Chapter two ANSWERS TO DISCUSSION QUESTIONS
1. Suppose you are a manager being asked to develop e-business and e-commerce applications to gain a competitive advantage in an important market for your company. What reservations might you have about doing so? Why?
As a manager you are responsible to be aware of these emerging technologies and new ways of conducting business in the new economy. Of course, if the manager is familiar with the concepts of developing an e-business or e-commerce application they certainly will have personal reservations in what to do. If the manager is not familiar with the tools involved in information technology, or how to effectively use these tools the task may seen quite daunting. However, the key is to know that this technology exists, and that it can be used for competitive advantages. As a manager your first task will be to assemble a team of experts and users to work on the development of the application.
2. How could a business use information technology to increase switching costs and lock in its customers and suppliers? Use business examples to support your answers.
Switching Costs: A businesses investment in IT can make customers or suppliers dependent on the continued use of innovative, mutually beneficial on your interenterprise information systems. They then become reluctant to pay the cost in time, money, effort, and inconvenience that it would take to change to another firm or competitor.
Lock in customers and suppliers: A businesses investment in IT can lock in customers and suppliers by building valuable relationships with them, where both parties are experiencing mutual benefits. If that can be achieved, it will deter both customers and suppliers from abandoning your firm for a competitor, or from intimidating a firm into accepting a less-profitable relationship.
3. How could a business leverage its investment in information technology to build strategic IT capabilities that serve as a barrier to entry by new entrants into its markets?
The cost of building and maintaining a strategic IT platform can be very expensive.
Leveraging investment in IT: By investing in advanced computer-based information systems to improve efficiency, firms are able to develop new products and services that would not have otherwise been possible without their strong IT capability.
Barriers to Entry: By increasing the amount of investment or the complexity of the technology required to compete in an industry or market segment can also discourage or delay other companies from entering a market.
4. Refer to the Real World Case on Capital One in the chapter. Is Capital One’s competitive position a temporary technology-based advantage, or a more enduring strategic business advantage? Defend your position.
Capital One’s competitive position is certainly not a temporary technology-based advantage. In the short term, their competitive advantage cannot be quickly duplicated or imitated by their competitors. Although in the long term competitors will be able to duplicate the use of this technology, it will require massive amounts of capital, a steep learning curve, and lengthy periods of time to amass that amount of information. As such, Capital One has a more enduring strategic business advantage. The major challenge will be for the competition to “catch-up” to Capital One while at the same
time Capital One will continue to forge ahead with new initiatives and innovations.
5. What strategic role can information technology play in business process reengineering and total
Information technology can play a vital role in BPR and TQM. Using the technology involved in
BPR, an organization can achieve dramatic improvements in areas such as cost, quality, speed and
service. Information technology can also be used to enable a firm to gain improvements in areas
such as product quality, productivity, flexibility, timeliness, and customer responsiveness. Thus,
the use of technology in BPR and TQM can result in improvements in the standard way of
6. How can information technology help a business form strategic alliances with its customers,
suppliers, and others?
Information technology can help a business form strategic alliances with its customers, suppliers,
competitors, consultants, and other companies (mergers, acquisitions, joint ventures, and virtual
companies). These new business linkages and alliances help firms to communicate, collaborate,
and share information in ways that were never possible. By establishing strategic alliances,
organizations are able to provide better quality products and services to their customers in a more
efficient manner, responsive, and flexible manner.
7. How could a business use the Internet technologies to form a virtual company, or become an agile
Agile companies depend heavily on information technology to:
; Enrich its customers with customized solutions to their needs.
; Cooperate with other businesses to bring products to market as rapidly and cost-efficiently as
; Combine the flexible, multiple organizational structures it uses.
; Leverage the competitive impact of its people and information resources.
; A virtual company is an organization that uses information technology to link people, assets,
; The Internet, intranets, and extranets interlink most virtual companies.
; Virtual companies form interorganizational information systems with their suppliers, customers,
subcontractors, and competitors.
8. Refer to the Real World Case on Moen Inc. in the chapter. What steps can Moen or other
companies take to convince reluctant business customers to use their Web-based ordering systems?
Give several examples.
Students’ will suggest a number of potential steps that Moen or other companies can take to
convince reluctant business customers to use their Web-based ordering system. For example,
customers must be convinced that there is something in the process that will benefit them. Moen
must be able to successfully demonstrate to the reluctant business customers how their business
operations can be improved. For example: Business expenses reduced, process efficiencies
increased, profit margin improved, ordering errors reduced, quicker movement of products to the
market, faster turnover of inventory, reduction in obsolete inventory, tracking and shipping
information on orders, less lost or missing items, use of just-in-time inventory in order to match the
needs of Moen production and so on. Basically, anything methods that Moen can utilize to
successfully demonstrate how these reluctant business customers can realize profits and increase
their ability to have a greater share in the market place is what is required to get them on board.
9. Information Technology can’t really give a company a strategic advantage, because most
competitive advantages don’t last more than a few years and soon become strategic necessities, which just raise the stakes of the game. Discuss.
Students’ responses will vary. In one sense, perhaps the statement has a ring of truth – however
that is in the long term. In the short term this is not the case. Information technology for early innovators certainly can and does give many companies a major competitive advantage. Although technology is changing at a rapid pace, the first mover into the market may be the one to gain the lion’s share. Other companies are busy playing catch up to the leader, and the leader concentrates on becoming more innovative in order to stay ahead. The winning companies can develop synergies and know how that is often hard to duplicate, and impossible to imitate. Take of the case of Amazon.com – they have the market share and others have not be able to duplicate it. Dell Computers is another early innovator – they are still successful at it. In both cases, the originator has captured a massive market share, as well as substantial customer loyalty.
10. MIS author and consultant Peter Keen says: “We have learned over the past decade that it is not technology that creates a competitive edge, but the management process that exploits technology.”
What does he mean? Do you agree or disagree? Why?
Students’ responses will vary. Technology and its related applications are developing at a rapid pace. If organizations are to compete successfully in today’s marketplace, they have little choice
but to be behind the technology ball. The management of the technology and the development of innovative ideas are the ingredients that make companies successful today. Technology is just technology – the management of the technology is the ingredient for the creation of a competitive edge. It is what you do with the technology that you have that will lead you to discover innovative ways to conduct business.