Information System and Firms’ Competitive Advantage: Wal-Mart Case

Introduction

The principal purpose of information systems in the past has been to support firms’ operations and management. However, there have been considerable changes in what information systems can offer or their application. That is to say, many firms have strived to gain a competitive advantage with the help of strategic information systems. American Hospital Supply was the pioneer in the use of online order entry terminals in the healthcare sector and is still the dominant firm in the medical supply business. United Airlines’ computerized reservation systems Apollo had an edge in the airline industry that many air carriers could not overcome easily in terms of the competitive environment. Merrill Lynch innovatively applied Cash Management Account, which relied on the database as well as laser printing technology, hence gaining an enviable competitive advantage (Rainer & Turban 39).

Other than the above-mentioned cases, a typically best example of how a firm can use an information management system is reflected in Wal-Mart’s series of up-to-date information systems that has seen its continuous growth and success in gaining competitive advantage in nearly the entire aspects of business operations and management. Presently, Wal-Mart is the biggest retail store in the world and the largest public corporation in the United States. This paper highlights how Wal-Mart has applied series of information systems to establish a competitive edge above its competitors.

Strategic Roles of Information Systems

Information Systems have some capabilities that help firms’ operational activities easier and reliable. Through the use of an information system, a firm is able to: have its operations performed in high-speed, high-volume with accurate numerical computations; develop fast as well as accurate communication and collaboration both internally with its departments and externally with other corporations; store a large amount of information in small space but with easy and secure access to the right person or people; make quick access to worldwide information in an easy and cheap way; increase the effectiveness of people working in a different location but for one primary goal or enhance the efficiency of group work, regardless of distance and time; interpret a large amount of data easily and quickly; finally automate its semi-automatic business process and manual tasks (Rainer & Turban 33).

Wal-Mart’s Information Systems Application

Some of the best information systems that Wal-Mart has applied in its operations are the Transaction processing system at its Wal-Mart checkout point-of-sale terminal, Supply chain management system, and Just-in-Time.

Transaction Processing System

The application of this type of information management system was a strategic approach that was meant to give the firm an easy time processing data from various business events (Levy 132). The company ensured the system was installed at its point-of-sale terminal to track the trend in sales. Through this approach, they were able to follow what type of goods were moving faster in terms of sales, at a particular time of the day, week, month and even season, and t what volume. By this, Wal-Mart was able to establish the correct volume of goods to be produced at a particular period of time in order to ensure their low price strategy is followed for competitive advantage (Levy 132).

Supply Chain Management

Supply Chain Management System has helped Wal-Mart manage its flow of products, services, and information among organizations. It was established at Wal-Mart’s retail link system that connects its suppliers (Daudelin 7). Supply Chain Management is fixed at Wal-Mart’s as well as its suppliers’ environments. It helps in the integration of planning, purchasing, manufacturing and distribution of goods between organizations with the common goal of achieving maximum sales. Wal-Mart is a pioneer implementer of SCM, with its Radio Frequency Identification (RFID) Tags (Daudelin 8). With this type of information system, Wal-Mart and the suppliers are automatically alerted on the progress of the product as far as sales and the stock amount is concerned. The company also applied Internet Protocol that enables it to exchange data with its suppliers all over the world. This was seen when the Electronic Data Interchange-Internet Integration Applicability Statement protocol, mostly referred to as EDIINT AS2, was installed within its enterprises and those of its suppliers. Its application helps the company and its suppliers’ lower costs, which are subsequently passed to the customers (Daudelin 8). This enables Wal-Mart to gain a competitive advantage with its low price strategy while achieving a large economy of scale. This is in contrast to many of its competitors in the retail industry which still apply the relatively expensive value-added networks.

Just-in-Time

Just-in-Time information management system is based on the need to acquire needed or the right information to be applied by the right people at the right time (Rainer & Turban 112). The concept was first developed and implemented by Toyota in its efforts to enhance the improvement of the process of manufacturing. Currently, it is being applied in many aspects of business efficiency delivery through the acquisition and delivery of information. Notably, several trends that relate to just in time information management system such as “on-demand computing, on-demand business, and on-demand organizations” (Rainer & Turban 114).

The world’s leading retailer has effectively applied a Just-in-Time information management system by providing its suppliers with virtual spaces within their stores, where they are able to stock as well as maintain the shelves allocated to them. They are also able to collect large amounts of data from its stores all over the globe to help them analyze what happens at each of these stores in a just-in-time style. In fact, the ability to collect real-time information enables the company to make a quick decision in regard to the need at that particular time.

Conclusion

The use of use information management systems to gain a competitive advantage in the modern business environment has become a common phenomenon. While some firms will use the information management systems to increase their production superiority, others apply them to increase the efficiency of operations and management. In both scenarios, the main aim is to increase a firm’s competitive advantage by timeless information acquisition, easy and quick management of supplies, easy sharing of information, and convenient reach to the customer.

Wal-Mart’s large economy of scale means that the global leading retailer is quick at adopting timeless information management system. The company has managed to apply some of the most advanced and prominent information management systems. They have successfully applied the Transaction processing system at its Wal-Mart checkout point-of-sale terminal, Supply chain management system, and Just-in-Time among many other information management systems. This has enabled Wal-Mart to reduce the cost of operations, notably those at its distribution centers, subsequently supporting its long-term strategic goal of taking ownership of the distribution centers. They have also managed to get quick and accurate information through their transaction processing system, and Just-in-Time information management systems. All these have elevated Wal-Mart above its competitors, hence its current status as the world’s leading retailer.

Works Cited

Daudelin, Alexandre. Supply Chain Management the Wal-Mart Way. Supply Chain and Logistics Journal, 2001. Web.

Levy M. Retailing management. New York: McGraw Hill. 2001. Print.

Rainer, Kelly & Turban, Efraim. Introduction to Information Systems: Supporting and Transforming Business. New York. Wiley Publishers, 2003. Print.