Introduction to Information Systems

Rainer, Prince, Sanchez-Rodriguez,

Splettstoesser Hogeterp, Ebrahimi
Fifth Canadian Edition

Chapter 2
Organizational Strategy, Competitive
Advantage, and Information Systems

Copyright ©2021 John Wiley & Sons Canada, Ltd.

Learning Objectives
• Discuss ways in which information systems enable cross-
functional business processes and business processes for a
single functional area
• Differentiate between business process reengineering,
business process improvement, and business process
management
• Identify effective IT responses to different kinds of
business pressures
• Describe the strategies that organizations typically adopt to
counter Porter’s five competitive forces

Copyright ©2021 John Wiley & Sons Canada, Ltd. 2

Chapter Outline
1. Business Processes
2. Business Process Improvement, Business Process
Reengineering, and Business Process Management
3. Business Pressures, Organizational Responses, and
Information Technology Support
4. Competitive Advantage and Strategic Information Systems

Copyright ©2021 John Wiley & Sons Canada, Ltd. 3

Opening Case: The Toronto Raptors and Maple Leaf
Sports Entertainment Enhance the Fan Experience

Think about:
• How interorganizational systems via apps are facilitating
digital transformation
• How business process changes could improve your concert
or sports experience

Copyright ©2021 John Wiley & Sons Canada, Ltd. 4

2.1 Business Processes

• Competitive Advantage
• Cross-Functional Processes
• Information Systems and Business Processes

Copyright ©2021 John Wiley & Sons Canada, Ltd. 5

Competitive Advantage

• An organizational strategy is a planned approach that the

organization takes to achieve its goals and mission
statement
• Competitive advantage is an advantage over competitors
in some measure, such as cost, quality, or speed; it leads to
control of a market and larger-than-average profits
• Often, effective use of IT (properly doing the things that
matter) is needed to operationalize an organization’s
strategy

Copyright ©2021 John Wiley & Sons Canada, Ltd. 6

Business Processes
• A business process is an ongoing collection of related
activities that create a product or service of value to the
organization, its business partners, and/or its customers
• Comprised of three elements:
1. Inputs
2. Resources
3. Outputs
• Efficiency vs. effectiveness
• Adding value can increase competitive advantage

Copyright ©2021 John Wiley & Sons Canada, Ltd. 7

TABLE 2.1 Examples of Business Processes
(1 of 2)
Accounting Business Processes
Managing accounts payable Managing invoice billings
Managing accounts receivable Managing petty cash
Reconciling bank accounts Producing month-end close
Managing cash receipts Producing virtual close
Finance Business Processes
Managing account collection Producing property tax assessments
Managing bank loan applications Managing stock transactions
Producing business forecasts Generating financial cash flow reports
Applying customer credit approval and credit terms
Marketing Business Processes
Managing post-sale customer follow-up Handling customer complaints
Collecting sales taxes Handling returned goods from customers
Applying copyrights and trademarks Producing sales leads
Using customer satisfaction surveys Entering sales orders
Managing customer service Training sales personnel

Copyright ©2021 John Wiley & Sons Canada, Ltd. 8

TABLE 2.1 Examples of Business Processes
(2 of 2)
Production/Operations Management Business Processes
Processing bills of materials Managing quality control for finished goods
Processing manufacturing change orders Auditing for quality assurance
Managing master parts list and files Receiving, inspecting, and stocking parts and materials
Managing packing, storage, and distribution Handling shipping and freight claims
Processing physical inventory Handling vendor selection, files, and inspections
Managing purchasing
Human Resources Business Processes
Applying disability policies Producing performance appraisals and salary adjustments
Managing employee hiring Managing resignations and terminations
Handling employee orientation Applying training and tuition reimbursement
Managing files and records Managing travel and entertainment
Applying health care benefits Managing workplace rules and guidelines
Managing pay and payroll Overseeing workplace safety
Management information Systems Business Processes
Antivirus control Applying e-mail policy
Computer security issues incident reporting Generating Internet use policy
Training computer users Managing service agreements and emergency services
Computer user and staff training Applying user workstation standards
Applying disaster recovery procedures Managing the use of personal software

Copyright ©2021 John Wiley & Sons Canada, Ltd. 9

Cross-Functional Processes

• No single functional area is responsible

• Steps executed in a coordinated, collaborative way
• Requires multiple areas of an organization to produce a
single output
• Example: procurement and fulfillment process uses three
functional areas to acquire merchandise

Copyright ©2021 John Wiley & Sons Canada, Ltd. 10

FIGURE 2.1 Business process for ordering
an e-ticket from an airline website
FIGURE 2.1 Business process for ordering an e-ticket from an airline
website.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 11

Information Systems and Business
Processes
IS’s have a vital role in three areas of business processes:
1. Executing the process
2. Capturing and storing process data
3. Monitoring process performance

Copyright ©2021 John Wiley & Sons Canada, Ltd. 12

IT’s About Business 2.1:
Graham Construction Digitizes Travel Expense
Business Process
Consider:
• How IT is helping the business reduce costs (efficiency)
• How the new system is providing better choices for
employees when submitting their expenses (effectiveness)

Copyright ©2021 John Wiley & Sons Canada, Ltd. 13

Executing the Process

• IS’s help execute the process by:

o Informing employees when it is time to complete a task
o Providing required data
o Providing a means to complete the task

Copyright ©2021 John Wiley & Sons Canada, Ltd. 14

Capturing and Storing Process Data

• Processes generate data

o For example: dates, times, product numbers, quantities,
prices, addresses, names, and employee actions
• ISs capture and store process data (aka transaction data)
• Immediate capturing and storing of data provides “real
time” feedback

