Computer technology is forcing the corporate sector to focus on the new way of thinking and exploring the new possibilities and re-evaluating their positions and management styles.
For a growing business, use of information technology is inevitable. The main aim of Information systems is to apply all the classical knowledge learnt before on to new requirements of strategy planning. By the use of spread sheets and microcomputers, strategic systems are easily planned and effectively implemented. The possibilities are limitless and stakes are high so the information system is taken to be as a competitive weapon.
Strategic information systems (SIS) is a planning of the development of strategic information systems. There are various systems like value chain and assessment of the environment that can be used for the opportunities. The information systems, strategic planning requires issue s and objectives that need to settle down into final before the desired objective can be achieved. This paper focuses on the strategic use of information systems and information technology, to achieve competitive advantage. Various factors that influence an organisation's success and failure in adopting competitive advantages are also addressed.
Systems information system planning starts identification of the target and assessment of the organisation's characteristics like customers, suppliers, competitors, market segments and the geographical positions. Strategic planning needs mission statement, business objectives, opportunity areas, pressure points that touch the business both externally and internally, business issues to be addressed strategies to resolve issues, targets, information systems objectives, implementation of the programs and measurement of the performance. Strategic information system becomes an integral part and necessary part of the business and may bring new markets and new ways of doing business and it directly affects the market share and profitability. There are three types of information systems: Financial systems, operational systems and strategic systems. Financial systems include computerization of accounting, budgeting and finance operations, whereas operational systems help in controlling the details of the business, such as inventory, re-ordering and cost allocations. Strategic systems link business to computer strategies and is mainly used to gain competitive advantage.
Competitive advantage
There has to be an explicit link between the organisation's business plan and its system plan so that goals and objectives of an organisation's can be achieved. Competitive advantage can be achieved in many different ways:
Deliver a product or a service at a lower cost:
The overall cost of the corporate activities is calculated and the cost that would attract the marketplace for the service or product is marked. In such a competitive strategy, there are many computer based operations and internal costs savings that give internal advantages to the company but cannot be considered a good competitive strategy unless it gets the company a good competitive position in the market. Dell computers are a high quality products for lesser price.
Differentiation advantage:
A product that is competitively attractive is differentiated by adding on new features, so the customer is attracted by new features rather than the price. Of course in such strategies, cost is involved, but then, they become the selling point. Customer gets attracted to the additional features for the same or nearby price. Dell differentiates in best understanding the needs of the customers and most effectively provide them with effective computing solutions to meet those needs. After the introduction of Apple iphone, many companies like Samsung, Sony, LG, Nokia, introduced similar types of cell phones with better, improved features to gain competitive advantage. Differentiation creates a big barrier before new entrants, for e.g. Apple's design skills and Pixar's animation prowess (Wikipedia, porter generic strategies)
Focus on a specific market segment:
Some companies gain competitive advantage by identifying the markets that have potential but have niches which need to be filled. Information technology is the fastest way to fill the segment and also have a potential to expand quickly and gain profit, though the application of the systems still vary from industry to industry. Dell focuses mainly on government institutions and corporate sectors.
Innovation
Some companies use computerised technology and advance their systems so that they could provide a newer and appreciably different product or service. Dell is not a very big innovator but still uses advanced technological systems. For example Wal-Mart's just in time inventory control process. It is a new way of inter-enterprise information system, resulting in new partnership and alliance system, by the use of computers and internet. Similarly, on operational levels, Consultants in strategic systems may have very innovative ideas, to attract mangers and get promotions and gains.
Environmental Analysis
External and internal factors both affect the success factor of an organisation.
External environmental factors that affect marketing are new entrants, economics, customer's needs and likings, government policies, political and social development and geographical conditions. To be stabilized in the global market, companies have to keep an eye on the currency exchange rates and the external environment. Dell Computers is a complex organization and is dedicated to give its best to the world of computers. It has been changing from time to time according to its customer's demands.
PESTG analysis
Political
The biggest threat to Dell is from the Chinese markets where even the small firms are supported and promoted by Chinese Government.
Economic
The economic environment is the one where the company will deal or compete. China is known for piracy but lack skilled labour. Many people will buy pirated computers because even though Dell sells for less, still some people can't afford to buy it. So if in India like developing countries, people will get computers for lesser price, even though made in China, most of the Indian community will buy that because it is cost effective. So the economic environment instability can lead to failure of web based business.
Social
Different countries have different cultural values and beliefs. Dell computer believe in direct sales but in Indian culture many people don't have faith in using credit/Debit cards, so the internet based selling system is totally failure in India.
Technological
Technology includes activities that require research and development. Technology can determine barriers to new entrants. Technological imbalance leads to new innovations. In India, many people don't have access to internet and many people can't afford to buy their own computer so much of a skill is not being used. Otherwise, making a new domain and satisfying customers by information technology can be a big threat to companies like Dell, who are web based.
Internal Enviornment
Differences in Countries and environment that effect the organisation are political, legal conditions such as trade regulations, environmental laws, antidiscrimination policies, industrial regulations etc., Socio-Cultural factors such as changing expectations of the society, cultures of the society too have effect on the organisation in which its actually operating. Economic factors like inflation, deflation of the interest rates and share markets and changes in the disposable income, and market value too add to the organisations operations. Demographic factors like population, gender, age, income, location etc, rapidly changing technological markets, global competition, consumer behaviour, all of these perspectives have their own effects on the organisations success. Dell makes gaming computers which are highly in demand with youngsters, So if Dell expects of selling its Dell Alienware at a place where there are less youngsters or in an educational organisation in a developing country, it is hard to sell because of the low income.
Porter's Competitive advantage
Dr. Michael E. porter, a professor from Harvard Business School has presented a framework for helping businesses to uphold competitive advantage, in the industry, either by means of cost or by differentiation. Although Dr. Porter's theory is not bound to Information technology, but in terms of sustaining competitive advantage, information technology cannot be left behind.
Value Chain
To give lower costs, you have to sacrifice uniqueness, and to sell at a higher price there has to be something distinguishable in your product or service. There is another strategy suggested by Dr. Porter, which says that competitive advantage can be most readily achieved by competitive scope in which the company is operating. So based on theory of scope and type Value Chain is a very useful analyzing tool. It adds basic idea to the firm's activities:
Inbound logistics:
This is receiving of the concerned materials from the suppliers, storing them and handling them within the firm. For example Dell computers vendors all the components required to assemble a computer, including subassemblies, from all over the world and assemble it and sell directly to the customers.
Operations
Computer aided flexible manufacturing. In Dell computers, although the assembling components are outsourced from different countries, but the assembling and configuration is in control of Dell Computers themselves only to keep informed of the sales, production and supply chains.
Outbound Logistics
This is concerned with online point of sale or order processing resulting in distributing the final product to the customers. When Dell builds laptop or PC to order, it has just taken the order of the customer and still the inventory is with the supplier, till Dell puts the order, Intel becomes exceptional as it takes off the stock of the Intel before obtaining the final order. After the customer's order gets finalised, over the phone or over the internet, the sales executive informs the product chain.
d.Marketing and sales
Marketing and sales include customer relation, order re-entry and price management.
e.Customer service
Customer sales management or after sales management covers all installations and customer training after the sales of the product.
The support activities are the part of the company's operation which includes:
Procurement
It includes purchasing of the raw material requirement for company's operations. So the best purchase department is the one who gets good quality products at lowest prices. For e.g., Dell Computers take payments off the customers either through credit card or directly online in around 38 days, and pays off his vendors later and is often called as late payer, just after the shipment is dispatched. Dell pays his vendors 44 days late than required. Dell has 44 days of sales outstanding.
Technology Development
This is an area that covers operational procedures and includes training, knowledge and innovations by Research and development. In Dell Computers, although the cost of Research and development is less, still it supplies the products quite efficiently. The assembly operations are admirable, because team of two engineers are responsible for assembling a whole one computer , so that if any faults or complaints are detected, they can be directly addressed to that particular team.
