Week 3 - Info Systems

jenniferelkhoury
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jenniferelkhoury
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Organizational Strategy, Information Systems, and Competitive Advantage • How does Organisational Strategy determine Information Systems Structure? • What Forces determine Industry Structure? • What is Competitive Strategy? • What is a Value Chain? • How do Value Chains determine business processes? • How do information systems provide competitive advantages?

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Question Answer
Why do we need information? So managers at various levels within a business can make informed decisions.
Information has to be accurate, timely (available), complete and relevant. If not? Then an organisation is at distinct disadvantage.
So, what is relevant? - Depends on what organisation is trying to achieve (it's strategy) - And that depends on a number of things
Modern organisations compete in a challenging environment. To remain competitive, they must... React rapidly to problems and opportunities that arise from extremely dynamic conditions.
A business environment is comprised of a number of factors in which businesses conduct their operations. These are: - Social - Legal - Economic - Physical - Political *Significant changes in any of these factors are likely to create business pressures on organisations *Organisations typically respond to these pressures with activities supported by IT.
Business Environments Map
What are the 3 Major Business Pressures? - Market Pressures - Technology Pressures - Societal/Political/Legal Pressures
What are the 4 factors of Market Pressures? - Global Economy - Intense Competition - Changing nature of the workforce - Powerful customers
What are 2 factors of Technology Pressures? - Technological Innovation - Information Overload
What are 5 factors of Societal/Political/Legal Pressures? - Social Responsibility - Government regulation/deregulation - Spending for social programs - Spending to protect against terrorism - Ethics
Given all pressures placed on a business, what do they need to develop in order to survive and compete? An organisational strategy.
Every organisation exists for some reason. Examples of this may be? - To make a profit is the most obvious - But it may be to help its members (RACV) or provide humanitarian aid (CARE) or a charity.
An organisational strategy is developed by 2 factors, these are? Goals Objectives
What is the aim of a organisational strategy through goals and objectives? - The aim is to create value - By way of making money, helping members or providing aid
What does an organisational structure establish? The structure, features, and functions of Information Systems (IS) that will be used in an organisation.
An IS must align with the goals of the organisation. Why is this? The technology, the computer and hardware, are not enough; Even the people and the procedures are of little use unless they are used to support the business objectives.
For a business to be successful, it must be: Competitive
A competitive business strategy ensures that: The organisational goals and objectives and the organisational structure of a business is determined by its competitive strategy.
How does an organisational strategy determine what information systems are used by an organisation? (chart)
In regards to Competitive Strategy, what its the best known framework for analysing competitiveness? Michael Porter's competitive forces model
Why do companies use Porter's model? To develop strategies to increase their competitive edge.
What does Porter's model demonstrate in regards to IT? How IT can make a company more competitive?
How is the Web involved? - Although the web has changed the nature of competition, it has not changed Porter's 5 fundamental forces. - Porter concludes that the overall impact of the Web is to increase competition, which generally diminishes a firm's profitability.
Porter’s model identifies five major forces that can endanger or enhance a company’s position in a given industry. These 5 forces model is:
5 Forces Examples? (Table)
When can an organisation decide where it wants to position itself within it's industry? When the organisation has assessed the competitive situation for their industry. This determines its competitive strategy.
Organisations continually try to develop strategies to counter the five competitive forces identified by Porter. It is important to note that an organisation's choice of strategy involves what? Trade-offs – A company that concentrates only on cost leadership might not have the resources available for research and development – A company that invests in customer happiness (customer-orientation strategy) will experience increased costs
Companies must select a strategy and then stay with it. This is because: - A confused strategy cannot succeed. - This selection, in turn, decides how a company will utilise its information systems.
After analysing industry structure, the organisation then determines the best competitive strategy. Which 4 factors has Porter identified must be consistent with strategy? - Goals - Objectives - Culture - Activities
Porter identified 5 generic competitive strategies: (table)
We know that after analysing industry structure, the organisation then determines the best competitive strategy. They then need to: Organise and structure the business to implement that strategy.
2 Examples of this? - For example, if they are to be the cheapest in the industry then they have to develop business activities that make them economically advantageous as possible. – It may be that the emphasis is on differentiation, say quality, then they have to develop business activities that ensure the highest quality of their products.
How is this done? By the Value Chain
Organisations use the Porter's 5 Forces and Competitive Strategy Models to design general strategies. To identify specific activities where they can use competitive strategies for the greatest impact, they use: Porter's Value Chain Model
What is a value chain? - A value chain is a sequence of activities through which an organisation's inputs and transformed into more valuable outputs.
