INFORMATION SYSTEM

ORGANIZATION MANAGEMENT

STRATEGY

PREPARED BY:

Assam university student..

(M.B.A)

INTRODUCTION

Information systems and organizations influence one another. Information systems are built by managers to serve the interests of the business firm. At the same time, the organization must be aware of and open to the influences of information systems to benefit from new technologies.The interaction between information technology and organization’s structure, business processes, politics, culture, surrounding environment and management decisions.

LEARNING OBJECTIVES• Identify and describe important features of

organizations that managers need to know about in order to build and use information systems successfully.

• Demonstrate how Porter’s competitive forces model helps companies develop competitive strategies using information systems.

• Explain how the value chain and value web models help businesses identify opportunities for strategic information system applications.

CONT...• Demonstrate how information systems help

businesses use synergies, core competencies, and network-based strategies to achieve competitive advantage.

• Assess the challenges posed by strategic information systems and management solutions.

TWO WAY RELATIONSHIP BETWEEN ORGANIZATIONS AND

INFORMATION TECHNOLOGYThis complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment.

FEATURES OF ORGANIZATIONS

• Organizational politics• Divergent viewpoints lead to political struggle,

competition, and conflict

• Political resistance greatly hampers organizational change

CONT.....• Organizational culture:

• Encompasses set of assumptions that define goal and product

• What products the organization should produce

• How and where it should be produced

• For whom the products should be produced

CONT.....• Organizational environments:

• Organizations and environments have a reciprocal relationship

• Organizations are open to, and dependent on, the social and physical environment

• Organizations can influence their environments

• Environments generally change faster than organizations

• Information systems can be an instrument of environmental scanning, act as a lens

INFORMATION SYSTEM TO ACHIEVE COMPETITIVE ADVANTAGE

• Why do some firms become leaders in their industry?

• Michael Porter’s competitive forces model• Provides general view of firm, its competitors,

and environment• Five competitive forces shape fate of firm

1. Traditional competitors

2. New market entrants

3. Substitute products and services

4. Customers

5. Suppliers

PORTERS COMPETITIVE FORCES MODEL

CONT...• Traditional competitors

• All firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs

• New market entrants • Some industries have high barriers to entry, e.g.

computer chip business• New companies have new equipment, younger

workers, but little brand recognition

CONT....• Substitute products and services

• Substitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs

• Customers • Can customers easily switch to competitor’s

products.• Suppliers• Market power of suppliers when firm cannot

raise prices as fast as suppliers

INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE

• Four generic strategies for dealing with competitive forces, enabled by using IT• Low-cost leadership • Product differentiation• Focus on market niche• Strengthen customer and supplier intimacy

INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE

• Low-cost leadership• Produce products and services at a lower price

than competitors while enhancing quality and level of service

• Examples: Wal-Mart

• Product differentiation• Enable new products or services, greatly

change customer convenience and experience• Examples: Google, Nike, Apple

INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE

• Focus on market niche• Use information systems to enable a focused

strategy on a single market niche; specialize• Example: Hilton Hotels

• Strengthen customer and supplier intimacy• Use information systems to develop strong ties

and loyalty with customers and suppliers; increase switching costs

• Example: Netflix, Amazon

BUSINESS VALUE CHAIN MODEL• The Value Chain is a systematic approach to

examining the development of competitive advantage.

• The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization.

• The process through which we add value to the products.

• An inter related series of processes that produces a service or product to the satisfaction of customers.

• Each activity in a process should add value to the preceding activities.

BUSINESS VALUE CHAIN MODEL

This figure provides examples of systems for both primary and support activities of a firm and of its value partners that can add a margin of value to a firm’s products or services

VALUE CHAIN

Primary activities:Inbound Logistics:• Here goods are received from a company's suppliers. They

are stored until they are needed on the production/assembly line. Goods are moved around the organization.

Operations: • This is where goods are manufactured or assembled.

Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine

VALUE CHAIN• Outbound Logistics:• The goods are now finished, and they need to be sent

along the supply chain to wholesalers, retailers or the final consumer.

