competitive advantage by locking in customers making it expensive for them to switch to another product. This could probably be achieved by selling the first product cheaply then selling additional enhancements to the product, creating a new product, or differentiating a product or service. An IT system can help significantly improve communications with a supplier and work the most efficiently with your firm. For example your IT system for a grocery store could keep track of all products sold and when inventory is running low the supplier already knows what your firm needs. Wal-Mart uses IT systems to keep strong relationships with their suppliers, these strong relations are a result of IT systems that lock in suppliers and create entry barriers for other firms that might be trying to buy from these suppliers. Overall IT systems help firms establish alliances with customers, suppliers which help the firm set standards for their product, promote product awareness and needs, develop market size, and reduce purchasing costs. From all of this firms can gain an even greater competitive advantage because they could reduce prices and increase profitability and even better give their competitors a run for their money! Competitors can easily copy your firm, purchase the same hardware and software and develop a competing strategy. However the information system of your firm is the most valuable and to sustain a competitive advantage you have to develop a distinct strategy and be able to change the way you compete over time. In order to sustain a competitive advantage you have to strongly integrate your information technology with the people and procedures of your firm. You could integrate a lot of your firm’s activities
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