INF10003

Introduction to Business Information Systems

Lecture 2
Competing in the Information Age
Information Systems in Business
Competitive Advantage

Acknowledgement to Jason Sargent & Dr. Adi Prananto for contributions to unit content

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Lecture Objectives
At the end of this session you should be able to:
 Understand business in the Information age

 Explain why are business in hurry to remove humans from their business (race to innovate)

 Identify the different departments in an organisation and why they must work together to achieve
success

 Explain systems thinking and how management information systems enable business
communications

 Explain why competitive advantages are temporary

 Describe Porter’s Five Forces Model and explain each of the five forces

 Demonstrate how a company can add value by using Porter’s value chain analysis

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Business & The Information Age
• We have been living in the information age for sometime: TRUE / FALSE?
• Only student with advanced technology skills can compete in the information
age: TRUE / FALSE?
• Many business leaders have created exceptional opportunities by coupling the
power of the information age with traditional business methods.

• ____________ is not a technology company; its original business focus was to

sell books, and it now sells nearly everything.
Jeffrey
Preston
Bezos
• _____________ saw an opportunity to change the way people purchase
books and applied the power of the information age to:
– Tailor offerings to customers,
– Speed the payment process,
– Enable constant monitor on shipments,
– Recommend future purchase …
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
The Race to Innovate
• Private Business is leading the charge.
Fad or Reality

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

The Race to Innovate
• Domino is the First Company delivering Pizza using Drone | CNBC

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

The Race to Innovate
• The real costs:
– “Drone delivery is about 10,000 times more expensive than
UPS or FedEx Ground”.

Logan Campbell, CEO of drone consulting firm Aerotas, says drone delivery has
a viable future delivering high value, urgently-needed items, like a heart
transplant being shipped to a hospital or other urgent medical products.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

The Race to Innovate
• More likely and most cost effective vision.
Large driverless
Truck base station

Remote Air
Drones

Remote land
• Cut cost Drones
• Far location services
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
The Race to Innovate
• Changing common practices and behaviors.

• No need to queue up
A checkout less supermarket • Scan & pay using smartphones

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

The Race to Innovate
How does it work?
• The system is logging the JUST WALK OUT TECHNOLOGY – Amazon Go
items as the shopper goes
along, which eliminates the
need to go through a
traditional check-out line.

• When customers exit the

store through a “transition
area,” the system senses
that they’re leaving, adds
up the items and charges
their Amazon account.

But will it be cheaper?

Yes. No cashiers are required.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

The Human Cost of Technology
• Experts say advanced automation is already on track to revolutionize the
transportation industry, potentially displacing millions of truckers and other
drivers for hire.
• If anything, the stakes are greater for the retail trade sector, which employs
more than three times as many Americans as the transportation and
warehousing sector (15.3 million vs. 4.6 million in 2014)
• Additional loss of privacy as customer profile generation would underlie
the systems AI.
• Loss of low skilled job opportunities and youth employment opportunities.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Organisations and Business Operations
• Organisations are complex: Investor Supplier
– People Customer
– Interactions between diverse Employee
Government sector
people
– Complexity makes it hard to know
& understand what is really going
on
• Organisations/Businesses
typically:
– Provide their customers with
goods &/or services

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Traditional Organisational Structure

Articulate policy, strategy, goals, plans; Often called ‘C’

level managers or ‘C’ Suite managers (CEO, CIO, COO …)

Implement policy, strategy Often called Dept.

Heads, Project Managers, Divisional Manager

Meet and serve customers

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Modern Organisational Structure
Customers and clients Receive an optimal service level &
experience at all time

Demonstrate a mindset of an engaged employee

Frontline employee team with intrinsic motivation; provide an optimal
service experience

Model the behavioral changes; empower and coach the

Team leaders &
team to take more ownership and responsibility;
managers
encourage problem solving

Model, coach and link the behavioral changes that

Top will lead to increased employee engagement and
managers customer satisfaction; keep clear vision on the
mission and strategies of the organization.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

 Traditional vs Open Office
• Segregation (senior staff separated
from junior staff)
• Compartmentalised – Depts don’t mix
• Reward/Promotion = Space
• Formalised share areas /spaces : Shared
spaces like conference rooms
/meeting rooms/ eating spaces and even
bathrooms can have segregation levels
based on job position.

• Minimal segregation (senior staff mix and

cohabitate in same areas as junior staff)
• Minimal Compartmentalised – Depts mix
• Minimal Reward/Promotion = Space
• Minimal to no segregation of shared spaces
like conference rooms /meeting rooms/
eating spaces and bathrooms.

15
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Departmentalised Organisations
Today, all organizations have computer system.
Yet problems still occur if departments work
independently:
• Lack of integration <> value creation
• Inefficiencies of information transfer &
process control
• Lack of communication, data sharing, flow
information
• Difficult to see ‘big picture’
• Minimal business intelligence and
knowledge

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

(http://findaccountingsoftware.com/expert-advice/the-four-things-every-start-up-should-know-about-selecting-software/)
Importance of Cross-functional Operations
• Marketing unit needs to analyse production and sales data to come
up with product promotions and advertising strategies.

