- Term Papers and Free Essays

Can Information Systems Provide Businesses With A Competitive Edge? Are Such It Related Competitive Advantages Sustainable In The Long Run? Why Or Why Not?

Essay by   •  December 31, 2010  •  2,609 Words (11 Pages)  •  2,152 Views

Essay Preview: Can Information Systems Provide Businesses With A Competitive Edge? Are Such It Related Competitive Advantages Sustainable In The Long Run? Why Or Why Not?

Report this essay
Page 1 of 11

Can information systems provide businesses with a competitive edge? Are such IT related competitive advantages sustainable in the long run? Why or why not?

In recent years, many businesses have faced an increasingly uncertain future. As a result, there is an "economic imperative" to gain advantage over their competitors (Bakos & Treacy, 1986). A competitive advantage is attained when "a firm reaches its comparative efficiency or bargaining power (Bakos and Treacy, 1986). There has been a need for the introduction of information systems into many businesses due to human limitations, with bounded rationality concerning the "memory, computation and communication" capacities of an individual (Bakos & Treacy, 1986). There is limit to which individuals are able to solve problems without the use of information systems. In order to shift the boundaries of rationality, information system must be implemented to aid "memory, computation and communication" (Bakos & Treacy, 1986). Information systems designed to gain competitive advantage are defined as "information systems that drive or formulate the organisation's competitive strategy in order to provide it with (or to maintain) a competitive advantage" (Wiseman, 1985). Wiseman (1988) also stated that companies should pursue short, medium and long-term investment in information systems, which display sustainability. He claimed their success could be measured in number of new clients, increase in market share and general return on the original investment. Some might argue that the continuous exponential improvement in technology would render long-term investment in it impossible. However, most of these 'new advances' will not overly benefit all companies in all markets. The importance of a well- implemented information system is very real. Clemons and Kimbrough (1986) believed that "recent attention given to the strategic use of information systems or the priority placed on finding opportunities is not overstressed". In order for this to be effective, it must not just be a short-term advantage. In order for long-term advantage to be gained "consumers must view the company's differentiation favourably, the firm must have the capacity to maintain its differentiation over the competition and the business must endure (Coyne, 1986).

Individual limitations are cited frequently for the rise in information systems and indeed corporations. If individuals were not limited, independent agents would operate instead of companies. This would flood the marketplace with excess competition and costs, which shows the existence of large firms is a necessity. In order to fulfil potential and overcome limitations, companies need to implement information systems. Nearly all modern corporations have an information system, but many are still limited by human factors. This is mainly because senior managers underestimate the importance of information systems. Companies also tend to resist change. A new information system can be an extremely daunting thing and can appear an undesirable option, especially if the company is doing well without one. There is a problem with "justifying the methodology, applying it and evaluating its output" (Sinclair, 1986). There was also a study conducted of eighty organisations (Lederer and Sethi, 1988), that the introduction of information systems and their planning of strategies were problematic, as they did not have the resources, processes or output for them. Managers in general were only to be fairly happy with the results. Some people believe that by implementing these new systems to solve problems with the old methods, they in turn will bring about new problems also needing new solutions. The resistance is a case of 'better the devil you know'. Managers are also wary of information systems as their benefit is difficult to quantify. Cooper and Kaplan (1988) stated that, even if their benefits are difficult to gauge, maintaining a competitive edge will result in a 'long-term added financial return for the organisation'.

The need for improved information systems is a notion echoed by Hamel and Pragalad in 'Competing for the future' (1994). Here, they suggest core competence being "a bundle of skills and technologies that enables a company to provide a particular benefit to customers". This is the main reason for improving information systems, as they "optimally position a company within an existing market and develops foresight into the whereabouts of tomorrow's market". Information systems should help the business to produce at a lower cost level. This will enable it to differentiate from its competitors and to analyse other markets and market sectors it may wish to enter into (Porter, 1980; Porter and Millar, 1985). Using information systems can potentially raise barriers to entry for new firms who will not have the technology that an established firm will or, or not have the capital to fund such a system. It can also create ways in which clients will depend on your business, be able to offer new and idiosyncratic goods and services and creating business opportunities (Bott et al., 1986, Porter and Millar, 1979).

Information systems providing competitive advantage can be displayed in the retail business. With high street businesses, rent and wages must be paid. These companies will also have distribution centres. With online retailers, they only have a distribution centre and due to the internet can have customers worldwide. The reduced expenses means they can offer lower prices in a price driven market. As a result, the demise of high street shops has been seen over the past few years. HMV sales fell 5.5% at Christmas 2005 compared to the previous year, and by September 2006, the sales were 10.5% lower than the previous September ( Utilising the internet is now the most widely sought avenue for competitive advantage. John Lewis has succeeded in this sense. Employment figures for their internet sales are larger than all but their flagship store in Oxford Street. As a result, Christmas sales figures for 2006 were 70% higher than 2005. Over Christmas 2006, Tescos also saw 1.3 million people purchasing on their website; a figure 30% higher than last year. The reason for internet sales being so much higher is the falling cost of information. Especially with the rise of price comparison websites, certain sales sectors are totally price driven, especially as products such as compact discs are homogenised. At its peak with the dotcom boom earlier this century, it was estimated that customer acquisition was four times greater with online companies than it was for companies with no web-based sales (Useem, 2000). Businesses have learnt from the mistakes of others that failed during this time and now firms are flourishing



Download as:   txt (16.8 Kb)   pdf (174.8 Kb)   docx (15 Kb)  
Continue for 10 more pages »
Only available on