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Page 1 of Chapter 2: Organizational Strategy, Competitive Advantage, and Information
Systems (4th Edition of Management Information Systems)
Chapter Outline
2.1 Business Pressures, Organizational Responses, and Information Technology Support

2.2 Competitive Advantage and Strategic Information Systems
Learning Objectives
2.1 Identify effective IT responses to different kinds of business pressures.

2.2 Describe the strategies that organizations typically adopt to counter Porter’s five competitive
forces.
Teaching Tips and Strategies
In this chapter, students are introduced to the basic concepts of information systems in the
organization and how businesses use information systems in nearly every facet of their
operations.
It is important for students to understand how information systems are critical to a business in
obtaining and maintaining a competitive advantage. So it is also important for your students to
make the connection between information systems and the success of a business. Making the
point that businesses usually fail when they do not keep up-to-date and close to state-of-the-art
information systems is usually something that helps get the students’ attention.
One way to explain this is to illustrate how universal Information Technology is used in
companies today. Explain to your students that they will probably work for a company that
utilizes a variety of technologies at various levels of the organization. You might want to open
your presentation for this chapter with a discussion about how information technology impacts
many aspects of our lives too. Some examples are:
▪ ATM machines and banks in general. (Growing cashless society)

▪ Grocery store checkout line cash registers with bar code scanners and the ability to use
ATM and credit cards for purchases. Some stores also using smartphone apps such as
ApplePay, Walmart Pay, Walgreens Pay, among others to process customer payment.
▪ The ability of those grocery stores point-of-sale systems to also update the store’s inventory
system in real-time.
▪ Your college or university relies on IT. The registrar’s office, financial aid office, and the
library are just a few examples.
▪ Smartphones, tables, and laptops.
Explain to your students how the various areas of your school use information technology to
perform their tasks. Develop examples of how the office that handles administrative systems
(i.e. registration/grades, financial aid, etc.) is usually on a different network, because this helps
limit the number of users that can modify grades or view students’ records.
Discuss why by properly managing their data network the school saves money and has the
ability to control what information or programs students and faculty members have access to.
Then explain how companies use access controls to manage information stored on their
network. For example, in most organizations, each user has a unique userID and pass code.
They are usually linked to a level of security clearance, which limits what information the user
can access. That access is based on a user’s need, which ensures that they can accomplish the
work that they need to complete, yet cannot access other parts of the system.
Many tasks that are performed by some employees are the same every week (such as
recording hours worked for payroll) and that process can be automated including entering time
sheets, calculating hours worked, etc. Discussing payroll related examples usually gets the
students interested in information systems since it has a universal interest for all employees,
whether they are an MIS major or not.
Unfortunately, in today’s interconnected world we have access to so much information that it is

