Study Material:
2. Strategic Uses of Information Systems
University Technology of Sydney 2005
Strategy & Strategic Moves
Although many information systems are built to solve problems, many were used to build and
seize opportunities. As in business, identifying problems is easier than creating an opportunity.
Why? Because a problem already exists and needs attention to be solved. However, an
opportunity on the other hand is less tangible and it needs a certain amount of vision to identify
an opportunity and create or might seize it. The information systems that help seize
opportunities are called Strategic Information System (SISs). These can be developed from
scratch or even evolve the existing organization’s ISs.
In a free market economy, it is difficult for a business to do well without some strategic planning.
Although strategies may vary, they tend to fall into some basic categories such as developing
new products, identifying markets or even any other action that might increase an organization's
value.
Many strategies may not and cannot involve information systems but organizations can
implement certain strategies such as maximizing sales and lowering costs. In other words,
better information gives an organization a competitive advantage in the marketplace. When a
business uses a strategy intending to create a market for new products and services, it does not
aim to compete with others. It is because the market does not yet exist. Therefore a strategic
move is not always a competitive move.
In the current world where everything is connected to the internet. Business competition is no
longer limited to a particular country or even region of the world. Therefore to increase the sale
of goods and services, companies must regard the entire world as their market. Even now there
are more and more companies developed information systems or features of information
systems that are unique to connect to global customers directly.
, Achieving a Competitive Advantage
Considering competitive advantage for a profit company is to maximize its profits by lowering
costs and increasing revenue. Therefore for it to achieve its competitive advantage it when its
profits increase significantly mostly through the increase in market share. An key essence
strategy is innovation. Through an innovation, the competitive advantage can be achieved
meaning the company tries a strategy that no one has tried before.
There are 8 basic ways to gain an competitive advantage:
● Initiative 1: Reduce Costs
Customers like to pay as little as possible, while still receiving the quality of the product
and service they acquired. One way to do it is to lower prices and the best way to lower
prices is to lower costs. For instance, massive automation of any business process gives
an organization competitive advantage. Through automation, the company can be more
productive and efficient therefore any cost savings can be transferred to customers
through lower prices of products and services. We can see this in China nowadays,
where most of their manufacturing companies are through automation. That is the
reason why products from China can be so cheap. As for service industries, the internet
also has created an opportunity to automate what until recently was considered a
human-only activity: customer service.For instance, nowadays airlines industries has
applied an automation through a self-checked in service through terminal or website.
These systems help customers to save time and avoid the possibility of missing flight
due to a long que of the checked in line service of the flight etc.
● Initiative 2: Raise Barriers to Entrants
The smaller the number of companies competing within industry, the better each
company is. Therefore, an organization may gain a competitive advantage by making it
difficult or impossible for others to produce the product and service it provides. Using
expertise of technology that is unavailable to competitors is one way to bar new entrants.
For example: Amazon.com, as the largest online retailer. The company secured a
patent for “one-click” features, which enables customers to enter their details only once.
From that moment on whenever they make a purchase at the site, they can only click
once to buy an item.
● Initiative 3: Establish High Switching Costs
Switching costs are expenses incurred when a customer stops buying a product and
service from one business and starts buying it from the others. Switching can be explicit
2. Strategic Uses of Information Systems
University Technology of Sydney 2005
Strategy & Strategic Moves
Although many information systems are built to solve problems, many were used to build and
seize opportunities. As in business, identifying problems is easier than creating an opportunity.
Why? Because a problem already exists and needs attention to be solved. However, an
opportunity on the other hand is less tangible and it needs a certain amount of vision to identify
an opportunity and create or might seize it. The information systems that help seize
opportunities are called Strategic Information System (SISs). These can be developed from
scratch or even evolve the existing organization’s ISs.
In a free market economy, it is difficult for a business to do well without some strategic planning.
Although strategies may vary, they tend to fall into some basic categories such as developing
new products, identifying markets or even any other action that might increase an organization's
value.
Many strategies may not and cannot involve information systems but organizations can
implement certain strategies such as maximizing sales and lowering costs. In other words,
better information gives an organization a competitive advantage in the marketplace. When a
business uses a strategy intending to create a market for new products and services, it does not
aim to compete with others. It is because the market does not yet exist. Therefore a strategic
move is not always a competitive move.
In the current world where everything is connected to the internet. Business competition is no
longer limited to a particular country or even region of the world. Therefore to increase the sale
of goods and services, companies must regard the entire world as their market. Even now there
are more and more companies developed information systems or features of information
systems that are unique to connect to global customers directly.
, Achieving a Competitive Advantage
Considering competitive advantage for a profit company is to maximize its profits by lowering
costs and increasing revenue. Therefore for it to achieve its competitive advantage it when its
profits increase significantly mostly through the increase in market share. An key essence
strategy is innovation. Through an innovation, the competitive advantage can be achieved
meaning the company tries a strategy that no one has tried before.
There are 8 basic ways to gain an competitive advantage:
● Initiative 1: Reduce Costs
Customers like to pay as little as possible, while still receiving the quality of the product
and service they acquired. One way to do it is to lower prices and the best way to lower
prices is to lower costs. For instance, massive automation of any business process gives
an organization competitive advantage. Through automation, the company can be more
productive and efficient therefore any cost savings can be transferred to customers
through lower prices of products and services. We can see this in China nowadays,
where most of their manufacturing companies are through automation. That is the
reason why products from China can be so cheap. As for service industries, the internet
also has created an opportunity to automate what until recently was considered a
human-only activity: customer service.For instance, nowadays airlines industries has
applied an automation through a self-checked in service through terminal or website.
These systems help customers to save time and avoid the possibility of missing flight
due to a long que of the checked in line service of the flight etc.
● Initiative 2: Raise Barriers to Entrants
The smaller the number of companies competing within industry, the better each
company is. Therefore, an organization may gain a competitive advantage by making it
difficult or impossible for others to produce the product and service it provides. Using
expertise of technology that is unavailable to competitors is one way to bar new entrants.
For example: Amazon.com, as the largest online retailer. The company secured a
patent for “one-click” features, which enables customers to enter their details only once.
From that moment on whenever they make a purchase at the site, they can only click
once to buy an item.
● Initiative 3: Establish High Switching Costs
Switching costs are expenses incurred when a customer stops buying a product and
service from one business and starts buying it from the others. Switching can be explicit
