Chapter 2

Using MIS
10th Edition
Chapter 3
Strategy and Information
Systems
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved 3-1
“We Can't Be Everything to Everybody.”
• Known for providing security monitoring.

• Current focus on security contracts.
• Mateo wants to focus on law enforcement
agencies, search & rescue, federal government.
• Good money in agricultural surveying, industrial
inspection, real estate videos, and wedding videos
too.
Study Questions
Q3-1 How does organizational strategy determine information
systems structure?
Q3-2 What five forces determine industry structure?
Q3-3 How does analysis of industry structure determine competitive
strategy?
Q3-4 How does competitive strategy determine value chain
structure?
Q3-5 How do business processes generate value?
Q3-6 How does competitive strategy determine business processes
and the structure of information systems?
Q3-7 How do information systems provide competitive advantages?
Q3-8 2027?
Strategy Determines Information Systems
Q3-1 How does organizational strategy determine information systems structure?
Figure 3-1 Organizational Strategy Determines Information Systems
Five Forces Determine Industry Structure
• Competitive Forces
– Competition from vendors who manufacture
substitutes.
– Competition from new competitors.
– Competition from existing rivals.
• Bargaining Power Forces
– Bargaining power of suppliers.
– Bargaining power of customers.
Use Five-forces Model to Identify Sources of
Strong Competition
Force Example of Strong Force Example of Weak Force

Toyota’s purchase of auto paint (because Your power over the
Bargaining power of
Toyota is a huge customer that will procedures and policies of your
customers
purchase paint in large volume) university
Threat of Patients using the only drug
Frequent traveler’s choice of auto rental
substitutions effective for their type of cancer
New car dealers (because they control Grain farmers in a surplus year
Bargaining power of what the “true price” of a vehicle is and (an oversupply makes the
suppliers the customer cannot reliably verify the product less valuable and less
accuracy of that price) profitable)
Professional football team
Threat of new Corner latte stand (because it is an easy
(because the number of teams
entrants business to replicate)
is tightly controlled by the NFL)
Google or Bing (expensive to
Used car dealers (because there are
Rivalry develop and market a search
many to choose from)
engine)
Figure 3-3 Examples of Five Forces
Assessing the Five Forces at Falcon Security
Force
Force Falcon Security Example Strength Falcon Security's Response
Bargaining power of A large account wants more Lower prices, or diversify into
Strong
customers services at a lower price other markets
Offer differentiating services,
Threat of Replace drones with wireless IP
Medium like LiDAR, that cameras can't
substitutions Web cameras
provide
Bargaining power of We're increasing the cost of the
Weak We'll make our own drones
suppliers drones we sell
Amazon begins offering
Threat of new Offer differentiating services
package delivery and Medium
entrants and enter other markets
surveillance via drones
Offer additional features like
A new drone company expands
Rivalry Weak direct streaming video to the
its operations into the state
customer
Figure 3-4 Five Forces at Falcon Security
Porter's Four Generic Competitive
Strategies
Q3-3 How does analysis of industry structure determine competitive strategy?
Figure 3-5 Porter's Four Competitive Strategies
The Lure of Love Bots
Ethics Guide
• The problem: 15 percent of the total subscribers

were female, while 85 percent were male
• “The key to maintaining subscribers on this type of
site is keeping them interested”
• To keep subscribers paying, “all we have to do is
send them some messages from a dummy
account”
• All interactions can be handled with AI bots
• Are the owner’s actions illegal? Unethical?
Drone Manufacturer’s Value Chain
Q3-4 How does competitive strategy determine value chain structure?
Figure 3-6 Drone Manufacturer's Value Chain
Task Descriptions for Primary Activities of
the Value Chain
Q3-4 How does competitive strategy determine value chain structure?
Figure 3-7 Task Descriptions for Primary Activities of the Value Chain
Source: Based on Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (The Free
Press, a Division of Simon & Schuster Adult Publishing Group). Copyright © 1985, 1998 by Michael E. Porter.
Three Examples of Business Processes for
Material Ordering Process
Figure 3-8 Three Examples of Business Processes
Improved Material Ordering Process Using
Integrated Databases
Figure 3-9 Improved Material Ordering Process
Low-Cost Rental Operations Value Chain
Q3-6 How does competitive strategy determine business processes and the structure of information systems?
Figure 3-10 Operations Value Chains for Bicycle Rental Companies
High-Service Rental Value Chain
Q3-6 How does competitive strategy determine business processes and the structure of information systems?
Figure 3-10 Operations Value Chains for Bicycle Rental Companies
Business Process and Information Systems
for High-Service Bike Rental
Figure 3-11 Business Process and Information Systems for High-Service Bike Rental
Principles of Competitive Advantage
Figure 3-12 Principles of Competitive Advantage
The Autonomous Race
So What?
• Nearly all major automakers are investing in and

have already been testing their own self-driving
cars.
• Nearly 93 percent of crashes have been attributed
to operator error being the “definite or probable”
cause.
• Identify some implications of driverless vehicles.
• What legal obstacles face producers of driverless
vehicles?
The Autonomous Race (cont’d)
So What?
• What vulnerabilities could be exploited by

equipping self-driving vehicles with Internet
access?
• What are some logistical issues that could arise
from a delivery vehicle without a human operator?
• What impact will the widespread use of driverless
vehicles have on other industries related to the
automotive industry?
Using IS to Create Competitive Advantages
• Enhances existing products.

