Our Group NATASYA ERNI BINTI MOHD NOR NOR ASMAH BINTI AB RAHMAN DEWI AINA SYAZWANI BINTI A GANI

Chapter outline 3.1Organization and information systems - What is an organization - Features of organization 3.2How information systems impact organizations and business firms Economic impact Organizational and behavioral impacts The internet and organizations Implications for the design and understanding of information systems

Chapter outline 3.3 Using Information Systems To Achieve Competitive Advantage  Porters Competitive Forces Model  Information System Strategies For Dealing With Competitive Forces  The Internet Impact On Competitive Advantage  The Business Value Chain Model  Synergies,Core Competencies, And Network Based Strategies 3.4Using Systems For Competitive Advantages : Management Issues  Sustaining Competitive Advantage  Aligning IT With Business Objective  Managing Strategic Transition.

IT CHANGES THE WAY PEOPLE DOING BUSINESS

Organizatio n MEDIATING FACTORS Environment Culture Structure Business Process Politics Management Decision  Information tecchnology RELATIONSHIP

 Environment Formal Social Structure Process Output

 Business Process  Organizational Politics  Organizational Culture  Organizational Environment  Organizational Structure

 IT changes both the relative cost of capital and cost of information.  It helps business to reduce cost of labour by automated most of work performed- less labour are required.  As the cost of information decrease, it also substitutes for other forms of capital such as buildings and machinery which is relatively high. Hence, over time, we should expect managers to increase their investment in IT because of its declining cost relative to other capital investment.  IT also reduce most of transaction cost: Ie nowadays, business my reduce it production cost by outsourcing most of it cost- this is possible because IT brings organization and suppliers relationship closer- thus organization does not have to produce product itself because it may get it from supplier in shorter time and with lesser cost. (many information for product

 IT also can reduce the internal management cost such as Agency Cost (Middle Manager) because IT make possible for managers to monitor a larger number of employees at a time- thus reduce number of middle managers.  As a result, the firms will be able to increase revenues while shrinking the number of middle managers. Therefore we should expect to see revenues per employees to increase overtime.

 BEHAVIORAL RESEARCHER ARGUE :  IT Flattening Organization: professional workers tend to be self-managing  It encouraged task- force networked organization  RESISTANCE TO CHANGE Some people inside the organization may faced difficulties to adap t.

USING INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE  The most widely used model for understanding competitive advantage is Michael Porter’s competitive forces model.  Michael Porter’s model can answer the sort of questions like:  How can you analyze a business and identify its strategic advantages?  How can you develop a strategic advantage for your own business?

Porter’s Competitive Forces Model

The five competitive forces  Traditional Competitors  New Market Entrants  Substitute Products and Services  Customers  Suppliers

Information System Strategies for Dealing with Competitive Forces 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

The Internet’s Impact on Competitive Advantage

The Business Value Chain Model  Porter Model  Not very specific -What exactly to do?  No exact methodology for competitive advantage  Value Chain Model -Highlights specific activities in the business -Competitive strategies can be best applied -IT Systems are most likely to have impact

The Business Value Chain Model

 The Business Value Chain Model  Primary activities  Support activities  Benchmarking  Comparing efficiency of your business process with strict standards.  Best practices  Identified by government or research organizations, most successful solution for achieving business objective.

 The Business Value Chain Model  Value Web  Collection of independent firms using highly synchronous IT to coordinate value chains to produce product or service collectively.  More customer driven, less linear operation than traditional value chain.

 The Business Value Chain Model  Information systems can improve overall performance of business unit by promoting synergies and core competencies.  Synergies - when output of some units used as inputs to others, or organization pool markets and expertise. -Examples : merger of bank of NY and JPMorgan Chase. -Purchase of You tube on Google.

 The Business Value Chain Model  Core competencies. - Activity for which firm is world-class leader. -Relies on knowledge, experience, and sharing this across business units. - Examples : Procter & Gamble’s intranet and directory of subject matter expert.

 The Business Value Chain Model  Network Based Strategies - Take advantage of firm’s abilities to network each other Include use of :  Network economics  Virtual company model  Business ecosystems

USING INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE : MANAGEMENT ISSUES. Sustaining competitive advantages -Because competitors can retaliate and copy strategic systems, competitive advantage is not always sustainable : systems may become tools for survival.

Aligning IT with business objective. 75 percent of businesses fail to align their IT with their business objectives, leading to lower profitability. Information technology takes on a life of its own and does not serve management and shareholder interests very well. Instead of business people taking an active role in shaping IT to the enterprise. They ignore it, claim not to understand IT, and tolerate failure in the IT area as just a nuisance to work around.

Performing strategic analysis - what is the structure of the industry? - what are value chains for this firm? - have we aligned IT with our business strategy? To align IT: Identify business goals and strategies Break strategic goals concrete activities and processes. Identify metrics for measuring progress. Determine how IT can help achieve business goals. Measure actual performance.

Managing strategic transitions -adopting strategic systems requires changes in business goals, relationships with customers and suppliers, and business process.

References Kenneth C. Loudon and Jane P. Loudon (2014) Management Information Systems: Managing the Digital Firm 13 th Edition, Pearson Education