often overwhelming for managers to know where the best data resides, and how to access it.
Managers can see what products are selling and what products are not. This information can
be used to better help management run the day-to-day operations of a business.
This chapter is important in that it sets the foundation for the importance of information systems
discussed through the rest of the book. Your students should begin to realize that this is
important for them to understand and will use in their future careers. Your students need to
understand that information technology not only change the way business is done, but it also
helps the business share information and make better-educated decisions that will in turn help
their business thrive in a competitive environment. The students should also be able to apply
this knowledge to their specific major.
It is important for students to understand that there is need for managers to understand what is
involved with IT because of the interdependence that exists between the business and
technology used.
It is also important for you to emphasize that technology is evolving into open system standards.
This means that industries now expect information technology solutions to be seamlessly
interconnected and upgradeable. A good example of this the way the medical industry is
automating patient records.
Businesses that can upgrade their systems can save millions of dollars not just on equipment
costs, but save money by not having to retrain customers or employees on new system
interfaces when they are implemented.
This chapter should help your students to realize that when they or the business where the work
is looking at adapting or changing technology they use, it is not as easy as just installing a piece
of new hardware or a software program. They must consider and analyze future needs and
make sure that the programs/technologies they are implementing will not only work today, but
also be able to integrate with new technologies in the future.
Blackboard/CMS suggestions
I again suggest that if you are teaching an online class or are looking for a short video for a
lecture class, you can usually find a relevant topic videos at http://youtube.com. The problem is
that sometimes they are product demos or sales videos, but they still usually present relevant
information or concepts.
Opening case: Disney Animation Develops Software to Make Big Hero 6
1. Is Hyperion a strategic information system for Disney Animation? Why or why not? Provide
specific examples to support your answer.
ANSWER
Hyperion is a software application that attempts to create light the way we actually see it in
the real world. The software attempts to mimic the many obstacles the sun’s rays encounter
in the atmosphere and then diffuse the light the same way natural light does.
Before Hyperion, the process of simulating light was tedious, because each ray of light’s
trajectory had to be individually tracked. A single frame of animation could contain several
light sources, and each ray of light could bounce o multiple surfaces, making the calculation
of those individual pathways computationally intensive.
Level: Easy
Section/Learning Objective: Section 2.1 / Learning Objective 2.1
Bloom’s Category: Synthesis
AACSB Category: Reflective Thinking
2. Will Hyperion provide a sustainable competitive advantage for Disney Animation? Why or
why not?
ANSWER
It would take a large amount of resources for a competitor to quickly replicate the system.
Disney needed huge amounts of processing power to produce the film. Three Disney server
farms in Los Angeles and one in San Francisco were connected to create a supercomputer
of 4,600 servers that contained 55,000 central processing units (CPUs). Coda, an
automated information management system, integrated the information being processed
from the four server farms. Because Disney artists could utilize such a huge amount of
computational power to process the images, they could see their work the next morning.
Animated films typically take about four years to produce, and the Disney team was writing
the Hyperion software and using it on Big Hero 6 at the same time.
Level: Medium
Bloom’s Category: Comprehension
3. Look ahead in this chapter. Which one of Porter’s strategies for competitive advantage is
Disney pursuing? Explain your answer.
ANSWER
The two of Porter’s strategies are:
Differentiation strategy. Offer different products, services, or product features than your
competitors.
Innovation strategy. Introduce new products and services, add new features to existing
products and services, or develop new ways to produce them.
Level: Easy
IT’s About Business - 2.1 Using Information Technology for Social Good
1. Describe how the Infoladies are a strategic information system for the country of Bangladesh.
Provide specific examples to support your answer.
ANSWER
A group of 50 young women travel to the villages to make computers, tablets, smartphones,
and digital cameras available to all. The Infoladies also bring a glucometer so that villagers
can monitor their blood sugar levels. They also help farmers research information on crops
and farming methods. However, the most popular request is for villagers to communicate
with male relatives via Skype. Many of these men work in the Middle East.
Level: Easy
2. Discuss how the Rainforest Connection’s use of smartphones is a strategic information

system for our planet. Provide specific examples to support your answer.
ANSWER
The Rainforest Connection uses volunteers to put solar panels on old smartphones and
place them high in the trees in the middle of a rainforest. The phones can pick up the sound
of chainsaws cutting down a tree within one square mile, and emit data to rangers patrolling
the forest, who can quickly stop the loggers. Just one phone can save enough trees to stop
15,000 tons of carbon from entering the atmosphere.
Level: Medium
IT’s About Business 2.2: Innovative Technologies for Airlines and Airports
1. Look ahead to Porter’s five strategies for competitive advantage. Provide an example of a
technology discussed in this case that supports each of Porter’s strategies.
ANSWER
Examples include…
Threat of entry of new competitors

- Delta airline’s providing their flight attendants with mobile devices to assist with customer
service
Bargaining power of suppliers

- Hong Kong Airport’s use of radio frequency identification (RFID) technology to track
where bags are and where they should go
- Airports are deploying multifunction kiosks in many areas, allowing passengers to serve
themselves without agents’ help
Bargaining power of customers (buyers)

