Information technology

1. 1/23/2023 1
CHAPTER 3
The Strategic Role
of Information
Systems

2. Outline
 Strategic role of Information Systems.
 Use of information systems to gain strategic
advantage.
 How should a manager think about competitive
strategies?
 IS and Value Chain model.
 Competitive strategies and Competitive forces the use
of information systems.
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3. Introduction
 Businesses invest in information systems to manage
their internal production functions and to came up
with the demands of key actors in their environments.
 Firms invest in information systems for the following
business objectives:
 To achieve operational excellence (productivity,
efficiency, agility)
 To develop new products and services
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4. Cont.
 To attain customer intimacy and service (continuous
marketing, sales, and service; customization and
personalization)
 To improve decision making with great accuracy and
speed
 To achieve competitive advantage over competitors
 To ensure survival (sustainability of the business in the
market)
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5. The role of information system.
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 Why we Use Information Systems?
• The three Primary Uses of Information Systems
1. Automation (doing things faster, with Greater accuracy
and consistency)
2. Organizational Learning (doing things better, using BI,
DM, DW, and Big Data)
3. Strategic support (Doing things smarter)
4. Automation (doing things faster)
• Technology is used to automate a manual process
Doing things faster, better, cheaper with Greater
accuracy and consistency

6. Styles of Processing
 Manual processing
 Technology-supported process
 Completely automated
Manual Processing:
 No technology automation support
Technology Supported Processing
 A combination of manual and system supported steps
Fully Automated Processing
 All manual steps have been eliminated.
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7. Strategic role of Information Systems.
“Operational Effectiveness” means performing similar
activities better than rivals or competitors do
_ “Strategic Positioning” means performing different
activities from rivals or performing similar activities in
different ways
“Organizations have competitive advantage:
• when they provide more value to their customers or
• when they provide the same value to customers at a lower
price”
“The essence of strategy is choosing to perform activities
differently than rivals do”
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8. Strategic Information System (SIS)
 Strategy
 Systems that support or shape a business unit’s competitive
strategy
 Competitive Advantage
 An advantage over competitors in some measure such as
cost, quality, or speed.
 A difference in the Value Chain Data
 Improving Core Competency
 Employee productivity
 Operational efficiency
 Approach
 Outwardly - Aiming at direct competition(customers, competitors,
environments
 Inwardly - Focused on enhancing the competitive position of the (firm
employees, systems, procedures)
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9. Strategic Information Systems (SISs)
 Is Any information system--EIS, OIS, TPS,
KMS--that changes the goals, processes,
products, or environmental relationships to help
an organization to gain a competitive advantage
or reduce a competitive disadvantage.
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10. The role of IT in Strategic Management
 Innovative applications - Create innovative
applications that provide direct strategic advantage to
organizations to be first mover in the market)
 Competitive weapons - IS(s) themselves are
recognized as a competitive weapon
 Changes in processes - IT supports changes in business
processes that translate to strategic advantage
 Links with business partners - IT links a company with
its business partners effectively and efficiently
 Cost reductions - IT enables companies to reduce
costs of transactions, transport,etc
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11. Cont.
 Relationships with suppliers and customers -IT can be used to
lock in suppliers and customers intimacy, or to build in
switching costs and loyalty.
 Toyota: uses IS to facilitate direct access from suppliers to production
schedules
 Permits suppliers to decide how and when to ship supplies to plants, allowing more
lead time in producing goods.
 Amazon: keeps track of user preferences for purchases, and recommends titles
purchased by others
 New products -A firm can leverage its investment in IT to create
new products that are in demand in the market place(need of
customer)
 Competitive intelligence - by collecting and analyzing
information about products, markets, competitors, and
environmental changes
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12. 2. IS for Organizational Learning (doing things better)
Going beyond automation
 Involves learning to improve the day-to-day
activities within the process .
 Looking at patterns and trends (outlier detection,
identifying loyal and not loyal customer) .
Organizational Learning
 Using acquired knowledge and insights to improve
organizational behavior( recommender system )
Total Quality Management (TQM)
 Monitoring an organization to improve quality of
operations, products, and services.
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13. 3. Strategic support (Doing things smarter)
• Providing support in a way that enables the firm to
gain or sustain competitive advantage over rivals.
Sources of Competitive Advantage
• Having the best-made product on the market.
• Delivering superior customer service.
• Achieving lower cost than rivals.
• Having branded manufacturing technology.
• Having shorter lead-times in developing and
testing new products.
• Having a well-known brand name and reputation.
• Giving customers more value for their money.

