1. Chapter 2
Strategic
Information
Systems

2. Learning Objectives
• Define strategic information systems and explain their
advantages
• Describe the value chain model and its relationship to
information technology
• Describe Porter's competitive forces model and how
information technology helps companies improve their
competitive positions
• Describe several frameworks that show how IT
supports the attainment of competitive advantage
• Building and Implementing Strategic Information
Systems

3. Internetworked
Commerce
Electronic
E-Business &
M-Commerce
1990-
2000
End User
End User
Strategic
Computing
EIS
1980-
1990
&
Decision
Support
Decision
Reporting Support
Systems (DSS)
1970-
1980
And Ad hoc
Reports
Management
Management
1960-
1970
Information
Systems
Processing
1950-1960
EDP and
TPS
Data
3

4. Information Revolution affecting
Competition
• It changes industry structure and, in doing so alters the
rules of competition. For example, the newspaper
industry, book retailer moving to online space.
• It creates competitive advantage by giving companies
new ways to outperform their rivals. For example,
traditional match-making service providers when went
online outperformed all their rivals.
• It spawns whole new businesses, often from within a
organization's existing operations. For examples, when
newspaper industry went online, they created multiple
number of new business models.

5. Strategic Information Systems (SIS)
• Strategic Information System (SIS) is any system
that offers an organization a competitive
advantage over its competitors.
• Strategic Information Systems (SIS) is concerned
with systems which contribute significantly to the
achievement of an organization's overall
objectives.
• Strategic Information Systems (SIS) is those
technology based systems that helps in
implementing business strategies of an
organization.

6. Methods of Competitiveness
• Cost Leadership
• Differentiation
• Focused or Niche Differentiation
• Innovation
• Alliance

7. Porter’s Value Chain Model
• Primary Activities
– Inbound Logistics: this deal with receipt, storage and
management of raw material.
– Operations: Deals with manufacturing or service
steps.
– Outbound Logistics: this deals with collection, storage
and distributions of finished product.
– Marketing and Sales: this includes order entry, price
management, and customer relationship
– After Sales: this deals with the support of the
products after the sale has been done. This may also
include installation and customer training.

8. Porter’s Value Chain Model
• Support Activities
– Procurement: this includes the procurement of raw
material required for the final product, or any other item
required by the organization. Procurement process is
generally spread across the organization.
– Technology: this deals with selection and utilization of
appropriate technology for product development and
other activities.
– Human Resource Management: this deals with managing
human resource in an organization from recruitment to
training to development of employees.
– Firm Infrastructure: this is a major support function which
includes accounting, legal, planning, labor relations, and
other departments in an organization.

9. Porter’s Value Chain Model

10. Porter’s Value System

11. Porter’s Competitive Forces Model

12. Steps to Achieve Cost Leadership
• Identify the appropriate value chain and assign
cost to each activity
• Identify the cost drivers for each value activity
and see how they interact
• Determine the relative costs of competitors and
the sources of cost differentiators
• Develop a strategy to lower relative cost position
through controlling cost drivers or by redefining
the value chain
• Test the cost reduction strategy for sustainability

13. Steps to Achieve Differentiation
• Identify the real customer
• Understand the customer’s value chain and impact of
seller’s product on it
• Identify the customer’s buying criteria
• Identify the possible sources of uniqueness
• Identify the cost associated with these sources of
uniqueness
• Select the value activities that create the most important
differentiation for the customer relative to costs incurred
• Test the selected differentiation strategy for sustainability

14. Wiseman’s Strategic Model
• Wiseman suggested use of the information
system for gaining competitive advantage.
• Wiseman emphasized that the significance of
information system does not lie only in the
technological sophistication, but the role that
they play in gaining and maintaining competitive
advantage for the organizations.
• Organisations must develop a complete
framework for identifying the Strategic
Information Systems opportunities

15. Strategic Planning Process
• Introduce the Information Service Management to SIS
concept, which helps in describing the complete process
using round-robin technique of idea generation to lower-
level management.
• Conduct an SIS idea-generation meeting with middle level
management.
• Conduct an SIS idea-generation meeting with senior
management.
• Introduce the SIS concepts to the top-level management.
• Lastly conduct the SIS idea-generation meeting with the
corporate planners. Compare and match the ideas
generated at various levels.

