Chapter 2

Using Information Technology

for Competitive Advantage
Copyright 2001, Prentice-Hall, Inc.
MANAGEMENT INFORMATION SYSTEMS 8/E
Raymond McLeod, Jr. and George Schell
2-1
What is a Firm?
Physical System
Closed-loop
Controlled by management
Uses feedback to ensure objectives met
Open because of environmental interaction
Managed through use of a conceptual
system

2-2
Importance of Environment
Very reason for a firms existence
Firm takes resources from environment,
transforms them, and returns goods and
services to environment

2-3
Society
Financial
Community
Government
Global
Community
Suppliers
The
Firm
Labor
unions
Stockholders
or owners
Customers
Competitors
The Firms Environment
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
A Value Chain
Firm Infrastructure
Human resource management
Technology development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and
sales
Service
Support
Activities
Primary Activities
2-7
Source : Michael E. Porter
Channel
value
chains
Supplier
value
chains
Buyer
value
chains
Firm
value
chain
A Value System
2-8
Source : Michael E. Porter
The Information Resources
Two views of information management

1. Manage data by implementing computer-
based database management systems
(DBMS)
2. Manage resources that produce the
information
2-9
The Information Resources
Facilities
Software Database
Hardware
Information
Specialists
Users
Information
2-10
The Information Resource
Manager -- the CIO
Chief Information Officer (CIO) is not
simply a title, but role
Manager of information services
Contributes managerial skills
Solves information resources problems
Solves problems in other areas of firms
operations

2-11
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, not IS
jargon
Provide reliable IS services
Be positive, not defensive
2-12
Strategic Planning
Long-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
Strategic
planning for
information resources
Strategic
planning for
marketing
resources
Strategic
planning for
manufacturing
resources
Strategic
planning for
human
resources
Strategic
planning for
financial resources
The Functional Areas Should Cooperate
in Developing Their Strategic Plans
2-14
Strategy Set Transformation
Organizational
strategy set
MIS
strategy set
Mission

Objectives

Strategy

Other
strategic
organizational
attributes
System
objectives

System
constraints

System
design
strategies
MIS
strategic
planning
process
2-15
Strategy Set Transformation:
Basic Flaw
Business areas do not always have the
resources to ensure accomplishment of
strategic objectives
2-16
SPIR
Strategy set transformation; support the
firms objectives
Strategic planning for information resources
(SPIR) develops firm and IS strategic plans
concurrently
SPIR content
1. What is to be achieved
2. What will be required
2-17
Strategic Planning for
Information Resources
Business
strategy
Information
resources
and
IS
strategy
Influence on
Business
Strategy
Influence on
Information
Resources
2-18
Strategic Plan Framework for
Information Resources
Strategic Plan
for Information
Resources

AIS
Objectives

MIS
Objectives

DSS
Objectives

Virtual
Office
Objectives

Knowledge-
based systems
Objectives
Required
Information
Resources
Required
Information
Resources
Required
Information
Resources
Required
Information
Resources
Required
Information
Resources
2-19
The Strategic Implications of
End-User Computing (EUC)
Levels of end users in terms of capabilities
menu-level end users
command-level end users
end-user programmers
functional support personnel
EUC application considerations
shifts workload so that end-users and
information 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
Information Resources
Management (IRM) Concept
Realization that firms information
resources go far beyond the information
itself
Activity pursued by managers at all levels
Identifying, acquiring, and managing
information resources needed to satisfy
information needs
2-22
IRM - 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
executive
2-23
IRM-Required Ingredients (cont.)
A consideration of the firms information
resources when engaging in strategic
planning
A formal strategic plan for information
resources
A strategy for stimulating and managing
end-user computing
2-24
The firms executives
CIO Other executives
Central computing
resources
Disbursed computing
resources
FUNCTIONAL AREAS
Users engaged in
end-user computing
Other users
ENVIRONMENTAL INFLUENCES
Internal influences Firms strategic plan
INFORMATION RESOURCES
DATA AND INFORMATION
The IRM Model
Information
services
Human
resources
Manufacturing
Marketing
Finance
The environment of the firm
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: Firms 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
2-30
Summary
Environment of a firm consists of eight
elements
Firms attempt to achieve competitive
advantage
Margin - value of products and services over
cost
Value chain
Information resources
Hardware, software, facilities, database,
information specialists, information, and users
2-31
Summary [cont.]
Executives perform strategic planning
SPIR
All firms managers need to engage in IRM
Recent revelation
Integrating concept
2-32