Chapter 2 Using Information Technology for Competitive Advantage MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell Chapter 2 Using Information Technology for Competitive Advantage 2-1 Copyright 2001, Prentice-Hall, Inc.

What is a Firm? Physical System Closed-loop Controlled by management Uses feedback to ensure objectives met Open because of environmental interaction Managed through use of a conceptual system 2-2

Importance of Environment Very reason for a firm’s existence Firm takes resources from environment, transforms them, and returns goods and services to environment 2-3

The Firm’s Environment Society Government Global Community Financial Community The Firm Customers Suppliers Labor unions Competitors Stockholders or owners 2-4

The Firm Is Connected to Its Environment by Resource Flows Physical and conceptual Some flows are major Some should not occur at all All resources that enter the firm from the environment eventually return to the environment 2-5

Competitive Advantage Computer field perspective Use of information to gain leverage in marketplace Relies on more than physical resources Addressed with strategic objectives 2-6

A Value Chain Firm Infrastructure Margin Human resource management Support Activities Margin Technology development Procurement Marketing and sales Inbound logistics Operations Outbound logistics Service Margin Primary Activities 2-7 Source : Michael E. Porter

Source : Michael E. Porter A Value System Supplier value chains Firm value chain Channel value chains Buyer value chains 2-8 Source : Michael E. Porter

The Information Resources Two views of information management 1. Manage data by implementing computer-based database management systems (DBMS) 2. Manage resources that produce the information 2-9

The Information Resources Hardware Software Database Information Specialists Information Users Facilities 2-10

The Information Resource Manager -- the CIO Chief Information Officer (CIO) is not simply a title, but role Manager of information services Contributes managerial skills Solves information resources problems Solves problems in other areas of firm’s operations 2-11

The CIO Attitude The business is what counts Build partnerships/ties with the rest of the firm Improve basic business processes Communicate in business terms, not IS jargon Provide reliable IS services Be positive, not defensive 2-12

Strategic Planning Long-range planning Intends to give firm most favorable position in its environment Specifies strategies for achieving objectives Need for each business area to create its own strategic plan 2-13

information resources planning for marketing The Functional Areas Should Cooperate in Developing Their Strategic Plans Strategic planning for information resources Strategic planning for marketing resources Strategic planning for financial resources Strategic planning for manufacturing resources Strategic planning for human resources 2-14

Strategy Set Transformation Organizational strategy set MIS strategy set Mission Objectives Strategy Other strategic organizational attributes System objectives constraints System design strategies MIS strategic planning process 2-15

Strategy Set Transformation: Basic Flaw Business areas do not always have the resources to ensure accomplishment of strategic objectives 2-16

SPIR Strategy set transformation; support the firm’s objectives Strategic planning for information resources (SPIR) develops firm and IS strategic plans concurrently SPIR content 1. What is to be achieved 2. What will be required 2-17

Strategic Planning for Information Resources Influence on Information Resources Information resources and IS strategy Business strategy Influence on Business Strategy 2-18

Strategic Plan Framework for Information Resources Virtual Office Objectives Knowledge-based systems Objectives AIS Objectives MIS Objectives DSS Objectives Required Information Resources Required Information Resources Required Information Resources Required Information Resources Required Information Resources 2-19

The Strategic Implications of End-User Computing (EUC) Levels of end users in terms of capabilities menu-level end users command-level end users end-user programmers functional support personnel EUC application considerations shifts workload so that end-users and information specialists’ talents are better used reduces communications gap 2-20

EUC Risks Poorly aimed systems Poorly designed/ documented systems Inefficient use of information resources Loss of data integrity Loss of security Loss of control 2-21

Information Resources Management (IRM) Concept Realization that firm’s information resources go far beyond the information itself Activity pursued by managers at all levels Identifying, acquiring, and managing information resources needed to satisfy information needs 2-22

IRM - Required Elements A recognition that competitive advantage can be achieved by means of superior information resources A recognition that information services is a major functional area A recognition that the CIO is a top-level executive 2-23

IRM-Required Ingredients (cont.) A consideration of the firm’s information resources when engaging in strategic planning A formal strategic plan for information resources A strategy for stimulating and managing end-user computing 2-24

The IRM Model The environment of the firm The firm’s executives ENVIRONMENTAL INFLUENCES The firm’s executives CIO Other executives Internal influences Firm’s strategic plan FUNCTIONAL AREAS Information services Finance Human resources Manufacturing Marketing INFORMATION RESOURCES Central computing resources Disbursed computing resources DATA AND INFORMATION Users engaged in end-user computing Other users 2-25

IRM Model: Firm Environment Provides setting for achieving competitive advantage Executives are aware of need to manage resource flows to meet needs of environmental elements 2-26

IRM Model: Firm’s Executives Includes CIO Guides firm toward objectives Key activity is strategic planning 2-27

IRM Model: Business Areas Information services is a major business area Each area develops own strategic plans One business area strategic plan is for information resources 2-28

IRM Model: Information Resources Strategic plan for information resources details acquisition and management Information resources Centralized Dispersed throughout firm 2-29

IRM Model: Users Details data and information flows between resources and users Some users engage in end-user computing 2-30

Summary Environment of a firm consists of eight elements Firms attempt to achieve competitive advantage Margin - value of products and services over cost Value chain Information resources Hardware, software, facilities, database, information specialists, information, and users 2-31

Summary [cont.] Executives perform strategic planning SPIR All firm’s managers need to engage in IRM Recent revelation Integrating concept 2-32