and George Schell

Chapter 2
Using Information Technology for Competitive Advantage

Copyright 2001, Prentice-Hall, Inc.

What is a Firm? 

Physical System
± Closed-loop Closed± Controlled by management ± Uses feedback to ensure objectives met ± Open because of environmental interaction 

Managed through use of a conceptual system

Importance of Environment 

Very reason for a firm¶s existence  Firm takes resources from environment, transforms them, and returns goods and services to environment


The Firm·s Environment Society Financial Community Government Global Community Suppliers The Firm Stockholders or owners Customers Labor unions Competitors 2-4 .

The Firm Is Connected to Its Environment by Resource Flows  Physical and conceptual  Some flows are major  Some should not occur at all  All resources that enter the firm from the environment eventually return to the environment 2-5 .

Competitive Advantage  Computer field perspective ± Use of information to gain leverage in marketplace ± Relies on more than physical resources  Addressed with strategic objectives 2-6 .

Porter 2-7 .A Value Chain Firm Infrastructure Support Activities Human resource management Technology development Procurement Inbound Operations Outbound Marketing and logistics logistics sales Service Primary Activities Source : Michael E.

Porter .A Value System Supplier value chains Firm value chain Channel value chains Buyer value chains 2-8 Source : Michael E.

Manage data by implementing computercomputerbased database management systems (DBMS) 2.The Information Resources Two views of information management 1. Manage resources that produce the information 2-9 .

The Information Resources Software Hardware Database Information Specialists Users Information Facilities 2-10 .

the CIO  Chief Information Officer (CIO) is not simply a title.The Information Resource Manager -. but role  Manager of information services  Contributes managerial skills ± Solves information resources problems ± Solves problems in other areas of firm¶s operations 2-11 .

not defensive  2-12 . not IS jargon  Provide reliable IS services  Be positive.The CIO Attitude The business is what counts  Build partnerships/ties with the rest of the firm  Improve basic business processes  Communicate in business terms.

Strategic Planning  LongLong-range planning ± Intends to give firm most favorable position in its environment ± Specifies strategies for achieving objectives  Need for each business area to create its own strategic plan 2-13 .

The Functional Areas Should Cooperate in Developing Their Strategic Plans Strategic planning for information resources Strategic planning for marketing resources Strategic planning for manufacturing resources Strategic planning for financial resources Strategic planning for human resources 2-14 .

Strategy Set Transformation Organizational strategy set Mission Objectives Strategy Other strategic organizational attributes MIS strategic planning process System constraints System design strategies 2-15 MIS strategy set System objectives .

Strategy Set Transformation: Basic Flaw  Business areas do not always have the resources to ensure accomplishment of strategic objectives 2-16 .

What will be required 2-17 . What is to be achieved » 2. support the firm¶s objectives  Strategic planning for information resources (SPIR) develops firm and IS strategic plans concurrently ± SPIR content » 1.SPIR  Strategy set transformation.

Strategic Planning for Information Resources Influence on Information Resources Business strategy Influence on Business Strategy Information resources and IS strategy 2-18 .

Strategic Plan Framework for Information Resources Strategic Plan for Information Resources AIS Objectives MIS Objectives DSS Objectives Virtual Office Objectives Knowledgebased systems Objectives Required Information Resources Required Information Resources Required Information Resources Required Information Resources Required Information Resources 2-19 .

The Strategic Implications of EndEnd-User Computing (EUC)  Levels of end users in terms of capabilities ± menu-level end users menu± command-level end users command± end-user programmers end± functional support personnel  EUC application considerations ± shifts workload so that end-users and endinformation specialists¶ talents are better used ± reduces communications gap 2-20 .

EUC Risks  Poorly aimed systems  Poorly designed/ documented systems  Inefficient use of information resources  Loss of data integrity  Loss of security  Loss of control 2-21 .

acquiring.Information Resources Management (IRM) Concept  Realization that firm¶s information resources go far beyond the information itself  Activity pursued by managers at all levels  Identifying. and managing information resources needed to satisfy information needs 2-22 .

Required Elements A recognition that competitive advantage can be achieved by means of superior information resources  A recognition that information services is a major functional area  A recognition that the CIO is a top-level topexecutive  2-23 .IRM .

)  A consideration of the firm¶s information resources when engaging in strategic planning  A formal strategic plan for information resources  A strategy for stimulating and managing endend-user computing 2-24 .IRMIRM-Required Ingredients (cont.

The IRM Model The environment of the firm ENVIRONMENTAL INFLUENCES The firm¶s executives CIO Internal influences Information services Finance Human resources Other executives Firm¶s strategic plan Manufacturing Marketing FUNCTIONAL AREAS INFORMATION RESOURCES Central computing resources Disbursed computing resources DATA AND INFORMATION Users engaged in end-user computing Other users 2-25 .

IRM Model: Firm Environment  Provides setting for achieving competitive advantage  Executives are aware of need to manage resource flows to meet needs of environmental elements 2-26 .

IRM Model: Firm·s Executives Includes CIO  Guides firm toward objectives  Key activity is strategic planning  2-27 .

IRM Model: Business Areas Information services is a major business area  Each area develops own strategic plans  One business area strategic plan is for information resources  2-28 .

IRM Model: Information Resources Strategic plan for information resources details acquisition and management  Information resources  ± Centralized ± Dispersed throughout firm 2-29 .

IRM Model: Users  Details data and information flows between resources and users  Some users engage in end-user computing end- 2-30 .

information specialists. and users 2-31 . database. software.value of products and services over cost ± Value chain  Information resources ± Hardware.Summary  Environment of a firm consists of eight elements  Firms attempt to achieve competitive advantage ± Margin . information. facilities.

]  Executives perform strategic planning ± SPIR  All firm¶s managers need to engage in IRM ± Recent revelation ± Integrating concept 2-32 .Summary [cont.

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