Competitive Advantages of Using Information Technology - Case Study Example

Competitive Advantages of Using IS/IT Name Institution Course Date Table of Contents Table of Contents 2 Executive Summary 3 Competitive advantages of using IS/IT 4 Introduction 4 JetBlue Airways success story 5 The success factors for JetBlue Airways 6 Ford’s failure story 7 Lessons learned from Ford failure 8 External factors influencing competitive advantage attempts 9 Technological opportunity 9 Customer needs and expectations 9 Intensity of competition 9 Internal factors influencing competitive advantage attempts 10 Management willingness 10 Organisational capabilities 10 Strategies and structures 11 Ways of sustaining competitive advantage 11 Conclusion 12 Executive Summary The ability of an organisation to gain or enhance competitive advantage is very significant for organisations. In order for any organisation to stay ahead of competition, it should continually seek to enhance competitive advantage. The role of IS/IT in creating competitive advantage include reduction of cost of operation, reduction of competitor’s differentiation advantages, enhancing innovation to name a few. In this report, successful and unsuccessful examples of use of information technology for competitive advantages will be discussed together with factors influencing success or failure of attempts to enhance competitive advantages. The paper will also discuss how organisations can sustain competitive advantage. Competitive advantages of using IS/IT Introduction Gaining competitive advantage is considered important for every organisation. Competitive advantage according to Alexy and Reitzig is a product, service or capabilities that a company’s customers value very highly as compared to the same offerings from the competitors’ (Alexy and Reitzig, 2012). Competitive advantages are normally temporarily since competitors are often looking for ways to facsimile the competitive advantage. For any organisation to stay ahead of the competitors, it should continually seek to develop and create any competitive advantages. To survive and avoid failure, an organisation should develop and implement effective strategies in order to counter the available competitive forces (Alexy and Reitzig). Meanwhile, information systems or information technology can be a driving force of such strategies. For instance, business organisations can utilise IS/IT to effectively shift the cost of operations and processes, to develop and create differentiated features or reduce the competitors’ differentiation advantages and to identify and develop new products and services and change business processes through automation (Booth, Roberts and Sikes, 2011). In addition, information systems can be used to expand local and international operations by establishing global intranet through mergers and acquisitions (Alexy and Reitzig, 2012). Also, organisations can use IS/IT to develop and enhance relationships with local and international partners through applications like developing inter organisational information systems (Alexy and Reitzig, 2012). In general information systems can assist organisations develop and enhance their competitive advantages. This paper will detail out successful and unsuccessful examples of the use of IS/IT by organisations for gaining and enhancing competitive advantages. It will also highlight a number of success factors with regard to the successful example and the lessons learned from the unsuccessful example. In addition, it will discuss some internal and external factors that influence the success and failure of gaining competitive advantage and the ways in which competitive advantage can be sustained. JetBlue Airways success story JetBlue Airways Corporation is an example of a company that successfully developed and implemented information systems for gaining and enhancing its competitive advantage. JetBlue’s strategy revolves around its core competencies (Glenn, 2011). It has benefited from using its information infrastructure for gaining a sustainable competitive advantage. JetBlue’s focus on information technology has driven the organisation into opportunities including paperless cockpits, JetBlue Events Management systems, Internet booking, ticketless traveling, reservation system, internet booking to name a few (Glenn, 2011). In addition, the Airline placed Hewlett-Packard notebooks in all the flight deck in order to allow pilots to utilize the HP technology for quick recalculations. Due to this, flight delays reduced. This has enabled the company reduce cost thus increasing its revenues. In addition, JetBlue Airways came up with new technology called the 2e Systems that established a platform that offered the airline with additional features such as managing and monitoring real-time view of its operations, automatically contacting crew members in case of rescheduling, sending emails and SMS to the crew members to make sure they are informed of any real-time changes, track acknowledgements in case a crew member is unreachable among other features (Miranda, 2012). The 2e Systems dramatically reduced the number of crew that needed to be contacted via the crew operations in addition to reducing approximately 6,000 calls into the centre. Also, it reduced the number of interrupted flights due to lack of inflight crew members. Moreover, the fully automated process of the 2e Systems offered the crew management with well clear overview of flight situation thereby giving them the ability to focus on other priorities set before them and manually intervene if need be. Also, another major information technology tool developed by the airline is the operational recovery system (Miranda, 2012). The system has helped the company select a number of goals and options before rerouting plans in an event of disruptions such as bad weather. The software also is able to develop solutions for delays or flight cancelation beyond three hours and has the ability to calculate the amount of capital to be incurred in case the company do so (Levick, 2011). The success factors for JetBlue Airways JetBlue Airways has instituted its strategic