Information Technology and Corporate Strategy
A key task of top management is formulating corporate strategy. What opportunities for new directions are available? What are competitors doing?
A firm can continue its present course, maintaining momentum where it is doing well.
Alternatively, the corporation can dramatically change its strategy by deciding among competing alternatives for new ventures. What is the role of technology in its strategy?
On the following slides we will discuss some generic strategies that firms may follow, and also some more specific strategies.
Modern firms are following specific strategies more and more, as competition becomes more pronounced in a competitive corporate background.
Some Generic Strategies
It is suggested that firms follow one of three generic strategies:
1. Low-cost producer.
Here the firm tries to have the lowest costs in the industry so that it can compete on price.
The firm tries to separate its product image from that of the competition in such a way that the customer wants its product. Luxury automobile manufacturers like BMW are very adept at differentiating their products from other cars. For example, if you buy a BMW, you are said to have "the ultimate driving machine."
3. Market niche strategy
A number of firms try to find a market niche and exploit it. A niche is some part of a market that is not being served by others. Hermes has stayed in its niche of producing high-quality, expensive products like women's scarves for a limited clientele.
Click the segments to read about each strategy.
Information Technology and Corporate Strategy
In today's competitive economy, we have observed firms focusing on more specific strategies. Click the numbers to read about each one.
1. Customer Driven
Here the firm focuses on its customers. How can we provide better customer service? How can we design products that meet our customers' needs? What technology exists so we can better serve our customers?
Customer service is extremely important in commodity businesses, for example, the mail order sales of personal computers.
1. Reducing Cycle Times
A firm has a variety of cycle times; a typical one is the length of time it takes to design a new product or service. Detroit automobile manufacturers and Boeing are focusing on reducing cycle times. They now use parallel design and engineering where tasks are done simultaneously rather than sequentially. In addition to saving time, parallel development results in better coordination among team members working on the design of a new car or plane.
2. Global Competition
Some firms have decided to follow a strategy of competing in the global marketplace rather than only in local markets. A firm with global presence will need a variety of technologies to help coordinate and control all its activities. Information Technology is a great facilitator for global operations.
In the U.S., the first part of the 1980s was an economic boom, leading to a number of excesses. The late 1980s and the early 1990s were marked by economic downturns and slow growth. To compete in a difficult economy, firms have attempted to determine their "right size." Usually to right-size meant a serious reduction in the number of workers in the firm, and rather large write-offs for restructuring. Blue-chip companies such as IBM reduced their levels of employment by tens of thousands of workers.
Most of the time, the firm adopts only one of these, but it is possible to follow two at the same time.
Capitalizing on Information Technology
How does the firm take advantage of information? There are four steps to be followed by top management:
1. Look for ways to incorporate technology in a product or service.
Does information processing provide an opportunity for a new approach to business? Does the technology make it possible to differentiate a product or service from that of the competition? Technology can help open a new market or increase an existing market share.
2. Seek ways to use technology to connect with other firms.
There is great interest in interorganizational systems that link two organizations together. Your firm may be able to connect electronically to its customers so that it is easy for them to order from you. A firm can encourage its suppliers to provide links for placing orders. In these instances, the firms in question are drawn more closely together, making it difficult for the competition. The internet is the connection mechanism of choice among firms.
3. Look for ways to use technology to make dramatic changes in the way you structure the organization.
Use Information Technology organization design variables so management can structure an organization that is highly competitive, that uses its technologically enabled structure to become a formidable competitor. IT based structures that focus on one of the strategies described earlier, for example, providing extraordinary customer service, can also provide an advantage.
4. Integrate technology with planning.
To integrate technology with planning, managers have to understand the operation of their business and the capabilities of technology. In addition, the firm has to have invested in building a modern technological infrastructure so that it is ready to take advantage of new opportunities. Finally, management has to make Information Technology a part of its planning process.
Click the numbers to read each step.
Log in to save your progress and obtain a certificate in Alison’s free Introduction to Corporate IT Strategy and Business Frameworks online course
Sign up to save your progress and obtain a certificate in Alison’s free Introduction to Corporate IT Strategy and Business Frameworks online course
Please enter you email address and we will mail you a link to reset your password.