MANAGEMENT OF INFORMATION TECHNOLOGY
INTRODUCTION
Gaining competitive advantage by leverage information technology and information systems is a critical concept for organization. Baltzan and Phillips define competitive advantage as a product or service that an organization’s customers value more highly than similar offerings from its competitors’. This implies the products, services and capabilities that an organization has while the competitor’s do not have. Competitive advantage are temporary as competing organizations seeks ways to duplicate the competitive advantage. In order to lead in competition, organizations have to continually develop strategies. This paper describes the procedures in which organizations can analyze, identify, and develop competitive advantage using tools such as Porters Five Forces, three generic strategies, and value chains.
PORTER FIVE FORCES MODEL
Michael Potters Five Forces Model is a powerful tool for assessing the competition in an industry and determining the relative attractiveness of that industry. Porters posit that in order for an organization to do an industry analysis, it must analyze five competitive forces and determine how it can gain competitive advantage over its competitors. These include:
Rivalry of competitors within the industry
Bargaining power of suppliers
Threat of competitors within the industry
Threats posed by substitute products which might capture market share
Bargaining power of customers
Threat of new entrants into an industry and its markets
Cost leadership
Differentiation
Innovation
Growth
Alliance
Information systems play the role of an enabler of these five competitive strategies
APPLE COMPUTERS
COMPANY PROFILE
Apple Inc is an American Multinational corporation based in California and designs, develops and sells consumer electronics computer software and personal computer. Its best known line of products include Mac computers, iPods music devices, iPhone Smartphones and iPad tablet computers. Its software includes OS X and iOS operating systems, iTunes media browsers and Safari web browser. Their latest operating system iOS is used in iPhone 5C and 5S.
Apple is the second largest information technology company by revenue and the third largest mobile phone manufacturer. Currently its stock prices trade at $556.07 at the NASDAG stokes exchange.
Cost Differentiation
In a bid to reduce the cost of operation and subsequently cost of doing business, organizations have adopted information systems. Information systems can be useful where the ultimate purpose is to significantly minimize the cost of doing business.
Differentiation
Organizations can use information systems to come up with differentiated features and reduce competitor’s differentiated advantages. This can be achieved through use of social networking platforms to better understand and serve customers. Apple uses differentiation strategy in order to compete successfully. Apple prides itself of innovation and technology as compared to other companies. This strategy has brought immense success while earning them higher than industry average profit margins. The strategy enabled them launched iTunes using the Mac as the hub for digital lifestyle. They opened stores and through customer relation and strategic management launched the digital lifestyle.
Apples incredible success is attributed to innovation and design of quality products differentiating them with those of its neighbor. Their iMac computers omitted the floppy disc drive which is evidently compulsory for any other company. Second, Apple encourages customer visits visit’s to its stores which provide help desk care and sales. Therefore, they built customer loyalty. Finally, Apple shares its revenue with developers a move that promotes more creativity in application development.
Microsoft is not as much successful as Apple because, first, it manufactures the software and hand it over to hardware makers who build what the user wants. This strategy does no down well in relation to a single company which assembles everything. Second, Microsoft is committing design faults ever since. Devices that attract the market should continually be slim and lighter. Apple has capitalized on that. Third, Microsoft is not too swift to read the market signs and act quickly the way Apple does. Fourth, Microsoft do not encourage customer interaction and loyalty through retail stores the way Apple did. Finally, Microsoft do not offer low cost tablets and Smartphones intended for the low class masses.
Innovation
Innovation is the process of creating and developing new business systems, processes and technology. This can be improved by use of information systems. Information systems aides in the identification of new goods and services, designs and ventures demanded in the market. Digital modeling and simulation of existing products and services shortens the design time and make it available on the market within the shortest time possible. Likewise, opportunities to shift the business to the online platform are realized through information systems. Innovations can be classified into open and combinational systems through which organizations can take advantage of while managing business operations.
The reason why Apple tops in the market in terms of brand equity, identity and personality is attributed to the fact that it has continously improved its brand by delivering high quality products through excellent design and innovation. The company released iPhone 5 in 2012 highlighting its advance features that are easy to use. Of more amazement is the larger display, faster chip and untrafast wireless technology on a thin and light device ever witnessed. The iPhone 5C and 5S hit the market in September this year and iPhone 6 is expeted some time in 2014 with totally new features such as a new and bigger Full HD screen than its predecessors. Currently iPhone has announced the introduction of low-cost plastic model version to substitute iPhone 5 as it anticipate to discontinue production of iPhone 4 and 4S. The new announcements are part of a strategy to hold its consumers from migrating to other brands in an attempt to wait for the low-cost versions. The change of manufacturing technology also does the trick to increase network externalities.
Apple values innovative ideas among its employees and outsiders. They engage in the following practices to foster and nuture new ideas:
Clear communication for support of open innovation strategies across the firm and opening up innovative ideas to outside parties
Demonstration of top management support. Steve Jobs while still the Chief Executive Officer of Apple demonstarted a leadership of demanding perfectionist who worked tirelessly to integrate business and information technology at the forefront. His aggressive and demanding personality is what led to the design and development of magnificent cellular devices.
Steve jobs innovative leadership is what propelled Apple to where it is today. Apple’s CEO commented on Steve Job that he had the ability and courage to change his mind more often than anyone else he had ever met to imply his increased will of deviating from the norm and attempting on new things. It is through appropriate governance and communication of clear rules, leadership and transparent processes for setting goals and solving conflicts that innovation is realized. Communication is becoming one of the essential tools of production in the corporate world and the ability to choose and organize these tools as needed in an organization while on the go is a game changer in the competitive world.