- Delta airline’s providing their flight attendants with mobile devices
- Edinburgh Airport’s use of GOOGLE Glass to provide services to passengers, such as
real-time flight information and foreign-language translation
- Helsinki airport’s use of Walkbase to improve the flying experience by alleviating
bottlenecks in passenger flow, such as in certain shopping areas or at the security gate.
- Hong Kong Airport’s use of radio frequency identification (RFID) technology to track
where bags are and where they should go
Threat of substitute products or services

Rivalry among existing firms in the industry

- Edinburgh Airport’s use of GOOGLE Glass to provide services to passengers, such as
real-time flight information and foreign-language translation
- Delta’s use of mobile devices in maintenance operations.
Level: Medium
2. Propose additional applications that airports and airlines might develop that could create a
competitive advantage in the marketplace.
ANSWER
Some examples might include…
- ability of passengers to order (and pay for) food by a smartphone app based on what is
sold at the airport and have it delivered to the plane prior to departure.
- passenger selection of movie(s) to watch on plane prior to departure
- passenger ability to select and start watching a movie in the departure area and finish it
while on the plane.
- airport parking’s ability to help someone remember where they parked their car (possibly
based on license tag reader/tracker)
Level: Medium
3. Are the technologies discussed in this case examples of strategic information systems? Why
or why not?
ANSWER
In some cases, it might be a matter of opinion. However, systems such as the one that
enables a member of the flight crew to report an in-cabin maintenance issue via their mobile
device so that a repair can be completed, if possible, at the next airport might be considered
strategic systems. As would the baggage system and system to track passenger flow
through the airport.
Level: Medium
IT’s About Business 2.3: The “Fit” Problem When Shopping for Clothes Online
1. Look ahead to Porter’s five strategies for competitive advantage. Take each of the example
companies in this case, and identify which of Porter’s strategies that company is using.
ANSWER
Examples include…
Cost leadership strategy

- Zappos.. no cost customer returns
Differentiation strategy
- Virtualize… creating a reference garment silhouette for comparison to help customers
shop online
- Cloths Horse… data-driven software that takes data from both consumers (body type,
favorite brands, fit preferences) and clothing manufacturers to create a database to
custom fit their customers.
- LoveThatFit… allows consumers to upload a full body image taken in tightly fitting
clothing. The startup uses proprietary algorithms to address the fit problem.
- Bodymetrics… Bodymetrics provides a “body scanner” that customers can access either
at home or in a store. This technology scans the customer’s body, captures more than
150 measurements, and produces a digital replica of the customer’s size and shape.
Innovation strategy
shop online
- It might be argued is Zappos’ strategy of no returns is Innovative
Operational effectiveness strategy

shop online
Customer orientation strategy

shop online
Level: Medium
2. Do the systems these companies are using constitute strategic information systems? Why or
why not?
ANSWER
Each company has a unique way of fitting their garments to their customers. So based on
that, each has what constitutes a strategic information system.
Level: Easy
Bloom’s Category: Analysis
Before You Go On - 2.1
Section 2.1
1. What are the characteristics of the modern business environment?
ANSWER
It is a combination of social, legal, economic, physical, and political factors in which
businesses conduct their operations
Level: Easy
Bloom’s Category: Knowledge
AACSB Category: Technology
2. Discuss some of the pressures that characterize the modern global business environment.
ANSWER
Market pressures are generated by the global economy, intense competition, the changing
nature of the workforce, and powerful customers.
Level: Medium
3. Identify some of the organizational responses to these pressures. Are any of these
responses specific to a particular pressure? If so, which ones?
ANSWER
Organizations are responding to the various pressures by implementing IT such as strategic
systems, customer focus, make-to-order and mass customization, and e-business.
Level: Medium
Before You Go On - 2.2
1. What are strategic information systems?

