It For Competitive Advantage

IT for Competitive Advantage • Team Members – Biru Charan Sainju(062BCT507) – Bishwa Hang Rai(062BCT508) – Gyanu Maharjan(062BCT509)

IT(Information Technology) • Information technology (IT), as defined by the Information Technology Association of America (ITAA), is "the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware.“ • In actuality, information technology is the use of computers and software to manage information. • In some companies, this is referred to as Management Information Services (or MIS) or simply as Information Services (or IS)

Competitive Advantage • A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. • Competitive advantage is, in very basic words, how a firm manages to keep making money and sustain its position against its competitors.

Competitive Strategies • According to Michael Porter in his theory of generic strategies, he suggested four "generic" business strategies that could be adopted in order to gain competitive advantage.

Strategy - Differentiation • This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. • Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. • Examples of Differentiation Strategy: Mercedes cars;

Strategy - Cost Leadership • With this strategy, the objective is to become the lowest-cost producer in the industry. • This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers. • Examples of Cost Leadership: Nissan; Dell Computers

Strategy - Differentiation Focus • In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. • Thedifferent needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants. • Examples of Differentiation Focus: any successful niche retailers; • important issue for any business adopting this strategy is to ensure that customers really do have

Strategy - Cost Focus • In the cost focus strategy, a business seeks a lower-cost advantage in just on or a small number of market segments. • The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's". • Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products.

IT for Competitive Advantage • Information Technology is changing the way companies operate. • It is affecting the entire process by which companies create their products. • Furthermore, it is reshaping the product itself. • IT is generating more data as a company performs its activities and is permitting it to collect or capture information that was not available before. • IT is also transforming the physical processing component of activities.

IT for Competitive Advantage(contd…) • IT not only affects how individual activities are performed but, through new information flows, it is also greatly enhancing a company’s ability to exploit linkages between activities, both within and outside the company. • It allows companies to coordinate value activities in far-flung geographic locations.

IT for Competitive Advantage(contd…) • In any company , information technology has a powerful effect on competitive advantage in either cost or differentiation. • The technology affects value activities themselves or allow companies to gain competitive advantage by exploiting changes in competitive scope.

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IT for Competitive Advantage(contd…) Lowering Cost – The technology’s history impact on cost was confined to activities in which repetitive information processing played a large part. – Nowadays, even activities like assembly that mainly involve physical processing now have a large information processing component. – For eg. Canon built a low cost copier assembly process around an automated parts selection and material handling system. – In addition to playing a direct role in cost , information technology often alters the cost drivers of activities in ways that can improve (or erode) a company’s relative cost position.

IT for Competitive Advantage(contd…) • Enhancing Differentiation – The new information technology makes it possible to customize products. – By bundling more information with the physical product package sold to the buyer, the new technology affects a company’s ability to differentiate itself. – IT can unlock the power of broader geographic scope to create competitive advantage. – IT is creating inter-relationships among industries that were preciously separate.

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