10.5 Using information technology competitively

Competitive advantage

When you are starting your business, very likely you will just be interested in substituting computer-based information systems for keeping the basic records of your business and preparing the reports you need to be an effective decision-maker. As your business grows, however, you should start to think of the potential benefit of going beyond the basics, as larger companies do, and look for ways to use information systems for competitive advantage. Many people use the term “technology-enabled innovation” to describe this process. Since it is never too early for you to start thinking about such innovation, we’ll cover the topic now.

Just about all businesses have competitors and customers have choices as to which businesses they decide to patronize. For example, you, as a customer, may have several restaurants to choose from if you want to buy a meal. Each restaurant, therefore, has other restaurants as competitors. A restaurant will try to offer its customers a better meal at a better price so that their business is successful in comparison with the competition. This is what is meant by gaining a competitive advantage. Of course, if a restaurant is the only one in a small town, its owner does not have to worry so much about competition (unless someone else decides to open a restaurant and compete for its customers. Businesses that can gain an advantage over their competitors are the ones who will be successful and, as we saw in [link] Chapter 4, most small businesses that start up are doomed to fail. So, competitive advantage is important.

Porter and competitive advantage

In [link] Chapter 3, you were introduced to the ideas of Professor Michael Porter, whose ideas on how to achieve a competitive advantage, first introduced in the 1980’s The information on Michael Porter needs to be cited. have stood the test of time. Recall that Porter’s model consisted of three main categories:

• The five Forces Model
• Three Generic Strategies
• The Value Chain

In this section we will discuss how the creative use of information technology and communications technologies (IS) can help organizations gain a competitive advantage. These ideas were first expressed in two separate Harvard Business Review articles Cite McFarlane and Porter/Millar. .

Use IS to alter the five forces in your favor. The five forces are illustrated in [link] :