ANSWER
Any information system which helps an organization gain a competitive advantage or reduce
a competitive disadvantage is a strategic information system.
Level: Easy
2. According to Porter, what are the five forces that could endanger a firm’s position in its
industry or marketplaces?
ANSWER
 The threat of entry of new competitors.
 The bargaining power of suppliers
 The bargaining power of customers
 The threat of substitute products or services
 The rivalry among existing firms in the industry
Level: Easy
3. Describe Porter’s value chain model. Differentiate between Porter’s competitive forces
model and his value chain model.
ANSWER
Porter’s competitive forces model is focused on analyzing the company’s external
environment and how competitive the industry is. The value chain model is focused on the
internal operations of the company and is a model to allow the firm to analyze its own
processes.
Level: Easy
4. What strategies can companies use to gain competitive advantage?
ANSWER
• Cost leadership
• Differentiation
• Innovation
• Operational effectiveness
Level: Easy
5. What is business – IT alignment?
ANSWER
Business-IT alignment is the tight integration of the IT function with the strategy, mission, and
goals of the organization. That is, the IT function directly supports the business objectives of
the organization
Level: Easy
6. Give examples of business – IT alignment at your university, regarding student systems.

(Hint: What are the “business” goals of your university with regard to student registration, fee
payment, grade posting, etc.?)
ANSWER
Responses will depend on the amount of IT support provided at your school. Hopefully that
support is high and link to the overall business strategy of the institution.
Level: Medium
Discussion Questions
1. Explain why IT is both a business pressure and an enabler of response activities that counter
business pressures.
ANSWER
Rapid changes in information technology and capabilities force business to adapt or go out
of business. On the other hand, IT assists companies in their efforts to stay up on the latest
strategies to provide the best customer service, to provide better quality products, new and
different delivery methods..
Level: Medium
2. What does a flat world mean to you in your choice of a major? In your choice of a career?
Will you have to be a “lifelong learner”? Why or why not?
ANSWER
It means that you need to think about who across the world you might be competing against.
You not only will have to think about those in your immediate vicinity, but due to the far
reaching impact of the new global, Web-based platform which will continue to grow, you will
be competing with anyone who has access to a cell phone or a computer.
You clearly will be a lifelong learner since there will be new devices, new applications and
new ways in which they are used. Anyone who stops learning will be left behind very
quickly..
Level: Medium
3. What might the impact of a flat world be on your standard of living?
ANSWER
Resources that were previously very expensive or unattainable will become increasingly
more available. Your ability to find inexpensive travel options are a good example.
Level: Easy
4. Is IT a strategic weapon or a survival tool? Discuss.
ANSWER
It is both. Used to establish a competitive advantage in an industry, IT helps an organization
implement its strategic goals and increase its performance and productivity. As a survival
tool, it is used to fend off various threats such as new entrants, suppliers and customers
bargaining power, substitute products or services, and rivalries among existing firms in the
industry.
Level: Hard
5. Why might it be difficult to justify a strategic information system?
ANSWER
SISs are often very complex and very expensive to develop and outcomes may take years
to observe and measure.
Level: Medium
6. Describe the five forces in Porter’s competitive forces model, and explain how the Internet
has affected each one.
ANSWER
• The threat of entry of new competitors.
• In the CarMax case we saw how the use of communications and the Internet allow
• a company to gain an advantage by providing access to its inventory.
• The bargaining power of suppliers
• Companies can find potential suppliers and compare prices giving buyers a better chance
to negotiate terms.
• The bargaining power of customers
• Customers’ power has increased tremendously with the availability of information on the
Internet. Much the same as suppliers above, they have a much more information about
sources of goods and services and pricing to help them when they are making purchasing
decisions. (The demon customer case drives this point home)
• The threat of substitute products or services
• Any industry which is primarily based on digitized information is at risk, and must take the
threat of Internet delivered products and services seriously.
• The rivalry among existing firms in the industry
• The Internet makes competition more intense.
• Keeping anything secret is impossible once it is available on the Internet. Competitors
can see the systems and match their features to remain competitive.
Level: Medium
7. Describe Porter’s value chain model. What is the relationship between the competitive forces
model and the value chain model?
ANSWER
The competitive forces model is useful for identifying general strategies, organizations us
the value chain model to identify specific activities where they can use competitive
strategies for greatest impact.
Level: Medium
Bloom’s Category: Application
8. Describe how IT can be used to support different value chains for different companies?
ANSWER
A value chain is a sequence of activities through which the organization’s inputs, whatever
they are, are transformed into more valuable outputs, whatever they are. So, based on this
definition, IT can support the HR/Payroll, Accounting, Purchasing, etc. for different value
chains.
Nearly every company has to have an IT operation that performs these functions
(HR/Payroll. Accounting, etc) even though they have different value chains.
Level: Medium
9. Discuss the idea that an information system by itself can rarely provide a sustainable
competitive advantage.
ANSWER
Information Technology is a tool. It is management’s responsibility to use it to the best
advantage that will help to sustain a competitive advantage.
Level: Medium
Problem Solving Activities
1. Surf the Internet for information about the Department of Homeland Security. Examine the
available information, and comment on the role of information technologies in the department.
ANSWER
Have the students report what they found.
Level: Easy
2. Experience customization by designing your own shoes at www.nike.com, your car at

