The Internet And Information System That Contribute To Competitive Advantage

AFF5200

ISSUES IN COMPETITIVE ADVANTAGE

PROJECT I

THE INTERNET AND INFORMATION SYSTEM THAT CONTRIBUTE TO COMPETITIVE ADVANTAGE

PREPARED FOR

Mr. Richard Laney

By

Wendy (20646836)

Sara

Prashanthi Ananthula (20107226)

Kaushalya Abeysinghe (20139128)

TABLE OF CONTENTS

INTRODUCTION

With the increasing global competition faced by businesses, it is important that in order to survive they have to put in place a highly effective Information Technology (IT) infrastructure to increase their chances of succeeding. In this report we focus on how information systems (IS) and internet can be used to achieve competitive advantage to a business. Over the past few decade mangers are focuses on adopting new technology to their business thus to achieve competitive advantage. These technological revolution lead to a significant change of structure of the industry and manner of companies compete

In this report, with two case studies (Wal-Mart stores & Commonwealth Bank of Australia вЂ" net bank), we examine the possible use of the Internet and information systems as a business tool to gain competitive advantage. Further, it discusses the competitive forces using Porter’s model and the strategies to overcome these forces. In the end it explains the most commonly used Internet tools with relation to practical examples of their possible use as tools to gain a competitive advantage.

INFORMATION SYSTEMS

Information system is a set of interrelated components that work collectively to carry out input, processing, output, storage and control actions in order to convert data into information products that can be used to support forecasting, planning, control, coordination, decision making and operational activities in an organisation .

ROLE OF INFORMATION SYSTEMS IN BUSINESS

Information systems play a vital role in business world. Up until mid-1950’s firms managed to conduct their business activities manually, this involved paper work to communicate information. During the past 50 years the flow of information among the businesses has been computerised. In today’s world, an information system is laid as a foundation for conducting business activities. It has been difficult for many industries to exist in the competitive market without an extensive use of information technology.

Businesses face many challenges and problems and information systems are used as a tool to solve these problems and achieve organisation’s objectives. Businesses - both small and large scale invest in information systems to manage the production functions and to survive in the competitive environment. Specially, Businesses today use information systems to achieve six major objectives: operational excellence, new products, services and business models, customer or supplier intimacy, improved decision making, competitive advantage and day-to-day survival.

Kia motors’ can be referred to as an example how companies today rely on information systems for operating their businesses. Kia has experienced quality problem due to the lack of system to track and identify defects in motors which affected its profits and long term survival. Later Kia came out with a solution to develop a system that extracted the data from all systems and integrated the data and then analysed them, with capability for displaying overall trends and for drill down into details. This defect reporting system helped the company to increase profits and even strategic advantage.

USING INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE

Competitive advantage is an advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retains more customers than its competitors. In every industry we can see that some firms do better than others- for example in case of retail industry Wal-mart is considered as a leader and Google in case of web search. Firms are said to have competitive advantage if they do better than others. But why do some firms do better than others? It may be because these firms have access to special resources or they are able to use commonly available resources more efficiently or could be any other reason.

Competitive advantage can be understood by Michael porter’s competitive forces model. This model provides general view of the firm, its competitors and the firm’s environment. The five competitive forces are traditional competitors, new market entrants, Substitute products and services, customers and Suppliers which are explained in diagram below

(Source from www.investopedia.com)

пÑ"? TRADITIONAL COMPETITORS

All firms face competition in the market with the competitors who are introducing new products and services and developing more efficient ways to produce their brands and attract customers.

пÑ"? NEW MARKET ENTRANTS

The existing firms always have to face a threat of new entrants which may weaken the position of existing firms. If the existing company has strong and durable barriers to entry then the company can secure position in the market.

пÑ"? THREATS OF SUBSTITUTES

The firm has to encounter competition if substitute products are available in the market. Usually