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Organisational Strategy, IS & Competitive Advantage

Following on from my article on Business Processes & IS, IS exists to help organisations achieve goals and objectives, that are determined by competitive strategy, that determines structures, features and functions of every IS.

Organisations examine industry structure to determine a competitive strategy, that determines value chains and business processes.

Industry Structure -> Competitive Strategy -> Value Chains -> Business Processes -> Information Systems.

Porter’s five competitive forces:

  • Bargaining power of customers
  • Threat of substitutions
  • Bargaining power of suppliers
  • Threat of new entrants
  • Rivalry among existing organisations

An analysis of the industry structure can determine the competitive advantage.

Porter’s four competitive strategies:

  • Cost leader

1#Broad cost leadership across industry

2#Narrow cost leadership focused on particular industry segment

  • Differentiation

3#Broad differentiation across industry

4#Narrow differentiation focused on particular industry segment

Goals, objectives, culture and activities must be consistent with the competitive strategy that determines the value chain structure that is a network of value-creating activities:

  • support activities: procedures > technology > human resources > infrastructure (indirectly contribute to production, sales and service)
  • primary activities: margin = value – cost (adds value to product, though intangible makes margins hard to calculate)
  • Linkage between value activities helps efficiency and is supported by IS. (Reduces costs)

To provide a competitive advantage, in (i) the product: the product/service must be new, enhanced or differentiated cost/quality, (ii) the process: lock in customers with high switching costs, lock in suppliers connect work with firm, raise barriers to entry, establish alliances as such product awareness, or reduce costs.

Here’s a fun YouTube video on value chains vs supply chains.

Featured image supplied free from Unsplash.




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