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Management Information system for product differentiation:
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If we look at how the industry has progressed in past century i.e. from Early Mechanization to Steam Power & Railways to Electrical & Heavy Engineering to Ford Type Mass Production to Information & Communication to mass customization to Holistic (Cook 2000) we can infer that as companies become more global the complexities of managing and delivering, quality and on-time at the right cost become an important issue of the millennium. Through his competitive forces model, Michael Porter tries to convey that product differentiation is key to a company’s success. Information systems can be leveraged to come out with unique highly differentiated products. This is important since many me too (Kotler 2003) with their low cost advantage can sweep the market in no time. So products or services have to be easily distinguishable and at the same time they shouldn’t be easily duplicable. Ulph and Vulkan (2000) propose that consumers differ with respect to their most desired products, and firms choose where to locate in product space and how much to charge each consumer. The past decade has found out and implemented potential of IT to conquer the product space. Some of the important IT applications towards product design and implementation are R&D databases, Professional work stations, electronic mail, custom engineering systems, and integrated systems to manufacturing (Clarke 1994). Product differentiation is important since it imposes switching costs over buyers and as a result may serve as an entry barrier. In addition, a continuous process of product differentiation may produce an additional cost advantage over competitors and potential entrants, through intellectual property protections, such as patents, and the cost of imitation. By coordinating linked activities, an enterprise can reduce transaction costs, gather better information for control purposes, and substitute less costly operations in one activity for more costly ones elsewhere. Coordinating linked activities is also an important way to reduce the combined time required to perform them. Hence co-ordination is increasingly important to competitive advantage. (Clarke 1994) And Information system has the biggest role to play in this type of coordination. So the link that we can see here is that Information Systems lead to better coordination which in turn leads to better information which helps in better product design and implementation which in turn leads to product differentiation. Thus we see that a high degree of intangible value is added to the organization. Thus though we see the investment in IT in company’s balance sheets but their returns being intangible are mostly hidden. Below we consider two examples of how IT has been used to differentiate and thus gain competitive advantage.
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