Competitive Advantage

Every business consists of two types of element: the physical and the virtual. The physical elements are items such as buildings, machinery and people; the virtual elements are items such as information about customers, knowledge about how to get the best from a manufacturing process and the rights to exploit a particular invention.
The information revolution provides organizations with an unparalleled opportunity to move elements of their business from the physical domain to the virtual domain. No longer does the development of new products have to be done on paper, no longer do you have to sell to your customers within shops, no longer do you have to keep large stocks of every item that you sell. Almost every element of a business can be converted from the physical into information that is stored and manipulated within a computer.
Once that transition is made, new laws of economics take over. Information is presented in many ways that would be impossible to do with a physical object, information can be transmitted around the world at phenomenal speed, information can be duplicated and sold many times over without incurring additional costs. These attributes of information mean that organizations that embrace the virtual world can play to a different set of rules, rules that are often stacked heavily in their favor.
Yet despite the enormity of the potential changes, our management methods are still firmly rooted in the physical. We can, for example, measure, account for and depreciate physical assets, yet there is no agreed method for accounting for the information we maintain on our customers, or indeed any other information, assets that in many organizations far exceed the value of the physical goods they sell.
The work that we do with organizations has made us realize that all businesses are undergoing, or about to undergo, a fundamental revolution, a revolution so enormous that it dwarfs any changes since the Industrial Revolution took place in the 19th century. Businesses will increasingly move their assets and processes from the physical domain to the virtual domain, new laws of economics will take over, and different rules and business models will apply.
Business today is experiencing the same kind of revelation. The information revolution now means that we can look at any part of our business, whether an investment decision, an office building or an individual product and examine all the individual bits of information that make it up: we can attribute costs to a single activity or good; we can watch the shopping behavior of individual customers in our stores; we can evaluate the return from a complex range of marketing activities. Like Galileo, we are surprised at what we see. What we thought were markets turn out to be complex, interdependent systems; what we thought was an organization turns out to be an interactive group of individuals. There is a whole new “virtual” universe out there, every bit of information a new star waiting to examined, understood and made use of. It is a universe which will challenge fundamentally (and already is challenging) many of our existing ideas about doing business. It is a universe that offers immense possibilities and massive dangers. The companies that do not explore and exploit it will fail.
Whether you work in bulk chemicals or software, the airline business or supermarket retailing, financial services or manufacturing, you and your competitors are finding new ways of using information that radically overturn the existing order. It is no longer sufficient to be the largest, to have the best products or the most efficient marketing. It is no longer sufficient to have the most established brand, the lowest costs or the best customer service. Our consulting experience suggests that, wherever you are and whoever you are, you are vulnerable to a competitor who uses information to overturn the established order in your market. Wherever we look, we see businesses that were once leaders in their fields — by virtue of their size or their low production costs — wiped out, sometimes almost overnight, by a competitor who has managed to harness information in order to secure a competitive advantage. (Earl 1998)
This paper is dedicated to the strategic role that information systems play in the organizational performance. Information system is a vital component of any successful organization as it helps businesses to expand and compete; it also improves efficiency and effectiveness of business processes; and its useful for managerial decision making and also for workgroup collaboration.
Information system is an organized combination of people, hardware, software, communications networks, data resources, policies and procedures that stores, retrieves, transforms, and disseminates information in an organization. (Earl 1998)
As an example of organization that uses its information system as a absolute competitive advantage I’ve chosen Amazon.com. Amazon is a leading multinational web commerce company with headquarters in Seattle, Washington. This company is the largest online retailer in the US; it’s an out-of-reach leader of web commerce trade category. It’s positioned as global customer-centric company where virtually anything that people are looking for can be successfully found and ordered. The most attractive sides of Amazon‘s business strategy are low prices, vast selection, and of course absolute convenience for the consumer. Therefore, thanks to these strong sides and advantages for the world audience, the company continues to evolve as a world-class web commerce giant. Currently, this company has a different websites for such countries as UK, Canada, France, Germany, Italy, Japan, and China. (What Amazon’s strong growth means for competitors 2010)