How can information system be used to achieve strategic advantage at the industry level? By working with other firms, industry participants can use information technology to develop industry-wide standards for exchanging information or business transactions electronically, which force all market participants to subscribe to similar standards.
Such efforts increase efficiency, making product substitution less likely and perhaps raising entry costs-thus discouraging new entrants. Also, industry members can build industry wide, IT-supported consortium, symposium, and communications networks to coordinate activities concerning government agencies, foreign competition and competing industries.
Looking at the industry value chain encourages you to think about how to use information systems to link up more efficiently with your suppliers, strategic partners, and customers. Strategic advantage derives from your ability to relate your value chain to the value chains of other partners in the process. For instance, if you are Amazon.com, you want to build systems that:
- Make it easy for suppliers to display goods and open stores on the Amazon site
- Make it easy for customers to pay for goods
- Develop systems that coordinate the shipment of goods to customers
- Develop shipment tracking systems for customers
In fact, this is exactly what Amazon has done to become one of the Web’s most satisfying online retail shopping sites. The Interactive Session on Technology discusses how Amazon.com developed and executes this business strategy. It also shows that Amazon.com had to revise its strategy several times in order to remain competitive. Internet technology has made it possible to create highly syncronized industry value chains called value webs.
A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a product or a service for a market collectively. It is more customer driven and operates in a less linear fashion than the traditional value chain. These value webs are flexible and adaptive to changes in supply and demand. Relationships can be bundled or unbundled in response to changing market conditions. Firms will accelerate time to market and to customers by optimizing their value web relationships to make quick decisions on who can deliver the required products or services at the right price and location.
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