Growth
Information systems are useful in creating global dominance. Organizations can utilize information systems to expand their coverage within their niches and outside it. New products that suite users demands can be launched in locations different from the headquarters using global intranets such as VPN and WANs. Apple products are available globally. They have opened up numerous stores world over and encourage their customers to visit their stores for inquiries and services. In addition, Apple shares its resources with its developers thereby encouraging more creativity in app development and growth.
Apples retail experience is exemplary and unmatched. Apples authorized outlets are small shops with its products and accessories and an outlet for support and repair. Their customer experience is also different. The company needed a personalized customer experience to regain the trust of its customers and built more solid relationships. Apple opened up retail stores with Genius bars manned by disciplined, well-trained and incredible workforce that would rather use the word “as it turn out” than “unfortunately” while referring to a unsolvable customer problem.
Strategic alliance
Organizations enter into strategic alliance with other organizations and partners to improve their competitive edge. Internet and intranets have created a front for mutual cooperation strategic alliance. Supply chain management and customer service is enhanced via seamless connectivity enabled by the internet. Likewise, using IT to develop virtual meeting rooms with business suppliers and business partners increases a company’s advantages over its competitors.
Apple’s history is one that is characterized with numerous mergers and strategic alliances. Steve Jobs is the pioneer finder of The Graphics Group later renamed Pixar. Pixar partnered with Disney to distribute films till 2003 when the contract ended. Later on Jobs oversee the purchase of the company by costing Disney $7.4 billion. The Pixar-Disney partnership produced films which won Academy Award prizes for best animation. Steve Jobs venture into the fields of computer graphics was highly successful as other fields.
When NeXT was acquired by Apple at a price of $427 million, Steve Jobs became the de facto and interim chief executive by July 1997. NeXT Software Inc. had released WebObjects in 1996 which transitioned to the present AppleStore, MobileMe and iTunes when NeXT was acquired by Apple in 1997.
Job introduced, altered and terminated a number of projects. Projects such as Newton and Cyberdog were terminated while licensing programs for Macintosh clones were changed and NeXTSTEP were introduced in Apple and rebranded to Mac OS X. The company increased sales under Jobs guidance with the introduction of products such as iMac and others that continued to become the market drivers. This acquisition is what is partly attributed to Apples success.
Other than the five basic strategic measures of developing competitive edge through information systems, organizations can shape their competitive edges by engaging in either or all of the following processes.
Organizations can lock their loyalty customers and suppliers by developing relations and initiating valuable new relationships via customer or partnership relationship management systems and applications. In this way, customers will find it difficult to shift to competitor’s products and services.
A company can also employ the use of switching costs via extranets and proprietary software applications to keep its current and new customers. A forms suppliers and customers will be reluctant to pay the costs in time, effort, and money. Also, they will not stand the inconveniences of switching to a company’s competitors. Examples of companies utilizing these criteria include Amazon’s user-friendly and beneficial B2C website and Alibaba.
Companies decide to raise entry barriers through operation improvement optimization and flattening of organizational structure. This is measured in the amount and complexity of technology needed for competitors to develop the same products and services. Google search engine is difficult to emulate, thus, developing a competitive edge for it over its competitors. P & G digitization strategy will affect every aspect of its operations making it world’s most advanced company as far as technology is concerned.
Apple not only creates extremely good OS which differentiates them from other industry players, but also develops good “core” software known as iLife. Apples iLife is synonymous with Microsoft Office software only that it is suited for entertainment and creativity. It is better than most software if not all in creating movies, music, DVDs and other media and is currently included in any new Mac. The same can be said of iTunes. Apple must have realized that it cannot be the winner in owning the content of the future, but can hold the key to the content. Announcing in 2009 that they have customer credit card information in excess of 100 million via its iTune application, they proved to be the best digital retailers.
VALUE CHAIN
Value chain is another Porters concept and tool for identifying competitive advantage and opportunities through strategic use of information systems. Value chain looks at a business as a mixture of primary and secondary operations. Primary operations involve those are fundamental to the businesses operations. These include customer service, sales and marketing. Secondary activities are the supplementary processes that ensure smooth running of operations. These may include procurement, administration, technology and human resources.
The value chain aids a business determine businesses processes for its clients. The value chain model dictates the business processes that may require the application of strategic advantages. Value is added to the business as well as developing a strategic competitive edge when it integrates the services of external partners, customers and suppliers. By taking advantage of the internet technologies, organizations create what can be termed as a value web or a value hub structure, both of which are intended to improving efficiency and effectiveness of the value and supply chain by connecting customers, suppliers, and partners in a digital way, thereby, reducing information inefficiencies and errors along the chain.
SUMMARY
This paper has explored the important aspects of information technology and information systems in identifying and enhancing competitive strategies and competitive advantages of organizations. Organizations can apply the Porter’s five forces and value chain to analyze their competitive position and attain competitive edge. Specifically, this paper has reviewed the way Apple has applied information systems to create strategic advantage in computing and electronic devices industry. It is clear that the factors of differentiation, innovation, strategic alliance and growth are easily noted. Information systems play a major factor in organizations competitive strategies. However, competitive strategies alone cannot be magic bullet. In order to meet the IS/IT potentials, both IS/IT and non-IS/IT needs should be addressed. The transparency in the design and implementation of a IS project should be realistic to business managers. Likewise, accountability of information system projects should be extended to business parts and processes in the organization.
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