MGAC70

CLASS 1 - CHAPTER 1-2

INFORMATION SYSTEMS & BUSINESS STRATEGY

DOUGLAS KONG
 WEEKLY CASE NOTE

• The weekly case outline should be between 1-2 pages

• It should outline all the key components for the case analysis (For week 2, please refer
questions posted and come up with a brief outline for you answer)
• Consider the following topics:
• Situational Analysis – Overview – Company goals; Current strategies; Stakeholder
analysis; Key success factors; Key takeaway from SWOT
• Identification of key strategic issues
• Identification of strategic options and analysis
• Recommendation
• Implementation plan and review of major operational issues
• Conclusion
 A P P L I C AT I O N C A S E S
H O W A M A Z O N D R O N E D E L I V E RY W I L L W O R K
HTTPS://YOUTU.BE/MZHVR4WM__M
 AP P L I C AT I O N C A S E S
I N S I D E M CDO NA L D' S F I RS T R O B O T I C R E S TA U R A N T
H T T P S : / / Y O U T U . B E / 2 9 A 4 P F G B P E Y ? S I = 3 J C Y B _ L _ 0 S _ T H L RT
 DEFINITIONS

• Information technology (IT): is any computer-based tool that people use

to work with information and to support the information and information-
processing needs of an organization.
• Information system: (IS): collects, processes, stores, analyzes, and
disseminates information for a specific purpose.
• The purpose of an IS : to get the right information to the right people at
the right time in the right amount and in the right format to support
business processes and decision making.
 DATA, INFORMATION AND
KNOWLEDGE

Data are streams of

raw facts.

Data is sorted,
processed or
assembled to create
information.

When people apply

learned criteria or
learned expertise to
information they
create knowledge.
 P E R S P E C T I V E S O N I N F O R M AT I O N S Y S T E M S

Four activities of information systems:

• Input: Captures raw data from organization or external

environment
• Processing: Converts raw data into meaningful form
• Output: Transfers processed information to people or activities that
use it
• Feedback: output returned to members of the organization to help
them evaluate or correct the input and/or processing
 P E R S P E C T I V E S O N I N F O R M AT I O N S Y S T E M S

• Information Systems are an integral part of organizations

• Key elements of organizations include

• People
• Structure
• Business processes
• Politics
• Culture
 ORGANIZATIONAL DIMENSION OF
INFORMATION SYSTEMS

• Separation of business functions

• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
• Unique business processes
• Unique business culture
• Organizational politics
 INFORMATION TECHNOLOGY

• Technology dimension of information systems

• Computer hardware and software

• Data management technology
• Networking and telecommunications technology
• Networks, the Internet, intranets and extranets,
World Wide Web
• IT infrastructure: provides platform that system is
built on
 STRATEGIC BUSINESS OBJECTIVES OF
INFORMATION SYSTEMS

1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
I NTERDEP ENDENCE BETW EEN ORGANI ZATI ONS AND I NF ORMATI ON
S YS TEMS

INSERT FIGURE 1.2]

 BUSINESS PROCESSES
• A business process is a collection of related activities (inputs,
resources and outputs) that produce a product or service of value to the
organization, its business partners and/or its customers.
• Examples of business processes in functional areas:
• Accounting: managing accounts payable & receivable
• Finance: Producing business forecasts
• Marketing: Handling customer complaints
• POM: Processing physical inventory
• Human Resources: Overseeing workplace safety
• MIS: Training computer users
 INFORMATION SYSTEMS (IS) AND
BUSINESS PROCESS
• IS are enablers of an organization’s business processes
• Breaking down the business process into three areas, we look at how IS
can help in each of them:
Execution of a process (such as doing the work: calculations, comparisons or
creation of data, documents or other output).
Example: When a sale is made, compare inventory quantity on hand to re-
order levels. If inventory is less than the re-order level, generate purchase
requisitions for the purchasing department.
 INFORMATION SYSTEMS (IS) AND BUSINESS
PROCESS (CONTINUED)

Capturing and storing process data (such as format the data, store it in the
correct data file on a physical storage device such as a hard drive).
Example: Once the purchase requisition has been approved by the
purchasing department, increase the quantity on order field and store the
purchase requisition data in the open purchase requisition file.
 INFORMATION SYSTEMS (IS) AND BUSINESS
PROCESS (CONTINUED)