position. With its new and advanced information technology systems in its operations, the company has continued stealing away markets and other benefits from its present competitors (Glenn, 2011). JetBlue Airways has taken the industry by a storm. To start with, the success of the implementation of information system in its operations for enhancing competitive advantage has been attributed to its management and leadership. Starting with a clean slate allowed the CEO David Neelem the advantage of picking highly qualified management and staff that really focussed on using technology to bring competitive advantage (Miranda, 2012). The CEO of the company is an innovator himself making the first airline in the United States to be 100% ticketless which has positioned it above the competition. Leadership has also focussed their attention on offering the highest possible customer service and physical asset though IT/IS for the lowest possible costs. JetBlue Corporation has also assembled the greatest industry minds and has focussed them in implementing technology on cost-cutting efficiency. It has secured a large sum of money to fund its IT/IS focus. Unlike other airlines that cut on IT spending, the company continues to increase its information technology funding (Glenn, 2011). Ford’s failure story An example of a company that unsuccessfully implemented information technology in its operation is Ford (Kim and Mauborgne, 2015). Sometimes, what seems to be an innovative strategy ends up as a huge failure. In 1999, the CEO of Ford, Nasser was eager to take the company to the web convinced that it will lead to a huge success. Ford developed Wingcast telemetric device that were to be installed in its vehicles to enable the drivers and all the passengers to be able to access the Web. As a result, the company formed a partnership with Qualcomm Inc. and Yahoo. In addition, the company also developed a B2C idea where the company would push the sales to the Web bypassing the retail and dealership part to on-line sale directly to the clients (Kim and Mauborgne, 2015). The idea was that the customers would assess the internet, take a virtual test-drive, view the vehicles’ images, pay for the purchase online and have the vehicle they choose driven to their door. Ford referred to this website as FordDirect.com. To this effect, the company developed ConsumerConnect for the purpose of enhancing the website and handing the direct sales. However, the consumers were never enthusiastic about Wingcast telemetric idea and as a result; the company eliminated it in June 2001. In addition, the B2C project was a colossal failure. The ConsumerConnect idea was disbandment permanently (Kim and Mauborgne, 2015). Today, FordDirect.com is operated jointly by Ford and Lincoln Mercury partnership. The website assist the consumers find the vehicle they like but have to look for a dealer who can deliver their Vehicles to their doorsteps. The site also offer deals for used cars which is not what the company anticipated frothier website. The price tag for all the failed projects of the company was approximated to be around $1 billion which was spent in the information system initiatives under Nasser’s leadership (Kim and Mauborgne, 2015). Lessons learned from Ford failure The failed information systems’ projects by Ford were not as a result of faulty technology. On the contrary, there are a good number of information technologies that support such initiatives of retail sale through the Web. No reason prevents cars to be selected and paid for via the internet (Kim and Mauborgne, 2015). The reason for the failure of Ford was as a result of not considering state laws and existing relationships with dealers. Many countries do not allow cutting an agent from sale. For instance, state franchising law forbid the company to bypass its dealers. Moreover, Ford still needed the dealers to cut deal with customers who did not have access to the internet or clients who needed to see the car before any purchase, thereby, it could not bypass its relationship with the dealers all at once (Kim and Mauborgne, 2015). The lessons learned from Fords failure is that being the first to implement information system is not enough for success. Also, all business ideas should be sound. This means that companies must carefully define what exactly buyers want before undertaking any innovation. Also, establishing a recognisable and strong brand name for a company is important but this does not mean that success is guaranteed. Establishing and satisfying the needs of the consumers is the most important success factor for any organisation (Alexy and Reitzig, 2012). External factors influencing competitive advantage attempts Technological opportunity Entrepreneurs are always led by technological opportunities (Laundon and Laundon, 2012). The direction and rate of technological advancement is defined by the appropriateness of technology in industry usage. The dimensions of technological opportunities include the technological importance which focuses on the expected technological contribution to competitive advantage; technological performance which focuses on the level of performance of technology with regard to alternative and the possibility of technological completeness or correctness (Laundon and Laundon, 2012). Technology advancement can result to either radical or disruptive results. Radical results leads to very high returns but such opportunities are less frequent. Therefore, for an organisation to gain competitive advantage it should continuously introduce incremental and sustaining process, product and service innovations. Customer needs and expectations Satisfaction of customer needs is very important in gaining and enhancing competitive advantage (Chui and Fleming, 2011). Organisations that are highly responsive to customers’ needs and expectations position themselves above their competitors. Companies should therefore analyse their satisfaction capacity and improve their products, processes and services in order to satisfy their customers. In this context, for a company to gain or enhance its competitive advantage, it should base its