IT stratergy and digital goods

Rahul De
MIS
MANAGING INFORMATION SYSTEMS IN BUSINESS,
GOVERNMENT AND SOCIETY
Copyright © 2018 by Wiley India Pvt. Ltd., 4436/7, Ansari Road, Daryaganj, New Delhi-110002

MIS : Managing Information Systems in Business, Government and Society by Rahul De
LEARNING OBJECTIVES
• Get an idea of the competitive environment of business
• Learn about information goods
• •
•
Understand Information systems and competitive strategy
2

MIND MAP OF CHAPTER TOPICS
3

COMPETITIVE ENVIRONMENT OF BUSINESS
• Commercial firms face competition for their products and also retaining their partners.
4

Partnering for Mutual Benefit
• Partnering helps firms to have access to functions they don’t have internally.
• The core competence of a firm is the skill or set of skills that it uses to run its business
in a unique manner.
• Transaction costs are the costs of creating and maintaining partnerships with partner
organisations.
Bargaining Power of Suppliers
• Information systems help to form partnerships
that help firms improve their bargaining power.
5

Bargaining Power
• Buyers, who buy the services or goods of a firm, also have a bargaining power. They
can bargain, among other things, over prices and delivery schedules. They can seek
other firms who have better prices or delivery schedules and thus bargain with the firm
on these issues. Firms operating in a highly competitive market have to make
attempts to improve their bargaining power over buyers.
Barriers to Entry
• Patents and long-term contracts create barriers to entry for rival firms.
Threat of Substitutes
• One of the biggest threats to a business is a substitute product or service. A substitute
product is a type of product that is very different from the original but serves the same
function as the original and acts as a replacement.
6

E-commerce has enabled a large number of commercial firms to place their business
and services on the internet. Substitutes for many kinds of businesses have sprung up,
such as online auctions and online banking.
Industry Regulations
• Laws of a motion determine whether it is easy or hard to do business in the nation
7

USING IT FOR COMPETING
• Competing on Low Cost
Providing low-cost substitutes for rival products is one of the proven ways to compete. Firms offer low-cost
products or services to draw away customers from their competitors and establish their presence.
• Competing on Differentiation
Differentiation means creating a distinct identity for a product to separate it from the competition.
8

INFORMATION GOODS
Properties of Information Goods
• Information goods are typically expensive to produce but cheap to reproduce.
• The capacity for devices to store digital goods is very high.
• It is easy to make versions, or variants, of digital goods.
• Experience goods are those whose value is known only after they are sampled.
Technology Lock-in and Switching Costs
• Lock-in is the phenomenon of being attached to a particular platform, software or data.
• Switching cost is the price paid to move away from a Lock-in.
9

Network Externalities
• A network externality is usually a benefit that accrue to a user when others join the network.
10
INFORMATION GOODS

INFORMATION GOODS
Positive Feedback
• Positive feedback is the news about the benefits of joining a network that people
receive.
Tippy Markets
• The combination of network externalities and positive feedback leads to tippy markets. A tippy market results
when there are two or more products competing in the market, and in the eventual outcome only one survives.
Each product is tippy in the sense that it could either succeed or fail, and with the effects of positive feedback
only one succeeds and the others fail.
11

INFORMATION SYSTEMS AND COMPETITIVE STRATEGY
• The promise of information systems is that they enable the competitive strategy of
commercial firms.
• The competitive strategy of a commercial firm is its long-term competitive position,
such as of being a low-cost player or a differentiator, which the firm adopts.
• A firm’s strategy is the set of activities it engages in as part of its long-term competitive
goals. Strategies lead to operational goals and to tactics that the firm undertakes.
12

INFORMATION SYSTEMS AND COMPETITIVE STRATEGY
The Value Chain
13
Information Systems for Value Chain
Activities

IT stratergy and digital goods

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