Competitive Advantage & Ethics in the Information Age

Posted on May 5, 2024 in Economy

Chapter 3: Competitive Advantage

Porter’s Five Forces Model

This model outlines five competitive forces that shape the fate of a firm:

  • Traditional Competitors: Existing rivals in the industry.
  • New Market Entrants: New companies entering the market.
  • Substitute Products and Services: Alternative offerings that can replace existing products.
  • Customers: The bargaining power of buyers.
  • Suppliers: The bargaining power of suppliers.

IS Strategies for Dealing with Competitive Forces

The basic strategy is to align IT with business objectives:

  1. Identify business goals and strategies.
  2. Break strategic goals into concrete activities and processes.
  3. Identify metrics for measuring progress.
  4. Determine how IT can help achieve business goals.
  5. Measure actual performance.

Competitive Strategies

  • Low-Cost Leadership: Use information systems to achieve the lowest operational costs and offer the lowest prices (e.g., Walmart’s inventory replenishment system).
  • Product Differentiation: Use IS to enable new products and services or enhance customer convenience (e.g., Google’s innovations, Apple’s iPhone).
  • Focus on Market Niche: Use IS to serve a narrow target market better than competitors (e.g., Hilton Hotel’s OnQ System).
  • Strengthen Customer and Supplier Intimacy: Build strong linkages to increase switching costs and loyalty (e.g., Toyota’s supplier access to production schedules, Amazon’s recommendation system).

The Internet’s Impact on Competitive Advantage

The internet has significantly impacted competitive advantage by:

  • Enabling new products and services.
  • Encouraging substitute products.
  • Lowering barriers to entry.
  • Changing the balance of power between customers and suppliers.
  • Transforming industries.
  • Creating new market opportunities.
  • Driving the growth of smart products and the Internet of Things.

The Business Value Chain Model

This model highlights activities where competitive strategies and information systems can have a strategic impact:

  • Primary Activities: Directly involved in producing and delivering products/services.
  • Support Activities: Support the primary activities.
  • Benchmarking: Comparing performance to industry best practices.
  • Best Practices: Superior methods for achieving business goals.

The Value Web

A firm’s value chain is linked to its suppliers, distributors, and customers, forming a value web. This web enables independent firms to collaborate and collectively produce a product using information technology.

Synergies, Core Competencies, and Network-Based Strategies

Information systems can improve the performance of business units within large corporations by promoting:

  • Communication: Facilitating information sharing between units.
  • Synergies: Leveraging the output of one unit as input for another.
  • Core Competencies: Identifying and developing world-class capabilities.

Network-Based Strategies

  • Network Economics: The value of a network increases as more participants join.
  • Virtual Company: Uses networks to connect people, resources, and partner companies without traditional organizational boundaries.

Disruptive Technologies

These technologies have a disruptive impact on industries, making existing products and business models obsolete. Companies must decide whether to be first movers or fast followers in adopting these technologies.

The Internet and Globalization

The internet has reduced the costs of operating globally, leading to benefits such as:

  • Scale economies and resource cost reduction.
  • Higher utilization rates and lower production costs.
  • Faster time to market.

Global Business and System Strategies

Companies can adopt various strategies for global operations, including:

  • Domestic exporters.
  • Multinationals.
  • Franchisers.
  • Transnationals.

Global System Configuration

Companies can choose from different system configurations for global operations:

  • Centralized systems.
  • Duplicated systems.
  • Decentralized systems.
  • Networked systems.

What is Quality?

Quality can be viewed from different perspectives:

  • Producer Perspective: Conformance to specifications and absence of variation.
  • Customer Perspective: Physical quality, quality of service, and psychological quality.

Quality Management Approaches

  • Total Quality Management (TQM): Focuses on continuous quality improvement involving all employees.
  • Six Sigma: Aims for near-perfect quality with a target of 3.4 defects per million opportunities.

How Information Systems Improve Quality

Information systems can improve quality by:

  • Reducing cycle time and simplifying production.
  • Enabling benchmarking against industry best practices.
  • Using customer feedback to improve products and services.
  • Enhancing design quality and precision.
  • Tightening production tolerances.

What is Business Process Management (BPM)?

BPM aims to continuously improve business processes by analyzing existing processes and designing/optimizing new ones. It involves both technology and organizational changes.

Steps in BPM

  1. Identify processes for change.
  2. Analyze existing processes.
  3. Design new processes.
  4. Implement new processes.
  5. Continuously measure and improve processes.

Chapter 4: Ethical and Social Issues in the Information Age

Five Moral Dimensions of the Information Age

The information age raises ethical concerns in several areas:

  • Information Rights and Obligations: Balancing the right to access information with the need for privacy and security.
  • Property Rights and Obligations: Protecting intellectual property in the digital age.
  • Accountability and Control: Ensuring responsible use of information systems and holding individuals accountable for their actions.
  • System Quality: Building reliable and secure information systems.
  • Quality of Life: Considering the impact of information systems on society and individuals’ well-being.

Key Technology Trends that Raise Ethical Issues

Several technology trends raise ethical concerns:

  • Rapidly increasing computing power.
  • Declining data storage costs.
  • Advances in data analysis techniques.
  • Networking advances.
  • Growth of mobile devices.

Advances in Data Analysis Techniques

  • Profiling: Combining data from multiple sources to create detailed profiles of individuals.
  • Non-obvious Relationship Awareness (NORA): Finding hidden connections between individuals or events.

Basic Concepts: Responsibility, Accountability, and Liability

  • Responsibility: Accepting the potential consequences of decisions.
  • Accountability: Mechanisms for identifying responsible parties.
  • Liability: The legal framework for recovering damages.
  • Due Process: Ensuring fair and transparent legal proceedings.

Ethical Analysis

A framework for analyzing ethical dilemmas:

  1. Identify and describe the facts.
  2. Define the conflict or dilemma and identify the values involved.
  3. Identify the stakeholders.
  4. Identify possible options.
  5. Evaluate the potential consequences of each option.

Candidate Ethical Principles

Several ethical principles can guide decision-making:

  • Golden Rule: Treat others as you would like to be treated.
  • Immanuel Kant’s Categorical Imperative: Act only according to principles that you would want to be universal laws.
  • Slippery Slope Rule: Avoid actions that could lead to a series of undesirable consequences.
  • Utilitarian Principle: Choose the action that produces the greatest good for the greatest number.
  • Risk Aversion Principle: Choose the action that minimizes harm or potential costs.
  • Ethical “No Free Lunch” Rule: Respect ownership rights and avoid taking anything without permission.

Internet Challenges to Privacy

The internet poses several challenges to privacy:

  • Cookies: Tracking user activity on websites.
  • Web beacons: Monitoring email opens and website visits.
  • Spyware: Secretly collecting user data.
  • Behavioral targeting: Using data to personalize advertising.

Privacy Concerns and Regulations

The collection and use of personal data raise concerns about privacy. The United States generally follows an opt-out model for data collection, while other regions, such as the European Union, have stricter regulations and often require an opt-in approach.

Property Rights: Intellectual Property

Intellectual property refers to creations of the mind, such as inventions, literary works, and artistic designs. It is protected by copyright, patents, trademarks, and trade secrets.

Challenges to Intellectual Property

The digital age presents challenges to intellectual property protection due to:

  • Ease of replication.
  • Ease of transmission.
  • Ease of alteration.
  • Compactness.
  • Difficulties in establishing uniqueness.

The Digital Millennium Copyright Act (DMCA) addresses some of these challenges by prohibiting the circumvention of technological measures that control access to copyrighted works.