Human Resources Management
This function covers recruiting, training and development. Rewards and Motivation of the workforce too adds to sustain profits. Dell Computers for instance spend lots of time in training their employees and explaining their company's strategy, objectives and goals.
Firm's infrastructure
This includes controlling and planning of the accounting department, legal department and Government Relations etc. Dell Computer Corporation is the world's leading direct seller.
Porter's Five Force
1. Strength
Dell Computer corporation deals directly with the customers and have award winning customer service. Dell's timely delivery, online support, internet and telephone purchasing and computerised system all of course its strengths. Dell has a wide range of products and services to choose from and a very competitive price.
2. Price for performance
Dell computers have a fantastic procurement, managing and distribution system. It has high financial performance because of the differentiation in price performance specification.
3. Customer focused
Each computer in the company is designed according to the customer's specification.
4. Reliability, service and support: Dell Direct provides its customer with an excellent service before and after the sales.
5. Latest technology: Dell keeps up-to-date with latest technology to compete its competitors.So it turn over its inventory quiet frequently maintaining low costs.
Dell Computers with increased efficiency and profitability, ended with $11.8 billion in cash and investments in 2010.There are around 100,000 members in Dell's team.
Weaknesses
Dell is most popular among the educational institutions and students, but it is not much popular among the section because of its focus on corporate and government institutional sector. Dell direct is a delayed process which takes some days to reach its customer and also customer cannot physically see the computer, which they are going to buy, and may lack confidence while finalizing the purchase.
Opportunities
Customers now-a-days are very educated they try to explore different features, which Dell anyhow tries to keep updated with. Customers want a reliable and supportive company who give after sales support and makes reliable machines, which means clients will surely try to explore company's other models on their next purchase.
Most of the Dell computers are sold on the internet, as they don't have any sales outlet. For Dell it is very cost effective for having no one in the middle to pay sales percentage, which means cheap prices for the customers. So if customers get internet delivery convenience and reliability, Dell's sales over the internet will increase.
Threats
Technology is very fast pacing and it changes with the lightening speed. New softwares, hardwares with new accessories coming very day. Chinese market and piracy ruling all the markets with its low prices. As any other company, it is important for Dell computers to keep themselves up-to-date with the information and look out for innovations. Other computer companies in the market sell laptops at a very competitive price, with good features, so dell should be always aware of the fact that, with almost identical prices, other companies display their computers in the market. Dell saves its costs and sell directly, but such a price difference can affect Dell's price conscious customers and demand may slow down because no one likes to wait for customized computers. At this time Dell computers is growing, but if the demand decreased it will have to change its low cost strategy.
Information technology as a tool of success
Dell introduced Information Technology and earned billion of dollars. Similarly, US department of Commerce with its knowledge management and use of information technology boosted US exports and gave information systems, a new direction with an amazing, knowledge based innovation. Definitely, Information systems cannot be ignored in business to be successful.
The US Department of Commerce aims at making American Business more innovative within US and more competitive abroad. The secretary of Department of Commerce's Economic Development (EDA), Gary Locke, supervises 38,000 employees with a budget of $6.5 billion. (www.commerce.gov) With the basic knowledge management technique, the Department of Commerce (DoC) provides timely and valuable advice to U.S companies willing to engage in international trade.
Department of Commerce uses its Insider for capturing the knowledge and management from Bellevue, Askme Corp., based in Washington. They use automated best practise by surfacing the knowledge of your organisation and by passing it on to the experts who need it most and can utilise it. Organisations transform the flow of information by answering the question and answer tool provided by Askme systems. The Department of Commerce has been using the web based technology to create a knowledge networking. They are connected to 100 offices in United States. Furthermore, in around 80 overseas countries, they have 150 offices with a group of 1,700 trade specialists. The specialists are so specialised that, they provide complete trading solution, including all the required documentation, local laws and the competitors in the way.
