SESSION 5 - IT & Sustained Competitive Advantage

Question 1

Whats the paper about?

Answer 1

• 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

Question 2

What are the different types of competitivity?

Answer 2

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

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

Competitive parity: implementing valuable strategy being simultaneously implemented by various competing firms

Competitive disadvantage: implementing not valuable strategy (no cost reducing/revenue increasing)

Question 3

Whats the create-capture-keep paradigm?

Answer 3

Create-capture-keep paradigm (Clemons1986): IT-based customer switching costs as source of sustained competitive advantage for firms selling IT applications

Switching costs: 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

Question 4

What two underlying assumptions is the resource-based view based on?

Answer 4

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

Question 5

What is causal ambiguity?

Answer 5

• 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

Question 6

What are the five attributes of IT that are possible sources of sustained competitive advantage?

Answer 6

• five attributes of IT that are possible sources of sustained competitive advantage: switching costs (discussed already), access to capital, proprietary technology, technical IT skills, managerial IT skills