IT and Strategic Value

Having IT that is up-to-date with the rest of the world we are constantly competing with is very important. Understanding the role IT plays in the business will be important in establishing proper scope, obtaining support for initiatives and delivering the greatest value to the organization at hand.  IT is very important in all countries weather it is in the very intermediate stages, or the more advanced stages. If companies are not up to date with current IT, then they will be at a very big disadvantage in business competition. Having more powerful, up-to-date information systems allow for better economic competition among the market. There are many advantages to having these information systems that run efficiently for your business. You can store, retrieve, transmit, and manipulate data more efficiently.

Strategic value is about competitive, pricing, cost, product, or market differentiation. Strategic value is not the same as a fair market value, where a hypothetical buyer and seller have access to all relevant data. Most importantly, strategic value have special hidden features that give buyers a quicker, less costly, and lower risk way to achieve their business goals. For example, entering a new market is a way to capitalize on strategic value. If you have a good understanding of your clients business and product line, you can analyze the market for competitors who could beneficially expand by acquiring the client. An easy example to see this put into action would be, a Midwestern company looking to expand to the East Coast could buy a competitor already established there, or a company hoping to expand its sales of machine parts to a new set of customers could acquire a company that sells an unrelated part to the same customers.

When IT "is the value chain", a good example to analyze is Amazon and Google. The closer IT is to the product or service, the more strategic its value will be to the organization. If there was no information technology, what exactly would their product consist of? Amazon is very efficient with the capabilities they have around fulfilling customers wants, needs, and orders. They have developed a lot of manual picking and packing and are very efficient with this process. The most important aspect of this to note is, if they were not able to reach their customers through IT, they would have no advantage over these other companies.  

When IT "is part of the value chain", a good example to analyze would be Target. The company has developed a new way to target their customers with marketing strategic values. They use a technique called predictive analytic aimed at their customers to predict their buying habits in the future based off of what they have bought in the past. Using this information, they will send out coupons to their current customers, as well as try and attract new customers. This technique is very good for capturing customers attention and retaining their business over a long span of time. 

Data mining companies have also seen a huge increase in demand for their services. They use certain information gathering technologies which allows other companies to access their data. The type of information these companies want are shopping trends, age, income, etc. An example of using data mining would be to analyze that when men bought diapers on Thursdays and Saturdays, they also tended to buy beer. On the other hand, they only bought a few items on these Thursdays. The retailer concluded that they purchased the beer, which meant to have it available for the upcoming weekend. The grocery chain could also use this newly discovered information in various ways to increase revenue for their chain. For example, they could move the beer display closer to the diaper display. And they could make sure beer and diapers were sold at full price on Thursdays because they would be expecting this business.