Microeconomic advantage of IT
Carr’s view that investment on IT infrastructure has only macroeconomic advantages is not true as it has both microeconomic and macroeconomic benefits.
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In macroeconomic sense, investment in IT impacts on the patterns of production, trade, employment as well as investment while in microeconomic sense, it changes business activities.
IT enhances a firm’s capacity to adopt e-commerce and besides, they use it to enhance reservations and package-tracking systems among other uses.
These help such companies which have adopted innovative application of IT achieve particular operating advantages which could help them achieve positioning and in turn gain dominance in the market over its competitors.
Comparison of growth of railroads and IT
Carr’s comparison of the growth of railroads in 1860s and IT in 1990s is fair both terms of rates of growth and economic impacts. Both of them came with initial advantages which made firms rush to implement systems which could help them take advantage of the new technologies.
However, these strategies led to overproduction of goods and availability of services which in turn resulted to surge of the same in the market.
Both of them therefore directly contributed to drop in price levels in the different periods which greatly impacted on profits gains by firms. Other sectors which have also raised the operation expenses include the motor-vehicle industry.
Recent IT investment
Where I work, the company has recently adopted a virtual meeting technology from Webex Company to provide webconferencing services for the firm.
This was a strategic investment meant to help cut costs on travel expenses especially between the company’s branches and headquarter by the company’s corporate managers as well as division personnel.
It will also ensure cost reductions on travel and entertainment expenses incurred during trips by the marketing personnel to meet its major customers. By adopting this technology, the company will lower its operating costs and therefore raise profits.
Information Technology matters a lot for corporations and nations globally. It has both macroeconomic and microeconomic advantages to firms and nations and any firm or country that does not invest in IT infrastructure is left in business operations.
The distribution networks have increased and prices of important IT functionality have dropped making it affordable. It is therefore essential for companies to be more innovative in IT applications to gain competitive advantages.
Porter’s Five Forces Model
The company has limited the threat of entry of new companies into the business by adopting an online technology as well as GPS technology which provides customers with access to distribution of its rental cars.
It also provides a variety of car models for rental to satisfy customer preference and choice. In addition, it has adopted a social networking technology to achieve customer loyalty to its rental services.
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Its adoption of online reservation services and marketing technologies ensure that it eliminates the threat of customers switching to taxis. Besides, it provides a broad variety of car models which is not possible to find in curb companies.
To minimize the bargaining power of customers, it ensures minimal human interaction between the company staff and the customers during transactions by making all its transaction services online. This reduces customers’ price sensitivity as it also maintains fixed costs.
Zipcar takes advantage of the strength of its distribution channels to achieve bargaining power in the market. This gives it exclusive advantage to charge high prices. Its prices are inclusive of parking fee, insurance as well as gas costs.
Finally, the company’s online and GPS technology provides it with a powerful competitive strategy which enables it gain competitive advantage over traditional rental agencies.
Zipcar’s Business Strategy and Information Technology
The synergy between Zipcar’s business strategy and IT has enabled the company achieve significant competitive advantage over its rival traditional rental agencies.
It has been able to achieve greater customer loyalty as compared to traditional rental agencies. It has over 200,000 customers who own Zipcards in more than 50 markets across the US, Canada and the UK.
The network effects applied by Zipcar include the Zipcard which enables customers achieve convenience in online car reservations as well as payment for rental services; and the social networking technologies enable customers to share their Ziptrips thereby increasing customer preference to Zipcar.
The most threatening competition is from entry of new players in the business who are also technologically savvy. The company will therefore adopt more innovative marketing strategies which enable Zipcar achieve greater customer loyalty and consistent positioning.