Information Technology as a Competitive Advantage
Appropriate application of information and technology in organization has facilitated the achievement of sustainable competitive advantages. Technology comes along with advantages such as up-to-date information, with accurate and fast systems of locating information (Ajhvan, 2004). These advantages have played a key role in enhancing operational efficiency and performance in organizations. At the moment, organizations are in a position to attain sustainable competitive advantage through the appropriate application of the dynamic information and technology systems. Organizations are gradually enhancing into more modernized ways of using technology in running their organizational activities and management strategies (Lynda et al, 2005). Research indicates that technology has proved to be vital in the success of any organizational business considering the fact that computers and the internet are now part and parcel of our lifestyles (Barney, 2006).
According to Tabb (2006) in all successful business strategies, information technology is pivotal. In the year 2004, a qualitative research was carried out to determine the relationship between the top 500 performing companies in the United States and their investment in information technology. The results from this analysis indicated that there existed a direct positive relationship as depicted by the effectiveness and the general performance of these companies (Hashemi, 2004). Another survey carried out on the top 100 companies also showed that most company managers were attributing the success of their business to the appropriate application of information technology systems. 79 percent of these managers were in line with the argument that information technology is crucial in organizational management (Gantz, 2004). This paper seeks to analyze the crucial roles played by information technology in the creation of synergies, development of sustainable competitive advantages with special emphasis on resource based strategies, and market based strategies.
Characteristics of Information Technology
The special information features depicted in this 20th century have culminated into a modernized set of technologies known as information technology (Lynda et al, 2005). Information technology involves a series of various implements that include information networks, work stations, information theories, artificial intelligence, software and also hardware. Information technology involves the application of modernized accurate systems to carry out organizational activities such as marketing, management, and establishing business strategies (Dehning, 2003). This sort of technology was first established in the 1980s with its basic functions being automating productive official tasks. With the application of internet and intra organizational networks, information technology has played a key role of enhancing intra-organizational communications by enabling intranet and extranet communications.
Information technology has also resulted into accurate, neat and fast large-scale publication of information in various geographical places, all at the same time (Gantz, 2004). Circulation of information has been made easy because of this, hence, reducing both labor and travelling costs and facilitating the effectiveness, accuracy and efficiency in organizations as depicted by the general profit outputs. With the rapid development of information technology being experienced globally, more attention has been shifted to informational knowledge (Hashemi, 2004). The criteria applied in measuring knowledge in organizations as remained to be the crucial element that enables people to recognize informational needs and appreciate the applicability of informational technology in solving their problems. Therefore, information technology can be viewed as one of the most crucial and essential organizational resource which is basically a source of sustainable competitive advantage.
The Role Played by Information Technology in Market Based Strategies
An organization can be deemed as having a competitive advantage over its competitors when it is in a position to create more value for its own stakeholders. One of the key factors inculcated in creating competitive advantage is the application of information technology in the organizational strategies of a business. Turban (2002), asserts that the application of information technology in strategic management is useless if it is blindly applied without considering the creation of value to potential customers. Information technology ought to be applied in a mane that considers the customer’s needs and demands and prioritizes them. If an organization is in a position to create a value that is of quality and higher compared to that for its competitors, then it is likely to maintain a high profile name for its brand hence giving it a sustainable competitive advantage. Customers remain to be the most important stakeholders that determine the success of any organization. Therefore, creating value for them is a stepping-stone towards achieving a sustainable competitive advantage in any organization. Quality, Price, and services stand out as the most crucial elements in creating value to a customer’s opinion.
The role played by Information Technology in Pricing
Price stands out as one of the most influential factors that affect a customer’s decision to go for an organization’s product or service. Proper application and utilization of information technology can help a company’s regulate its operational costs and restructure their product and service price to suit the customer’s demands (Tabb, 2006). Information technology can help reduce operational costs such as sales distribution costs, design and production costs. Cutting down such costs enables the organization to maintain low product and service costs hence boosting mass sales that culminate into large profits. If an organization can be in a position to maintain low rates of costs compared to their to that of potential competitors, then it is in a better position to determine the cost of their products in that particular field (Lynda et al, 2005).
Information technology works to reduce costs through automating the productive sales and distribution activities hence paving way for implementation of leadership strategies (Turban, 2002). Automatic savings result from activities such as application of robots and computerized mechanisms instead of manpower. Application of online reception systems and customer services, electronic data interchange, carrying out electronic commerce through the barcode system, carrying out sales marketing and product promotions online and many other activities reduce operation costs of organizations hence facilitating the determination of low product prices (Powell, 2008). Information technology curbs the need for physical offices hence, making it possible to reach a large number of people from just one point. It also allows a company to carry out its office operation for 24 hours and increase its profits. It facilitates sharing of costs with a wide variety of products and services hence reducing each service or product entity remarkably.
Internet can also be used in establishing communication with a large number of contract manufacturer, raw material providers, and even marketers (Tabb, 2006). This helps the company access relevant providers and contractors easily with minimal costs and makes appropriate purchases. Internet also plays a crucial role in outsourcing of a company. In the recent past, many companies have contracted with sub companies that help them carry out some specific tasks. The internet plays the key role of facilitating easy flow of information and communication with the contracting companies. This reduces both manufacturing and travelling costs and the reduction of such costs is reflected in price reduction. This also implies that an organization can easily expand to cater for its customers globally, since it can outsource its work to several companies online.
