Information as a strategic resource, Use of information for Competitive Advantage
Business environment is prone to changes and this factor makes business planning very complex. Some factors such as the market forces, technological changes, complex diversity of business and competition have a significant impact on any business prospects. MIS is designed to assess and monitor these factors. The MIS design is supposed to provide some insight into these factors enabling the management to evolve some strategy to deal with them.
Since these factors are a part of the environment, MIS design is required to keep a watch on environment factors and provide information to the management for a strategy formulation. Strategy formulation is a complex task based on the strength and the weakness of the organization and the mission and goals it wishes to achieve. Strategy formulation is the responsibility of the top management and the top management relies on the MIS for information.
There are various business strategies such as overall company growth, product, market, financing and so on. MIS should provide the relevant information that would help the management in deciding the type of strategies the business needs. Every business may not require all the strategies all the time.
The type of strategy is directly related to the current status of business and the goals it wishes to achieve. The MIS is supposed to provide current information on the status of the business vis-a-vis the goals. MIS is supposed to give a status with regard to whether the business is on a growth path or is stagnant or is likely to decline, and the reasons thereof. If the status of the business shows a declining trend, the strategy should be of growth. If business is losing in a particular market segment, then the strategy should be a market or a product strategy.
The continuous assessment of business progress in terms of sales, market, quality, profit and its direction becomes the major role of MIS. It should further aid the top management in strategy formulation at each stage of business.
The business does not survive on a single strategy but it requires a mix of strategy operating at different levels of the management. For example, when a business is on the growth path, it would require a mix of price, product and market strategies. If a business is showing a decline, it would need a mix of price-discount, sales promotion and advertising strategies.
Information is Strategic Resources. Because Information helps in taking Strategic, Tactical and operational Decisions. It is one of critical and importance resource.
- It helps us understand Cost, Quality, price, technology, productivity and product.
- It helps to smooth following of business process and there by smooth managing of business operation.
- It helps to maintain the business standards like ISO, QS, CMMI, Six Sigma etc.
- It helps to be ahead in the competition
- It helps company in analyzing their own SWOT
- It helps in maintaining its own profitability.
- It will help in taking new business decisions like new plant, new product, new business line etc.
- It protects company from business cycles.
- It provides future direction to the organization.
- It provides the competitive edge.
Use of information for Competitive Advantages
the study of information management entails an understanding of information and communication technology also. However, information management is a distinct subject not related (other than the practical considerations of providing the output information timely and accurately) to information and communication technology. Let us now delve deeper into the subject to get a clear understanding of the basic concepts that drive management information systems.
As is clear, the advantage that a modern corporate house enjoys can be traced to its management of information. If the business house cannot manage its information, then it is likely that it will not have any competitive advantage. Typically an organization can develop competitive advantage if it can, does or have what others can’t, do or have. In modern times, the advantages on account of raw materials, technological edge, etc., is being neutralized by the forces of modern business. The last frontier so to say is information management. Companies that have managed to do it successfully like Dell, Google, etc., have generated an unparalleled competitive advantage as their reaction time to changes in the market and/or competition is much less and hence, they can shift business gears faster than their competitors and hence the advantage. Competitive advantage through managing information can accrue to an organization if it:
- Manages information to reduce reaction time for change
- Managing information makes the organization efficient
- Information management leads to insights into the business that the competitors cannot have
- Information management is used for predictive analysis so that the organization is one step ahead of competition.
According Porter Miller: Information helps in following:
- Change in industry structure: This includes Five Forces:
- Customers’ bargaining power
- Suppliers’ bargaining power
- Threats of new entrant in market
- Pressure from substitute products and services and
- Existing Industry competitors
- Birth of new business/new business initiatives
- New ways of doing business
- Lower the cost
- Information and information system facilitate value chain e.g. product delivery, quality
- In increased the speed, accuracy and timeliness of the organization
- It helps in simplifying the business processes
- It helps organization in meeting the standards and benchmarks
- New way of doing the work
- New way of dealing in Product differentiation
- It helps in new way of developing strategies, planning, forecasting and monitoring
- It helps in problem solving and decision making by extensive internal and external data analysis.
- It improves the ability to perform
- It helps in getting advantages of market situation and keeps ahead in the competition.
- It helps in eliminating waste, inefficiencies and gaps in the business operations
- Provides the flexibility and helps manage the uncertainties
- Analysis external information and making use of business
Strategic Information System can offer competitive advantage to an organization:
1) Generating databases to improve marketing: An information system also provides companies an edge over their competition by generating databases to improve their sales and marketing strategies. Such systems treat existing information as a resource. For example, an organization may use its databases to monitor the purchase made by its customers, to identify different segments of the market, etc.
2) Creating barriers to competitor’s entry: In this strategy, an organization uses information systems to provide products or services that are difficult to duplicate or that are used to serve highly specialized markets. This prevents the entry of competitors as they find the cost for adopting a similar strategy very high.
3) ‘Locking in’ customers and suppliers: Another way of gaining competitive advantage is by locking in customers and suppliers. In this concept, information systems are used to provide such advantages to a customer or a supplier, that it becomes difficult for them to switch over to a competitor. For example, an organization may develop its information system and give many benefits to its customers, like reliable order filling, reduced transaction costs, increased management support and faster delivery service.
4) Leveraging technology in the value chain: This approach pinpoints specific activities in the business where competitive strategies can be best applied and where information systems are likely to have a greater strategic impact. This model advocates that information technology can best be used to gain competitive advantages by identifying specific, critical leverage points.
5) Lowering the costs of the products: strategic information systems may also help organizations lower their internal costs, allowing them to deliver products and services at a lower price than their competitors can provide. Thus, such information systems can contribute to the survival and growth of the organization. For example, airlines use information systems strategically to lower costs so that they may counter competitor’s discount fares.