What does the value chain identify? Identifies points where an organisation can use information technology to achieve competitive advantage.
If an organisation makes a change or introduces a new way of doing something that adds value, then is makes more money. (profit) this is done by: Changing something along the Value Chain.
According to Porter’s value chain model, the activities conducted in any organization can be divided into two categories: - Primary Activities - Support Activities
What are Primary Activities? - Relate to the production and distribution of the firm's products and services. - These activities create value for which customers are willing to pay.
What are support activities? - The primary activities are buttressed by the support activities. - Unlike primary activities, support activities do not add value directly to the firm's products or services. - They contribute to the firm's competitive advantage by supporting the primary activities.
The Value chain (Chart)
Linkages - What was Porter's idea when creating the concept of Value Chains? - To create integrated, cross-departmental business systems - Do not automate or improve existing systems - Instead, create new processes to integrate activities of all departments across entire value chain
What is the 'holy grail' alignment of organisations? Business-Information technology alignment, or strategic alignment
What is Business-information technology alignment? - The tight integration of the IT functions with the organisation's strategy, mission and goals - The IT functions directly support the business objectives of the organisation
There are 6 characterises of excellent alignment: ● Organizations view IT as an engine of innovation that continually transforms the business, often creating new revenue streams ● Organizations view their internal and external customers and their customer service func- tion as supremely important ● Organizations rotate business and IT professionals across departments and job functions ● Organizations provide overarching goals that are completely clear to each IT and business employee ● Organizations ensure that IT employees understand how the company makes (or loses) money ● Organizations create a vibrant and inclusive company culture.
Many organisations fail to achieve close alignment. Given the importance of business-IT alignment, why do so many organisations fail to implement this policy? The major reasons are: – Business managers and IT managers have different objectives – The business and IT departments are ignorant of the other group’s expertise – A lack of communication.
One solution to this problem is: To map and improve business and IT business processes to achieve greater alignment.
What is a Business Process? A business process is an ongoing collection of related activities that create a product or a service of value to the organisation, it's business partners, and/or it's customers.
A process is comprised of 3 fundamental elements: – Inputs: Materials, services, and information that flow through and are transformed as a result of process activities. – Resources: People and equipment that perform process activities. – Outputs: The product or a service created by the process.
Why do Business Processes implement value chains or portions of value chains? - To add Value - Thus each value chain activity consists of one or more business processes.
Successful organisations measure their process activities - why? To evaluate how well they are these executing processes.
There are two fundamental metrics that organisations employ in assessing their processes. What are these and what do they focus on? Efficiency: focuses on doing things well in the process Effectiveness: focuses on doing the things that matter; creating outputs of value to the process customer. *Many processes cross functional areas in an organisation *Other processes involve only a single functional area.
Business Processes (Table for example)
Business Process Example (Ordering an ticket from an airline)
How can an organisation use it's business processes to create a competitive advantage? - If they enable the company to innovate - Or to execute more effectively and efficiently than its competitors *Clearly, good business processes are vital to organizational success.
What are 2 steps in which organisations take that determine if their business processes are well designed? - The 1st step is to document the process by describing its steps, its inputs and outputs, and it's resources - The organisation can then analyse the process and, if necessary, modify it to improve its performance * This is called 'Business process reengineering'.
How can Business Processes be documented? By using formal techniques
What is BPMN 2.0? An international standard developed by the OMG group for documenting Business Processes
4 ways why we document processes? - For understanding - For analysis - To research possibilities of Automation - To look for possible efficiencies
BPMN 2.0 Example
We know now that a business process is supported by an Information System. Why is better information systems essential to the activities of a Value Chain? Better information systems help add value at various stages within the value chain, in either primary activities, support activities or in linkages.
Information systems & Competitive advantage (List)
An information system is a critical enabler of an organisation's business processes. 2 reasons why? - Information systems facilitate communication & coordination among different functional areas - And allow easy exchange of, and access to, data across processes.
IS play a vital role in which 3 areas? - Executing the process - Capturing and storing process data - Monitoring process performance
Important notes to take from this topic: - IS have an important role to play in fulfilling an organisation's strategy - However, they do not lead the strategy. They are only designed to FIT it (They must be appropriate) - This is one reason why no single information system suits every organisation (because they have different strategies).
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