• Production unit needs to understand sales forecasts to determine

the company's manufacturing needs.

• Sales unit need to rely on information from operations to understand

inventory, place orders and forecast consumer demand.

• All departments need to understand the accounting and finance

departments' information for budgeting.
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Solution: Management Information Systems
• Systems thinking is a way of looking at a problem holistically. It “requires you to
model the components of the system and to connect the inputs and outputs
among those components into a sensible whole – one that explains the
phenomenon observed” (Kroenke, Bunker & Wilson, 2014 p.8)

(Baltzan, Lynch & Fisher 2015,

p.22)
Systems Thinking: A cautionary Tale (Cats in Borneo)
https://www.youtube.com/watch?v=17BP9n6g1F0 (3.09 min)
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Solution: Management Information Systems

• Getting departments to work inter-dependently

• Seamless transfer of data from one department to another
– Data from all departments can been seen, gathered, used
• Improved intelligence & knowledge & business decisions

(Baltzan, Lynch & Fisher 2015, p.16 )

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Solution: Management Information Systems
Business decision can impact on most if not all parts of business.
• Example: if marketing wanted to pursue an increased social media campaign to improve
sales by 20% and to do so it needs to increase its marketing budget by 35% as well as
employ new staff members.
• Which department data and personnel would the marketing department to consult with to
pursue this venture?

(Baltzan, Lynch & Fisher 2015, p.16 )

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

 Solution: Management Information Systems

Triangulating People, IT and Information

People use …

Information technology to work … Business

Success

Information

Baltzan, Lynch & Fisher 2015, p. 17

• Information Technology (IT) is primarily concerned with hardware and software

(for example servers, operating systems, web services, networks

• Information Systems (IS) “Collects, processes, stores, analyses and

disseminates information for a specific purpose” (Gray et. al, 2015, p.3).
It’s primarily concerned with the people, processes and the technology.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

• But ..
– For Information Systems to work effectively, it requires a
well designed and implemented Information technology
System.
• Could this system handle a
growth in its business capacity?

• Is this system using its systems

effectively to capture data to be
used for strategic decision?

• What do you see that limits this

business’s IT system from
handling business growth and
information sharing?

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

22
Solution: Management Information Systems

• What could possibly go wrong?

December 2015 “Top software failures
2015: Glitch releases US prisoners early”
(Jee, 2016)

February 2016 “An engineer caused Telstra’s big outage

by turning the network off and on again” (Tucker, 2016)

A “hardware fault” in their systems led to Virgin

Australia check in desks going down for hours
stranding 1000’s of customers.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Global IT ?
• Business in the global environment
– Cultural business challenges
• Language (diff, website versions, religion, customs)
– Political business challenges
• Trans-border, data flows, imports, exports, trade agreements)
– Geo-economic business challenges
• Locality challenges, fly-in-fly-out, tech support teams

“Trump says he
Global MIS doesn’t want to do
business with
Huawei due to
national security
concerns” – 18 Aug
2019, CNBC
DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Global IT ?
 What to sell to our customers?
 What do customers want or not
want?
 How do make customers happy with
the products?
• Moving from product-centricity to customer-centricity  Why do some potential customers
not buy from us?
• Mass production to mass customisation
• Organisational agility supported by a ‘plug and play’ IT infrastructure
• Competitive advantage  What enables a company to outperform its competitor?
• First-mover advantage  First to enter the market with a competitive advantage.

– The integration of business and technology has allowed organisations to

increase their share of the global economy, transform the way they
conduct business and become more efficient and effective.

https://www.nike.com/my
/nike-by-you

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Identifying Competitive Advantage
•Business strategy: a leadership plan that achieves a specific set of
goals or objectives, such as:
 developing a new product or service
 entering a new market
 increasing customer loyalty
 attracting new customers
 increasing sales

Competitive advantage a product or service that an organisation’s

customers place a greater value on than similar offerings from a competitor

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Identifying Competitive Advantage
 Competitive advantages are typically temporary. Why?
Competitors are quick to copy competitive advantages.

 First-mover advantage occurs when an organisation can significantly affect

its market share by being first to market with a competitive advantage
• What’s happened to these first-movers?

- AltaVista -> Google These were first-movers with

- Napster -> iTunes innovation & market leaders.
- VisiCalc -> Lotus 123 -> Excel
- Word Perfect -> Word Yet, they were eclipsed by
- Netscape -> Internet Explorer -> Firefox, Chrome fast followers, in some cases
- Apple Newton -> Palm Pilot -> Blackberry ->iPad
multiple times.
- IBM PC -> Compaq -> Dell
- Ofoto -> Flickr Did this occur because of the
- Nintendo –> Xbox -> Playstation technology or was it
- Friendster –> Myspace ->Facebook management?
- Blackberry –> iPhone

o Should you be a first-mover or fast-follower? That is the question!

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Identifying Competitive Advantage
Competitive Intelligence
• The process of gathering information about the
competitive environment to improve the company’s
ability to succeed.

