INFORMATION SYSTEMS FOR BUSINESS STRATEGIC ADVANTAGE

The strategic role of information systems in today business involves using information technology to develop products, services, and capabilities that will give or provide company strategic advantages over the competitive forces that they might face in the global marketplace. This will creates strategic information systems i.e. information systems that support or shape the competitive position and strategies of a company. So a strategic information system can be understood as any kind of information system that can helps a company to gain a competitive advantage, to reduce a competitive disadvantage and to meet other strategic companies objectives.

A company can survive and succeed in the long run if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry i.e. rivalry of competitors within its industry, threat of new entrants, threat of substitutes, bargaining power of customers and bargaining power of suppliers.

Information technology can be used to implement a variety of competitive strategies such as the following:

a. Improving Business Processes - help make a company operational processes substantially more efficient, and its managerial processes much more effective. By making such improvements to its business processes a company may be able to cut its operational costs, improve the quality and customer service and develop innovative products for new markets.
b. Promoting Business Innovation - information systems technology can result in the development of new products, services, and processes. This can create new business opportunities, enable a company to enter new markets and enable a company to enter into new market segments of existing markets.
c. Lock In Customers and Suppliers - information technology can also allow a business to lock in customers and suppliers by building valuable new relationships with them. This can be accomplished by create inter-organizational information systems in which telecommunications networks electronically link the terminals and computers of businesses with their customers and suppliers, resulting in new business alliances and partnerships.
d. Creating Switching Costs - a major emphasis in strategic information systems is to build switching costs into the relationships between a company and its customers or suppliers. Information systems technology can make customers or suppliers dependent on the continued use of innovative, mutually beneficial inter-organizational information systems.

e. Raising Barriers to Entry - information technologies can erect barriers to entry for new players in the industry, and can discourage firms already in the market.
f. Leveraging a Strategic IT Platform - information technology enables a firm to build a strategic IT platform that allows it to take advantage of strategic opportunities. Typically, this means acquiring hardware and software, developing telecommunications networks, hiring information system specialists, and training end users. A firm can then leverage investment in information technology by developing new products and services.
g. Developing a Strategic Information Base - information systems allow a firm to develop a strategic information base that can provide information to support the firm's competitive strategies. A firms’ database is considered a strategic resource which is used to support strategic planning, marketing, and other strategic initiatives.

Several vital capabilities of information technology that break traditional barriers to strategic business success include break time barriers, break geographic barriers,break cost barriers and break structural barriers.

a. Breaking Time Barriers - information technology is used to shorten the intervals between the various critical steps in a business process. Telecommunications is a lot faster than most other forms of communications, thus, it provides information to remote locations immediately after it is requested.
b. Breaking Geographic Barriers - telecommunications networks enable you to communicate with people almost anywhere in the world. Telecommunications and computing technologies make it possible to distribute key business activities to where they are needed, where they are best performed, or where they best support the competitive advantage of a business.
c. Breaking Cost Barriers - computers and telecommunications can often significantly reduce the cost of business operations when compared with other means of information processing and communications. For example, they can reduce costs in such areas as production, inventory, distribution, or communications. Information technologies have also helped companies cut labour costs, minimize inventory levels, reduce the number of distribution centres, and lower communications costs.
d. Breaking Structural Barriers
Computers and telecommunications networks can help a business develop strategic relationships by establishing new electronic linkages with customers, suppliers, and other business entities. For example, telecommunications networks can support innovations in the delivery of services, increase the scope and penetration of markets, and create strategic alliances with customers, suppliers, and even a company’s competitors.