www.jaguar.com, your CD at www.easternrecording.com, your business card at
www.iprint.com, and your diamond ring at www.bluenile.com. Summarize your experiences.
ANSWER
Before starting this activity, you might consider asking the students if any have already used
any of these sites and discuss their experiences.
Level: Easy
3. Access www.go4customer.com. What does this company do and where is it located? Who
are its customers? Which of Friedman’s flatteners does this company fit? Provide
examples of how a U.S. company would use its services.
ANSWER
The company operates call centers located in India. They do everything from market
surveys and debt collections, to inbound call center operations. Using Friedman’s model,
the would be a global company handling outsourced services. A US company could use
them for a number of things, including operating their customer call center, telephone
marketing, and market surveys.
Level: Easy
4. Enter Walmart China (www.wal-martchina.com/english/index.htm). How does Walmart

China differ from your local Walmart (consider products, prices, services, etc.)? Describe
these differences.
ANSWER
This site is more of a corporate information site than a marketing site. No products listed for
sale, however there is some information about a few product lines.
Level: Easy
5. Apply Porter’s value chain model to Costco (www.costco.com). What is Costco’s

competitive strategy? Who are Costco’s major competitors? Describe Costco’s business
model. Describe the tasks that Costco must accomplish for each primary value chain
activity. How would Costco’s information systems contribute to Costco’s competitive
strategy, given the nature of its business?
ANSWER
Costco’s business model is to sell premium merchandize at a lower price to members
(captive group of shoppers). Sam’s club is their biggest competitor. They need to procure
the right merchandise mix targeting their members by building a strong understanding of
their base of members. They need to have an efficient supply chain and then be able to
track the success of their promotions and marketing efforts.
Level: Medium
6. Apply Porter’s value chain model to Dell (www.dell.com). What is Dell’s competitive
strategy? Who are Dell’s major competitors? Describe Dell’s business model. Describe
the tasks that Dell must accomplish for each primary value chain activity. How would Dell’s
information systems contribute to Costco’s competitive strategy, given the nature of its
business?
ANSWER
Dells strategy is to offer high-end computers with premium features and components at a
lower price and allow for customers to customize their systems using a web-based interface.
Dell must support a highly efficient supply chain system and reduce their inventory costs.
They need to track new components and offer them to their customers and then track the
quality of their components as they are introduced into their systems.
Level: Medium
Closing Case 1: Football Teams Use Virtual Reality
1. In what other ways could professional and college football programs use virtual reality
systems? (Hint: Consider the fan experience.)
ANSWER
Have your students come up with a few ideas, but a few might include
- provide a way for a fan experience what it is like to be on the field during a recent major
game
- provide a way for a fan experience what it is like to be on the field during a historical game
- not sports, but the tech could be used by key member’s of the college’s marching band to
learn show formations enabling them to train their squads, reducing time on the practice
field.
Level: Medium
Section/Learning Objective: Section 2.4 / Learning Objective 2.4,1
2. Are STriVR and EON strategic information systems for any football program? Why or why
not? Support your answer with specific examples.
ANSWER
These information might be considered strategic information systems in that they enable
individual players to learn formations and tendencies of other team members faster. This is
because the system can reduce the time between plays during practice.
These systems can also be programmed to replicate or mimic tendencies of future opposing
teams so that players can see this from field level rather than only from a game film shot
from above the field.
Level: Medium
3. Will STriVR and EON become competitive necessities for football programs? Why or why
not? Support your answer with specific examples.
ANSWER
As these systems mature and develop, as mentioned in the case, the turnaround of game
“films” will become faster. This will potentially enable the teams that use it the ability to view,
via VR, what another team did in their previous game.
Another reason is that players earn a great deal of money. An injury can be expensive both
financially, and if it is a key player, on the field. Using one of these systems, has the
potentially of reducing the change of an injury.
Level: Medium
Closing Case 2: Bank of America Transforms Its Information Technology
1. What is the relationship between the development of mobile banking customer applications
and the closing of banking centers?
ANSWER
As BofA analyzed their network of banking centers, they found that some of those centers
were not being utilized as much as the bank deployed new technologies (i.e online banking,
etc…). This enabled BofA to reduce the number of banking centers and ATMs needed to
support their customer base.
Level: Easy
2. Refer to Porter’s strategies for competitive advantage. Which strategy (or strategies) is (are)
the Bank of America pursuing? Provide specific examples to support your answer.
ANSWER
Cost leadership strategy… reduced operating costs by reducing the number of banking
centers and ATMS. Consolidated and reduced the number of data centers
Differentiation and Innovation strategy… provided customers with a banking experience