• Competitive intelligence tools

– Five Forces Model  for evaluating industry
attractiveness
– Three strategic initiatives  for choosing a business
focus
– Value chain analysis  for executing business
strategies

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Five Forces Model
Evaluating Industry Attractiveness
• Porter identified the following which can hurt potential sales:
 Knowledgeable customers can force down prices by pitting rivals against each
other

 Influential suppliers can drive down (your) profits by charging higher prices for
supplies

 New market entrants can steal potential investment capital

 Substitute products can steal customers

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Five Forces Model
• To combat these, Porter developed the 5 Forces Model to help
determine the attractiveness of an industry:
1. Bargaining power of customers
2. Threat of substitutions
3. Bargaining power of suppliers
4. Threat of new entrants
5. Rivalry among existing competitors

Porter’s five forces explained:

https://www.youtube.com/watch?v=ZWQMwnCFIj0 (1.58 min) (Kroenke 2010, p.43 )

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Examples of Porter’s 5 Forces
Force Example of Strong Example of Weak
Force Force
Bargaining power of Retail stores stocking Your power over the
customer Apple products prices of Apple products
Threat of substitutions Patients choice of over Patients using the only
the counter pain killers drug effective for their
type of illness
Bargaining power of Fruit farmers in a Fruit farmers in a surplus
suppliers drought year year
Threat of new entrants Local coffee shop 3 hat seafood restaurant
Rivalry among existing Used car dealers Lamborghini car dealers
competitors

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Example: 5 Forces model in the Airline Industry
Force Strong (High) Force: Increases competition
or Lots of Competitors
Buyer Power Many Airlines for buyers to choose from
forcing competition based on price
Supplier Power Limited number of plane and engine
manufacturers to choose from along with
unionized workers
Threats of substitution Many substitutes including cars, trains,
of products or services and buses. Even substitues to travel such
as video conferencing and virutal
meetings
Threat of new entrants Many new airlines entering the market all the time.
Rivalry among existing Intense competition-many rivals
competitors

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Example: 5 Forces model in the Starbucks
The nature of the relationships among these forces is best presented in the
following figure:
Moderate
• A huge chain of store
• Takes time to develop a
brand & earns brand
loyalty

High
• Low switching costs
• High substitute
availability

Low
High
• Large no. of suppliers
• Beverages and food
worldwide
items can be
• Coffee beans required
substituted with
easily available (Except for
low switching cost
premium coffee bean)

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Value Chain Analysis
Business process a standardised set of activities that accomplish a
specific task, such as a specific process

Value chain analysis views a company as a series of business

processes that each add value to the product or service

Departmental structures,
environment, systems
Employee training, hiring new staff

Applies MIS to processes to add value

Purchases inputs (e.g. raw

materials, resources,
equipment, supplies)

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M (Baltzan, Lynch & Fisher 2015, p.32 )
Value Chain Analysis
For a tyre manufacturing business

(Baltzan, Lynch & Fisher 2015, p.32 )

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M
Value Chain Analysis For a tyre manufacturing business

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Example: Bicycle Manufacturer’s Value Chain

Coke Value Chain Example:

https://www.youtube.com/watch?v=4SlH77WBI_I (4.01 min)

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M

Bibliography
 Baltzan P, Lynch K & Blakey P 2013, Business driven information systems, 2e, McGraw-Hill Australia, NSW.

 Baltzan P, Lynch K & Fisher J 2015, Business driven information systems, 3e, McGraw-Hill Australia, NSW.

 Bolma LG & Deal TE 2003, Reframing Organizations, 3rd edn, Jossey-Bass, San Francisco.
 Gray H, Issa T, Pye G Troshani I, Rainer RK, Prince B & Watson HJ 2015, Management Information Systems, First
Australasian Edition, Wiley & Sons, Qld., Australia

 Jee C 2016 Top software failures 2015: Glitch releases US prisoners early, ComputerWorld UK viewed 7 March 2016,
http://www.computerworlduk.com/galleries/infrastructure/top-10-software-failures-of-2014-3599618/#3

 Kroenke D M 2015, MIS Essentials, 4th edn, Pearson Ed. Ltd., Essex, England

 Kroenke D, Bunker D & Wilson D 2014, Experiencing MIS, 3rd edn, Pearson Australia, French Forest, NSW

 Kroenke D 2010, Experiencing MIS, 2nd edn, Pearson Education, Upper Saddle River, NJ
 Rainer Jnr RK, Turban, E & Potter, RE 2007, Introduction to Information Systems: Supporting and Transforming Business,
John Wiley & Sons, Hoboken, NJ.

 Tucker, H 2016, An engineer caused Telstra’s big outage yesterday by turning the network off and on again, Business Insider
Australia, viewed 7 March 2016, http://www.businessinsider.com.au/an-engineer-caused-telstras- big-outage-yesterday-by-
turning-it-off-and-on-again-2016-2

 Wood J, Chapma, S, Fromhol, M, Morrison V, Wallace J, Zeffane R, Schmerhorn J, Hunt J & Osborn R 2009

• Organizational Behaviour: A Global Perspective. 3rd edn, John Wiley & Sons, Brisbane, Australia.

DULN004(Q) KP(JPS)5195/IPTS/1144 05 June 2004 Co. No. 497194-M