• Marketing and Sales:• In true customer orientated fashion, at this stage the

organization prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.

• Service:• This includes all areas of service such as installation, after-

sales service, complaints handling, training and so on.

VALUE CHAIN

Support Activities:• Procurement:• The initial area. It means purchasing. This

function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. Technology Development:

• Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

VALUE CHAIN

Human Resource Management (HRM):• Employees are an expensive and vital resource. An

organization would manage recruitment and s election, training and development, and rewards and remuneration. The mission and objectives of the organization would be driving force behind the HRM strategy.

Firm Infrastructure:• This activity includes and is driven by corporate or

strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.

SIX STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEM

OPERATIONAL EXCELLENCE NEW PRODUCT ,SERVICES,AND BUSINESS

MODELS CUSTOMER AND SUPPLIER INTIMACY IMPROVED DECISION MAKING COMPETITIVE ADVANTAGE SURVIVAL

BUSINESS STRATEGIC OBJECTIVES

• Operational excellence:• Improvement of efficiency to attain higher

profitability• Information systems, technology an important

tool in achieving greater efficiency and productivity

• E.g. Wal-Mart’s Retail Link system links suppliers to its 5289 stores wordlwide for superior replenishment system

BUSINESS STRATEGIC OBJECTIVES

• New products, services, and business models:• Business model: describes how company

produces, delivers, and sells product or service to create wealth

• Information systems and technology are a major enabling tool for new products, services, business models• E.g. Apple’s iPod, iTunes transformed the old

business model of music distribution from CDs into online

• Netflix’s Internet-based DVD rentals vs rental stores

BUSINESS STRATEGIC OBJECTIVES

• Customer and supplier intimacy: • Serving customers well leads to customers

returning, which raises revenues and profits• E.g. High-end hotels that use computers to track

customer preferences (room temperature, TV channels) and use IS to monitor and customize environment

• Intimacy with suppliers allows them to provide vital inputs, which lowers costs• E.g. J . C. Penney’s information system which links

shirt sales records at each store to contract manufacturer in Hong Kong. Supplier produces (quantity, style, color, size) based on the sales records and delivers directly to stores; no inventory storage costs for J.C.Penney, lower price to customer

BUSINESS STRATEGIC OBJECTIVES

• Improved decision-making• Without accurate information:

• Managers must use forecasts, best guesses, luck• Leads to:

• Overproduction/underproduction of goods and services

• Misallocation of resources• Poor response times

• Poor outcomes raise costs, lose customers• E.g. Verizon’s (phone company) Web-based digital

dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Fast response through immediate allocation of repair resources

BUSINESS STRATEGIC OBJECTIVES

• Competitive advantage• Delivering better performance• Charging less for superior products• Responding to customers and suppliers in real time• Often achieved through one of first four strategic

business objectives• E.g. Dell: Consistent profitability over 25 years; Dell

remains one of the most efficient producer of PCs in world (mass customization)

• But Dell has lost some of its advantages to fast followers– HP (competitive advantage is not sustainable)

BUSINESS STRATEGIC OBJECTIVES

• Survival• Information systems and technologies as a necessity

for businesses to survive• Driven by:

• Industry-level changes, e.g. the introduction of ATMs by one bank forces other banks to follow

• firms need IS capability to respond to these requirements

INFORMATION SYSTEMS CAN IMPROVE OVERALL PERFORMANCE OF BUSINESS UNITS BY PROMOTING

• Synergies:• When output of some units used as inputs to others,

or organizations pool markets and expertise.

• E.g. : united western bank merger with IDBI .

• Core competencies:• Activity for which firm is world-class leader.

• Relies on knowledge, experience, and sharing this across business units.

• E.g. Procter & Gamble’s uses an intranet known as Innovation Net to help people working on similar problems share ideas and expertise.

CONT....

• Network-based strategies:• The availability of internet and networking

technologies has provided advantage of firm’s abilities to network with each other.

• Include use of:

• Network economics

• Virtual company model

• Business ecosystems