As the name suggests, there are two aspects to this business strategy. The “Focus” refers to when a company focuses on a niche market, either by industry or geography, and becomes the expert in delivering for that industry.

1. Strategic Information Systems(SIS)
for
Competitive Advantage
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2. Porter’s Generic Strategies
• Porter identified 4 generic strategies that are all around gaining a
competitive advantage, so if you’re currently looking at your strategy
then reminding yourself of the generic strategies can be very useful if
you want to achieve market share growth.
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3. Porter’s Generic Strategies
The four strategies are called:
1. Cost Leadership Strategy
2. Differentiation Strategy
3. Cost Focus Strategy
4. Differentiation Focus Strategy
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4. 1. Cost Leadership Strategy
The Cost Leadership Strategy is where a business focuses on reducing the
cost to deliver the products or services to a customer, ensuring you’re more
profitable and thus can add shareholder value or invest in other parts of the
business strategy.
• There are a number of factors to consider when you’re going
for Cost Leadership:
• What impact will the drive down on costs have to your
customers and employees?
• Is it maintainable as you scale?
• How will you reinvest the additional profits of the business?
• How will you produce the lowest cost delivery vs your
competitors?
• Will any of the saving be passed on to customers?
• Can you maintain your position as the lowest cost, or will
competitors catch up?
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5. Differentiation Strategy
The Differentiation Strategy is where a business focuses on
differentiating its products or services from competitors. This focused
strategy has a wide spectrum from full product diversity to unique
features within a core product.
• There’s a number of factors to consider when you’re going for
Differentiation:
• How mature is the market your product or service operates in?
• What is the history of competitor innovation?
• What does your customer feedback suggest?
• Is your company setup to take advantage of new features with strong
marketing?
• Why do you currently win or lose sales deals?
• How do you currently research the market and requirements?
• Your management team skills – creativity, outward thinking, market
expertise are required attributes
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6. Cost Focus Strategy
As the name suggests, there are two aspects to this business strategy.
The “Focus” refers to when a company focuses on a niche market,
either by industry or geography, and becomes the expert in delivering
for that industry. The “Cost” refers to the company producing the
product or service for an aggressive cost to them, much like the Cost
Leadership Strategy we discussed earlier.
• In addition to the factors from Cost Leadership, you
should consider the following:
• How big is the niche market you’re operating in or
working towards?
• Can you provide the product or service at a cheaper cost
than the competition?
• Can you maintain the quality required to be leader in the
niche market?
• What is the level of cost per customer to become the
leader within this market?
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7. Differentiation Focus Strategy
The Differentiation Focus Strategy is an evolution of the Differentiation
Strategy. As with Cost Focus, there are two aspects - one focusing on
the Differentiation aspect of the strategy while the other highlighting
the fact the business is entering a niche marketplace.
•In addition to the factors from Differentiation,
you should consider the following:
•How big is the niche market you’re operating in
or working towards?
•Does the market lend itself to differentiation?
•What is the size of the market vs the investment
required to differentiate?
•What new features or products will make you
successful?
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8. Response Strategies
(added by Porter and others)
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INNOVATION
Developing new products & services
GROWTH
Increasing market share, acquiring
more customers or selling more
products
IMPROVE INTERNAL EFFICIENCY
To improve employee and customer
satisfaction
ALLIANCES
Working with business partners to
create synergy & provide
opportunities for growth
CRM
Customer-oriented approaches, e.g.
the customer is king (queen)

9. Competitive Intelligence
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The Internet is
central to
supporting
competitive
intelligence
Such activities drive business
performance by:
 Increasing market
knowledge
 Improving internal
relationships
 Raising the quality of
strategic planning
Many companies
monitor the
activities of
competitors

10. Porter’s Model in Action
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11. Porter’s Model in Action (cont.)
Step 1: The players in each force are listed.
Step 2: An analysis is made which relates
Porter’s determining factors.
Step 3: A strategy is devised to defend against
these factors.
Step 4: Support information technologies are
employed.
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12. Porter’s 5 Competitive Forces
 The threat of entry of new competitors.
 The bargaining power of suppliers.
 The bargaining power of customers (buyers).
 The threat of substitute products or services.
 The rivalry among existing firms in the industry.
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13. Competitive Advantage in the Web Economy
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Competitive Strategy
Search for a competitive advantage in an industry, which leads to control of the market.
Competitive Advantage
Look for a competitive necessity, which will help your company keep up with the
competitors.
Sustainable Strategic Advantage
Maintain profitable & sustainable position against the forces that determine
industry competition.