Monitoring process performance (such as examine, analyze and assess the

business process to ensure compliance and to evaluate the process).
Example: Reports can be automatically produced to identify purchase
requisitions where goods have not been received, where too much or too
little has been received, and or purchase requisitions waiting to be
approved.
 CROSS-FUNCTIONAL PROCESSES

• A cross-functional business process is one in which no single functional

area is responsible for its execution. Multiple functional areas collaborate to
perform the process.
• For example, the materials procurement process includes all of the tasks
involved in acquiring needed materials externally from a vendor.
Procurement comprises five steps that are completed in three different
functional areas of the firm: warehouse, purchasing, and accounting.
 BUSINESS PROCESS REENGINEERING, BUSINESS PROCESS
IMPROVEMENT AND BUSINESS PROCESS MANAGEMENT

How does an organization ensure business process excellence?

Business Process Reengineering (BPR) is a radical strategy for improving the efficiency
and effectiveness of an organization’s business processes. It is known as the “clean
slate” approach.
Business Process Improvement (BPI) is a more incremental approach, with lower risk
and cost than BPR. Six Sigma is a popular methodology for BPI.
Business Process Management (BPM) is a management technique that includes methods
and tools to support the design, analysis, implementation, management, and
optimization of business processes
 MIS

• MIS supports all other functional areas in organizations.

• MIS Is responsible for providing the information that each functional area
needs in order to make decisions.
• Users must be well informed so that they can work with MIS and clearly
communicate business requirements.
• MIS personnel must understand both the information requirements and the
technology associated with each functional area. They must think “business
needs” first and “technology” second.
BUSINESS STRATEGY
 COMPETITIVE ADVANTAGE

• An Organizational strategy is a planned approach that the

organization takes to achieve its goals and its mission statement.
• Competitive advantage is 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.
 MARKET PRESSURES

• The Global Economy and Strong Competition; the need for real-time
operations
• The Changing Nature of the Workforce
• Powerful Customers
 GLOBALIZATION

• Individuals can connect and compete anywhere, anytime

• Competition is increased as people and organizations can provide
resources worldwide
• The Internet has “flattened” the world, making anywhere accessible to
anyone anytime
 CHANGING NATURE OF THE
WORKFORCE

Workforce is Becoming More Diversified

• Women
• Single Parents
• Minorities
• Persons with Disabilities

IT is Enabling Telecommuting Employees

 POWERFUL CUSTOMERS

• Increasing consumer sophistication & expectations

• Consumer is more knowledgeable about
• Products and services
• Price comparisons
• Electronic auctions

• Customer Relationship Management

 SOCIETAL/POLITICAL/LEGAL PRESSURES

1.Social Responsibility
2.Government Regulation and Deregulation
3.Protection Against Terrorist Attacks
4.Ethical Issues
 TECHNOLOGICAL INNOVATION AND
OBSOLESCENCE
Disruptive Technology
A new way of doing things that opens new markets and destroys old ones
• Obsolescence: old analog camera
• Innovation: digital camera
Sustaining Technologies
Provides improved products in an established market
 D I S R U P T I V E V E R S U S S U S TA I N I N G T E C H N O L O G I E S

Company Disruptive Technology

Apple iPod, iPhone, iPad

Companies That Capitalized on Disruptive Technologies
Charles Schwab Online brokerage

Hewlett-Packard Microprocessor-based computers, inkjet printers

IBM Minicomputers and personal computers

Intel Low-end microprocessors

Intuit Digitized accounting software

Microsoft Operating system software

Oracle Database software

Sony Transistor-based consumer electronics

 COMPETITIVE ADVANTAGE AND
STRATEGIC INFORMATION SYSTEMS

• Strategies for Competitive Advantage

• Business-Information Technology Alignment
• Understanding the Mission and Vision of a company

• SWOT Analysis
• Value Chain Model
• Porter’s Competitive Forces Model
 SWOT ANALYSIS

• Managers need to analyze

• The general environment
• The firm’s industry and competitive environment
• SWOT analysis
•Strengths
•Weaknesses
•Opportunities
•Threats
Basic technique for analyzing firm and industry conditions
 PORTER’S VALUE CHAIN MODEL

