CHAPTER 2

Information Systems and the Modern

Organization
CHAPTER OUTLINE
2.1 Business Processes
2.2 Business Process Reengineering and
Business Process Management
2.3 Business Pressures, Organizational
Responses, and Information Technology
Support
2.4 Competitive Advantage and Strategic
Information Systems
2.5 Business – Information Technology
Alignment
 2.1 Business Processes
◼ Business Process: a collection of related
activities that produce a product or a service of
value to the organization, its business partners,
and/or its customers.
◼ One functional area
◼ Cross-functional

Example of Business Process:

Ordering e-ticket from Oman Air website

http://www.omanair.com/wy/
 Receive Ticket
Order
Traveler Airline Web Site
Seats NO
Notify Traveler
Plan Trip Available
YES

Check Flights Reserve Seats

NO
Frequent
Use NO Flyer
NO Seats Credit
Mileage
Available Card?
Sufficient?
? YES
YES
YES Charge Credit Card
Subtract Mileage
Submit Ticket Order
Charge NO
Notify Traveler
OK?
Receive e-Ticket YES
Confirm Flight(s)

Issue e-Ticket
2.2 Business Process Reengineering and
Business Process Management
Business Process Reengineering (BPR)

a radical redesign of a business process that

improves Its efficiency and effectiveness,
often by beginning with a “clean sheet.”
Business Process Reengineering and
Business Process Management
Business Process Management (BPM)

A management technique that includes

methods and tools to support the design,
analysis, implementation, management, and
optimization of business processes.
✓ Customer satisfaction

✓ Cost reduction
Business Process
Excellence ✓ Quality

✓ Differentiation
 2.3 Business Pressures, Organizational
Responses and IT Support
Business Pressures:
◼ The business environment is the combination of social,
legal, economic, physical, and political factors that affect
business activities.

◼ Significant changes in any of these factor are likely to

create business pressure on the organization.

◼ Market Pressures
◼ Technology Pressures
◼ Societal Pressures
Business Pressures, Organizational
Responses and IT Support
 Market Pressures
The Global Economy and Strong Competition
◼ Regional agreements
◼ NAFTA – European Union
◼ BRICS
◼ Cost of labor
◼ Outsourcing / offshoring

The move to global economy has been facilitated by the

emergence of the global Web-based platform
 Market Pressures
The Changing Nature of the Workforce

◼ More diversified
◼ Increasing number of women
◼ Persons with disabilities
◼ Teleworking
 Market Pressures
Powerful Customers

◼ More knowledgeable customer

◼ Higher expectations
◼ Compare prices

Compare 120+ leading car insurance providers in the UK

◼ Online shopping / e-auction

◼ Customer Intimacy / CRM
 Technology Pressures
◼ Technological Innovation and Obsolescence
◼ Hard to remain technologically current

◼ Information Overload
◼ The internet is bringing flood of
information
 Societal Pressures
◼ Social Responsibility
◼ Green IT

◼ Digital Divide : the gap between those who have access

to ICT and those who do not

◼ Government Regulation and Deregulation

◼ Compliance with new laws and policies
 Societal Pressures
See CBS video on disposal of e-waste

One Laptop per Child initiative

 Societal Pressures
◼ Protection Against Attacks / Natural disaster
◼ 9/11
◼ Cyclone Gonu
◼ National Data Center

◼ Ethical Issues
◼ Monitoring e-mails (Snoopware)

Monitoring Employees on Networks: Unethical OR Good Business ?

◼ Customers privacy
 Organizational Responses
◼ Strategic Systems
◼ increase market share and/or profits
◼ better negotiate with suppliers
◼ prevent competitors from entering their markets.

◼ Customer Focus
◼ Retaining current customers and attracting new ones
 Organizational Responses
◼ Make-to-Order and mass customization
◼ producing customized products and services
◼ Reebok
◼ Dell

◼ E-business and E-commerce

◼ Buying and selling products and services electronically.
◼ E-business is a broader concept than e-commerce.
◼ B2C , C2C, B2B
 2.4 Competitive Advantage and
Strategic Information Systems
◼ Competitive Advantage
An advantage over competitors in some measure such as
cost, quality, or speed, leads to control of a market and to
larger-than average profits.

◼ Strategic Information Systems

provide a competitive advantage by helping an organization to implement its
strategic goals and to increase its performance and productivity
 Competitive Advantage and Strategic
Information Systems
 Cost Strategy
Example: Using computer-aided manufacturing systems to lower production
costs
creating web sites for electronic commerce to lower marketing costs
 Differentiation Strategy
Example: Providing fast and complete customer support services via the
Internet

 Innovation Strategy
Example :Introduce unique product/service that include IS compo net

 Customer- orientation Strategy : concentrate on making customers

happy
Competitive Advantage and Strategic
Information Systems
 Competitive Advantage and Strategic
Information Systems
How can a business use IS to compete?
 Porter’s Competitive Forces Model
The best-known framework for analyzing competitiveness is Michael
Porter’s competitive forces model (Porter, 1985).

http://www.youtube.com/watch?v=mYF2_FBCvXw

How the Web influences Porter’s competitive forces?

 Porter’s Competitive Forces Model
◼ Threat of entry of new competitors is high
when it is easy to enter a market and low when
significant barriers to entry exist.

◼ A barrier to entry is a product or service feature

that customers expect from organizations in a
certain industry.

◼ For most organizations, the Internet increases

the threat that new competitors will enter a
market.
Porter’s Competitive Forces Model
◼ The bargaining power of suppliers is high
when buyers have few choices and low when
buyers have many choices.

◼ Internet impact is mixed. Buyers can find

alternative suppliers and compare prices more
easily, reducing power of suppliers.

◼ On the other hand, as companies use the

Internet to integrate their supply chains,
suppliers can lock in customers.
Porter’s Competitive Forces Model
◼ The bargaining power of buyers is high when
buyers have many choices and low when buyers
have few choices.

◼ Internet increases buyers’ access to information,

increasing buyer power.

◼ Internet reduces switching costs, which are the

costs, in money and time, to buy elsewhere.
This also increases buyer power.
Porter’s Competitive Forces Model
◼ The threat of substitute products or
services is high when there are many
substitutes for an organization’s products or
services and low where there are few
substitutes.

◼ Information-based industries are in the

greatest danger from this threat (e.g., music,
books, software). The Internet can convey
digital information quickly and efficiently.
Porter’s Competitive Forces Model
◼ The rivalry among firms in an industry is
high when there is fierce competition and low
when there is not.
 Porter’s Value Chain Model
This model identifies specific activities where
organizations can use competitive strategies for
greatest impact.
 Porter’s Value Chain Model
Primary activities
are those business activities that relate to the production
and distribution of the firm’s products and services (core
business), thus creating value for which customers are
willing to pay

Support activities
are those business activities that do not add value directly
to a firm’s products and services, but support the primary
activities. Support activities include accounting, finance,
management, human resources management, product and
technology development (R&D), and procurement.
2.5 Business – Information Technology
Alignment
The tight integration of the IT function with the strategy,
mission and goals of the organization

The IT function directly support the business

objectives of the organization
Business – Information Technology
Alignment
Characteristics of Excellent Business-IT Alignment

▪ Organizations view IT as an engine of innovation

▪ Organizations view customers as supremely important
▪ Organizations provide goals that are clear to IT function

Why business-IT Alignment Fails:

▪ Business managers and IT managers have different objectives

▪ The business and IT departments are ignorant of other group’s

expertise

▪ Lack of communication