Analyse the role of MIS in underpinning competitive advantage and developing strategy.

The terms as the strategic use of information systems, strategic advantage or strategy denote the decisions organizations face over which commodities to offer, and which markets to deliberately target. These choices are essential for their success. A company seeks to get a competitive advantage from the way how it positions an own-brand product or service in comparison with competitors.

Managers develop their business strategy in several ways. Although managers are traditionally believed to develop their strategy in a planned, intended, and conscious fashion, many analysts also claim that strategies may develop in other ways. For example, emergent strategies evolve without an obvious intention of managers. They are certain to result from the combined effect of successive daily and operational decisions. Additionally, there are some unrealized but initially intended strategies, those which managers advocate and propose, though they are not implemented in the end. “So strategies develop, from highly structured top-down planning procedures to informal and ad-hoc practices” (Boddy, Boonstra, & Kennedy, 2002, p. 75). In the majority of companies, the realized strategy takes place somewhere between these points. Computer-based information systems may actively contribute to a company’s strategy. They are similar to any other capability – marketing, human resource or finance. They are resources that managers are able to incorporate into a strategic and business planning.

The notion that information systems can be applied to give a company an advantage over the competitors emerged in the 1980s and spawned numerous researches purporting to demonstrate how developing and modern computer technologies as networks and databases could be used to give a company a competitive edge (Clarke, 2001). Michael Porter is certainly the most well-known author in the studies of competitive strategy. In terms of its particular relevance to information systems, Porter’s key idea is that of generic approaches. He suggests that competitive advantage is gained from one of the following three generic strategies: focus, differentiation, and cost leadership. Focus pays attention to a specific area of the market where the company intends to outperform its competitors by improved skills and knowledge. Differentiation is about an organization making a product or service in a distinct way from that of its competitors. Cost leadership brings an advantage by managing to produce at a lower cost (Clarke, 2001).

In attempting to create competitive advantage with the help of information systems, numerous researchers have focused on the generic strategies, with differentiation and cost leadership being favored approaches. The utilization of information to differentiate is applied, for instance, by insurance firms to differentiate the latest offering of a vitally service-based product. This resulted in the UK in a rising migration apart from high street set up insurance companies towards telephone-based firms such as Direct Line. Cost leadership, in its turn, is the principal use of technology by the majority of UK banking sector, employing approaches as automated banking in order to decrease the total cost base, which mainly contains personnel costs.

Two options of implementing information systems in the procedure of competitive rivalry are through effective management and by decreasing costs. On-line inventory systems give a chance to make profound changes in manufacturing supply systems. This vastly pares inventory levels, and reduces costs associated with them. Car manufacturers are just invoiced for necessary components when the final assembly leaves the factory. Once the system is aware of that X headlamps being used, after a while it passes relevant information to the supplier of components. They forward an electronic invoice for the used components, and deliver or supply suitable replacements. There are almost the same systems in retailing, where companies as Procter & Gamble and Unilever in the role of suppliers manage their largest customers’ inventory. Consequently, such inter-organizational systems decrease the costs of inventory with the help of lower inventory levels. However, they also reduce the necessity for working capital and let a purchasing department to concentrate on strategic supply concerns and non-routine orders. The information systems can give opportunities for changing, creating or supporting generic strategies. Branch accounting system of a travel agent has an opportunity now to provide descriptive business patterns to managers, hence, enabling them to track trends closely, and make better-informed promotional and pricing decisions. Another good example is a Dutch retailer, Ahold, which attained much better operations in the supply chain by applying data-mining knowledge and capability extraction in its clientele database. Management information systems are able to extend the span of control of managers, which leads to the flattening of companies.

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