where they can conduct business with the bank using information technology (mobile and
web-based) and no longer have to go to an ATM or banking center.
Innovation strategy… annual meet with technology start-ups to assess and, in some cases,
adopt new evolving applications and technologies.
Operational effectiveness strategy… reduced operating costs by reducing the number of

banking centers and ATMS. Consolidated and reduced the number of data centers
Customer orientation strategy… provided new ways for BofA customer to conduct business
and financial transactions with the bank via the bank’s website and smartphone apps.
Have your students come up with others…
Level: Medium

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Page 1 of Chapter 2: Organizational Strategy, Competitive Advantage, and Information

Systems (4th Edition of Management Information Systems)

2.1 Business Pressures, Organizational Responses, and Information Technology Support

2.1 Identify effective IT responses to different kinds of business pressures.

Teaching Tips and Strategies

▪ ATM machines and banks in general. (Growing cashless society)

Unfortunately, in today’s interconnected world we have access to so much information that it is

Opening case: Disney Animation Develops Software to Make Big Hero 6

2. Discuss how the Rainforest Connection’s use of smartphones is a strategic information

Threat of entry of new competitors

Bargaining power of suppliers

Bargaining power of customers (buyers)

Threat of substitute products or services

Rivalry among existing firms in the industry

Cost leadership strategy

Operational effectiveness strategy

Customer orientation strategy

Before You Go On - 2.1

1. What are the characteristics of the modern business environment?

Before You Go On - 2.2

1. What are strategic information systems?

4. What strategies can companies use to gain competitive advantage?

AACSB Category: Technology

5. What is business – IT alignment?

6. Give examples of business – IT alignment at your university, regarding student systems.

3. What might the impact of a flat world be on your standard of living?

4. Is IT a strategic weapon or a survival tool? Discuss.

5. Why might it be difficult to justify a strategic information system?

Problem Solving Activities

2. Experience customization by designing your own shoes at www.nike.com, your car at

4. Enter Walmart China (www.wal-martchina.com/english/index.htm). How does Walmart

5. Apply Porter’s value chain model to Costco (www.costco.com). What is Costco’s

Closing Case 1: Football Teams Use Virtual Reality

Closing Case 2: Bank of America Transforms Its Information Technology

Differentiation and Innovation strategy… provided customers with a banking experience

Operational effectiveness strategy… reduced operating costs by reducing the number of

Have your students come up with others…

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