operations on customers’ needs and endeavour to satisfy these needs (Chui and Fleming, 2011). Intensity of competition Companies often compete with competitor in price, quality and quantity. In a situation where there is modest competition, the possibility of competitive advantage will be intensified compared to a situation where there is intensive competition (Laundon and Laundon, 2012). Companies that are in an industry sector with high competition often introduce more strategies and innovations compared to companies in an industry sector with low competition. Therefore, companies present in high competitive industry should intensify their innovative activities involving their products, prices, services etc. in order to gain competitive advantage (Laundon and Laundon, 2012). Internal factors influencing competitive advantage attempts Management willingness Leadership and management of an organisation have the power to affect the success of an attempt of gaining competitive advantage (Laundon and Laundon, 2012). The strategies required for competitive advantage such as funding are in the hands of the management. A leadership that is willing to invest time and funds in initiatives that empower competitive advantage leads to the success of a company. Organisational capabilities Organisational capabilities can be thought as the bonding mechanisms of an organisation whereby resources are combined in innovative ways in an attempt to gain competitive advantages. Capabilities can involve the combination of operational skills, technology, financial resources among others to the success of an initiative (Jaruleski, Loehr and Holman, 2012). Therefore, competitive advantage can be achieved only when an organisation is capable enough to combine resources in an innovative way in accomplishment of a goal or objective. Strategies and structures Strategic abilities involve achieving competitive advantages through combination of internal resources while attracting the external opportunities and preventing external threats (Lichtenthaler, Hoegl and Muethel, 2011). Good strategy requires crafting an effective structure, vision, plan and goal. Determination of effective ways in which internal resources will interact with available external competitive environment is fundamental and identical to implementing effective strategy. Successful attempts to enhancing competitive advantage are affected by an organisation structure and strategies (Jaruzelski, Loehr and Holman, 2012). Ways of sustaining competitive advantage There are various benefits associated with the implementation of information system in organisational operations. However, such benefits are also enjoyed by an organisation’s competitors. The means by which an organisation sustains its competitive advantage should be considered (Laudon and Laudon, 2012). The fundamental advantage of IS/IT is its ability to reduce cost and enhance efficiency. However, according to Michael Porter, this is not considered a strategy. There are many firms that have had no substantial strategy such as Ford but reduced costs. But when other firms copied their reduction cost model, they could no longer be competitive (Laudon and Laudon, 2012)). Therefore, without a distinctive strategy, speed and flexibility go nowhere. Therefore, what is strategy and how can it sustain competitive advantage? Strategy according to Porter is the creation of a unique, novel and valuable position. Once a position is placed which cannot be copied by a competitor, competitive advantage is sustained. Strategy is aimed at creating competitive advantage by reinstating a unique position (Laudon and Laundon, 2012). So how does IS/IT develop such position? It is important to mention that information system in strategic terms is customised business applications being utilized by organisations. Therefore, lower level of IS will not sustain competitive advantage. Use of high levels of IS require firms to innovate through their products, services operations. Therefore, firms should use information technology specific to their operations and as a catalyst for innovation. To sustain competitive advantage through the use of information technology, organisation should continue to innovate. In the long-run, through continuous innovation, firms are able to develop and build brand loyalty and recognition (Roberts and Sikes, 2011). Conclusion Information system supports a business organisation’s competitive strategy. Through competitive strategy, companies seek to achieve competitive advantage- a business advantage over its competitors. An example of an organisation that implemented IS/IT successfully for enhancement of competitive advantage is JetBlue Airways as a result of good leadership and effective allocation of funds for information technology. Ford on the other hand unsuccessfully implemented IT for the purpose of gaining competitive advantage. Some factors influencing the success or failure of an attempt at gaining competitive advantage by companies include organisational capabilities, management abilities, effective strategies, intensity of competition among others. For sustainability of competitive advantage through the use of information technology, organisations should develop a culture that supports continuous innovation. And through continuous innovation, companies are able to develop and build brand loyalty and recognition. References Alexy, O. & Reitzig, M. 2012, ‘Managing the business risks of open innovation’, McKinsey Quarterly, January 2012, pp. 1–5. Booth, A., Roberts, R. & Sikes, J. 2011, ‘How strong is your IT strategy?’, McKinsey on Business Technology, Number 23, Summer 2011, pp. 2–7. Chui, M. & Fleming, T. 2011, ‘Inside P & G’s digital revolution’, McKinsey Quarterly, November 2011, pp. 1–11. Jaruzelski, B., Loehr, J. & Holman, R. 2012, ‘The global innovation 1000: Making ideas work’,Strategy+Business, iss. 69, Winter 2012, pp. 1–14. Kim, W. & Mauborgne, R 2015, Blue ocean strategy : how to create uncontested market space and make the competition irrelevant, Boston, Massachusetts, Harvard Business Review Press. 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