Each organization is aware of the special effects, benefits and implication of Information technology (IT) in business performance and also its capacity in building sustainable competitive advantages. In business, IT is used through the value chains of activities which help the organization to optimize and control functions of operations for easy decision making. Also, the use of IT as a competitive weapon has become a popular instrument to influence on a particular organizational performance and the processes that will allow a smooth coordination of technology and corporate as well as business strategies.
The information revolution is sweeping through our economy. No company can escape its effects. Dramatic reductions in the cost of obtaining, processing, and transmitting information are changing the way we do business.
Most general managers know that the revolution is under way, and few dispute its importance. As more and more of their time and investment capital is absorbed in information technology and their effect, executives have a growing awareness that the technology can no longer be the exclusive territory of EDP or IS departments. As they see their rivals use information for competitive advantage, these executives recognize the need to become directly involved in the management of the new technology
Today, information technology must be conceived of broadly to encompass the information that businesses create and use as well as a wide spectrum of increasingly convergent and linked technologies that process the information. In addition to computers, then, data recognition equipment, communications technologies, factory automation, and other hardware and services are involved.
The information revolution is affecting competition in three vital ways:
- It changes industry structure and, in so doing, alters the rules of competition.
- It creates competitive advantage by giving companies new ways to outperform their rivals.
- It spawns whole new businesses, often from within a company’s existing operations.
Information technology is changing the way companies operate. It is affecting the entire process by which companies create their products. Furthermore, it is reshaping the product itself: the entire package of physical goods, services, and information companies provide to create value for their buyers.
An important concept that highlights the role of information technology in competition is the “value chain. “This concept divides a company’s activities into the technologically and economically distinct activities it performs to do business. We call these “value activities.” The value a company creates is measured by the amount that buyers are willing to pay for a product or service. A business is profitable if the value it creates exceeds the cost of performing the value activities. To gain competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium price (more value).
Technology Advances have expanded production potential, product range variety, and increased outward expansion opportunities. It helped lower the cost and risk levels thus reducing the manufacturing capital requirements. Scheduling flexible production systems provides smaller production runs which uses just in time inventory which takes care not to carry excess inventory. Manufacturers can now have expanded range and variety of product of improved quality. Manufacturing industries in the developed countries are shifting from mass production of standardized goods to production of specialized goods, narrowly skilled workers to more versatile labourers, unvarying high-volume technology to flexible intelligent machinery. Survival in a dynamic environment entails the capacity to learn. The pace at which organizations learn may in the future become the only source of a sustainable competitive advantage. The rapid pace of development in Information Technology has created new business opportunities especially to Small Units.