22/03/2021

BUSINESS INFORMATION
SYSTEM DESIGN
Week-3

INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY

DESIGN

Team Teaching
PSMI Laboratory © 2021
Industrial and Systems Engineering Department - ITS

Outline

01 Organizations and
Information Systems 02 How Information Systems
Impact Organizations and
Business Firms

03 Using Information System

to Achieve Competitive
Advantage

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Organization and Information Systems

Mediating Factors

Environment
Organization Culture Information
Structure System
Business Process
Politics
Management Decisions

What is Organization?
Organization
a stable, formal social structure that takes resources from the environment
and processes them to produce outputs.

Environmental Production Environmental

Resources Process Outputs

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Features of Organizations
Routine and Business Process
All organizations, become very efficient over time because individuals in the firm develop
routines for producing goods and services. As employees learn these, they become highly
productive and efficient, and is able to reduce its costs over time as efficiency increases.

Organizational Politics
People in organizations have different and specialties,
concerns, and perspectives. As a result, they naturally have divergent viewpoints about how
resources, rewards, and punishments should be distributed.

Organizational Culture
Organizational culture is a powerful unifying force that restrains political
conflict and promotes common understanding, agreement on
procedures, and common practices.

Organizational Environment
Organizations reside in environments from which they draw
resources and to which they supply goods and services.

Features of Organizations
Organizational Structure
The kind of information systems you find in a business firm—and the nature of problems
with these systems—often reflects the type of organizational structure.

Other Organizational Features

e.g: Leadership styles, etc.

How do these definitions of organizations relate to

information systems technology? A technical view of
organizations encourages us to focus on how inputs are
combined to create outputs when technology changes are
introduced into the company.

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FEATURES OF ORGANIZATION – BUILD & USE IS

SUCCESSFULLY

Business model & process

Organization culture & politics
Organization goals
Each organization has
Group served
its unique. Different
Social roles Determine the use & design of IS
with the others
Leadership style
Type of task performed
Incentives
Type of structure

ORGANIZATIONAL STRUCTURES

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What is STRATEGY?

Strategy
How long-term objectives will be achieved.
Business strategies may include geographic expansion, diversification,
acquisition, product development, market penetration, retrenchment,
divestiture, liquidation, and joint ventures.

Gaining Market Share

Desired
Outcome in
Business Outperform competitors (Cost,
quality and time to market)

DISRUPTIVE TECHNOLOGY
Substitute product that perform as well or better (often much better) than anything currently produced/used

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HOW Information System IMPACT

ORGANIZATION/FIRM
Economic IS changes relative cost of capital, costs of
Impact information, and transaction cost

Org and Flatten structure

Behavioral
Impact
Post industrial

Understanding organizational resistance to

change

IMPLICATION FOR THE DESIGN AND

UNDERSTANDING OF IS
The central organization factors to consider when planning a new system are:

The environment in which the organization must function

The structure of the organization: hierarchy, specialization, routines, and business process

The organization’s culture & politics

The type of organization and its style of leadership

The principal interest group affected by the system and the attitudes of workers who will be using the
system

The kind of tasks, decisions, and business processes that the IS is designed to assist

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USING IS TO ACHIEVE COMPETITIVE ADVANTAGE

Porter’s Competitive Force Model

USING IS TO ACHIEVE COMPETITIVE ADVANTAGE

Porter’s Competitive Force Model

Threat of entry of new competitors is high when it is

easy to enter a market and low when significant barriers to
entry exist.
A barrier to entry is a product or service feature that
customers expect from organizations in a certain industry.
For most organizations, the Internet increases the threat
that new competitors will enter a market.

The bargaining power of suppliers is high when buyers

have few choices and low when buyers have many choices.
Internet impact is mixed. Buyers can find alternative
suppliers and compare prices more easily, reducing power
of suppliers.
On the other hand, as companies use the Internet to
integrate their supply chains, suppliers can lock in
customers.

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USING IS TO ACHIEVE COMPETITIVE ADVANTAGE

Porter’s Competitive Force Model

The bargaining power of buyers is high when buyers

have many choices and low when buyers have few choices.
Internet increases buyers’ access to information,
increasing buyer power.
Internet reduces switching costs, which are the costs, in
money and time, to buy elsewhere. This also increases
buyer power.

The threat of substitute products or services is high

when there are many substitutes for an organization’s
products or services and low where there are few
substitutes.
Information-based industries are in the greatest
danger from this threat (e.g., music, books, software). The
Internet can convey digital information quickly and
efficiently.

USING IS TO ACHIEVE COMPETITIVE ADVANTAGE

Porter’s Competitive Force Model

The rivalry among firms in an industry is high when

there is fierce competition and low when there is not.

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IS STRATEGIES FOR DEALING WITH COMPETITIVE

FORCES

The computer collects the orders from all Walmart stores and transmits them to suppliers. Suppliers can
also access Walmart’s sales and inventory data using Web technology.

No need to spend much money on maintaining large inventories of goods in its own warehouses.

Results in Overhead Cost Efficiency

Average Retail Industry
24.9% 16.6% 20.7%

An efficient customer response system directly links consumer behavior

to distribution and production and supply chains.

IS STRATEGIES FOR DEALING WITH COMPETITIVE

FORCES

Google continuously introduces new and unique search services on its Web site, such as Google
Maps.

By purchasing PayPal, an electronic payment system, in 2003, eBay made it much easier for
customers to pay sellers and expanded use of its auction marketplace.

Apple created the iPod, a unique portable digital music player, plus a unique online Web music
service where songs can be purchased. Apple has continued to innovate with its multimedia
iPhone, iPad tablet computer, and iPod video player.

Nike sells customized sneakers through its NIKEiD program on its Web site

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IS STRATEGIES FOR DEALING WITH COMPETITIVE

FORCES

Hilton Hotels’ OnQ system analyzes detailed data collected on active guests in all of
its properties to determine the preferences of each guest and each guest’s
profitability. Hilton uses this information to give its most profitable customers
additional privileges, such as late check-outs.
Contemporary customer relationship management (CRM) systems feature
analytical capabilities for this type of intensive data analysis.

IS STRATEGIES FOR DEALING WITH COMPETITIVE

FORCES

Chrysler Corporation uses information systems to facilitate direct access by suppliers to

production schedules, and even permits suppliers to decide how and when to ship supplies
to Chrysler factories.

Keeps track of user preferences for book and CD purchases, and can recommend titles
purchased by others to its customers.

Strong linkages to customers and suppliers increase switching costs (the cost of
switching from one product to a competing product), and loyalty to the firm.

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IMPACT OF THE INTERNET ON COMPETITIVE AND

INDUSTRY STRUCTURE

THE BUSINESS VALUE CHAIN MODEL

Highlights specific activities in the business where competitive strategies can best applied, and where IS are
most likely to have a strategic impact

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THE VALUE WEB

Internet technology has made it possible to create highly synchronized
industry value chains called value webs.

A value web is a collection of independent firms that use

information technology to coordinate their value chains to
produce a product or service for a market collectively.

Example:
If you are Amazon.com, you want to build systems
that:
• Make it easy for suppliers to display goods and open
stores on the Amazon
site
• Make it easy for customers to pay for goods
• Develop systems that coordinate the shipment of goods
to customers
• Develop shipment tracking systems for customers

LET’S DISCUSS THIS CASE

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