14. Use of information systems to gain strategic
advantage.
 A competitive strategy is a broad-based formula for
how a business is going to compete, what its goals
should be, and what plans and policies will be required
to carry out those goals.
 A strategic information system helps an
organization gain a competitive advantage
through its contribution to the strategic goals
of an organization and/or its ability to
significantly increase performance and
productivity.
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15. Competitive Strategy Concepts.
 The strategic role of information systems involves
using information technology to develop products,
services, and capabilities that give a company
strategic advantages over the competitive forces it
faces in the global marketplace.
 This creates strategic information systems,
information systems that support or shape the
competitive position and strategies of an enterprise.
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16. IS and Value Chain model
 organization uses as strategic tool of information
system.
 to discover where a company can apply IS to gain a
competitive advantage
 Tool to use highlights the primary or support activities
 The value chain helps an organization determine the
‘value’ of its business processes for its customers.
 The value chain model views an organization as a
chain or a series of processes,
 primary activity(i.e., Purchased supplies inbound
logistics, Operations, Outbound logistics, Sales and
marketing, Service)
secondary/support activities (i.e., administration,
human resources, technology, procurement)
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17. Cont.
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18. The Role of IS in Value Chain
IS competitive advantage in VC:
 Internet link with suppliers, dealers
 Extranets: using the Internet for B2B interactions
 Computer-aided manufacturing systems
 Web site with online product ordering
 Customer service response system
 Computer-aided design
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19. The Technology/Strategy Fit
 An IS implementation should create a significant
organizational change consistent with the business
strategy.
 Business Process Reengineering (BPR)
 The fundamental re thinking and radical redesign
of business processes to achieve dramatic
improvements in critical measures of
performance
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20. Cont.
So a strategic information system can be any kind of
information system (TPS, MIS, DSS, etc.) that helps
an organization:
1. Gain a competitive advantage.
2. Reduce a competitive disadvantage.
3. Meet other strategic enterprise objectives.
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21. Porter’s Competitive Forces Model
 According to Michael Porter, a firm can survive and
succeed in the long run if it successfully develops
strategies to confront five competitive forces that shape
the structure of competition in its industry. These
forces are:
1. Rivalry of competitors within its industry.
2. Threat of new entrants.
3. Threat of substitutes products or services(market
share).
4. Bargaining power of customers.(buyers)
5. Bargaining power of suppliers.
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22. Rivalry of competitors within its industry.
 This is your direct competition and sits at the center of
Porter’s model. Most businesses limit their
competition by geography. This is a fatal mistake.
Threat of new entrants.
 This summarizes how easily a new competitor can
enter your industry.
Example: How easy is it to move into your industry? Your
service? Is your customer based easily reached? Can a
new competitor easily access your distribution
channels? Are your customers loyal to your brand?
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23. cont.
Threat of substitutes products or services.
 This threat comes from the availability of alternative
products with lower prices or better performance.
 Substitute products are related economically by the degree to which
consumers are willing to use one product instead of the other
 E.g., Internet music service versus CDs.
Example:
How easily can a competitor access your customer
base? How easily can a competitor duplicate your
pizza and service? How loyal are your customers?
Does your pizza reflect the whims of a trend? Or is it a
commodity, easily substituted with another pizza?
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24. Cont.
Bargaining power of customers
 Think of this as a customer’s buying power.
 The Internet offers customers a unique opportunity to
quickly and easily compare prices.
Example:
Can you compete with other pizza sellers like BJ’s,
Wegmens or Sam’s Club? Is your pizza differentiated?
Is choosing a competitor’s pizza easy and not related
to any costs of a customer’s time, wallet or effort?
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25. Cont.
Bargaining power of suppliers.
This is your suppliers’ buying power and refers to
everything you need to provide your goods and
services.
Example: Are there only a few suppliers to those who
make pizza? Is your ability to be different dependent
on a supplier’s special product(an imported cheese,
fresh tomatoes, etc.)? Can your competitors easily
access your supplies? What would happen if one of
your suppliers closed their door or started selling to
your competitor? Don’t forget your employees as a
service supplier. Is finding and retaining reliable help
competitive?
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27. Competitive strategy of Information System
 A Strategic Information System can offer competitive
strategy to an organization in the following ways:
These include:
 Cost Leadership Strategy
 Differentiation Strategy
 Innovation Strategy
 Growth Strategies
 Alliance Strategies
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28. Cost Leadership Strategy:
using online B/C(e. g. Amazon.com)& B/B(e.g. Alibaba’s) models to
reduce the costs of business processes
 Use information systems to be come a low cost producer of
products and services.
 Find ways to help suppliers or customers reduce their costs.
 Increase the costs of competitors.
 e.g. walmart
 Minimizes inventory at warehouses, operating costs.
 Efficient customer response system.(minimizing inventory
and time delays between receipt of the goods, and the
customer purchase.)
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29. Cont….competitive strategy
Differentiation Strategy:
-Develop ways to differentiate products and services from
competitors.
- Reduce the differentiation advantages of competitors.
Innovation Strategy
- Find new ways of doing business:
a) develop new products & services
b) enter new markets or marketing segments.
c) establish new business alliances
d) find new ways of producing products/services
e) find new ways of distributing products/services
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30. Cont..: competitive strategy
Growth Strategies:
‾ Significantly expand the company’s capacity to produce
goods and services.
‾ Expand into global markets
‾ Diversify into new products and services
‾ Integrate into related products and services.
Alliance Strategies
‾ Establish new business linkages and alliances with
customers, suppliers, competitors, consultants and other
companies (mergers, acquisitions, joint ventures,
forming virtual companies, etc.).
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31. Use of information technologies to implement basic
competitive strategies.
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32. CHAPTER 4
Information
Systems in
Business
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33. 1/23/2023 33
3.1. Functional Units
How are enterprises organized?
Most are organized
in a hierarchy