The Role Played by Information Technology in Enhancing Quality
Quality can be regarded as another aspect of creating value to the customers. Customers are constantly attracted to goods and services of high qualities and therefore, any organization that is in a position to offer quality gods is deemed to have a competitive advantage over its competitors (Gantz, 2004). High value in this capacity simply implies the capability of an organization to produce products and services which meet the needs and demands of their customers and are accurate in accordance with their descriptions. Information technology influences the quality of products produced in an organization in various ways. First, acts as a quick and accurate way of receiving the customer’s demands, opinions and needs about particular products (Powell, 2008). This enables the company to design strategies that offer services and products that are in accordance with the demands. Information technology also enables quick electronic survey which can be used to determine the customer’s needs. Reacting to the customer’s needs in a fast and more accurate manner enables the company maintain a god performance reputation which culminates into more customers and is reflected by large profit margins hence becoming sustainable competitive advantage for an organization.
Information technology also helps an organization take note of new emerging product trends and services and act to meet those trends before their competitors are aware (Dehning, 2003). Under such instances, even if competitors rush to imitate the new trends, the advantage of being the first actor still remains with the organization. This is due to the fact that ideas will still be offered to the market in a more accurate and faster manner which will remain being a competitive advantage to the company. The advantage of being the first to act creates upholds the company’s good reputations and it keeps enhancing innovativeness and creativity within the company.
Time invested is marketing is considered as an important tool for an organization’s success in this era. In a research carried out in 2006, managers belonging to 35 global markets were quick to note that time-to market is a crucial element in the success of any organization (Powell, 2008). The directors of Hewlett Packard’s company and AT8T company were of the opinion that the less the time taken in producing a product, planning, delivering and serving the customer with a quality product the greater the strategic advantage of such an organization as compared to that of its competitors (Powell, 2008).
Information technology maximizes the company’s flexibility in response to dynamic market demands (Ajhvan, 2004). It makes it easy for an organization to adapt to change as soon as possible. Information technology tools like software programmes that help in designing products and services accurately help the organization to easily adopt to change. This technology also makes it easy for the organization to choose more efficient and effective workforces and competent service providers in the market. Information technology also makes the production of standard products and services possible through the creation of appropriate management and accurate control of automated systems of quality.
The Role Played by Information Technology in Enhancing Quality of Services
Services can also be considered as another aspect of creating value to customers. Such services include after sale services, fast communication with customers, fast and accurate delivery of services and products to customers and lastly, offering accurate and relevant information to customers (Tabb, 2006). These are the most essential aspects in ensuring that customers receive appropriate services. Information technology helps an organization serve customers in a more advanced way by enabling a mass customization strategy (Ajhvan, 2004). Mass customization simply means the organization’s ability to produce, design, and offer a product based on the customer’s demands. For instance, Del company’s success is attributed to this strategy. Information Technology makes it possible for a company to create close mutual relationships with customers hence facilitating mass customization.
An organization that is in a position to offer its services and products to customers with less physical on the part of the customers encourages the customer to make more purchase as he does not strain to incur travelling and transport costs (Dehning, 2003). This acts as a sustainable competitive advantage to the organization. Also offering services through appropriate application of information technology creates a competitive advantage for an organization through saving time and omitting the physical place dimension. Constant communication to potential customer, expressing guarantees, and offering up to date information about existing products through the application of communication networks, electronic exchange documents, and online payments acts as a competitive advantage to an organization since it is fast, easy and accurate compared to physical movements.
The Role Played by Information Technology in Resource Based Strategies
This approach recognizes an organization as a series of skills and resources that are applied in producing services and products to enable the company compete with its competitors. Sustainable competitive advantage in a company can be developed through the accurate and proportionate combination of a company’s resources and skills (Barney, 2006). The resource-based approach depicts that organizations should create strategies that are in line with their skills and resources to enable offer quality products and services. The application of information technology enables a company achieves this through providing appropriate information to organizations in regards with proper application of skills, appropriate management strategies, dynamic capabilities knowledge and management. This acts as a sustainable competitive advantage to an organization.
The Role Played by Information Technology in Enhancing Resource Management
A company’s resources include capital, physical and human resource. In the present information era, information technology can be regarded as one of the most crucial resources in an organization (Lynda et al, 2005). Information technology as a resource includes communication networks, hardware, software, and specialized labor force. The most crucial is the specialized workforce that is pivotal in accurate product creation. Information technology tools act as a competitive advantage in improving the company’s specialized work force through changing organizational structures, improving organizational communications, and enhancing organizational efficiency and accuracy (Hannagan, 2002).
The Role Played by Information Technology in enhancing Skills and Abilities
The sort of skills that such an organization owns reflects an organization’s capability of accurately implementing and combining organizational resources (Lynda et al, 2005). Skills and abilities act as a competitive advantage to the company when they are in a position to manage resources in a way that cannot be imitated by competitors. Information technology helps improve technical skills for this purpose through provides a wide range of information on how to improve such skills (Barney, 2006). Managerial skills are also improved by information and technology through making it easy to supervise work, measure the accuracy, and performance of workers and determining the organization’s weakness hence giving it a competitive advantage (Barney, 2006).
Information technology has resulted into great organizational structures and procedures that have helped boost performance of companies. With proper and accurate application of information technology, companies are in a position to come up with appropriate organizational strategies both in the market bases strategies and in resource based strategies which act as a sustainable competitive advantage to such companies.