| Running Head: Information Technology in the MDCM | | | | adopted 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 a | | | | improve the competitive advantage of the company. |
| firm will gain competitive advantage, this case study | | | | (Rockart, 1984) |
| discusses MDCM inc. company that have faced a | | | | The company y may a also add value to its value |
| decline in its market share and profits as a result of | | | | chain 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 with | | | | decision making, computer software decision making |
| information technology objectives are discussed | | | | and introduction of consumer services system and |
| include value added chain and those related to porters | | | | ensures efficient response to consumer enquiries. |
| five force strategy. | | | | (Porter, 1985) |
| Introduction: | | | | Riesman and Porter five force strategy: |
| The medical device contract manufacturing company | | | | Parson also identifies which information technology can |
| (MDCM) was founded in 1972, the company | | | | be used in order to achieve competitive advantage; |
| specializes in contract manufacturing of medical | | | | these five forces include power of buyer, power of |
| devices has subsidiaries in over 35 countries, by | | | | supplier, new entrants, competition and substitution |
| working together with consumers the company was | | | | threat. (Porter, 1993) |
| able to achieve 42% market share in the US in the | | | | Substitution of labor: |
| year 1974, and by the year 1985 the market share | | | | Substitution information technology for labor is one of |
| grew to 54%. This growth was attributed to acquisition | | | | the ways in which a firm can gain competitive |
| of smaller companies and also expansion of its | | | | advantage, MDCM main problem is the existence of |
| operations into other regions in the US. (Harvard | | | | custom systems that increase administration costs, |
| Business, 2006) | | | | introducing information technology will reduce |
| In the year 1989 to 1990 the company lost 4 of its | | | | administration 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 consolidated | | | | performed more effectively and efficiently by the new |
| and the company lost its pricing power, profits and | | | | IT system. |
| market share continued to decline until the year 2000 | | | | (Riesman, 1982) |
| when changes were made to reduce internal costs | | | | Increased switching costs for the consumer: |
| and also structuring the company to improve | | | | The 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 to | | | | associated with switching from one supplier to another |
| lower their costs of operation further, opportunities | | | | whereby a value added information system will results |
| arise in three different ways and they include internal | | | | into increased cost of identifying other suppliers. |
| costs, competitive ness and business portfolio, internal | | | | (Riesman, 1982) |
| costs refers to improvement of the efficiency and | | | | Cooperation with rivals: |
| effectiveness of an organization therefore reducing | | | | A shared IT system with rivals will encourage |
| costs, competitiveness refers to advantage | | | | cooperation with rivals, this means that through |
| associated with information technology that result into | | | | cooperation the company will gain price power over |
| added competitiveness, and business portfolio refers | | | | the consumer and this will improve selling prices of |
| to an information technology that affect decision made | | | | products, 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 production | | | | Reduced company switching costs: |
| costs associated with the production process of the | | | | The firm will also realize a reduction in switching costs, |
| products, the article highlights internal costs as one of | | | | through its information technology system the firm will |
| the major problem that result into reduced costs, and | | | | be 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 system | | | | will enable the company gain competitive advantage |
| that would enable access its subsidiaries | | | | over its competitors. |
| Different legacy systems: - the company has custom | | | | (Riesman, 1982) |
| legacy system that increase administration costs | | | | Product innovation: |
| which include many different custom sales, financial | | | | Information technology will lead to product innovation, |
| and duty and inspection systems | | | | introduction of information technology into the company |
| Operating system: - outdated operating systems for its | | | | will help in the improvement of products produced by |
| employees | | | | the company, products produced will be better than |
| Email system: - the company lacks a standardized | | | | those of the competitors and also potential substitutes |
| email system | | | | and therefore the firm will gain competitive advantage. |
| (Harvard Business, 2006) | | | | (Riesman, 1982) |
| The other objective is to increase market share, the | | | | Sharing of information: |
| company was one of the largest medical product | | | | Information 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 competitive | | | | the consumers in two ways and one is that there will |
| advantages the market share declined. For this reason | | | | be a quick response to enquiries by the consumer and |
| one of the main objectives is to increase market | | | | also 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 in | | | | products and therefore better meet the needs of the |
| the medical product manufacturing industry, the | | | | consumer. |
| company should relies through investment in | | | | (Riesman, 1982) |
| information technology which will add value to its | | | | In addition Austin and McFarland (2007) used the five |
| product, increase market share and also increase | | | | force strategy to show how information technology |
| profits recorded. | | | | can be used to gain competitive advantage, for rivalry |
| The company therefore intends on reducing its internal | | | | they state that information technology can be used to |
| costs by investing in information technology, this will be | | | | establish a planning system that will reduce costs and |
| achieved through the identification of function areas | | | | also enable the firm to react more quickly to consumer |
| where information technology will be used in the | | | | enquiries. Regarding the threats of entry by other firms |
| reduction of costs; this strategy will also be aimed at | | | | into the industry they state that websites can be re |
| improving the efficiency and effectiveness in the | | | | designed 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 corporate | | | | market share but over the years this has changed due |
| strategies highlighted above; the following is an analysis | | | | to increased internal costs and high competition in the |
| of how these strategies will relate to information | | | | industry, The above discussion highlights the |
| technology objectives with reference to value chain | | | | importance 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 can | | | | technology objectives using the five force porter |
| be used to create add value to products in order to | | | | strategies and the value added chain strategy. |
| achieve competitive advantage, there are three ways | | | | References: |
| which this can be achieved and they include improving | | | | Harvard Business (2006) MDCM Inc. strategic IT |
| each function of the value adding chain, this will involve | | | | portfolio management case study, retrieved on 4th |
| better consumer care, improved efficiency of | | | | December, from |
| processes such as order processing and enquiry | | | | Porter, M. 1993. Competitive strategy, New York: free |
| replies. (Rockart, 1984) | | | | press |
| The other way to add value to the product value is | | | | Riesman, H. and Gerstein, M. 1982. Creating competitive |
| through improved links with the suppliers and | | | | advantages with information technology. Business |
| consumers, creation of the value added chain will | | | | strategy journal, vol (3) (1) page 53 to 60 |
| influence the switching cost of both the suppliers and | | | | Rockart, J. 1984. Information technology: strategic |
| the consumers, when information technology is | | | | approach. |