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Functional Units
What is a functional unit?
 Individual operating entity, which can include
departments, centers, and divisions
Manufacturing
Engineering
or product
development
Accounting
and
Finance
Human
Resources
(HR)
Distribution
Sales
Marketing
Information
Technology
Customer
Service

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3.1.1. Human Resources Management
 Manages human resources function
 Employee relationship management (ERM) system
facilitates communication with employees
 Human resources information systems support
activities such as identifying potential employees,
maintaining complete records on existing
employees, and creating programs to develop
employees’ talents and skills.

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Human Resources Management
SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
Training and development TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL
CAREER PATHING DESIGN EMPLOYEECAREER PATHS KNOWLEDGE
COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BENEFITS MANAGEMENT
HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCENEEDS STRATEGIC

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3.1.2. Financial and Accounting Management
What are the functions of accounting and finance systems?

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Financial and Accounting Management
SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL
PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWLEDGE
BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT
PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC

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3.1.3. Production/Operations Management
What is computer-aided design (CAD)?
 Uses special software
to aid in product
design
 Computer-aided
engineering (CAE)
uses computers to
test product designs

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Production/Operations Management
What is computer-aided manufacturing (CAM)?
 Use of computers to control production equipment
 Computer-integrated
manufacturing (CIM)
integrates operations
of manufacturing
process

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Production/Operations Management
What is Material Requirements Planning (MRP)?
Uses software to
monitor and control
production processes
Focuses on
inventory of parts
Manufacturing Resource
Planning II (MRP II)
is extension of MRP
Helps in scheduling,
tracking production,
and monitoring
product quality

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Production/Operations Management
SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERATIONAL
COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDGE
PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRODUCTS MANAGEMENT
FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILITIES STRATEGIC

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3.1.4. Marketing and Sales Management
What is a marketing information system?
 Central repository for marketing tasks
 Market research system analyzes data gathered from
surveys

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Marketing and Sales Management
What is sales force automation (SFA) software?
 Tools for
traveling
salespeople
 Runs on PDAs
or notebook
computers

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Marketing and Sales Management
SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL
MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE
PRICING ANALYSIS DETERMINE PRICES MANAGEMENT
SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC

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3.1.5. Distribution Management
Provide forecasting
for inventory control
Provide tracking of
product shipments

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3.1.6. Customer Relationship Management
Manages information about customers, interactions with
customers, past purchases, and interests
Mainly used in three departments
Sales—tracks sales
process from initial
contact through
final purchase
Customer service
department—
tracks ongoing
correspondence
with customer
Marketing—learns
about customers
and then designs
new products

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Customer Interaction Management
 Manages interactions
with customers
 Telephone calls
 E-mail
 Web interactions
 Instant Messaging
Sessions

