Skip to main content
Engineering LibreTexts

2.2: What is Competitive Advantage

  • Page ID
    78228
  • \( \newcommand{\vecs}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}} } \) \( \newcommand{\vecd}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash {#1}}} \)\(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\) \(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\)

    Competitive Advantage

    What does it mean when a company has a competitive advantage? What are the factors that play into it? While there are entire courses and many different opinions on this topic, let’s go with one of the most accepted definitions, developed by Michael Porter in his book Competitive Advantage: Creating and Sustaining Superior Performance. A company is said to have a competitive advantage over its rivals when it is able to sustain profits that exceed average for the industry. According to Porter, there are two primary methods for obtaining competitive advantage: cost advantage and differentiation advantage. 

    One of the ways that information systems participated in competitive advantage is through integrating the supply chain electronically. This is primarily done through a process called electronic data interchange, or EDI. EDI can be thought of as the computer-to-computer exchange of business documents in a standard electronic format between business partners. By integrating suppliers and distributors via EDI, a company can vastly reduce the resources required to manage the relevant information. Instead of manually ordering supplies, the company can simply place an order via the computer and the next time the order process runs, it is ordered.

    Using Information Systems for Competitive Advantage

    Now that we have an understanding of competitive advantage and some of the ways that IT may be used to help organizations gain it, we will turn our attention to some specific examples. A strategic information system is an information system that is designed specifically to implement an organizational strategy meant to provide a competitive advantage. These sorts of systems began popping up in the 1980s, as noted in a paper by Charles Wiseman entitled “Creating Competitive Weapons From Information Systems.”[4]

    Specifically, a strategic information system is one that attempts to do one or more of the following:

    • deliver a product or a service at a lower cost;
    • deliver a product or service that is differentiated;
    • help an organization focus on a specific market segment;
    • enable innovation.

    Following are some examples of information systems that fall into this category.

    Collaborative Systems

    As organizations began to implement networking technologies, information systems emerged that allowed employees to begin collaborating in different ways. These systems allowed users to brainstorm ideas together without the necessity of physical, face-to-face meetings. Utilizing tools such as discussion boards, document sharing, and video, these systems made it possible for ideas to be shared in new ways and the thought processes behind these ideas to be documented.

    Broadly speaking, any software that allows multiple users to interact on a document or topic could be considered collaborative. Electronic mail, a shared Word document, social networks, and discussion boards would fall into this broad definition. However, many software tools have been created that are designed specifically for collaborative purposes. These tools offer a broad spectrum of collaborative functions. Here is just a short list of some collaborative tools available for businesses today:

    • Google Drive. Google Drive offers a suite of office applications (such as a word processor, spreadsheet, drawing, presentation) that can be shared between individuals. Multiple users can edit the documents at the same time and threaded comments are available.
    • Microsoft SharePoint. SharePoint integrates with Microsoft Office and allows for collaboration using tools most office workers are familiar with. SharePoint was covered in more detail in chapter 5.
    • Cisco WebEx. WebEx is a business communications platform that combines video and audio communications and allows participants to interact with each other’s computer desktops. WebEx also provides a shared whiteboard and the capability for text-based chat to be going on during the sessions, along with many other features. Mobile editions of WebEx allow for full participation using smartphones and tablets.
    • Atlassian Confluence. Confluence provides an all-in-one project-management application that allows users to collaborate on documents and communicate progress. The mobile edition of Confluence allows the project members to stay connected throughout the project.
    • IBM Lotus Notes/Domino. One of the first true “groupware” collaboration tools, Lotus Notes (and its web-based cousin, Domino) provides a full suite of collaboration software, including integrated e-mail.

    2.2: What is Competitive Advantage is shared under a CC BY-SA license and was authored, remixed, and/or curated by LibreTexts.

    • Was this article helpful?