Management Information Systems: Managing the Digital Firm PDF

Management Information Systems: Managing the Digital Firm Seventeenth Edition, Global Edition Chapter 1 Information Systems in Global Business Today Copyr...

Management Information Systems: Managing the Digital Firm Seventeenth Edition, Global Edition Chapter 1 Information Systems in Global Business Today Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Learning Objectives 1.1 How are information systems transforming business, and why are they so essential for running and managing a business today? 1.2 What is an information system? How does it work? What are its management, organization, and technology components? Why are complementary assets essential for ensuring that information systems provide genuine value for organizations? 1.3 What academic disciplines are used to study information systems, and how does each contribute to an understanding of information systems? 1.4 How will MIS help my career? Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Smart Stores Reinvent the Retail Space (1 of 2) Business Challenges – Mounting competition from online retailers – Take advantage of opportunities provided by new technology Solutions – Acrelec system helps stores manage curbside pickup – AWM Smart Shelf enables retailers to view and track products in real-time; helps shoppers locate products using mobile devices; personalizes shopper experiences – AWM Frictionless enables low-contact cashierless checkout Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Smart Stores Reinvent the Retail Space (2 of 2) Illustrates how brick-and-mortar retail stores are using information technology to compete more effectively against online retailers Demonstrates IT’s role in driving business operations and management decisions Illustrates how deploying new technology requires companies to redesign jobs and procedures, changing how companies run their businesses Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  How Information Systems Are Transforming Business Global spending on information technology (IT) and IT services: nearly $3.8 trillion in 2019; $160 billion spent on management consulting and services Organizational, management, and cultural changes are often required for firms to derive full business value from IT investments Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.1 Information Technology Capital Investment Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What’s New in Management Information Systems (1 of 3) IT Innovations – Cloud computing, big data, Internet of Things – Mobile digital platform – AI and machine learning – Use of social networks for business objectives New Business Models – Online streaming and downloadable video ▪ Examples: Netflix, Apple TV Channels, Amazon Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What’s New in Management Information Systems (2 of 3) E-commerce Expansion – E-commerce worldwide expands to nearly $3.6 trillion in 2019 – Growth in social commerce spurred by growth of mobile platform – Mobile retail e-commerce growing more than 20 percent a year, reaching almost $300 billion in 2020 Management Changes – Managers becoming more mobile – Managers use social networks, collaboration tools – Business intelligence applications accelerate Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What’s New in Management Information Systems (3 of 3) Firms and Organizations Change – More collaborative, less emphasis on hierarchy and structure – Greater emphasis on competencies and skills – Higher-speed/more accurate decision making based on data and analysis – More willingness to interact with consumers (social media) – Better understanding of the importance of IT Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Interactive Session: Management: Will the Coronavirus Pandemic Make Working from Home the New Normal? (1 of 2) Class Discussion – Define the problem described in this case. What are the management, organization, and technology issues raised by this problem? – Identify the information technologies used to provide a solution to this problem. Was this a successful solution? Why or why not? Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Interactive Session: Management: Will the Coronavirus Pandemic Make Working from Home the New Normal? (2 of 2) Class Discussion – Will working from home become the dominant way of working in the future? Why or why not?. Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Globalization Challenges and Opportunities: A Flattened World Internet and global communications have greatly changed how and where business is done – Drastic reduction of costs of operating and transacting on global scale – Competition for jobs, markets, resources, ideas – Growing interdependence of global economies – Requires new understandings of skills, markets, opportunities Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  The Emerging Digital Firm In a fully digital firm: – Significant business relationships are digitally enabled and mediated – Core business processes are accomplished through digital networks – Key corporate assets are managed digitally Digital firms offer greater flexibility in organization and management – Time shifting, space shifting Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Strategic Business Objectives of Information Systems (1 of 2) Growing interdependence between: – Ability to use information technology – Ability to implement corporate strategies and achieve corporate goals Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.2 The Interdependence Between Organizations and Information Systems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Strategic Business Objectives of Information Systems (2 of 2) Firms invest heavily in information systems to achieve six strategic business objectives: 1. Operational excellence 2. New products, services, and business models 3. Customer and supplier intimacy 4. Improved decision making 5. Competitive advantage 6. Survival Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Operational Excellence Improved efficiency results in higher profits Information systems and technologies help improve efficiency and productivity Example: Walmart – Power of combining information systems and best business practices to achieve operational efficiency— and over $524 billion in sales in 2019 – Most efficient retail store in world as result of digital links between suppliers and stores Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  New Products, Services, and Business Models Information systems and technologies enable firms to create new products, services, and business models Business model: how a company produces, delivers, and sells its products and services Example: Apple – Transformed old model of music distribution with iTunes – Constant innovations—iPod, iPhone, iPad, etc. Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Customer and Supplier Intimacy Customers who are served well become repeat customers who purchase more – Example: Mandarin Oriental Hotel – Uses IT to foster an intimate relationship with its customers, keeping track of preferences, etc. Close relationships with suppliers result in lower costs – Examples: Mandarin Oriental Hotel and JC Penney (in text) – JC Penney uses IT to enhance relationship with supplier in Hong Kong Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Improved Decision Making Without accurate information, managers must use forecasts, best guesses, and luck, resulting in misallocation of resources, inventory, employees Real-time data improves ability of managers to make decisions – Example: Verizon’s web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Competitive Advantage Often results from achieving previous business objectives Advantages over competitors – Charging less for superior products, better performance, and better response to suppliers and customers – Examples: Apple, Walmart, UPS are industry leaders because they know how to use information systems for this purpose Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Survival Businesses may need to invest in information systems out of necessity; it is simply the cost of doing business Keeping up with competitors – Citibank’s introduction of ATMs Federal and state regulations and reporting requirements – Toxic Substances Control Act and the Sarbanes-Oxley Act Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What Is an Information System? (1 of 3) Information technology: the hardware and software a business uses to achieve objectives Information system: interrelated components that manage information to: – Support decision making and control – Help with analysis, visualization, and product creation Data: streams of raw facts Information: data shaped into meaningful, useful form Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.3 Data and Information Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What Is an Information System? (2 of 3) Activities in an information system that produce information: – Input – Processing – Output – Feedback Sharp distinction between computer or computer program versus information system Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What is an Information System? (3 of 3) Feedback – Output is returned to appropriate members of organization to help evaluate or correct input stage Computer/computer program vs. information system – Computers and software are technical foundation and tools, similar to the material and tools used to build a house Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.4 Functions of an Information System Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Dimensions of Information Systems Organizations Management Technology Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.5 Information Systems Are More Than Computers Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Dimensions of Information Systems: Organizations (1 of 2) Hierarchy of authority, responsibility – Senior management – Middle management – Operational management – Knowledge workers – Data workers – Production or service workers Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.6 Levels in a Firm Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Dimensions of Information Systems: Organizations (2 of 2) Separation of business functions – Sales and marketing – Human resources – Finance and accounting – Manufacturing and production Unique business processes Unique business culture Organizational politics Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Dimensions of Information Systems: Management Managers set organizational strategy for responding to business challenges In addition, managers must act creatively – Creation of new products and services – Occasionally re-creating the organization Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Dimensions of Information Systems: Information Technology 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 Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Interactive Session – Technology: Healthcare at Singapore’s JurongHealth Services Class Discussion – What technologies are used by JurongHealth? What purpose do they serve? – Search the web for RFID. Suggest an example of using RFID for locating and tracking people. – What information systems are implemented by JurongHealth? Describe the input, processing, and output of any one such system. – Why are information systems important for JurongHealth? Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  It Isn’t Just Technology: A Business Perspective on Information Systems (1 of 3) Information system is instrument for creating value Investments in information technology should result in superior returns – Productivity increases – Revenue increases – Superior long-term strategic positioning Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  It Isn’t Just Technology: A Business Perspective on Information Systems (2 of 3) Business information value chain – Raw data acquired and transformed through stages that add value to that information – Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits Business perspective – Calls attention to organizational and managerial nature of information systems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  It Isn’t Just Technology: A Business Perspective on Information Systems (3 of 3) Investing in information technology does not guarantee good returns There is considerable variation in the returns firms receive from systems investments Factors – Adopting the right business model – Investing in complementary assets (organizational and management capital) Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.7 The Business Information Value Chain Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Complementary Assets: Organizational Capital and the Right Business Model (1 of 2) Assets required to derive value from a primary investment Firms supporting technology investments with investment in complementary assets receive superior returns Example: Invest in technology and the people to make it work properly Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.8 Variation in Returns on Information Technology Investment Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Complementary Assets: Organizational Capital and the Right Business Model (2 of 2) Complementary assets – Examples of organizational assets ▪ Appropriate business model ▪ Efficient business processes – Examples of managerial assets ▪ Incentives for management innovation ▪ Teamwork and collaborative work environments – Examples of social assets ▪ The Internet and telecommunications infrastructure ▪ Technology standards Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.9 Contemporary Approaches to Information Systems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Technical Approach Emphasizes mathematically based models Computer science, management science, operations research Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Behavioral Approach Behavioral issues (strategic business integration, implementation, etc.) Psychology, economics, sociology Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Approach of This Text: Sociotechnical Systems (1 of 2) Management information systems – Combine computer science, management science, operations research, and practical orientation with behavioral issues Four main actors – Suppliers of hardware and software – Business firms – Managers and employees – Firm’s environment (legal, social, cultural context) Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Approach of This Text: Sociotechnical Systems (2 of 2) Sociotechnical view – Optimal organizational performance achieved by jointly optimizing both social and technical systems used in production – Helps avoid purely technological approach Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 1.10 A Sociotechnical Perspective on Information Systems Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  How Will MIS Help My Career? The Company: Power Financial Analytics Data Services Position: Financial client support and sales assistant Job Requirements Interview Questions Author Tips Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Management Information Systems: Managing the Digital Firm Seventeenth Edition, Global Edition Chapter 3 Information Systems, Organizations, and Strategy Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Learning Objectives 3.1 Which features of organizations do managers need to know about to build and use information systems successfully? 