PROGRESS REPORT by Emanuel Baisire

The role of Information systems in shaping competitive strategies

Progress Report:

The work status of the paper is proceeding as planned and the previously submitted

proposal is acting as a guiding principle towards the research. I immediately started

conducting secondary research about existing linkage between information systems

technology and competitive advantage. The topic also inspired me to take a closer about

books and business technology magazines related to information systems technology.

The gained information provided me with a clear insight as to what information systems

technology affect business profitability, employee’s productivity and customer

satisfaction. Majority of the resources needed for the paper are readily available and the

paper is mostly likely to be complete as scheduled. Related literature has been reviewed

and paper outlines have also been determined. The paper has so far covered the

introductory part which explains why there is need for information systems technology

and why such systems should become a principle spirit for businesses and also act as a

guiding force to compete in a global economy. Modern business operations are

interconnected with each other and for firms to take advantage of the global economy

there is a need to invest in information systems to unlock their isolations. At this stage,

the paper has created a linkage between information systems technology and Porter’

competitive forces model.

Problem encountered:

The main problem encountered was the disparity views about the distinction between

information systems and information technology by many authors. Many books and other

publication tend not to make a clear distinction between information systems and they

often use the two terms interchangeably. The challenge during literature view process is

that I had to make my own interpretation whenever I encountered an article confusing the

two terms. Another problem is that the competitive strategy literature is dominated by

Michaels Porter’s theories thus making it difficult to derive at a balanced notion. Many

competitive strategy authors base their foundation and explanation on Porters model thus

limiting my ability to gain a broader knowledge about such an interesting topic.

Finally, it is mainly big companies that are featured as success stories in utilizing

information systems to reduce costs, product differentiation and mapping a good

competitive strategy. Therefore, this has affected my understanding on how small

companies with limited financial resources can benefit from an extensive information

systems technology and not only rely on low-level information technology like cell-

phones and non-interactive websites.

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Introduction:

Firms are constantly investing in information technology infrastructure to maintain a

competitive edge and survive in a dynamic business environment. The paper focuses on

the role played by information system’s components like organization’s strategy,

technology and management to improve a firm’s competitive advantage1. In this case,

Information systems are referred to as those elements capturing data and process it into

valuable information for decision-makers.

The motivation for this topic is based on the dominant role played by information

systems in shaping new industry structures and increasing the rate of first-mover

advantage. It is also important to note that firms investing in new or advanced

information technology and ignore organizational changes in other complementary assets

are not likely to rip the maximum benefits of information systems. Firms integrating

technology with organization changes yield more returns in terms of high productivity

and innovation than those without an expanded view of information systems.

The role of information system is also important because it enables organizations to

identify and deploy new strategies and cost reduction techniques in a timely manner than

competitors (Loudon, 2007). Firms need to integrate their business processes in order to

gain a competitive advantage. For instance there is a need for technology within different

departments like human resource, sales and marketing, production and research to

complement each other to yield a competitive advantage.

1 Kenneth C. Laudon and Jane P. Laudon, Managing Information System: Managing the Digital Firm, Upper Saddle River: Pearson Prentice Hall, 2007.

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Information Systems and Competitive Strategies:

According to Loudon et al (2007), Information system “is a set of interrelated

components that collect or retrieve, process, store, and distribute information to support a

decision-making process and control within an organization”2. Information systems

process raw data into meaningful information used in different spheres of an

organization. The gained information enables managers to plan, coordinate and make

sound decisions based on prevailing conditions.3 Information systems technology is a

core component in a value chain process because every step during the value chain

process disseminates and uses information (Porter, 1998).

Competitive strategy is a firm’s ability to position itself in a more advantageous sphere

than other firms within the industry4. The logic of adopting a competitive strategy is to

map out a profitable and sustainable path that is superior to the determinants of industry

competition. A firm with a profitable and sustainable strategy does not only outperform

its competitor but it also tends to shape the directions of firms in the same industry

(Porter, 1998). Porter uses a five forces model to explain why some firms are more

profitable than others. Competitive advantage is generated by a firm’s ability to provide

customer with a valued product or service at a reasonable a cost. According to Porter

(1998), Value is what buyers are willing to pay for a product and a superior value is a

2 Laudon, K.C. and Laudon, P.L.(2007). Managing Information Systems: Managing the Digital Firm, Upper Saddle River Pearson

Prentice Hall.

3 http://www.referenceforbusiness.com/management/Log-Mar/Management-Information-Systems.html.4 Porter, M.E (1998). Competitive Advantage: Creating and Sustaining Superior Performance: With A New Introduction. New York: Free Press.

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firm’s ability to charge its customers a lower price compared to other firms in the same

industry.

Modern firms have significantly invested in information systems technology to achieve a

competitive edge against competition. Great emphasis has been placed on Information

technology as a way of understanding customer needs and what they value most5.

However, the nature and industry structure of a firm determines the need for information

systems. Some firms rely heavily on information technology to operate while others use

information systems technology to achieve a specific business process. It is not

necessarily true that firms with advanced information systems technology will be

competitive than those with minimal or no established information systems. However,

adapting an appropriate information technology can be a crucial venue for a firm’s

competitiveness but not every change in information systems technology yield a

successful business operation (Porter, 1998). Firms with advanced information

technology can be as vulnerable and less profitable as those firms with less information

technological capabilities.

Competitive advantage is mostly achieved when a firm’s goal is to use information

system technology as a tool to reduce cost, differentiate its product, reduce threat of new

market entrants, and reduce its bargaining power (Loudon, 2007). A sound competitive

strategy should be aimed at reinventing products and services beyond a certain market

boundary (Pavlou and El Sawy, 2006). It is also argued that information systems

technology should have the capacity to streamline business processes and link a firm to

both its customers and suppliers.

5 Pavlou and El Sawy (2006). The Case of New Product Information Research 17(3),pp198-227

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The extent of information system technology in the value chain extends to business

processes like material handling, controlling, scheduling, order processing, human

resource management, procurement, product development, marketing and sales services6.

Proposed Outline: Information Systems and Competitive Strategies

Table of Contents

I- The role of Information systems in shaping competitive strategies

2- Abstract

3- Introduction

4- Information Systems and Competitive Strategies

5.0 Linkage between competitive forces and information systems5.1 Information systems and entry barriers5.2 Information Systems and buyer power5.3 Information systems and suppliers power5.4 Information systems and threat of substitutes

6- Competitive Strategies

7 - Conclusions

8 - Reference

6 Ibid

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Reference:

Avison and Fitzgerald (1995). Information Systems Development: Methodologies,

Techniques and Tools 2nd ed. Maidenhead: McGraw Hill.

Grim et al (2006). Strategy as Action: Competitive Dynamics and Competitive

Advantage, New York: Oxford University Press.

Laudon, K.C. and Laudon, J.P. (2007). Managing Information Systems: Managing the

Digital

Firm. Upper Saddle River: Pearson Prentice Hall.

Liker J.L. (2004). The Toyota Way: 14 Management Principle from the World’s Greatest

Manufacturer, New York: McGraw-Hill.

Pavlou et al (2006). The Case of New Product Information Research 17(3), pp198-227.

Porter, M.E (1998). Competitive Advantage: Creating and Sustaining Superior Performance: With A New Introduction. New York: Free Press.

Internet Sources:

http://www.referenceforbusiness.com/management/Log-Mar/Management-Information-Systems.html.http://web.mit.edu/cisr/working%20papers/cisrwp373.pdfhttp://web.mit.edu/cisr/working%20papers/cisrwp368.pdf

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