: Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis Flashcards
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
INTRODUCTION: What is article about?
a variety of factors cause firms to obtain sustained competitive advantage
– relative cost position; firm’s ability to differentiate products; ability to cooperate in strategic alliances
* aim of paper: create model that anticipates the conditions under which aspects of firm’s IT will be sources of competitive disadvantage, competitive parity, temporary or competitive advantage
* model suggests types of IT investments that are most likely to be sources of sustained competitive advantage
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
IT AND COMPEITITVE ADVANTAGE: PREVIOUS LITERATURE
what was the previous focus?
ability of IT to add economic value to firm either by reducing firm’s costs or differentiating its products and services but value per se is not sufficient condition for sustained competitive advantage
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
What leads to Sustained competitive advantage:
implementing strategy that is not simultaneously implemented by competing firms & where these firms have significant disadvantages in acquiring the resources necessary to implement the strategy
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
Temporary competitive advantage:
implementing a valuable strategy currently pursued by only few competing firms that do not face significant disadvantage in acquiring the resources necessary
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
Competitive parity:
implementing valuable strategy being simultaneously implemented by various competing firms
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
Competitive disadvantage:
implementing not valuable strategy (no cost reducing/revenue increasing)
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
THE CREATE-CAPTURE-KEEP PARADIGM what is it?
IT-based customer switching costs as source of sustained competitive advantage for firms selling IT applications
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
Switching costs meaning?
created when customers make investments that are specific to particular supplier (eg costs of employee training to use supplier’s unique IT); investments only valuable when customers continue purchasing IT from same supplier
- once switching costs are created, IT suppliers have customers captured and thus can extract value out of relationships with captured customers (by eg reducing service level, increasing price)
– as long as cost to customers of switching suppliers is less than extra value being extracted, customers will continue purchasing IT from that supplier
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
THREE REASONS WHY CREATE-CAPTURE-KEEP APPROACH IS NOT SOURCE OF COMPETITIVE ADV
1) customers are able to anticipate risk of being captured by IT supplier if investments to supplier are made: will only be willing to make investments when receiving guarantee that supplying firm will not take unfair advantage of investments
2) suppliers that exploit customer’s switching costs will gain reputation for being untrustworthy: unable to attract future customers
3) number of options for customers to obtain IT has increased over time: customer switching cost would only be source of competitive advantage if supplier would be in monopoly situation
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
THE RESOURCE-BASED VIEW OF FIRM
* based on two underlying assertions:
1) resource heterogeneity: resources and capabilities possessed by competing firms may differ
2) resource immobility: that differences between resources may be long lasting (costly to implement)
* firm may use its IT resources to help implement wide range of strategies: cost leadership, product differentiation, strategic alliance strategies, diversification strategies, vertical integrations strategies
* conditions under which firm’s heterogeneously distributed resources & capabilities can be source of sustained competitive advantage: history, causal ambiguity, social complexity
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
THE RESOURCE-BASED VIEW OF FIRM
based on two underlying assertions:
resource immobility meaning?
that differences between resources may be long lasting (costly to implement)
* firm may use its IT resources to help implement wide range of strategies: cost leadership, product differentiation, strategic alliance strategies, diversification strategies, vertical integrations strategies
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
THE RESOURCE-BASED VIEW OF FIRM
based on two underlying assertions:
resource heterogeneity meaning?
resources and capabilities possessed by competing firms may differ
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
WHAT IS THE ROLE OF HISTORY ?
- firm ability to develop resources in low-cost way may be depend on being in right place at right time in history:
1) as time moves on, opportunities can only be recreated at high cost
2) cost of imitating resources increases as time moves on as some attributes can only be developed over long period of time
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
WHAT IS CAUSAL AMBIGUITY ?
- firm can only imitate resources at low cost when knows what exactly they should imitate
REASONS WHY CAUSAL AMBIGUITY MIGHT EXIST
1) invisible assets: sources of advantage may be taken for granted & are unspoken, tacit attributes of firm (organisational culture, routines, operating procedures)
2) competitive advantage may depend on large number of small decisions and actions in firm
Information Technology & Sustained Competitive Advantage: A Resource-Based Analysis
WHAT IS SOCIAL COMPLEXITY ?
- socially complex resources & capabilities are costly to imitate: are beyond management’s ability to change rapidly as they evolve and change over time (reputation, trustworthiness, culture)
