Introduction to Business Information Systems (ISYS1000) Module 5 PDF

Introduction to Business Information Systems (ISYS1000) Module 5 Organisations, Strategy and Information Systems CRICOS Provider Code 00301J Learning Outcomes Understand the impact of information systems on organizations....

Introduction to Business Information Systems (ISYS1000) Module 5 Organisations, Strategy and Information Systems CRICOS Provider Code 00301J Learning Outcomes Understand the impact of information systems on organizations. Analyse Porter’s competitive forces model and the value chain model and propose competitive strategies using information systems. Understand how synergies, core competencies, and network economics help companies develop competitive strategies using information systems. Describe the challenges posed by strategic information systems and understand how they should be addressed. IS Impact on Organisation Economic Impacts of Information Technology (1) Cost Dynamics Changes IT lowers capital and information costs. Alters capital-labor balance in organizations. Influences business strategies with cost-effective IT solutions. Labor and IT Decreased IT costs lead to labor substitution. Affects roles in middle management and clerical work. Shift towards automation and digital solutions. Economic Impacts of Information Technology (2) Shift in Capital Investment More investment in IT over traditional capital (buildings, machinery). Reflects the growing importance of digital infrastructure. Transaction Costs and Firm Size IT reduces transaction costs, making outsourcing more viable. Decreases employee numbers but maintains/increases revenue. Efficiency through IT-driven operations. Management Costs Efficiency IT reduces costs in managing and supervising employees. Aligns with agency theory for efficient employee monitoring. Organizational and Behavioral Impacts of IT Flattening Organizational Structures IT leads to fewer hierarchical levels. Rapid information dissemination reduces managerial layers. Empowerment of Lower-Level Employees Better access to information empowers decision-making at lower levels. Supported by increased employee skill sets and education. Increased Managerial Efficiency Faster and more accurate decision-making by managers. Streamlined management structures with fewer managers needed. Organizational and Behavioral Impacts I T flattens organizations Decision making is pushed to lower levels Fewer managers are needed (I T enables faster decision making and increases span of control) Postindustrial organizations Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Understanding Organizational Resistance to Change Information systems become bound up in organizational politics because they influence access to a key resource—information Information systems potentially change an organization’s structure, culture, politics, and work Four factors Nature of the innovation Structure of organization Culture of organization Tasks affected by innovation Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.7 Organizational Resistance to Information System Innovations Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved The Internet and Organizations The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations The Internet can greatly lower transaction and agency costs Example: Large firm delivers internal manuals to employees via a corporate website, saving millions of dollars in distribution costs Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Implications for the Design and Understanding of Information Systems Organizational factors in planning a new system: Environment Structure Hierarchy, specialization, routines, business processes Culture and politics Type of organization and style of leadership Main interest groups affected by system; attitudes of end users Tasks, decisions, and business processes the system will assist Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Porter’s competitive forces model and the value chain model and competitive strategies using information systems  Porter’s Competitive Forces Model (1 of 3) 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: Traditional competitors New market entrants Substitute products and services Customers Suppliers Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Porter’s Competitive Forces Model (2 of 3) Traditional competitors All firms share market space with competitors who are continuously devising new products, services, efficiencies, and switching costs New market entrants Some industries have high barriers to entry, for example, computer chip business New companies have new equipment, younger workers, but little brand recognition Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Porter’s Competitive Forces Model (3 of 3) Substitute products and services Substitutes customers might use if your prices become too high, for example, iTunes substitutes for CD s Customers Can customers easily switch to competitor's products? Can they force businesses to compete on price alone in transparent marketplace? Suppliers Market power of suppliers when firm cannot raise prices as fast as suppliers Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Figure 3.8 Porter’s Competitive Forces Model Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (1 of 3) 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 Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (2 of 3) Low-cost leadership Produce products and services at a lower price than competitors Example: Walmart’s efficient customer response system Product differentiation Enable new products or services, greatly change customer convenience and experience Example: Google Nike Mass customization; customer experience management Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (3 of 3) Focus on market niche Use information systems to enable a focused strategy on a single market niche; specialize Example: Hilton Hotels’ OnQ system Strengthen customer and supplier intimacy Use information systems to develop strong ties and loyalty with customers and suppliers Increase switching costs Examples: Toyota, Amazon Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Key Competitive Strategies Strategy Description Example Achieve the lowest production and operational costs in the Cost Leadership Walmart using automatic inventory systems. industry to offer lower prices. Offer unique products, services, or features that stand out BMW with high-quality engineering; Uniqlo with Differentiation from competitors. unique, high-quality casual wear. Introduce new products, services, or processes, or Dyson's innovative vacuum technology; Huawei's Innovation significantly improve existing ones. development of 5G technology. Improve internal business processes to perform activities Operational Effectiveness Toyota’s just-in-time manufacturing. more effectively than rivals. Focus on creating strong ties and loyalty with customers Amazon's personalized recommendations; Apple's Customer Orientation through personalized services. customer experience. Specialize in serving a specific market niche more Hilton Hotels focusing on high-end customers; Ferrari Focus on Market Niche effectively than competitors. specializing in luxury sports cars.  The Internet’s Impact on Competitive Advantage Transformation or threat to some industries Examples: travel agency, printed encyclopedia, media Competitive forces still at work, but rivalry more intense Universal standards allow new rivals, entrants to market New opportunities for building brands and loyal customer bases Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Smart Products and the Internet of Things Internet of Things (IoT) Growing use of Internet-connected sensors in products Smart products Fitness equipment, health trackers Expand product differentiation opportunities Increasing rivalry between competitors Raise switching costs Inhibit new entrants May decrease power of suppliers Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  The Business Value Chain Model Firm as 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 Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Figure 3.9 The Value Chain Model Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Extending the Value Chain: The Value Web Firm’s value chain is linked to value chains of suppliers, distributors, customers Industry value chain Value web Collection of independent firms using highly synchronized I T to coordinate value chains to produce product or service collectively More customer driven, less linear operation than traditional value chain Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Figure 3.10 The Value Web Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Synergies, core competencies, and network economics help companies develop competitive strategies using information systems. Synergies When output of some units are used as inputs to others, or organizations pool markets and expertise Example: Merger of Bank of NY and JP Morgan Chase Purchase of YouTube by Google Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Core Competencies Activity for which firm is world-class leader Relies on knowledge, experience, and sharing this across business units Example: Procter & Gamble’s intranet and directory of subject matter experts Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Network-Based Strategies Take advantage of firm’s abilities to network with one another Include use of: Network economics Virtual company model Business ecosystems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Network Economics Marginal cost of adding new participant almost zero, with much greater marginal gain Value of community grows with size Value of software grows as installed customer base grows Compare to traditional economics and law of diminishing returns Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Virtual Company Model Virtual company Uses networks to ally with other companies Creates and distributes products without being limited by traditional organizational boundaries or physical locations Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Business Ecosystems and Platforms Industry sets of firms providing related services and products Platforms Microsoft, Facebook Keystone firms Niche firms Individual firms can consider how IT will help them become profitable niche players in larger ecosystems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.11 An Ecosystem Strategic Model Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Challenges posed by strategic information systems and understand how they should be addressed. Challenges Posed by Strategic Information Systems Sustaining competitive advantage Competitors can retaliate and copy strategic systems Systems may become tools for survival Aligning IT with business objectives Performing strategic systems analysis Structure of industry Firm value chains Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved