Many companies have found that effective and efficient information systems allow them to deal with external forces in one of four ways: low-cost leadership, product differentiation, focus on market niche, and strengthen customer and supplier intimacy.
By using information systems to lower our operational costs we can lower our prices. That will make it difficult for traditional competitors and new market entrants to match our prices.
A very effective use of strategic information systems is to create products or services that are so different that they create barriers for the competition. Product differentiation is at the heart of Apple Computer‘s success. People like to feel that they are unique individuals with their own needs and desires. One of the best strategies for dealing with competitors is to offer customers exactly what they want, when they want it, and how they want it. The Internet provides a new outlet for mass customization by allowing customers to order one-of-a-kind products.
Focus on Market Niche
If an organization is in a tough competitive market, it can choose to focus on a very narrow segment of the market rather than a broad general audience. A firm can gather very specific information about its customers using data mining techniques. Then it creates a focused differentiation business strategy to market directly to those consumers. Apple Computer uses focused differentiation to help sell its computers to a narrow target market of graphic designers and educators rather than the general population of computer users.
Strengthen Customer and Supplier Intimacy
Supply chain management (SCM) systems increase supplier intimacy while customer relationship management systems increase customer intimacy. SCM systems create immense switching costs between a company and its suppliers because of the investment of hardware and software necessary to make the system successful. Customer relationship management systems allow companies to learn details about customers that give them the competitive advantage over traditional competitors and new market entrants.