3.2 What is the impact of information systems on organizations? 3.3 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies develop competitive strategies using information systems? 3.4 What are the challenges posed by strategic information systems, and how should they be addressed? 3.5 How will MIS help my career? Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  N26: A Bank Without Branches Problem – Improving operational efficiency – Improve customer experience Solutions – Online customer-centric processes – Improved cash-based operations – Security systems Illustrates use of IT to differentiate services and improve customer experience Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  The Relationship Between Organizations and Information Technology Information technology and organizations influence each other – Relationship influenced by organization’s ▪ Structure ▪ Business processes ▪ Politics ▪ Culture ▪ Environment ▪ Management decisions Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.1 The Two-Way Relationship Between Organizations and Information Technology Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  What Is an Organization? Technical definition – Formal social structure that processes resources from environment to produce outputs – A formal legal entity with internal rules and procedures, as well as a social structure Behavioral definition – A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.2 The Technical Microeconomic Definition of the Organization Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.3 The Behavioral View of Organizations Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Features of Organizations Use of hierarchical structure Accountability, authority in system of impartial decision making Adherence to principle of efficiency Routines and business processes Organizational politics, culture, environments, and structures Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Routines and Business Processes Routines (standard operating procedures) – Precise rules, procedures, and practices developed to cope with virtually all expected situations Business processes: Collections of routines Business firm: Collection of business processes Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.4 Routines, Business Processes, and Firms Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Organizational Politics Divergent viewpoints lead to political struggle, competition, and conflict Political resistance greatly hampers organizational change Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  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 May be powerful unifying force as well as restraint on change Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  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 instrument of environmental scanning, act as a lens Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Figure 3.5 Environments and Organizations Have a Reciprocal Relationship Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Disruptive Technologies Substitute products that perform as well as or better than existing product Technology that brings sweeping change to businesses, industries, markets Examples: personal computers, smartphones, Big Data, artificial intelligence, the Internet First movers and fast followers – First movers—inventors of disruptive technologies – Fast followers—firms with the size and resources to capitalize on that technology Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Organizational Structure Five basic kinds of organizational structure (Mintzberg) – Entrepreneurial – Machine bureaucracy – Divisionalized bureaucracy – Professional bureaucracy – Adhocracy Information system often reflects organizational structure Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Other Organizational Features Goals – Coercive, utilitarian, normative, and so on Constituencies Leadership styles Types of tasks Different environments Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Economic Impacts IT changes relative costs of capital and the costs of information Information systems technology is a factor of production, like capital and labor IT affects the cost and quality of information and changes economics of information – Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets) ▪ Outsourcing Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Transaction Cost Theory Firms seek to economize on transaction costs (the costs of participating in markets) – Vertical integration, hiring more employees, buying suppliers and distributors IT lowers market transaction costs, making it worthwhile for firms to transact with other firms rather than grow the number of employees Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Agency Theory Firm is nexus of contracts among self-interested parties requiring supervision Firms experience agency costs (the cost of managing and supervising) which rise as firm grows IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Organizational and Behavioral Impacts IT flattens organizations – Decision making is pushed to lower levels – Fewer managers are needed (IT 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  Figure 3.6 Flattening Organizations 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 (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) 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 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  Interactive Session: Organizations: Shipping Wars Class discussion – Why is shipping so important for e-commerce? Explain your answer. – Compare the shipping strategies of Amazon, FedEx, and UPS. How are they related to each company’s business model? – Will FedEx succeed in its push into ground shipping. Why or why not? Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved  Interactive Session: Technology: Singapore as a Smart Nation Class Discussion – What are the factors driving the Smart Nation initiative? – What are the possible downsides of the Smart Nation projects? – Describe the smart city initiatives of an urban center in your country or region. 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  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 IT 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 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 Example: Li & Fung – Manages production, shipment of garments for major fashion companies – Outsources all work to thousands of suppliers 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 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  How Will MIS Help My Career? The Company: Superior Data Quality Position Description: Entry-level business development representative Job Requirements Interview Questions Author Tips Copyright © 2022, 2020, 2018 Pearson Education, Ltd. All Rights Reserved Copyright This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. 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