Information Technology (IT) facilitates organizations with a decisive game changing opportunity. Current IT technologies and their applications provide organizations with opportunities to derive competitive advantage.
Enterprise Resource Management (ERP) systems are in wide use by organizations’ financial, human resource, supply chain, and inventory management operations. Companies implement ERP systems for the purpose of integrating the business processes thereby providing greater efficiency and reducing cost.
Customer Relationship Management (CRM) systems provide the opportunity for improving customer service and creating long-term relationships with the organizations customers.
Collaboration software systems, often referred to as Unified Communications (UC), permit enterprise teams to collaborate from anywhere on common tasks using voice, video, wireless, and document sharing platforms. This application enables geographically remote knowledge workers to meet in real time to solve enterprise problems. This eliminates travel costs and creates greater efficiency, contributing to a broad market cost leaders competitive advantage.
Michael Porter* provides a framework for pursuing competitive advantage. Below are examples of how IT helps supports Porter’s generic competitive strategies.
Wal-Mart, a broad market cost leader, uses an ERP system for continuous inventory replenishment. It captures sales data at the checkout counter and uses the data for restocking orders sent directly to suppliers. The system enables Wal-Mart to keep costs low while fine-tuning its merchandise to meet customer demands. British food giant Tesco transformed itself from a struggling grocery chain into a world-class retailer, in part by applying ERP and CRM to its business. It was the first to introduce a loyalty ‘Clubcard’. The card enabled Tesco to gather customer-shopping data, which identifies consumer trends and product gaps. This enabled Tesco to get closer to its customers and improve its product line. Tesco used this competitive advantage to become Britain’s largest grocer.
Amazon’s strategy employs broad market differentiation. It personalizes CRM information to recommend books to customers based on previous purchases. Its online one-click technology provides customers with a fast checkout service supported by Amazon’s ERP online ordering, distribution, and shipping system. Amazon’s disruptive business model has displaced the traditional brick and mortar chain bookstores. Amazon, with the help of ERP and CRM, re-invented the bookstore business.
Porter Airlines competes with a niche focus low cost strategy. It derives low cost by operating a single hub and spoke model. It flies only energy efficient low cost Bombardier Q400s. Moreover, it flies only to communities that are within 1,000 miles of Toronto. Porter Airlines chose to enter the market abandoning the traditional travel agent/call centre-ticketing model in favour of an online ERP model. It uses ERP for website ticketing, seat selection, flight status information, online check-in, and boarding passes. Its user-friendly website is convenient and a low cost distribution tool. Approximately 80% of Porter’s tickets are booked via an internet ERP connection. It also uses CRM for its frequent flyer program. ERP and CRM supports Porter Airlines’ niche focus low cost strategy. It provides a competitive advantage against Air Canada its primary competitor.
Apple Computer uses a niche focus differentiation strategy. It designs uniqueness into its products. Apple uses ERP to manage its supply chain. Apple’s profits and its gross margins were 40% in the last quarter of 2011, compared with 10 to 20% for most other device companies. This is in large part due to its focus on operations and ERP coordinating, manufacturing, procurement, and logistics. According to Gartner, Apple is the leader in supply chain excellence**. This provides Apple with a significant advantage over its competitors.
Some organizations chose to straddle the middle attempting to be all things to all markets. They attempt to be best cost providers while seeking differentiation and serving both the broad and niche markets. IT, while an enabler, generally cannot help organizations that lack focus. Few companies are successful with a straddle the middle strategy.
IT provides game changer opportunities. Technologically astute companies that use technologies such as ERP, CRM, and UC as an innovation enabler are likely to lead in their chosen market. Wal-Mart, Tesco, Amazon, Porter Airlines, and Apple are but a few examples of organizations that use IT in their chosen strategy to achieve competitive advantage. IT permits organizations to be cost leaders, provide differentiation, and use a broad or focused strategy. IT also enables organizations to be more productive, effective, market leaders, and deliver superior performance. Organizations that treat IT as a mere utility are likely not market leaders nor are they likely to use IT for competitive advantage.
* Porter, M. (1990). Competitive Advantage, Creating and Sustaining Superior Performance. The Free Press. New York, N.Y.
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