Chapter 3
List and describe four competitive strategies enabled by information systems that firms can pursue.
- Low-Cost Leadership: Use information systems to achieve the lowest operational costs and lowest prices. (Ex. Walmart's continuous replenishment system AKA an efficient customer response system) - Product Differentiation: Use information systems to enable new products and services or greatly change the customer convenience in using your existing products and services. (Ex. mass customization) - Focus on Market Niche: Use information systems to enable a specific market focus and service this narrow target market better than competitors. - Strengthen Customer and Supplier Intimacy: Use information systems to tighten linkages with supplies and develop intimacy with customers.
Identify and describe the features of organizations that help explain differences in organizations' use of information systems.
- Routines and Business Processes: Organizations become very efficient over time by developing routines. - Organizational Politics: Political resistance is one of the great difficulties of bringing about organizational change. - Organizational Culture: Encompasses this set of assumptions about what products the organization should produce, how it should produce them, where, and for whom. It is also a powerful restraint on change. - Organizational Environments: Organizations are open to and dependent on the social and physical environment that surrounds them. Environments generally change must faster than organizations. - Organizational Structure: The kind of information systems you find in a business firm often reflects the type of organizational structure.
Explain how to perform a strategic systems analysis.
1. What is the structure of the industry in which the firm is located? 2. What are the business, firm, and industry values chains for this particular firm? 3. Have we aligned IT with our business strategy and goals?
Define the value web and show how it is related to the value chain.
A value web is collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively. It is more customer driver and operates in a less linear fashion than the traditional value chain.
Define and describe a virtual company and the benefits of pursuing a virtual company strategy.
A virtual company uses networks to link people, assets, and ideas, enabling it to all with other companies to create distribute products without being limited by traditional organizational boundaries or physical locations.
Define an organization and compare the technical definition of organizations with the behavioral definition.
An organization is a stable, formal social structure that takes resources from the environment and processes them to produce outputs. A more realistic behavioral definition of an organization is a collection of rights, privileges, obligations, and responsibilities delicately balanced over a period of time through conflict and conflict resolution.
Explain how the value chain model can be used to identify opportunities for information systems.
At each stage of the value chain, you can ask, "How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?" Using the business value chain model will also cause to consider benchmarking your business processes against your competitors or others in related industries and identifying industry best practices.
Describe the major behavioral theories that help explain how information systems affect organizations.
Behavioral researchers consider that information technology could change the decision-making by reducing the costs of information acquisition and distribution. IT could eliminate middle managers and their clerical support by sending information from operating units directly to senior management and by enabling information to be sent directly to lower-level operating units. It enables some organizations to act as virtual organizations because they are no longer limited by geographic locations. One behavioral approach views information systems as the outcome of political competition between organizational subgroups. IT becomes involved with this competition because it controls who has access to information, and information systems can control who does what, when, where, and how.
Describe what the competitive forces model explains about competitive advantage.
Firms that "do better" than others are said to have a competitive advantage over others: The either have access to special resources that others do not, or they are able to use commonly available resources more efficiently (usually because of superior knowledge and information assets).
Describe how promoting synergies and core competencies enhances competitive advantage.
Synergies lower costs and generate profits. Merged companies consolidate operations, lower retailing costs, and increase cross-marketing. Core competencies enhance competitive advantage by allowing a firm to be a world-class leader in a particular area.
Describe how the Internet has changed competitive forces and competitive advantage.
The Internet has made competitive rivalry much more intense. Internet technology is based on universal standards that any company can use, making it easy for rival to compete on price alone and for new competitors to enter the market.
Describe the impact of the Internet and disruptive technologies on organizations.
The Internet increases accessibility, storage, and distribution of information and knowledge for organizations. It is capable of dramatically lowering the transaction and agency costs facing most organizations. Disruptive technologies are substitute products that perform as well or better than anything currently produced. In some cases, these technologies can put entire industries out of business. In other cases, disruptive technologies simply extend the market, usually with less functionality and much less cost than existing products.
Explain why aligning IT with business objectives is essential for strategic use of systems.
The basic principle of IT strategy for a business is to ensure the technology serves the business and not the other way around. The more successfully a firm can align its IT with its business goals, the more profitable it will be. Business people must take an active role in shaping IT to the enterprise. They cannot ignore IT issues. They cannot tolerate failure in the IT area as just a nuisance to work around. They must understand what IT can do, how it works, and measure its impact on revenues and profits.
Explain why there is considerable organizational resistance to the introduction of information systems.
The introduction of information systems potentially change an organization's structure, culture, business processes, and strategy. Many new information systems require changes in personal, individual routines that can be painful for those involved. It is important to provide incentives.
Explain how businesses benefit by using network economics and ecosystems.
Through network economics, business models that are based on network effects have been highly successful on the Internet, including social networks, software, messaging apps, and on-demand companies like Uber and Airbnb. In a network, the marginal costs of adding another participant are about zero, whereas the marginal gain is much larger. By using an ecosystem, businesses are able to participate in industry sets instead of just a single industry. The elements of different industries create value for consumers that that none of them could achieve acting alone.
Describe the major economic theories that help explain how information systems affect organizations.
Transaction Cost Theory: Firms and individuals seek to economize on transaction costs, much as they do on production costs. Information technology can help firms lower the cost of market participation. Agency Theory: The firm is viewed as a "nexus of contracts" among self-interested individuals rather than a unified, profit-maximizing entity. A principal (owner) employs "agents" (employees) to perform work on their behalf. Information technology, by reducing the costs of acquiring and analyzing information, permits organizations to oversee a greater number of employees.
Explain how information systems promote synergies and core competencies.
Information systems promote synergies by tying together the operations of disparate business units so that they act as a whole. Information systems promote core competencies by encouraging the sharing of knowledge across business units.
Describe how information systems can support each of these competitive strategies and give examples.
Low-Cost Leadership: Walmart's continuous replenishment system AKA an efficient customer response system - Product Differentiation: mass customization - Focus on Market Niche: analyzing customer buying patterns, tastes, and preferences closely so that they can efficiently pitch advertising and marketing campaigns to smaller and smaller target markets - Strengthen Customer and Supplier Intimacy: facilitating direct access by suppliers to productions schedules and even permit supplies to decide how and when to ship supplies to their factories
List and describe the management challenges posed by strategic information systems.
Managers will need to devise new business processes for coordinating their firms' activities with those of customers, suppliers, and other organizations.
Define Porter's competitive forces model and explain how it works.
Michael Porter's competitive forces models provides a general view of them firm, its competitors, and the firm's environment. In this model, five competitive forces shape the fate of the firm: new market entrants, substitute products, suppliers, customers and traditional competitors.
Define and describe the value chain model.
The value chain model highlights specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. The model views the firm as a series or chain of basic activities that add a margin of value to a firm's products or services.
Explain how the value web helps businesses identify opportunities for strategic information systems.
The value web synchronizes the business processes of customers, supplies, and trading partners among different companies in an industry or in related industries. Firms will accelerate time to market and to customers by optimizing their value web relationships to make quick decisions on who can deliver the required products or services at the right price and location.
