This document discusses the relationship between organizations and information systems. It notes that information systems are built by managers to serve business interests but organizations must also adapt to new technologies. The document then outlines several learning objectives related to using models like Porter's competitive forces and the value chain to help businesses identify strategic IS opportunities. It also discusses how IS can help achieve competitive advantages through operational excellence, new products/services, customer intimacy, improved decision-making, and survival.

2. INTRODUCTION
Information systems and organizations influence one
another. Information systems are built by managers
to serve the interests of the business firm. At the
same time, the organization must be aware of and
open to the influences of information systems to
benefit from new technologies.
The interaction between information technology and
organization’s structure, business processes, politics,
culture, surrounding environment and management
decisions.

3. LEARNING OBJECTIVES
• Identify and describe important features of
organizations that managers need to know about in
order to build and use information systems
successfully.
• Demonstrate how Porter’s competitive forces
model helps companies develop competitive
strategies using information systems.
• Explain how the value chain and value web
models help businesses identify opportunities for
strategic information system applications.

4. CONT...
• Demonstrate how information systems help
businesses use synergies, core competencies, and
network-based strategies to achieve competitive
advantage.
• Assess the challenges posed by strategic
information systems and management solutions.

5. TWO WAY RELATIONSHIP
BETWEEN ORGANIZATIONS AND
INFORMATION TECHNOLOGY
This complex two-way
relationship is
mediated by many
factors, not the least of
which are the decisions
made—or not made—
by managers. Other
factors mediating the
relationship include the
organizational culture,
structure, politics,
business processes, and
environment.

6. FEATURES OF
ORGANIZATIONS
• Organizational politics
• Divergent viewpoints lead to political
struggle, competition, and conflict
• Political resistance greatly hampers
organizational change

7. CONT.....
• Organizational culture:
• Encompasses set of assumptions that define
goal and product
• What products the organization should
produce
• How and where it should be produced
• For whom the products should be produced

8. CONT.....
• Organizational environments:
• Organizations and environments have a
reciprocal relationship
• Organizations are open to, and dependent
on, the social and physical environment
• Organizations can influence their environments
• Environments generally change faster than
organizations
• Information systems can be an instrument of
environmental scanning, act as a lens

9. INFORMATION SYSTEM TO ACHIEVE
COMPETITIVE ADVANTAGE
• Why do some firms become leaders in their
industry?
• Michael Porter’s competitive forces model
• Provides general view of firm, its
competitors, and environment
• Five competitive forces shape fate of firm
1. Traditional competitors
2. New market entrants
3. Substitute products and services
4. Customers
5. Suppliers

10. PORTERS COMPETITIVE
FORCES MODEL

11. CONT...
• Traditional competitors
• All firms share market space with competitors
who are continuously devising new
products, services, efficiencies, switching costs
• New market entrants
• Some industries have high barriers to entry, e.g.
computer chip business
• New companies have new equipment, younger
workers, but little brand recognition

12. CONT....
• Substitute products and services
• Substitutes customers might use if your prices
become too high, e.g. iTunes substitutes for
CDs
• Customers
• Can customers easily switch to competitor’s
products.
• Suppliers
• Market power of suppliers when firm cannot
raise prices as fast as suppliers

13. INFORMATION SYSTEMS TO ACHIEVE
COMPETITIVE ADVANTAGE
• Four generic strategies for dealing with
competitive forces, enabled by using IT
• Low-cost leadership
• Product differentiation
• Focus on market niche
• Strengthen customer and supplier intimacy

14. INFORMATION SYSTEMS TO ACHIEVE
COMPETITIVE ADVANTAGE
• Low-cost leadership
• Produce products and services at a lower price
than competitors while enhancing quality and
level of service
• Examples: Wal-Mart
• Product differentiation
• Enable new products or services, greatly
change customer convenience and experience
• Examples: Google, Nike, Apple

15. INFORMATION SYSTEMS TO ACHIEVE
COMPETITIVE ADVANTAGE
• Focus on market niche
• Use information systems to enable a focused
strategy on a single market niche; specialize
• Example: Hilton Hotels
• Strengthen customer and supplier
intimacy
• Use information systems to develop strong ties
and loyalty with customers and suppliers;
increase switching costs
• Example: Netflix, Amazon

16. BUSINESS VALUE CHAIN MODEL
• The Value Chain is a systematic approach to
examining the development of competitive
advantage.
• The chain consists of a series of activities that
create and build value. They culminate in the total
value delivered by an organization.
• The process through which we add value to the
products.
• An inter related series of processes that produces a
service or product to the satisfaction of customers.
• Each activity in a process should add value to the
preceding activities.

17. BUSINESS VALUE CHAIN MODEL
This figure
provides
examples of
systems for both
primary and
support activities
of a firm and of
its value partners
that can add a
margin of value
to a firm’s
products or
services

18. VALUE CHAIN
Primary activities:
Inbound Logistics:
• Here goods are received from a company's suppliers. They
are stored until they are needed on the
production/assembly line. Goods are moved around the
organization.
Operations:
• This is where goods are manufactured or assembled.
Individual operations could include room service in an
hotel, packing of books/videos/games by an online
retailer, or the final tune for a new car's engine

19. VALUE CHAIN
• Outbound Logistics:
• The goods are now finished, and they need to be sent
along the supply chain to wholesalers, retailers or the final
consumer.
• Marketing and Sales:
• In true customer orientated fashion, at this stage the
organization prepares the offering to meet the needs of
targeted customers. This area focuses strongly upon
marketing communications and the promotions mix.
• Service:
• This includes all areas of service such as installation, after-
sales service, complaints handling, training and so on.

