1. Information Systems for Competitive Advantage
Using MIS 4e Chapter 3
Information Systems for Competitive Advantage

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Study Questions
Q1: How does organizational strategy determine information systems structure?
Q2: What five forces determine industry structure?
Q3: How does analysis of industry structure determine competitive strategy?
Q4: How does competitive strategy determine value chain structure?
Q5: How do business processes generate value?
Q6: How does competitive strategy determine business processes and the structure of information systems?
Q7: How do information systems provide competitive advantages?
Q8: 2021?
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Q1: How Does Organizational Strategy Determine Information Systems Structure?
Organizations examine the structure of their industry and determine a competitive strategy
Competitive strategy determines value chains determine business processes
Structure of business processes determines design of supporting information systems
Figure 3-1
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4. Q2: What Five Forces Determine Industry Structure?
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5. Q2: What Five Forces Determine Industry Structure? (cont’d)
Five Forces at FlexTime
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6. Q3: How Does Analysis of Industry Structure Determine Competitive Strategy?
Porter’s Four Competitive Strategies
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7. FlexTime Competitive Strategy
Focus downtown
Urban, city workers
Sophisticated environment
Adults only
Provide superior product, intense, to-the-max workouts that leave clients “pumped and excited”
Focus, Differentiated Strategy
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8. Q4 How Does Competitive Strategy Determine Value Chain Structure?
Value is amount of money a customer is willing to pay for a resource, product, or service. Difference between value an activity generates and its cost is called margin.
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9. Support Activities in the Value Chain
Support Activity
Description
Technology
R & D, New Techniques, Methods, Procedures
Procurement
Raw Materials
Human Resources
Training, Recruiting, Compensation
Firm Infrastructure
General Management, Finance, Accounting, Legal, Government Affairs
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10. Bicycle Maker’s Value Chain
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11. Value Chain Linkages
Interactions across value activities readily supported by information systems
Manufacturing systems use linkages to reduce costs
Sales forecasts to plan production
Production plan used to determine raw materials needs
Material needs used to schedule purchases
Just-in-time inventory
Reduced Inventory sizes and costs
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12. Q5 How Do Business Processes Generate Value?
Network of activities that generate value by transforming inputs into outputs
Business process
Cost of inputs plus cost of activities
Cost of a business process
Equals value of the outputs minus cost
Margin of a business process
Transforms input resources into output resources
Activity
Flow between or among activities
Resources
Inventories, store physical items
Facilities store resources
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13. Three Examples of Business Processes for Bicycle Manufacturer
Materials ordering process transforms cash into a raw materials inventory
Manufacturing process transforms raw materials into finished goods
Sales process transforms finished goods into cash
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14. Three Business Processes for Bicycle Manufacturer (cont’d)
Notice activities get data resources from databases and put data into databases
Business processes vary in cost and effectiveness. Streamlining business processes to increase margin (add value, reduce costs, or both) is key to competitive advantage
Querying both databases allows purchasing department to make decisions on raw materials quantities and customer demand
With this data, purchasing can reduce size of raw materials inventory, reducing production costs and add margin to value chain
Example of using a linkage across business processes to improve process margin:
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15. Improved Ordering Process
Purchase Bicycle Parts activity queries both raw materials inventory database and finished goods inventory database
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16. Ethics Guide: Yikes! Bikes
You are the operations manager for Yikes! Bikes, a manufacturer of high-end mountain bicycles
New owners being deceitful about their plans to turn company into a low-cost, low-service producer.
Most employees will lose their job, but new owners not being honest with employees about that
New owners say you might be promoted to new general manager. Should you trust them?
Q: Should you tell employees what you know?
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Q6 How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?
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Q6 How Does Competitive Strategy Determine Business Processes and Structure of Information Systems? (cont’d)
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19. High-Service Business Bike Rental
Extensive use of information systems
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Bottom Line
Organizations analyze their industry and choose a competitive strategy
Given a strategy, business processes to span value-generating activities are designed
Those processes determine scope and requirements of each organization’s information systems
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21. Q7: How Do Information Systems Provide Competitive Advantages?