14. The Role of IT
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IT creates applications that provide strategic advantages to
companies
IT is a competitive weapon
IT supports strategic change, e.g, re-engineering
IT networks with business partners
IT provides cost reduction
IT provides competitive business intelligence

15. Porter’s Value Chain Model
PRIMARY ACTIVITIES
 In bound logistics (in puts)
 Operations (manufacturing & testing)
 Outbound logistics (storage & distribution)
 Marketing & sales
 Service
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Supply
Chain

16. Porter’s Value Chain Model
SUPPORT ACTIVITIES
 Firm Infrastructure
 Human Resources Management
 Technology Development
 Procurement
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17. VALUE SYSTEM
A firm’s value chain is part of a larger stream of activities, which
Porter calls a “Value System”.
 Includes the suppliers that provide the necessary inputs AND
their value chains.
 Applies to both products & services, for any organization,
PUBLIC or PRIVATE.
 Is the basis for the Supply Chain Management.
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18. The Value Chain Model
The Value System Model is
used to:
 Evaluate a company’s process
and competencies.
 Investigate whether adding IT
supports the value chain.
 Enable managers to assess
the information intensity and
the role of IT.
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19. Bakos & Treacy Framework
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20. Stages in Customer Resources Life Cycle (1-7)
(1) Establish Customer Requirements
(2) Specify Customer Requirements
(3) Select a source, match customer with a supplier
(4) Place an order
(5) Authorize and pay for goods & services
(6) Acquire goods or services
(7) Test & accept goods or services
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21. Stages in Customer Resources Life Cycle (8-13)
(8) Integrate into and manage inventory
(9) Monitor use and behavior
(10) Upgrade if needed
(11) Provide maintenance
(12) Transfer or dispose of product or service
(13) Accounting for purchases
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22. Web-based Strategic Information Systems (SISs)
Many of the SISs of the 70s - 90s were based on privately owned
networks, or organizational information systems (OISs).
EDI-based systems are of key importance.
SISs are changing the nature of competition.
In some cases, SIS renders traditional business procedures
obsolete.
 E.g, Encyclopedia Britannia
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23. Examples of EDI/Internet-based SIS
(for individual Companies)
 Electronic Auctions
 Electronic Biddings
 Buyer-Driven Commerce
 Single Company Exchange
 Direct Sales
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24. Examples of EDI/Internet-based SIS
(for Groups of Companies)
 Industry Consortiums
 Horizontal Consortiums
 Web-based Call Centers
 Web-based Tracking Systems
 Web-based Intelligent Agents
 Web-based Cross Selling
 Accessing knowledge via Intranets
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25. SIS Implementation
Major Issues to be Considered:
 Justification
 Justifying SIS may be difficult due to the intengible nature of
their benefits.
 Risks & Failures
 The magnitude, complexity, continuous changes in technology
and business environment may result in failures.
 Finding appropriate SIS
 Identifying appropriate SIS is not a simple task.
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26. Sustaining SIS & Strategic Advantage
A Major problem that companies face is how to sustain their SIS
competitive advantage.
3 Major approaches =
 Create inward systems which are not visible to competitors.
 Provide a comprehensive, innovative & expensive system that is
difficult to duplicate.
 Combine SIS with structural changes. This would include business
processes, reengineering & organizational transformation.
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27. Managerial Issues
Implementing SIS Can Be Risky.
The investment involved in implementing
Strategic Information Systems (SIS) is
high.
Strategic Information Systems
Requires Planning.
Planning for an SIS is a major concern of
organizations.
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28. Managerial Issues (cont.)
Sustaining Competitive Advantage Is Challenging.
As companies become larger and more sophisticated, they develop
resources to duplicate the systems of their competitors quickly.
Ethical Issues.
Gaining competitive advantage through the use of IT may involve unethical
or even illegal actions.
Companies can use IT to monitor the activities of other companies and may
invade the privacy of individuals working there.
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