In the past, there were not many means of contacting the experts sitting worldwide to get their suggestions and to stay in touch with them to seek their advice, so the knowledge sharing was limited. But the web based technology system helped them to set up a knowledge supply chain providing best practice. Laura McCall, the program manager of DOC says that Askme systems help U.S businesses to compete in the foreign markets. The DOC's Insider helps US based companies to do the international market research and locate partners situated overseas.
Information Technology and High-Tech High-Profile failure
United Kingdom passport system failure in 1999 was a high tech, high profile failure. There were big delays in issuing passport.
UK Passport Department had to face a backlog of 566,000 outstanding passport applications. The phone lines were continually congested. So they had to face a bill for compensation for several 100 people, who could not travel. The passport office was going to introduce a new IT system to fasten the application processing of the passport to deal with high number of application. The system got introduced into two of the six offices only on test basis.
Unfortunately, the staff was not trained enough to deal with the new system neither with computer nor manually because of the lack of time and quick installation of the new system in the office. Apart from that when the phone lines went congested they could not communicate with the public by phone or through media. Nor were people contacted individually.The risk undertaken by introducing the new sytem was not assessed properly and the decision taken was that of insufficient contingency planning.
Lesson Learnt
It is good to have a business that is customer oriented. Company's should make a product that allows consumers to meet their goals. Products or services should be well planned and well structured before they come to market. Products or services should have quality of differentiation. People admire the quality over price and also go for reliable and stable services. Success of business needs up-to-date knowledge of the market. Adopt Apple's policy of being the best, than being the first. The planning and project management techniques required close attention. The new systems should be thoroughly tested before introduction. Staff should be adequately trained and the new system should not be implemented so quickly. There should be some time for the staff to learn new process and techniques. The clients should be well informed. It is important for the organisation to forsee the expected means of handling the situation
Big Vs Small or Medium Business
In today's dynamic world without the use of Information technology you cannot compete anyone or mange your business properly. Wal-mart introduced IT to gain operational excellence. Netflix, Apple iPod and iTunes are the business models by IT use. Improved and efficient decision making can be done by Information technology. For e.g., GIS data mining, CRM, mathematical modelling in DSS applications. The main aim of the business today is to maximise the customers and business value. Small enterprises cannot compete with bigger companies because of the lack of resources. They can only compete up to a certain level.
Small and middle enterprises have their own importance in the society. Small enterprise tries to compete big companies with superior quality. They have simply to identify their strengths and become noticeable. The use of technology can help the small enterprises to rise and sustain. Porter says that a company has a competitive advantage if it is able to deliver its service or product at a lower price. So attracting the bigger enterprises and entering the value chain, small and middle enterprises can be a superior performer, though it involves cost too.
There are various ways that technology can be used and people made to interact with that technology to get the desired results for the business. The report discusses one such business which aims to increase its market share from the current thirty five percent to sixty percent in the next five years. The product and the work culture have been gaining the business advantage over its competitors. But to grow to almost being double the size in next five years requires the manual systems to be replaced by faster, more efficient and reliable systems which use technology to achieve the goals.
Manufacturers Vs service Providers
Mobile manufactures attract many consumers by attracting them with additional product features. For example, Nokia has introduced its own online platform to compete with Apple's iTunes. Similarly, the service providers gain profit by new innovations as people will get attracted towards phone service providers once new mobile hand set gets introduced. So the competitive advantage is gained both by manufacturers and the service providers in alignment. If the manufacturers, make a product that is not differentiated or has nothing unique, then atleast it has to be cost effective to sustain the market competition.
Conclusion
Success in today's world can only be achieved by introduction of information systems and information technology. The success or the failure of an organisation depends upon the chance encounters. It depends upon availing the proper opportunities in the emerging global markets. The use of internet and technology has empowered businesses and has changed the way business use to operate. Thus, many businesses are using web based technologies to sustain competitive advantage.