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22. Two Ways to Respond to the Five Competitive Forces
Creating new products or services
Enhancing existing products or services
Differentiating
By cost
By quality
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23. Competitive Advantage via Business Processes
Lock in customers
By creating high switching costs
Lock in suppliers
Make it easy to connect to and work with your organization
Create entry barriers
Establish alliances
Creating better business processes
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24. How Does an Actual Company Use IS to Create Competitive Advantages?
Superior customer service
Making it easy for customers to do
business by minimizing data entry:
Drop-down lists, automatic fill-ins, contact lists for customers
Minimizing data-entry errors
ABC, Inc., an actual company, created a competitive advantage in shipping industry by:
Following slides shows some web pages of ABC’s information system
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25. ABC, Inc. Web Page to Select Recipient from Customer Records
Fig3-14
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26. ABC, Inc. Web Page to Select Contact from Customer Records
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27. ABC, Inc., Web Page to Specify Email Notification
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28. ABC, Inc., Web Page to Print a Shipping Label
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29. How Does This System Create a Competitive Advantage?
Enhancing existing products
Differentiating products
Locking in customers
Raising barriers to market entry
Increasing profit margins by decreasing costs and decreasing errors
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30. Q8 2021? What Does Flextime Look Like in 2021?
Assume FlexTime keeps pace with emerging research on optimal workout schedules (
Could develop information systems to track client workouts and intensity, then relate data into net cardiovascular benefits.
Could correlate workout data with dietary data and client weight loss or gain.
Maybe provide data to medical insurers and help its active clients to obtain reductions in medical insurance premiums.
FlexTime could, but should it? Is it worthwhile for FlexTime to develop such systems?
Optimist view
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Pessimistic View
No longer a single business entity. Maybe it becomes a federation of trainers, workout spaces, dieticians, and recreational sports leagues.
Federation uses free data storage, data communication, and emerging collaboration tools and systems to appear as a virtual organization to clients, but is composed of independently owned and operated small business entities.
Who knows?
Suppose economic downturn proves too much for FlexTime and it is forced to reconfigure into a shadow of former self
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32. Guide: Limiting Access to Those Who Have Access
Digital divide segregates “haves” and “have-nots”
Using the Internet is a matter of access to knowledge
Advantages accrue to those who have easy access
Digital divide between those who have Internet access and those who don’t
Divide deepens education, income, social differences
Internet access might be available at public places, but:
Not everyone served
Not as convenient as home access
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33. Intellectual capital resides on Internet readily available
Benefits of Access
Intellectual capital resides on Internet readily available
Cheaper product customer support
Reduces warehousing costs
Reduces mailings costs
Benefits for businesses
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Issues to Think About
What groups of people in the United States are not connected to the Internet?
Does it make sense for benefactors, such as Bill and Melinda Gates, to provide access to those in poverty?
What keeps the elderly from accessing the Internet?
Should the government help the elderly?
What could be done to provide Internet access for the poorly educated?
What role, if any, could local governments have? State? Federal? United Nations?
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Issues to Think About
If you are from outside the United States, what is the connectivity situation in your country?
Is there a digital divide there?
Are some countries more behind in connectivity trends than others?
What does this mean for their ability to compete? What does this mean for citizens of those countries?
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Take Away from Guide
Knowledge grows exponentially—just like capital
Digital divide can create or worsen social problems
Businesses and government should explore their responsibilities with respect to the digital divide
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37. Guide: Your Personal Competitive Advantage
Who will be your competitors when you seek a job after you graduate from college?
What will be your competitive advantage in the job market?
What can you do before you graduate to develop your competitive advantage?
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38. Guide: Your Personal Competitive Advantage (cont’d)
Switching costs?
Differentiating products?
Creating barriers?
Establishing alliances?
Reducing costs, increasing revenues?
How could these concepts help you get and keep a job?
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