Information Technology In The Mdcm Inc. Company:

Running Head: Information Technology in the MDCMadopted it may lead to increased consumer switching
Inc. Company:cost and also reduce the company's supplier switching
Name:cost. (Rockart, 1984)
University:The other way to add value to the products is the
Course:introduction of more services and product into the
Date:market, for example the introduction of a more
Abstract:efficient way to communicate with consumers will
Investing in Information technology is one in which aimprove the competitive advantage of the company.
firm will gain competitive advantage, this case study(Rockart, 1984)
discusses MDCM inc. company that have faced aThe company y may a also add value to its value
decline in its market share and profits as a result ofchain by introduction of computer aided manufacturing
failing to adopt appropriate information technology.process, the use of computer software to aid in
Ways in which the strategies can be matched withdecision making, computer software decision making
information technology objectives are discussedand introduction of  consumer services system and
include value added chain and those related to portersensures efficient response to consumer enquiries.
five force strategy.(Porter, 1985)
Introduction:Riesman and Porter five force strategy:
The medical device contract manufacturing companyParson also identifies which information technology can
(MDCM) was founded in 1972, the companybe used in order to achieve competitive advantage;
specializes in contract manufacturing of medicalthese five forces include power of buyer, power of
devices has subsidiaries in over 35 countries,  bysupplier, new entrants, competition and substitution
working together with consumers the company wasthreat. (Porter, 1993)
able to achieve 42% market share in the US in theSubstitution of labor:
year 1974, and by the year 1985 the market shareSubstitution information technology for labor is one of
grew to 54%. This growth was attributed to acquisitionthe ways in which a firm can gain competitive
of smaller companies and also expansion of itsadvantage, MDCM main problem is the existence of
operations into other regions in the US. (Harvardcustom systems that increase administration costs,
Business, 2006)introducing information technology will reduce
In the year 1989 to 1990 the company lost 4 of itsadministration costs whereby the firm will not be
major consumers and this led to a decline in its profits,required to hire labor to undertake tasks that can be
profits began to decline as its consumers consolidatedperformed more effectively and efficiently by the new
and the company lost its pricing power, profits andIT system.
market share continued to decline until the year 2000(Riesman, 1982)
when changes were made to reduce internal costsIncreased switching costs for the consumer:
and also structuring the company to improveThe value added IT based information system will
efficiency.  (Harvard Business, 2006)increase the consumer switching costs, this is the cost
Information technology offer firms an opportunity toassociated with switching from one supplier to another
lower their costs of operation further, opportunitieswhereby a value added information system will results
arise in three different ways and they include internalinto increased cost of identifying other suppliers.
costs, competitive ness and business portfolio, internal(Riesman, 1982)
costs refers to improvement of the efficiency andCooperation with rivals:
effectiveness of an organization therefore reducingA shared IT system with rivals will encourage
costs, competitiveness refers to advantagecooperation with rivals, this means that through
associated with information technology that result intocooperation the company will gain price power over
added competitiveness, and business portfolio refersthe consumer and this will improve selling prices of
to an information technology that affect decision madeproducts, and the higher prices will help the company
by potential investors.to realize higher profits.
Business objectives(Riesman, 1982)
One of the main objectives is to reduce the productionReduced company switching costs:
costs associated with the production process of theThe firm will also realize a reduction in switching costs,
products, the article highlights internal costs as one ofthrough its information technology system the firm will
the major problem that result into reduced costs, andbe in a better position to identify potential suppliers who
some of these problems include:may supply products at lower costs; this reduced cost
Networking: - the company lacks a network systemwill enable the company gain competitive advantage
that would enable access its subsidiariesover its competitors.
Different legacy systems: - the company has custom(Riesman, 1982)
legacy system that increase administration costsProduct innovation:
which include many different custom sales, financialInformation technology will lead to product innovation,
and duty and inspection systemsintroduction of information technology into the company
Operating system: - outdated operating systems for itswill help in the improvement of products produced by
employeesthe company, products produced will be better than
Email system: - the company lacks a standardizedthose of the competitors and also potential substitutes
email systemand therefore the firm will gain competitive advantage.
(Harvard Business, 2006)(Riesman, 1982)
The other objective is to increase market share, theSharing of information:
company was one of the largest medical productInformation technology system put in place will improve
manufacturing company and had realized a 53%information sharing, this will help in improving services to
market share but due to a decline in its competitivethe consumers in two ways and one is that there will
advantages the market share declined. For this reasonbe a quick response to enquiries by the consumer and
one of the main objectives is to increase marketalso information sharing across the subsidiaries and
share. (Harvard Business, 2006)various departments will help improve the quality of the
The other objective is to become a market leader inproducts and therefore better meet the needs of the
the medical product manufacturing industry, theconsumer.
company should relies through investment in(Riesman, 1982)
information technology which will add value to itsIn addition Austin and McFarland (2007) used the five
product, increase market share and also increaseforce strategy to show how information technology
profits recorded.can be used to gain competitive advantage, for rivalry
The company therefore intends on reducing its internalthey state that information technology can be used to
costs by investing in information technology, this will beestablish a planning system that will reduce costs and
achieved through the identification of function areasalso enable the firm to react more quickly to consumer
where information technology will be used in theenquiries. Regarding the threats of entry by other firms
reduction of costs; this strategy will also be aimed atinto the industry they state that websites can be re
improving the efficiency and effectiveness in thedesigned and also to aid in which will help reduce costs.
company.Conclusion:
Matching IT objective with cooperate strategies:MDCM inc was once a market leader in terms of
The IT objectives must match with the corporatemarket share but over the years this has changed due
strategies highlighted above; the following is an analysisto increased internal costs and high competition in the
of how these strategies will relate to informationindustry, The above discussion highlights the
technology objectives with reference to value chainimportance of information technology in business
management and the porters five force strategy.strategies, it also shows how the objectives of the
Value added chain:company will be matched with the information
According to Rockart (1984)Information technology cantechnology objectives using the five force porter
be used to create add value to products in order tostrategies and the value added chain strategy.
achieve competitive advantage, there are three waysReferences:
which this can be achieved and they include improvingHarvard Business (2006) MDCM Inc. strategic IT
each function of the value adding chain, this will involveportfolio management case study, retrieved on 4th
better consumer care, improved efficiency ofDecember, from
processes such as order processing and enquiryPorter, M. 1993. Competitive strategy, New York: free
replies. (Rockart, 1984)press
The other way to add value to the product value isRiesman, H. and Gerstein, M. 1982. Creating competitive
through improved links with the suppliers andadvantages with information technology. Business
consumers, creation of the value added chain willstrategy journal, vol (3) (1) page 53 to 60
influence the switching cost of both the suppliers andRockart, J. 1984. Information technology:  strategic
the consumers, when information technology isapproach.