Page 43 - DMGT505_MANAGEMENT_INFORMATION_SYSTEM

Management Information Systems

Notes 2.5.3 IS Techniques to Gain Competitive Advantage

Competitive advantage may be achieved with many techniques in business. Information
technology is one area that may provide several opportunities. In general, MIS techniques may
not be better than other methods. However, some firms have experienced considerable success
from using these techniques, so they are well worth considering.

Additionally, the rapid changes in technology often lead to competitive advantages if your firm
is the first to find a creative use for the new technology. The other side of the coin is that untested
new technologies may not work as planned. Hence, the pioneer is taking a risk: If the project
fails, the development costs may put the firm at a competitive disadvantage.
The question we wish to examine is how information systems can take advantage of these
techniques. The fundamental mechanisms for gaining competitive advantage are barriers to
entry, switching costs, lower production costs, product differentiation, control over distribution
channels, innovation, and quality control.

Sources of Barriers to Entry
The sources of entries are:

 Economies of scale (size)
 Economies of scope (breadth)
 Product differentiation

 Capital requirements
 Cost disadvantages (independent of size) Distribution channel access Government policy.

Barriers to Entry

The additional costs of creating a sophisticated information system make it harder for firms to
enter the industry.
 Distribution Channels: Control over distribution prevents others from entering the
industry. Consumers are reluctant to switch to a competitor if they have to learn a new
system or transfer data.

 Lower Production Costs: Using technology to become the least-cost producer gives an
advantage over the competition.
 Product Differentiation: Technology can add new features to a product or create entirely
new products that entice consumers.
 Quality Management: Monitoring production lines and analyzing data are important
aspects of quality control. Improving quality leads to more repeat sales.
 The Value Chain: Evaluating the entire production process identifies how value is added
at each step. Combining steps or acquiring additional stages of the value chain can lead to
greater profits.

Self Assessment

Fill in the blanks:
13. The successful application of ................................. in the contemporary global environment
requires an organization to have an effective strategic management process.

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