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The relationship between Information Technology (IT) and competitive advantage lies in the manner in which IT can be used to develop effective business strategies. IT may be used to enhance the operation of a business, to gather and process information about various microeconomic business factors, and to help organizations streamline the different arms of their operations. IT and competitive advantage are connected by the fact that IT can help companies cut down on costs, which can be translated to a cost advantage.
Operations of businesses can be enhanced through the use of IT, creating a link between IT and competitive advantage. An example of how IT can be used to enhance the operation of businesses can be seen in its value for the collection of data regarding customer behavior and preferences. Most companies utilize the advantage offered by IT to conduct online surveys regarding the use of their products. This is especially common among retailers, manufacturers and producers of services. The purpose of this survey is to find out the opinion of consumers and customers regarding their products with the view of applying the results of the survey to the enhancement of their products.
IT and competitive advantage are related by the ability of companies to use IT to cut down on their costs. Such a reduction in overhead costs will benefit the company when this is passed on to its consumers in the form of reduced prices. This type of competitive advantage can be gained through factors like the use of automated phone systems, which will be synchronized with the other preprogrammed information using IT. This uses emails to send out information to consumers in different parts of the world, rather than physical mail and other forms of cost-saving systems.
Another connection between IT and competitive advantage is the fact that IT can be used to achieve both differential and cost advantage over other competitors. For example, if a company is trying to introduce a product into the market, it may conduct a survey on the reaction of consumers to the product samples before mass-producing it. The data regarding the opinions of the consumers may be collected from various cities and entered into a single database from which a pattern of preference will be drawn. This will help the company decide whether to continue with the product, overhaul it, or make some minor adjustments prior to mass-producing the product.