Tutorial 4 Flashcards
Sustained competive advantage
When a firm is implementing a strategy not
simultaneously implemented by many competing firms and where these other firms face
significant disadvantages in acquiring the resources necessary to implement this strategy.
Temporary competitive advantage
When a firm is implementing a valuable strategy
currently pursued by few competing firms, where these competing firms don’t face significant
disadvantages in acquiring the resources necessary to implement this strategy.
Competitive parity
When a firm is implementing a valuable strategy being simultaneously
implemented by several competing firms.
Competitive disadvantage:
When a firm is implementing a strategy that is not valuable.
Resource-based view of IT
-Competitive advantage arise when firms possess valuable, rare, inimitable and
non-substitutable resources
-IT is often imitable and widely available, reducing its potential as a long-term
differentiator
Attributes of IT evaluated for competitive advantage:
-Capital requirements:
Large IT investments may give temporary advantage but
don’t ensure sustainability as competitors can acquire similar resources
Attributes of IT evaluated for competitive advantage:
- Proprietary Technology:
Difficult to maintain as a sustainable advantage due to
rapid imitation and technology diffusion
Attributes of IT evaluated for competitive advantage:
- Technical skills
Essential for IT operations but easily transferable and not unique
to firms
Attributes of IT evaluated for competitive advantage:
- Managerial skills
The only attribute identified as a potential source of sustained
competitive advantage ⇒ Ability to:
●Integrate IT with business strategy
●Work effectively with different functional areas
●Adapt IT systems to evolving business needs
Create-Capture-Keep praradigm
The creation of significant customer switching costs in the acquisition of IT creates an economic opportunity for IT suppliers
Challenges to IT-based competitive advantage
-Imitation and Diffusion:
Competitors can quickly adopt similar IT solutions
Challenges to IT-based competitive advantage
-Switching costs & Customer Lock-In:
While some IT systems create high
switching costs, customers often anticipate this and seek alternatives
Challenges to IT-based competitive advantage:
-Changing Market Dynamics:
The speed of technological advancement makes it
difficult for firms to maintain an IT-based lead
Strategic Management (Mata, Fürst & Barney, 1995)
Focuses on understanding sources of sustained competitive advantages for firms
Managerial implications (Mata, Fürst & Barney) => IT as a competitive advantage
-Firms should focus on developing managerial IT skills rather than just acquiring
technology
-IT should be integrated into strategic planning and operations to create real business
value
-Strong interpersonal relationships between IT and other business functions can
enhance competitive advantage
Carr, N.G.
1. IT as a commodity
-IT is no longer a rare resource but an essential infrastructure like electricity or
roads
-Companies no longer gain a competitive edge simply by having IT - it’s a cost
of doing business
Carr, N.G.
2. Historical Perspective
-Similar to past infrastructural technologies (e.g. railroads, telegraphs,
electricity), IT initially offered strategic advantages but eventually become
standardized and universally available
Carr, N.G.
3. Vanishing Competitive Advantage
-Initially, companies like American Hospital Supply and Walmart used IT for
strategic benefit
-However, best practices become widely replicated, reducing IT’s ability to
differentiate businesses
-IT-based advantages are short-lived, and innovations are quickly copied
Carr, N.G.
4. The Risks of Overinvestment
-Companies overspend on IT under the illusion that it provides lasting
competitive advantage
-Many firms adopt expensive IT solutions that don’t provide proportional value
-Studies show higher IT spending doesn’t correlate with better financial
performance
Carr, N.G.
5. A New IT Strategy: Shift from Offense to Defense
-Instead of seeking differentiation through IT, firms should focus on cost
management, security, and risk mitigation
-Avoid unnecessary upgrades and prioritize reliability over cutting-edge
innovation
-Companies should adopt outsourcing and standardized IT solutions to reduce
costs
Chae, Koh &Prybutok
Standardisation and Homogenisation of IT
-In the 1990s, proprietary IT systems were a competitive advantage
-By the 2000s, the widespread adoption of ERP systems, web technologies, and
outsourcing made IT capabilities easier to replicate, reducing differentiation
=> The role and value of IT has changed over the period of time, making IT a weaker predictor of business performance. The advent of the arrival of the Internet, the prevalence of outsourcing, particularly offshore outsourcing, and increasing adoption of ERP packages, along with the decreasing cost of computing are some of the developments that have made IT more available and homogeneous
Chae, Koh & Prybutok
Information week 500 list
IW 500 that used to measure IT capability is flawed => The selection criteria for inclusion in the IW 500 list have constantly changed
Chae, Koh & Prybutok
Implications: IT strategy
-Firms should focus on complementary assets such as organizational structure,
human IT resources, and business processes to drive performance
-IT strategy should shift from differentiation to cost management and risk mitigation
McAfee & Brynjolfsson (2008)
-IT has intensified competition:
=> …widening the gap between industry leaders and
laggards
=> High-IT industries experience greater market concentration, increased
turbulence, and larger performance differences
McAfee & Brynjolfsson (2008)
- Process innovation is essential for IT-driven success
Companies like CVS and Cisco used IT not just for automation but transform
their operations, achieving a competitive edge through efficiency and
scalability
McAfee & Brynjolfsson (2008)
- IT enables rapid replication and scaling of best practices => ERP systems
-ERP systems help standardize and optimize operations across locations,
allowing successful firms to expand their lead quickly
McAfee & Brynjolfsson (2008)
Three-step approach to maximize IT’s impact:
- Deploy a solid IT infrastructure to support business processes
- Innovate by using IT to improve workflows and efficiency
- Propagate successful innovations across the organization
McAfee & Brynjolfsson (2008)
MAin Findings: IT on industry
- IT has intensified competition, widening the gap between industry leaders and
laggards - Process innovation is essential for IT-driven success:
- IT enables rapid replication and scaling of best practices:
