Organisational Strategy, IS & Competitive Advantage
Following on from my article on Business Processes & IS, IS exists to help organisations achieve goals and objectives, that are determined by competitive strategy, that determines structures, features and functions of every IS.
Organisations examine industry structure to determine a competitive strategy, that determines value chains and business processes.
Industry Structure -> Competitive Strategy -> Value Chains -> Business Processes -> Information Systems.
Porter’s five competitive forces:
- Bargaining power of customers
- Threat of substitutions
- Bargaining power of suppliers
- Threat of new entrants
- Rivalry among existing organisations
An analysis of the industry structure can determine the competitive advantage.
Porter’s four competitive strategies:
- Cost leader
1#Broad cost leadership across industry
2#Narrow cost leadership focused on particular industry segment
3#Broad differentiation across industry
4#Narrow differentiation focused on particular industry segment
Goals, objectives, culture and activities must be consistent with the competitive strategy that determines the value chain structure that is a network of value-creating activities:
- support activities: procedures > technology > human resources > infrastructure (indirectly contribute to production, sales and service)
- primary activities: margin = value – cost (adds value to product, though intangible makes margins hard to calculate)
- Linkage between value activities helps efficiency and is supported by IS. (Reduces costs)
To provide a competitive advantage, in (i) the product: the product/service must be new, enhanced or differentiated cost/quality, (ii) the process: lock in customers with high switching costs, lock in suppliers connect work with firm, raise barriers to entry, establish alliances as such product awareness, or reduce costs.
Here’s a fun YouTube video on value chains vs supply chains.
Featured image supplied free from Unsplash.