Chapter 2: Information

Systems for Competitive

advantage
 2
Study questions
Q1 How to enable Organizational through
Information Systems?
Q2 How organization can use IS to achieve
competitive advantage?
 From Organizational Strategy to
Information Systems Structure, to
Competitive Advantage

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Q1 How to enable
Organizational through
Information Systems?

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Decision-Making Levels of an Organization 4

2-4

Source: textbook [2], page 80

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Operational level
 Routine, day-to-day business process
 Decision: structured decisions
 Procedures are specified in advance
 Can be programed
 IS:are used to increase Efficiency
(faster, lower cost)

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Managerial level
 Functional managers (e.g. marketing,
finance, manufacturing managers) focus on:
 monitoring operational-level activities and
providing info to higher levels.
 Utilizing organizational resources to increase
Effectiveness (goals/tasks to accomplished well)
 Decision: semi-structured decisions
 Solutions/problems are not clear-cut, require
judgment.
 Procedures can be specified in advance, but not
to the extent where a specific recommendation
can be made

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Executive level
 Focus on long-term strategic questions
 Which products to produce, which
countries to compete in, what
organizational strategy for follow.
 Decision: unstructured decisions
 Complex and non-routine.
 Few or no Procedures can be specified in
advance

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Systems For Different Levels of Management
8

• Transaction processing systems:

• Keep track of basic activities and transactions of
organization (e.g., sales, receipts, cash deposits,
payroll, credit decisions, flow of materials in a
factory).
• Management information systems and
decision-support systems:
• Help with monitoring, controlling, decision making,
and administrative activities.
• Executive support systems:
• Help address strategic issues and long-term trends,
both in firm and in external environment.

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Transaction Processing Systems (TPS) 9
 Operational level
 Purpose:
 Processing of business events and transactions
 Increase efficiency
 Automation
 Lower costs
 Increased speed and accuracy
 Examples:
 Payroll processing
 Sales and order processing
 Inventory management
 Product purchasing, receiving, and shipping
 Accounts payable and receivable

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Architecture of a TPS

Source: Textbook [2]

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Architecture of a TPS: Inputs
 Source documents
 Different data entry methods

Source: Textbook [2]

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8-11
Architecture of a TPS: Processing 12

 Online processing
 Immediate results
 Batch processing
 Transactions collected and later processed together
 Used when immediate notification not necessary

Source: Textbook [2]

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Architecture of a TPS: Outputs
 Counts, summary reports
 Inputs to other systems
 Feedback to systems operator

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Summary of TPS Characteristics

Source: Textbook [2]

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Management Information Systems

 Managerial level
 Purpose:
 Produce reports
 Support of midlevel managers’ decisions

 Examples:
 Salesforecasting
 Financial management and forecasting
 Manufacturing, planning and scheduling
 Inventory management and planning
 Advertising and product pricing
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Architecture of an MIS

Source: Textbook [2]

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Summary of MIS Characteristics

Source: Textbook [2]

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Decision Support Systems (DSS)
 Decision-making support for recurring
problems
 Used mostly by managerial level
employees
 Interactive decision aid
 What-if analyses
 Analyzeresults for hypothetical changes
 Example: Microsoft Excel

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 19
Architecture of a DSS
8-19

Source: Textbook [2]

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Common DSS Models

Source:
Textbook [2]

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Executive Support System (ESS)
 Aka Executive Information system (EIS)
 Executive level
 Purpose:
 Aid in executive decision making
 Provide information in highly aggregated form

 Examples:
 Executive-level decision making
 Long-range and strategic planning
 Monitoring of internal and external events and
resources
 Crisis management
 Staffing and labor relations

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Architecture of an ESS

Source: Textbook [2]

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Summary of ESS Characteristics

Source: Textbook [2]

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Business Process Supported by Functional Area IS 24

Source: Textbook [2]

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Organizational Functions and Representative Information
Systems

Source: Textbook [2]

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Major IS Tasks: Business Value Added 26

 Automating: Doing Things Faster

 Organizational Learning: Doing Things Better
 Supporting Strategy: Doing Things Smarter

Source: Textbook [2],

page 83

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 27

Q2 How organization can

use IS to achieve
competitive advantage?

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Achieving Competitive Advantage 28
1. How does organizational strategy determine
information systems structure?
2. What five forces determine industry structure?
3. How does analysis of industry structure determine
competitive strategy?
4. How does competitive strategy determine value chain
structure?
5. How do business processes generate value?
6. How does competitive strategy determine business
processes and the structure of information systems?
7. How do information systems provide competitive
advantages?
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1. How Does Organizational Strategy Determine Information 29
Systems Structure?

Source: textbook [1], pg 68

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2. What Five Forces Determine Industry Structure? 30

Competitive Forces
• Competition from vendors of substitutes.
• Competition from new competitors.
• Competition from existing rivals.
Bargaining Power Forces
• Bargaining power of suppliers.
• Bargaining power of customers.

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Use 5-forces Model to Identify Sources of
Strong Competition

Source: textbook[1], pg 69

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3. How Does Analysis of Industry 32
Structure Determine Competitive
Strategy?

Porter's Four
Competitive
Strategies
Source: textbook [1], pg 70

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Business – IS alignment
 To be effective goals, objectives,
culture, and activities must be
consistent with strategy.
 In MIS, this means all information
systems must reflect and facilitate the
organization's competitive strategy.

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4. How Does Competitive Strategy 34
Determine Value Chain Structure?

Linkag
es
Source: textbook [1], pg 71

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Task Descriptions for Primary
Activities of the Value Chain

Source: textbook [1], pg 72

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5. How Do Business Processes Generate Value? 36

Source: textbook [1], pg 74

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Improved Material Ordering Process 37

Source: textbook[1], pg 75

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6. How Does Competitive Strategy Determine Business 38
Processes and the Structure of IS?

Low-Cost Rental Value Chain

Source: textbook [1], pg 78

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High-Service Rental Value
Chain

Source: textbook [1], pg 78

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Source: textbook [1], pg 79

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7. How Do IS Provide 41
Competitive Advantages?

Principles of
Competitive
Advantage

Source: textbook [1], pg 79

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Summary
Q1 How to enable Organizational through
Information Systems?
Q2 How organization can use IS to achieve
competitive advantage?
 From Organizational Strategy to
Information Systems Structure, to
Competitive Advantage

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 43
Additional Resources
 Management Information Systems:
Video Clip
 Decision support system:
Video clip

BUSINESS INFORMATION TECHNOLOGY