• Value chain
o A sequence of activities through which the organization’s inputs are
transformed into valuable outputs
• Primary activities
o Relate to production and distribution of products and services
• Support activities
o Support primary activities contributing to competitive advantage
 Business Value Chain Model
• Firm is viewed as a series of activities that add value to products or
services
• Highlights activities where competitive strategies can best be applied
• Primary activities vs. support activities
• At each stage, determine how information systems can improve
operational efficiency and improve customer and supplier intimacy
• Utilize benchmarking, industry best practices
VALUE CHAIN
PORTER’S VALUE CHAIN MODEL
 COMPETITIVE STRATEGY AND STRATEGIC
INFORMATION SYSTEMS

• Competitive Strategy: document’s a business’s approach to compete and

how it will accomplish those goals, for example, in increasing market
share
• Competitive Advantage: helps a company function profitably within a
market and generate larger-than-average profits.
• Strategic Information Systems (SIS): provide a competitive advantage by
helping an organization implement its strategic goals and improve its
performance and productivity.
PORTER’S COMPETITIVE FORCES MODEL
 PORTER’S COMPETITIVE FORCES MODEL

Threat of entry of new competitors

The threat that new competitors will enter your market is high when entry is
easy and low when there are significant barriers to entry.
Entry barrier: a product or service that customers have come to expect and that must be provided by all new competitors,
increasing the cost to enter a new market

Internet increases the threat that new competitors will enter a market because it is easy to for new competitors to set up a web
presence
 PORTER’S COMPETITIVE FORCES MODEL

The bargaining power of suppliers is high when buyers have few

choices from whom to buy and low when buyers have many choices.
Impact of the Internet is mixed
Buyers can find alternative suppliers and compare prices easily, reducing the power of suppliers
Companies can use the Internet to integrate their supply chain, suppliers prosper and their power increases (they can charge higher
prices), locking in their customers
 PORTER’S COMPETITIVE FORCES MODEL

The bargaining power of customers (buyers) is high when buyers have

many choices from whom to buy and low when buyers have few choices.

Since the Internet increases access to information, customer power is increased since customers can look for the lowest price
As sellers implement online loyalty programs, they can lock in their customers, reducing customer power
 PORTER’S COMPETITIVE FORCES MODEL

The threat of substitute products or services is high when there are many
alternatives for an organization’s products or services and low where there
are few alternatives.

The Internet increases the use of substitutes since buyers can readily search for them online
Information-based industries are in the greatest danger from this threat (e.g. music, e-books, software, since the
Internet can be used to send digital information quickly and efficiently
 PORTER’S COMPETITIVE FORCES MODEL

The rivalry among firms in an industry is high when there is intense

competition among many firms in an industry. The threat is low when the
competition is among fewer firms and is not as intense.

Rivalry has increased since rivals can easily see via the Internet what their competitors are doing and replicate such systems.
In the past proprietary systems were easier to keep secret, lengthening the time that such systems provided a strategic
advantage to organizations.
STRATEGIES FOR COMPETITIVE ADVANTAGE
 STRATEGIES FOR COMPETITIVE ADVANTAGE,
EXAMPLES

• Cost Leadership – Walmart

• Differentiation – WestJet, Dell
• Innovation – CITI
• Operational Effectiveness – Deloitte
• Customer-orientation - Amazon
 BUSINESS – INFORMATION TECHNOLOGY
ALIGNMENT

Business–information technology alignment is the tight integration of the

IT function with the organization’s strategy, mission, and goals of the
organization. That is, the IT function directly supports the business
objectives of the organization.
 CHARACTERISTICS OF EXCELLENT ALIGNMENT

Organizations:
• view IT as an engine of innovation that continually transforms the business,
often creating new revenue streams.
• view their internal and external customers and their customer service function as
supremely important.
• rotate business and IT professionals across departments and job functions.
• provide overarching goals that are completely clear to each IT and business
employee.
• ensure that IT employees understand how the company makes (or loses) money.
• create a vibrant and inclusive company culture.
 IT GOVERNANCE

A structure of relationships and processes to direct and control the enterprise in order to:
• achieve the enterprise’s goals
• by adding value
• while balancing risk versus return over IT and its processes.

Helps organizations effectively manage their IT operations to align with their business
strategies.

Managing IT throughout the organization, includes:

planning, acquisition, implementation, ongoing support as well as monitoring and
evaluation