16. Summary
• This chapter has outlined the emergence and development of theory in the area of management
strategies and strategic information systems.
• With the change in business environment, the information needs of managers kept on changing.
• Organizations started using information systems for business purposes way back in 1950s for data
processing activities and Transaction Processing Systems (TPS) emerged as a Strategic Information
Systems as it started giving competitive advantage to organizations.
• Later in 1960s, organizations started using the data generated by TPS for management reporting
purposes and hence Management Information Systems (MIS) became critical application for business
organisations. Organization got lot of advantage from TPS and MIS systems, but these systems were
too structured systems and never supported decisions of real-time changing needs of managers.
From 1970s onwards, organizations started developing Management Support Solutions like DSS and
ESS.
• With the emergence of Internet as main business communication tool, organizations started looking
at new methods of doing business to gain competitive advantage. Organizations implemented
business models to support e-commerce, e-business and virtual organization using Internet as main
communication and networking technology.
• Strategic Information Systems (SIS) is any Information Systems solution implemented at any level
that offers and organization a competitive advantage over its competitors.
• SIS is concerned with a system which contributes significantly to the achievement of an
organization’s goals and objectives.
• The SIS that helps the organization to achieve competitive advantage can be achieved by
Differentiation, Cost Leadership, Focused or Niche and Innovation.
• Value Chain Model suggest that each organization’s activities can be divided into nine value based
activities and are broadly categorized as primary and support activities.
• Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and
after sales. The support activities include procurement, technology, human resource management
and firm’s infrastructure.

17. Summary
• Organization’s competitive advantage grows out of its ability to perform these activities either in cheaper manner or
in a differentiated manner as compared to its competitors.
• None of these activities are independent. Information technology solutions are implemented at each of these
activities in such a manner that overall optimisation of the product is done.
• Porter also suggested an organization’s value chain for competing in a particular industry is embedded in larger
stream of activities being performed by number of organizations in that industry is defined as “Value System”. Value
System may include suppliers, distributors and retailers.
• Porter’s Competitive Forces Model suggests that the performance of the organization is determined by the extent to
which they cope with, and manipulate, the five key forces which make up the industry structure. The five key forces
defined are the bargaining power of suppliers; the bargaining power of buyers; the threat of new entrants; the threat
of substitute products; and rivalry among existing firms.
• Organizations in general tend to follow one of the four generic strategies to gain above-average performance over its
competitors. The four generic strategies are: cost leadership; differentiation; cost focus; and focused differentiation.
• Charles Wiseman emphasized that organizations must start using information technology based solutions to gain
competitive advantage. Wiseman suggested that the significance of the technology is more on its implementation to
gain competitive advantage.
• Organization must draw a complete IS plan as it helps the organization to identify the key business processes and key
decision points. The IS plan of an organization must also match with the organization plan.
• Porter and Miller suggested the use of an information intensity matrix to assess the role of information technology for
strategic advantage. Strategic thrusts which have been identified as a means of identifying strategic IS are
differentiations; cost; innovation; growth; and alliance. IT can be used to support the organization’s competitive
strategy by supporting competitive thrusts.
• To implement the strategic information system that organizations need to develop a complete strategic planning
process. Wiseman suggested a five stage process for effective SIS planning under which SIS idea-generation meeting
are held at various level in an organization. The basic objectives of these meetings are to introduce the strategic
perspective on information systems which should match with the business strategies of an organisation.
• The importance of the information revolution is not whether it will offer a significant impact on organisation’s
competitive position or not, but when and how it will strike. Organisations that anticipate the power of information
technology will be in control of challenges. Organisations that do not respond will be forced to accept changes that
others have initiated and will find themselves at a competitive disadvantage.