Lesson Four Mis

LESSON 4: Information Systems and business strategy
Overview
After completing this chapter, you will be able to:
• understand SIS (Strategic information system)

• Analyze the role played by the six major types of information systems in organizations
• Examine how the competitive forces and value chain models can be used to identify
opportunities for strategic information systems
• Describe how organizations can use information systems to enhance quality in their
operations, products and services
Summary of the subtopics

• Strategic information system (SIS)
• Role played by is in organizations
• Opportunities for SIS
• How IS promote quality
4.1 Strategic information system (SIS)

It is a system that enables companies to gather information about their competitors and the
economy, which can help them gain and sustain a competitive advantage e.g. increasing market
share, defining its market share etc.
Information is needed in the following areas:
• threats of new entrants
• threats of substitute products
• bargaining power of customers
• bargaining power of suppliers
• natural rivalry among competitors
4.1.1 Characteristics of SIS

• It is largely external i.e. it looks at economic trends, markets and technological changes,
political influences etc.
• It is future oriented- it is concerned with long term future trends, forecasting and strategic
assessment.
• It is both quantitative and qualitative- it involves opinions, judgments, observations and
insight.
• It is boundary free-there is no artificial boundary and the information is broad and
reflecting holistic organizational view.
• It is multi-dimensional –it considers all facets of the organization.
4.2 Role played by information system in an organization

Strategic level systems help senior manager with long-term planning. The principle concern at
this level is matching changes in the external environment with existing organizational capabilities.
It supports the long-range planning activities of senior management. It also helps the senior
management to tackle and address strategic issues both in the firm and in the external environment.
Management level systems help middle managers monitor and control. It typically provides
periodic reports rather than instant information on operations. It supports the monitoring,
controlling, decision-making and administrative activities of middle managers. Some of the
management level systems support non-routine decision making where they tend to focus on less-
structured decisions for which information requirements are not always clear.
Knowledge level systems help knowledge and data workers design product, distribute information
and cope with paperwork. The main purpose is to help integrate new knowledge into the business
and to help the organization control the flow of paperwork. Knowledge level systems, especially
in the form of workstations and office systems are the fastest-growing applications in business
today.
Operational level systems help operational manager keep track of the firm’s day-today activities.
The principle purpose is of operational level system is to answer routine questions and to track the
flow of transactions through the organization.
4.2.1 Six Major Types of Systems
Information systems are built to serve each of the four levels of an organization based on the five
main functional area of business.
• Transaction Processing Systems (TPS) serve the operational level of an organization.
• Knowledge Work Systems (KWS) and Office Automation Systems (OAS) serve the knowledge
level of an organization.
• Decision-support Systems (DSS) and Management Information Systems (MIS) serve the
management level of an organization.
• Executive Support Systems (ESS) serves the strategic level of an organization.
4.3 opportunities for strategic information systems
Strategic information systems should be distinguished from strategic level systems for senior
managers that focus on long-term, decision making systems where strategic information systems
can be used at all levels of an organization and are far-reaching and deep-rooted than the other
kinds of systems. Strategic information systems fundamentally change a firm’s goals, products,
services or internal and external relationships. In order to use the strategic information systems as
competitive weapons, we must understand where strategic opportunities for businesses are likely
to be found based on two models of a firm and its environment: the Competitive Forces Models
and the Value Chain Model
4.3.1 Countering Competitive Forces (Competitive Forces Model)
In the competitive forces model (a model used to describe the interaction of external influences,
specially threats and opportunities, that effects an organization’s strategy and ability to compete;
illustrates in Figure 4.1), a firm faces a number of external threats and opportunities:
• The threat of new entrants into its market
• The pressure from substitute products or services
• The bargaining power of customers
• The bargaining power of suppliers
• The positioning of traditional industry competitors
Competitive advantage can be achieved by enhancing the firm’s ability to deal with customers,
suppliers, substitute products and services, and new entrants to its market, which in turn may
change the balance of power between a firm and other competitors in the industry in the firm’s
favor.
New market Substitute products

