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ch03_v8_notes - 1 Essentials of Business Information...

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Essentials of Business Information Systems, 8E Chapter 3 Achieving Competitive Advantage with Information Systems The changes that have taken place in computing have affected the business environment in a big way. Over 40 percent of business equipment investments in the last decade have been on technology. Organizations are finding more efficient ways to accomplish tasks via networking, either internal networks or by connecting to external networks. Technology has caused many changes in the way businesses connect to their customers, suppliers, and business partners to achieve a competitive advantage. 3.1 Using Information Systems to Achieve Competitive Advantage Google, Amazon, e-Bay–the giants of the Internet. They are successful and make loads of money. They could easily rest on their laurels, kick back, and relax. If they are so successful, why do they keep working so hard to continually introduce new products and services and improve the old ones? Because someone, somewhere, is trying to take their place and become the new giant. These companies must constantly work to keep their competitive advantage and they are using information systems to do so. Porter’s Competitive Forces Model Porter’s competitive forces model contends that much of the success or failure of a business depends on its ability to respond to its external environment. Figure 3-1 shows four external forces that every business must contend with at one time or another. Figure 3-1: Porter’s Competitive Forces Model. It’s important to understand from this model that a firm’s success is not predicated on how well it does internally. It must also pay attention to: 1
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Traditional competitors: always nipping at your heals with new products and services trying to steal your customers. New market entrants: not constrained by traditional ways of producing goods and services, they can easily jump into your markets and lure customers away with cheaper or better products and services. Substitute products and services: customers may be willing to try substitute products and services if they decide your price is too high or the quality of your products and services is too low. Customers: fickle to say the least, they are now armed with new information resources that make it easier for them to jump to your competitors, new market entrants, or substitute products. Suppliers: the number of suppliers used may determine how easy or difficult your business will have in controlling your supply chain. Too few suppliers and you lose a lot of control. Information System Strategies for Dealing with Competitive Forces Many companies have found that effective and efficient information systems allow them to deal with external forces in one of four ways: low-cost leadership, product differentiation, focus on market niche, and strengthen customer and supplier intimacy.
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