20. VALUE CHAIN
Support Activities:
• Procurement:
• The initial area. It means purchasing. This function is
responsible for all purchasing of goods, services and
materials. The aim is to secure the lowest possible
price for purchases of the highest possible quality.
Technology Development:
• Technology is an important source of competitive
advantage. Companies need to innovate to reduce
costs and to protect and sustain competitive
advantage. This could include production
technology, Internet marketing activities, lean
manufacturing, Customer Relationship Management
(CRM), and many other technological developments.

21. VALUE CHAIN
Human Resource Management (HRM):
• Employees are an expensive and vital resource. An
organization would manage recruitment and s
election, training and development, and rewards and
remuneration. The mission and objectives of the
organization would be driving force behind the HRM
strategy.
Firm Infrastructure:
• This activity includes and is driven by corporate or
strategic planning. It includes the Management Information
System (MIS), and other mechanisms for planning and
control such as the accounting department.

22. SIX STRATEGIC BUSINESS OBJECTIVES
OF INFORMATION SYSTEM
 OPERATIONAL EXCELLENCE
 NEW PRODUCT ,SERVICES,AND BUSINESS
MODELS
 CUSTOMER AND SUPPLIER INTIMACY
 IMPROVED DECISION MAKING
 COMPETITIVE ADVANTAGE
 SURVIVAL

23. BUSINESS STRATEGIC
OBJECTIVES
• Operational excellence:
• Improvement of efficiency to attain higher
profitability
• Information systems, technology an important
tool in achieving greater efficiency and
productivity
• E.g. Wal-Mart’s Retail Link system links
suppliers to its 5289 stores wordlwide for
superior replenishment system

24. BUSINESS STRATEGIC
OBJECTIVES
• New products, services, and business models:
• Business model: describes how company
produces, delivers, and sells product or service
to create wealth
• Information systems and technology are a
major enabling tool for new
products, services, business models
• E.g. Apple’s iPod, iTunes transformed the old
business model of music distribution from CDs into
online
• Netflix’s Internet-based DVD rentals vs rental stores

25. BUSINESS STRATEGIC
OBJECTIVES
• Customer and supplier intimacy:
• Serving customers well leads to customers
returning, which raises revenues and profits
• E.g. High-end hotels that use computers to track
customer preferences (room temperature, TV
channels) and use IS to monitor and customize
environment
• Intimacy with suppliers allows them to provide
vital inputs, which lowers costs
• E.g. J . C. Penney’s information system which links
shirt sales records at each store to contract
manufacturer in Hong Kong. Supplier produces
(quantity, style, color, size) based on the sales
records and delivers directly to stores; no inventory
storage costs for J.C.Penney, lower price to
customer

26. BUSINESS STRATEGIC
OBJECTIVES
• Improved decision-making
• Without accurate information:
• Managers must use forecasts, best guesses, luck
• Leads to:
• Overproduction/underproduction of goods and
services
• Misallocation of resources
• Poor response times
• Poor outcomes raise costs, lose customers
• E.g. Verizon’s (phone company) Web-based digital
dashboard to provide managers with real-time data on
customer complaints, network performance, line
outages, etc. Fast response through immediate
allocation of repair resources

27. BUSINESS STRATEGIC
OBJECTIVES
• Competitive advantage
• Delivering better performance
• Charging less for superior products
• Responding to customers and suppliers in real time
• Often achieved through one of first four strategic
business objectives
• E.g. Dell: Consistent profitability over 25 years; Dell
remains one of the most efficient producer of PCs in
world (mass customization)
• But Dell has lost some of its advantages to fast
followers– HP (competitive advantage is not
sustainable)

28. BUSINESS STRATEGIC
OBJECTIVES
• Survival
• Information systems and technologies as a necessity
for businesses to survive
• Driven by:
• Industry-level changes, e.g. the introduction of
ATMs by one bank forces other banks to follow
• firms need IS capability to respond to these
requirements

29. INFORMATION SYSTEMS CAN
IMPROVE OVERALL PERFORMANCE
OF BUSINESS UNITS BY PROMOTING
• Synergies:
• When output of some units used as inputs to
others, or organizations pool markets and expertise.
• E.g. : united western bank merger with IDBI .
• Core competencies:
• Activity for which firm is world-class leader.
• Relies on knowledge, experience, and sharing this
across business units.
• E.g. Procter & Gamble’s uses an intranet known as
Innovation Net to help people working on similar
problems share ideas and expertise.

30. CONT....
• Network-based strategies:
• The availability of internet and networking technologies
has provided advantage of firm’s abilities to network
with each other.
• Include use of:
• Network economics
• Virtual company model
• Business ecosystems