Page 129 -

128 Part One Organizations, Management, and the Networked Enterprise

checkouts. Contemporary customer relationship management (CRM) systems
feature analytical capabilities for this type of intensive data analysis (see
Chapters 2 and 9).
Credit card companies are able to use this strategy to predict their most
profitable cardholders. The companies gather vast quantities of data about
consumer purchases and other behaviors and mine these data to construct
detailed profiles that identify cardholders who might be good or bad credit
risks. We discuss the tools and technologies for data analysis in Chapters 6
and 12.

Strengthen Customer and Supplier Intimacy
Use information systems to tighten linkages with suppliers and develop intimacy
with customers. Chrysler Corporation uses information systems to facilitate
direct access by suppliers to production schedules, and even permits suppliers
to decide how and when to ship supplies to Chrysler factories. This allows
suppliers more lead time in producing goods. On the customer side, Amazon
keeps track of user preferences for book and CD purchases, and can recommend
titles purchased by others to its customers. Strong linkages to customers and
suppliers increase switching costs (the cost of switching from one product to a
competing product), and loyalty to your firm.
Table 3.4 summarizes the competitive strategies we have just described.
Some companies focus on one of these strategies, but you will often see
companies pursuing several of them simultaneously. Starbucks, discussed in
the Interactive Session on Organizations, is an example.

THE INTERNET’S IMPACT ON COMPETITIVE
ADVANTAGE

Because of the Internet, the traditional competitive forces are still at work, but
competitive rivalry has become much more intense (Porter, 2001). Internet
technology is based on universal standards that any company can use, making
it easy for rivals to compete on price alone and for new competitors to enter the
market. Because information is available to everyone, the Internet raises the
bargaining power of customers, who can quickly find the lowest-cost provider

TABLE 3.4 FOUR BASIC COMPETITIVE STRATEGIES
STRATEGY DESCRIPTION EXAMPLE

Low-cost leadership Use information systems to produce products and services at a Walmart
lower price than competitors while enhancing quality and level of
service
Product differentiation Use information systems to differentiate products, and enable new Google, eBay, Apple, Lands’ End
services and products
Focus on market niche Use information systems to enable a focused strategy on a single Hilton Hotels, Harrah’s
market niche; specialize
Customer and supplier Use information systems to develop strong ties and loyalty with Chrysler Corporation, Amazon
intimacy customers and suppliers

MIS_13_Ch_03_Global.indd 128 1/17/2013 2:26:24 PM