• Differentiates products.
• Locks in customers.
• Raises barriers to market entry.
• Increases profit margins by decreasing costs and
decreasing errors.
Using IS to Create Competitive Advantages
(cont’d)
• Maintains customer account data

– IS collects information for ABC (adds value).
– IS saves customers time by automatically filling in
part of form (adds value for customer).
• Package & information delivery system
– IS helps customer to select delivery address and
generate shipping labels.
– What value does shipper get?
Two Roles for Information Systems
Regarding Products
Figure 3-13 Two Roles for Information Systems Regarding Products
Web Page to Select a Contact from the
Customer’s Records
Figure 3-14 ABC, Inc., Web Page to Select a Recipient from the Customer's Records
ABC Web Page to Select a Contact from
Customer’s Records
Figure 3-15 ABC, Inc., Web Page to Select a Contact from the Customer's Records
Web Page to Specify Email Notification
Figure 3-16 ABC, Inc., Web Page to Specify Email Notification
Web Page to Print Shipping Label
Figure 3-17 ABC, Inc., Web Page to Print a Shipping Label
Strategy and Information Systems in 2027
Q3-8 2027?
• Pace of change and integration of new technology

fast and increasing.
• Augmented reality devices, like Google Glass and
Microsoft's HoloLens, will change competitive
landscape.
• New businesses based on advances in self-driving
cars, drones, 3D printing.
• New products constructed in someone’s garage.
Innovations by Technology Companies
Q3-8 2027?
Market
Self-driving
Company Cap. In Search Smartphone AI Smartwatch AR/VR Drones
Car
Billions
iPhone Siri Apple Watch ? ?

Apple $539
(2007) (2011) (2015) (dev.) (dev.)
Daydream VR
Google Nexus Now Wear (os) Wing Self-driving Car
Alphabet $480 & Magic Leap
(1998) (2013) (2012) (2014) (dev.) (dev.)
(dev.)
Bing Lumia Cortana Band Hololens

Microsoft $395
(2009) (2011) (2014) (2014) (2016)
Facebook FAIR Oculus Rift Ascenta

Facebook $306
(2004) (dev.) (2016) (dev.)
Galaxy S S Voice Gear S2 Gear VR

Samsung $162
(2010) (2012) (2013) (2015)
Figure 3-18 Innovations by Technology Companies
Hacking Smart Things
Security Guide
• Internet of Things (IoT)

– Internet-enabled devices.
– Outfitting every object with Internet access
hazardous, even dangerous, proposition.
• Unintended risks associated with incorporating this
capability into things.
Internet of Threats
Security Guide
• What about securing data stored on Internet-

enabled smart devices?
– How to protect 10, 20, or 30 different Internet-
enabled devices in your home?
– Could hacker hijack webcam in your living room, or
actually hijack your car?
– What businesses and government agencies could
benefit?
Internet of Threats (cont’d)
Security Guide
• What are some benefits or risks for businesses

adopting new Internet-enabled devices?
• How about supply chain, customer service? What
else?
Director of Architecture
Career Guide
Gabe Chino in Financial Services

Q. What attracted you to this field?
A. “I have always been interested in how technology can enhance
our lives. After getting some exposure to programming in college, I
was hooked. I realize there is no end to innovation and creativity in
this field, so I am never bored.”
Q. What advice would you give to someone who is
considering working in your field?
A. “My advice would be to always watch where the tech field is
going. If this field is really for you, stay current with the latest IT
trends.”
Active Review
Q3-1 How does organizational strategy determine information
systems structure?
Q3-3 How does analysis of industry structure determine
competitive strategy?
Q3-4 How does competitive strategy determine value chain
structure?
Q3-6 How does competitive strategy determine business
processes and the structure of information systems?
Q3-7 How do information systems provide competitive
advantages?
Q3-8 2027?
The Amazon of Innovation
Case Study 3
Figure 3-19 Innovation at Amazon

Source: Data from Amazon.com: http://phx.corporate-ir.net/phoenix.zhtml?p=irolcorporateTimeline&c=176060, accessed
April 2016.
The Amazon of Innovation (cont'd)
Case Study 3
• Amazon’s business lines have three categories:

• Online retailing
– Own inventory
– Associates program
– Consignment
• Order fulfillment
• Cloud services
Fulfillment Fees for Regular-Sized Goods
for a Company Like Falcon Security
Case Study 3

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Using MIS

• Known for providing security monitoring.

Figure 3-1 Organizational Strategy Determines Information Systems

Force Example of Strong Force Example of Weak Force

Figure 3-3 Examples of Five Forces

Figure 3-4 Five Forces at Falcon Security

Figure 3-5 Porter's Four Competitive Strategies

• The problem: 15 percent of the total subscribers

Figure 3-6 Drone Manufacturer's Value Chain

Figure 3-8 Three Examples of Business Processes

Figure 3-9 Improved Material Ordering Process

Figure 3-10 Operations Value Chains for Bicycle Rental Companies

Figure 3-10 Operations Value Chains for Bicycle Rental Companies

Figure 3-12 Principles of Competitive Advantage

• Nearly all major automakers are investing in and

• What vulnerabilities could be exploited by

• Enhances existing products.

• Maintains customer account data

Figure 3-13 Two Roles for Information Systems Regarding Products

Figure 3-16 ABC, Inc., Web Page to Specify Email Notification

Figure 3-17 ABC, Inc., Web Page to Print a Shipping Label

• Pace of change and integration of new technology

iPhone Siri Apple Watch ? ?

Bing Lumia Cortana Band Hololens

Facebook FAIR Oculus Rift Ascenta

Galaxy S S Voice Gear S2 Gear VR

Figure 3-18 Innovations by Technology Companies

• Internet of Things (IoT)

• What about securing data stored on Internet-

• What are some benefits or risks for businesses

Gabe Chino in Financial Services

Figure 3-19 Innovation at Amazon

• Amazon’s business lines have three categories:

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