Traditional view of IT
Information Technology has been heralded, by many, as the greatest invention after the wheel. While scanning contemporary literature, it becomes quite impossible to find anything that goes contrary to what is said above. There are some who temper their predictions by mouthing a few warnings against improper usage etc. there are very rare instances when somebody has raised his / her voice against the prevailing wind. At this juncture we need to examine the fact that though IT has pervaded our life in a way unimaginable a few decades back, is it sufficient to get us competitive advantage in today’s dynamic and fast-moving marketplace. Organisations have to proverbially run to keep pace with the requirements of their stakeholders. At this juncture, we need to re-examine if IT is the end-all be-all? Is it the panacea to falling sales??
Traditional view of IT First let us examine what can give us competitive advantage?? Michael Porter’s five forces model is given below. Buyers Buyers in an industry are strong if they make volume purchases or are made up of large, concentrated consumer groups. If there are only a few buyers for several not well-differentiated suppliers, the buyers can be very powerful relative to the suppliers.
One method for firms to defend against powerful buyers is by building switching costs into their product or service. Forward integration is a more subtle form of establishing switching costs. The McKesson Drug Company, through its ECONOMOST ordering system, made it possible for pharmacists to order supplies over hand-held terminals that read shelf lists. The products would be sent in the correct shelving order. McKesson added value to their product by facilitating drug purchasing and shipments. They took over a function that pharmacists traditionally did themselves.
Suppliers Like that of buyers, the bargaining power of suppliers is great when they are few. If a firm can attain raw materials from only one source, that source has the power to control pricing and delivery with no threat of losing business. To decrease the bargaining power of suppliers, a firm should avoid suppliers that force significant switching costs. A second means of reducing supplier power is through backward integration. One major IT area that Wal-Mart has exploited is very small aperture terminals (VSATS) for applications like inventory control, credit card and check verification, loss prevention, and quick response.
Substitution Two ways in which a firm can compete against substitute products are with relative price performance and product features. IT helps Wal-Mart skillfully manage large inventories. Buying in bulk and warehousing lets Wal-Mart demand discounts from suppliers. Savings incurred by use of this strategy are passed on to customers. New Entrants & Rivals Building entry barriers can provide one of the most powerful strategic uses of IT. To compete against existing industry rivals, firms can use IT to form a new basis for competition. New product and markets are a means of forming new bases of competition.
The generic strategic prescription provided by Porter are: 1. Low cost 2. Differentiation 3. innovation Porter has also talked of a Value Chain approach to competitive strategy. The value chain is an analytical framework to examine value-adding activities in the individual firm and between firms. The assumption of the value chain is that competitive advantage arises from the value created for the customer that exceeds the cost of creating the value.
The more a firm understands its own value chain as well as the value chain of the customer, the greater the ability to create value for that customer. Value activities consist of primary and support activities. We present excerpts from five articles garnered from the print media as well as the internet. Some of these article are path-breaking with respect to the horizon of their vision as well as the out-of-the-box thoughts that have gone into them.