Using Information Technology to Increase Competitive Advantage - Research Paper Example

 Using Information Technology to Increase Competitive Advantage Abstract Information technology is developing at a very great speed, particularly in the business world. Many firms are using the internet for various functions to enhance their production efficiency and augment their marketing strategies. However, key among these is the use of technology to increase the competitive advantage of firms. This paper analyzes how a company/business can use information technology to increase its competitive advantage. Introduction Internet has changed the structure of global markets and made it possible to hook up to other systems, people, and companies, without the restrictions of time and space. The dispersion of such a system is purposefully significant for economic development of every country. With the development and progression of the information and communication technology (ICT), competitive advantage plays a vital role in contemporary companies and businesses (Cicak, 2010). Information network comprises diverse types of software platforms and databases, which the companies use to increase effectiveness and augment their competitive advantage. These include venture-wide networks devised to administer all principal functions of the company provided for instance SAP, PeopleSoft, and JD Edwards among others. They also include more general-purpose database creations aimed at specific uses for instance the products provided by Oracle, Microsoft, and many others (Dewett & Jones, 2000). Ways in which information technology helps in generating competitive advantage The fundamental means for understanding the impact of information technology on companies is the value chain. This is the set of procedures harmonized to produce a certain product or service and offering it to the consumers. In almost all industries and companies, information networks carry out several separate but interrelated activities that affect the procedures like production, fabricating, advertising, selling or delivering products to customers. Modern industry is endeavoring to reinforce relationships with clients, generate new revenue opportunities as well as lessen supply chain inadequacy. The directness of Internet networks ensures ultimate compatibility with other technologies and the volatility of internet-based information systems (Cicak, 2010). Because of advancements in information technology, buyers have easier access to information concerning products and providers, therefore boosting their bargaining power. In addition, internet networks tend to lessen variable costs and to generate considerably greater pressure for firms to engage in vicious price competition. Although internet affects the operational efficiency and strategic positioning in various ways, it also offers new opportunities for reinforcing or realizing strategic positioning (Cicak, 2010). Information efficiencies (INE) are the savings on cost and time that effect when Information Technology permits individual workers to carry out their present tasks at a higher stage, take on extra tasks, and enlarge their positions in the company because of progresses in the capability to collect and evaluate data. On the other hand, information synergies (INS) are the routine gains that outcome when Information Technology permits two or more persons or subunits to merge their resources, cooperate, and collaborate across function or subunit limitations (Dewett & Jones, 2000). Another way in which network technology helps to create competitive advantage is through differentiation. Information technology helps a company to differentiate itself through various aspects. These include pricing, product improvement, and shorter-time to market as well as customer service. Furthermore, information network can help a company offer customised products and services, therefore improving differentiation and competitive advantage. Supported by the Internet’s interactivity aspect, for instance registration form and E-mail, a company can easily gather customer information including demographic information, product comments and possible demands on services or products. This information is very essential for the customization of existing products in inventive means. Consequently, this will help the company differentiate its products and services from its rivals or concentrate on a certain customer group (Teo & Pian, 2003). Developments in Information Technology have really eased institutional memory and the capacity to capture and incorporate plain knowledge by making it easy to communicate, codify, incorporate, store, and recover. For instance, at McKinsey and Company, the necessity of precise and well-timed data resources to sustain their consultants in the field has caused the formation of the Rapid Response Network. In this regard, several knowledgeable consultants gather knowledge on-line from all levels of the company and then use in-house Information Technology to spread information to consultants all through the organization. This information would otherwise not have been accessible to them (Dewett & Jones, 2000). Various studies on Information technology indicate that the use of an electronic marketplace can lessen transaction costs. Moreover, information technology and the Internet can considerably decrease the costs of acquiring, processing, and conveying information, therefore altering the way companies carry out business. Internet adoption can reduce the cost of marketing, advertising, and business operations. Furthermore, cost reductions stimulated by the information technology originate from less costly product advertising, cheaper distribution channels as well as direct savings (Teo & Pian, 2003). Another significant but deserted way in which information technology creates competitive advantage is easing the innovation process. In this regard, information technology brings new problem solving ideas in to the company (Dewett & Jones, 2000). Teo & Pian (2003) agrees that information concerning customer requirements gathered from the internet might help in the creation of new product ideas. In addition, the teamwork network within the company and between the company and its business associates can assist production process. Moreover, close interaction among business associates along the supply chain can offer opportunities to enhance the product-distribution process. Information Technology and the Internet are generating many new associations among businesses and widening the extent of industries in which a company must compete to attain competitive advantage. For instance, internet adoption in a company can improve its association advantage by offering an effectual and cheaper communication channel among coalition partners. Despite the overwhelming evidence of the significance of information technology in enhancing competitive advantage of a firm, it is neither the only nor the overriding influence. Other traditional aspects for instance scale, the skills of workers, process and product knowledge, and ventures in physical assets also play significant roles in creating competitive advantage. Moreover, even though information technology is transformational in some aspects, several conventional means of competitive advantage remain integral. Furthermore, while a new way of performing business has become accessible, the basics of competition remain unchanged. However, the best way of realizing complete use of the internet is by integrating the Internet into overall strategy. Eventually, this new powerful technology will become a likewise powerful force for competitive advantage (Cicak, 2010). Conclusion Many firms are using the developments and innovations of information technology for several functions. However, the major target of these firms is to increase their competitive advantage using Information technology. The use of internet and networking helps in increasing the competitive advantage of firms in several ways. These include creating effective link among employees, differentiation of products and services, cost reduction, improving innovation, creating alliances and enhancing the overall growth of the firm. However, use of information technology is not the only way of creating competitive advantage. Firms should not overlook the strengths of other traditional means and they should therefore integrate information technology in these means. References Cicak, M. (2010). Managerial Tools & Internet the Sources of Competitive Advantage of Firms. Retrieved from http://www.tmt.unze.ba/zbornik/TMT2010/053-TMT10-115.pdf Dewett, T. & Jones, G.R. (2000). The Role of Information Technology in the Organization: A Review, Model, and Assessment. Journal of Management, 27, 313-346. Teo, T. & Pian, Y. (2003). A Contingency Perspective on Internet Adoption and Competitive advantage. European Journal of Information Systems, 12, 78-92. Read More