49. Information Systems in the Enterprise.
 No business can afford disjointed information systems
that don't work together to produce a coherent picture
of the entire organization.
 All the functions of a business must be integrated
across traditional lines of demarcation.
 Islands of information can be devastating to a
company if data cannot be shared throughout the
company.
 Even worse, the islands of information can create
problems if each faction of an enterprise has differing
information that conflicts with other islands of
information.
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50. Cont.
 These kinds of problems are what gave rise to
enterprise applications that share the same data
anywhere it's needed in an organization.
 As networks of all kinds take hold, from the Internet to
intranets to extranets, Web-based enterprise
applications are increasingly widespread.
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51. Enterprise Systems.
 It's not unusual to find an organization with three or more
different information systems that act as islands.
 Enterprise systems aim to correct that problem. Also known as
enterprise resource planning (ERP) systems,
 their main goal is to bridge the communication gap between all
departments and all users of information within a company.
 If production enters information about its processes, the
data are available to accounting, sales, and human
resources.
 If sales and marketing is planning a new advertising
campaign, anyone, anywhere within the organization will
have access to that information
 .If HRM appoints an employees, the profiles of employee’s
are available to finance department.
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52. Enterprise system(ES)
 are large-scale application software packages that
support business processes, information flows,
reporting, and data analytics in complex organizations.
In short, ES are packaged enterprise application
software (PEAS) systems.
Types of enterprise systems include:
 Enterprise resource planning (ERP)
 Customer relationship management(CRM)
 Material requirements planning (MRP)
 Business intelligence systems and data warehousing
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Enterprise Resource Planning (ERP)
Provides software
applications
to coordinate activities
of functional units
ERP system is
commercial software
package that enables
a company to
integrate the data
used throughout the
entire organization.
What is ERP?
ERP systems integrate the functional areas of the organization by enabling
seamless information flows across them.

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55. Enterprise Resource Planning (ERP)
 An ERP system is an attempt to integrate all functions
across a company to a single computer system that can
serve all those functions’ specific needs.
 It may also integrate key customers and suppliers as
part of the enterprise’s operation.
 It provides integrated database and custom-designed
report systems.
 It adopts a set of “best practices” for carrying out all
business processes.
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56. Major Reasons for Adopting ERP
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 Integrate financial information
 Integrate customer order information
 Standardize and speed up operations processes
 Reduce inventory
 Standardize Human Resources information
Potential Benefits of ERP
Internal Benefits
 Integration of a single source of data
 Common data definition
 A real-time system
 Increased productivity
 Reduced operating costs
 Improved internal communication
 Foundation for future improvement

57. Cont.
External Benefits
 Improved customer service and order fulfillment
 Improved communication with suppliers and
customers
 Enhanced competitive position
 Increased sales and profits
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58. ERP Implementation
 ERP systems require a major commitment and
investment,
 often require companies to modify some of their
processes to accommodate the software, and
 can take a long time to implement
 ERP is a process of managing all resources and their use in the
entire enterprise in a coordinated manner.
ERP is a set of integrated business applications, or modules which
carry out common business functions such as general ledger,
accounting, or order management

59. Benefits of ERP Systems
 They can make organizations more flexible, agile, and adaptive.
 They can improve managers’ ability to make better, more timely
decisions.
 They can improve customer service, production, and distribution.
 Automated update of related information when new information
is entered in one module.
 Direct access to a wealth of real-time operating information.
Limitations of ERP.
 May require organizations to change existing business processes
to fit the predefined business processes of the ERP software.
 Can be complex, expensive, and time consuming to implement.

60. Material requirements planning (MRP)
 Material requirements planning (MRP) is a production
planning and inventory control system used to manage
manufacturing processes.
 Most MRP systems are software-based, while it is
possible to conduct MRP by hand as well.
 An MRP system is intended to simultaneously meet
three objectives:
 Ensure materials are available for production and products are
available for delivery to customers.
 Maintain the lowest possible material and product levels in store
 Plan manufacturing activities, delivery schedules and
purchasing activities.
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61. Alok Srivastava
3.2. Business Intelligence Systems
Business Intelligence (BI) is a
broad range of software and
solutions aimed at collection,
consolidation, analysis and
providing access to information
that allows users across the
business to make better decisions.
 The technology includes
software for database query and
analysis, multidimensional
databases or OLAP tools, data
warehousing and data mining,
and web enabled reporting
capabilities.
 Applied across disciplines but
especially in Customer
Relationship Management,
Supply Chain Management,
Enterprise Resource Planning
Provide better, faster and more
accessible reports
 involves acquiring data and information
from a wide variety of sources and
utilising them in decision-making.

62. What can companies do with BIS?
 Track their own operations
 customers’ activity patterns
 industry trends.
 Fact-based assessments help companies work toward
specific goals with confidence.