entrants and services
The firm Traditional

competitors
Suppliers Customers
Figure 4.1
Organization can use four basic competitive strategies to deal with these competitive forces:
• Product differentiation
Firms can develop brand loyalty by product differentiation – creating unique new products and
services that can be easily be distinguished from those of competitors, and that existing competitors
or potential new competitors can’t duplicate. Manufacturers are starting to use information
systems to create products and services that are custom-tailored to fit the precise of individual
customers.
• Focused differentiation
Businesses can create new market niche by focused differentiation – identifying a specific
target for a product or service that it can serve in the superior manner. A firm can provide a
specialized product or service that serves this narrow target market better than existing competitors
and that discourages new competitors. An information system can give companies advantage by
producing data to improve their sales and marketing techniques. Sophisticated data-mining
software tools find patterns in large pools of data and infer rules from them that can be used to
guide decision making. Data-mining is both a powerful and profitable tool, but it poses challenges
to the protection of individual privacy. Data-mining technology combines information from many
diverse sources to create a detailed “data image” about individuals, such as the income, hobbies,
driving habit, and the question here is whether companies should be allowed to collect such
detailed information about individuals.
• Developing tight linkages to customers and suppliers
Firms can create ties to customers and suppliers that “lick” customers into the firm’s products and
that tie suppliers into a delivery timetable and price structure shaped by the purchasing firm. This
raises switching costs (the cost for customers to switch to competitors’ product and services) and
reduces customers’ bargaining power and the bargaining power of suppliers. This is similar to the
just-in-time delivery or inventory systems which reduce the cost of inventory, the space required
for warehousing and construction time.
• Becoming the low-cost producer
To prevent new competitors from entering their markets, business can produce goods and services
at a lower price than competitors. Strategically oriented information systems help firms
significantly lower their internal costs, allowing them to deliver products and services at a lower
price (and sometimes with higher quality) then what the competitors can provide. For example,
organizations can use supply chain management to integrate supplier, distributor and customer’s
logistics requirements into one cohesive process. Information systems make supply chain
management more efficient by integrating demand planning, forecasting, materials requisition,
order processing, inventory allocation, order fulfillment, transportation services, receiving,
invoicing and payment. Supply chain management can not only lower inventory costs but also
can create efficient customer response systems that deliver the product or service more rapidly to
the customer.
The following show how the above mentioned strategic can be use on the Internet.
Strategy Internet Application
Virtual banking which allows customers to view account
Product differentiation statements, pay bills, check account balance and obtain 24-hour
customer service through the World Wide Web
Hotel room reservation tracking system which provides
Focused differentiation
electronic information on participating hotels. It can analyze
these usage patterns to tailor hospitality-related products more
closely to customer preferences
Links to customers and Access through websites to track or check the status of any
suppliers shipment
Uses EDI (electronic data interchange) to quote any quotation
Low cost producer
or charge any bills.
4.3.2 Value Chain Model

(Leveraging Technology in the Value Chain)
The value chain model highlights the primary or support activities that add a margin of value to a
firm’s products or services where information systems can best be applied to achieve a competitive
advantage. The value chain model can supplement the competitive forces models by identifying
specific, critical leverage points where a firm can use information technology most effectively to
enhance its competitive position. This model views the firm as a series or chain or basic activities
that add a margin of value to a firm’s products or services. These activities can be categorized as
either primary activities or support activities. Primary activities are most directly related to the
production and distribution of the firm’s product and services that create value for customer which
includes inbound logistics, operations, outbound logistics, sales and marketing, and services.
Support activities make the delivery of the primary activities possible and consist of organization
infrastructure (administration and management), human resources (employee recruiting, hiring
and training), technology (improving products and the production process) and procurement
(purchasing input). Organizations have a competitive advantage when they can provide more
value to the customers or when they provide the same value to customers at a lower price.
Information systems could have strategic impacts if it helped the firm provide products or services
at a lower cost than competitors or if it provides the products or services same cost as competitors
but with greater value.
4.4 How Information Systems Promote Quality
4.4.1 What is Quality?

Quality can be defined from both producer and customer perspectives. From the perspective of
producer, quality signifies conformance to specifications or absence of variation form those
specification. From the perspective of customer, quality means:
• Concerned with the quality of physical product – its durability, safety, ease of use and
installation.
• Concerned with the quality of service – the accuracy and truthfulness of advertising,
responsiveness to warranties and ongoing product support.
• Concerned with psychological aspects – the company’s knowledge of its product, the courtesy
and sensitivity of sales and support staff, and the reputation of the product.
Total Quality Management (TQM) is a concept that makes quality control a
responsibility to be shared by all people in an organization. TQM holds that the achievement of
quality controls is an end in itself. Everyone is expected to contribute to the overall improvement
of quality. TQM encompasses all of the functions within an organization.
4.4.2 How Information Systems Contribute to Total Quality Management
Information systems can help firms to achieve their goals by:
• Simplifying the product, the production process or both
• Benchmark
• Use customer demands as a guide to improving products and services
• Reduce cycle time
• Improve the quality and precision of the design
• Increase the precision of production

Lesson Four Mis

Uploaded by

Copyright:

Available Formats

Lesson Four Mis

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lesson Four Mis

Uploaded by

Copyright:

Available Formats

LESSON 4: Information Systems and business strategy

• understand SIS (Strategic information system)

Summary of the subtopics

4.1 Strategic information system (SIS)

4.1.1 Characteristics of SIS

4.2 Role played by information system in an organization

4.3.1 Countering Competitive Forces (Competitive Forces Model)

New market Substitute products

The firm Traditional

4.3.2 Value Chain Model

4.4.1 What is Quality?

You might also like