Copyright ©2021 John Wiley & Sons Canada, Ltd. 15

Monitoring Process Performance

• IS evaluates information to determine how well a process

is being executed
• Evaluations occur at two levels
1. Process (process as a whole)
2. Instance (a specific task or activity)
• Monitoring identifies problems for process improvement

Copyright ©2021 John Wiley & Sons Canada, Ltd. 16

2.2 Business Process Improvement, Business Process
Reengineering, and Business Process Management

• Reengineering
• Improvement
• Management

Copyright ©2021 John Wiley & Sons Canada, Ltd. 17

Measures of Excellence in Executing
Business Processes Include:
• Customer satisfaction
• Cost reduction
• Cycle and fulfillment time reduction
• Quality
• Differentiation
• Productivity

Copyright ©2021 John Wiley & Sons Canada, Ltd. 18

Business Process Reengineering (BPR)

• Michael Hammer & James Champy, 1993, Reengineering

the Corporation
• BPR:
o A radical redesign of an organization’s business processes to
increase productivity and profitability
o Examines business processes with a “clean slate” approach

Copyright ©2021 John Wiley & Sons Canada, Ltd. 19

Business Process Improvement (BPI)
(1 of 2)
• BPI:
o An incremental approach to move an organization toward
business-process-centered operations
o Focuses on reducing variation in process outputs by
identifying the underlying cause of the variation
• Six Sigma is a popular methodology for BPI

Copyright ©2021 John Wiley & Sons Canada, Ltd. 20

Business Process Improvement (BPI)
(2 of 2)
• Five basic phases of successful BPI
1. Define
2. Measure
3. Analyze
4. Improve
5. Control

Copyright ©2021 John Wiley & Sons Canada, Ltd. 21

BPI versus BPR

BPI BPR
• Low risk/low cost • High risk/high cost
• Incremental change • Radical redesign
• Bottom-up approach • Top-down approach
• Takes less time • Time consuming
• Quantifiable results • Impacts can be
• All employees trained in overwhelming
BPI • High failure rate

Copyright ©2021 John Wiley & Sons Canada, Ltd. 22

Business Process Management (BPM)
(1 of 2)
• A management system used to support continuous BPI
initiatives for core business processes over time
• Important components of BPM:
o Process modeling
o Business activity monitoring (BAM)

Copyright ©2021 John Wiley & Sons Canada, Ltd. 23

Business Process Management (BPM)
(2 of 2)
• Business Process Management Suite (BPMS)
o An integrated set of applications used for BPM
• Emerging trend of social BPM
o Enable employees to collaborate across functions internally
and externally using social media tools

Copyright ©2021 John Wiley & Sons Canada, Ltd. 24

IT’s About Business 2.2:
BPR, BPI, and BPM at Chevron
Consider:
• What were the issues that motivated Chevron to initiate
BPR, BPI, and BPM?
• How does that compare to recent organizational upheavals
like those caused by the COVID-19 pandemic?

Copyright ©2021 John Wiley & Sons Canada, Ltd. 25

2.3 Business Pressures, Organizational Responses,
and Information Technology Support
• Business Pressures
• Organizational Responses

Copyright ©2021 John Wiley & Sons Canada, Ltd. 26

Business Pressures

• Market pressures
• Technology pressures
• Societal/political/legal pressures

Copyright ©2021 John Wiley & Sons Canada, Ltd. 27

FIGURE 2.2 Business pressures, organizational
performance and responses, and IT support
FIGURE 2.2 Business pressures, organizational performance and
responses, and IT support.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 28

Market Pressures

• Globalization
• Changing nature of the workforce
• Powerful customers

Copyright ©2021 John Wiley & Sons Canada, Ltd. 29

Globalization

• The integration and interdependence of economic, social,

cultural, and ecological facets of life, made possible by
rapid advances in IT

Copyright ©2021 John Wiley & Sons Canada, Ltd. 30

Changing Nature of the Workforce

• The workforce is becoming more diversified

o Women
o Single parents
o Visible minorities
o Persons with disabilities
• IT is enabling telecommuting employees

Copyright ©2021 John Wiley & Sons Canada, Ltd. 31

Powerful Customers

• Increasing consumer sophistication and expectations

• Consumer is more knowledgeable about
o Products and services
o Price comparisons
o Electronic auctions
• Customer relationship management (discussed in Chapter
11)

Copyright ©2021 John Wiley & Sons Canada, Ltd. 32

Technology Pressures

• Technological innovation and obsolescence

o Rapid development of both new and substitute products and
services
• Information overload
o Vast stores of data, information, and knowledge
o Difficulties in managing data for decision making

Copyright ©2021 John Wiley & Sons Canada, Ltd. 33

Societal/Political/Legal Pressures

• Social responsibility
• Compliance with government regulations
• Protection against terrorist attacks
• Ethical issues

Copyright ©2021 John Wiley & Sons Canada, Ltd. 34

Social Responsibility and Philanthropy
in Business
• PatientsLikeMe (www.patientslikeme.com)
• Kiva (www.kiva.org)
• Canadian Red Cross (www.redcross.ca)

Copyright ©2021 John Wiley & Sons Canada, Ltd. 35

Social Responsibility

• Green IT
o Facilities design and management
o Carbon management
o International and Canadian provincial environmental laws
• Digital Divide
o One Laptop per Child (OLPC): one.laptop.org

Copyright ©2021 John Wiley & Sons Canada, Ltd. 36

Compliance with Government
Regulations
• Canadian Sarbanes-Oxley Act (C-SOX) (Bill 198) affects
collection and management of information
• PIPEDA (Personal Information Protection and Electronic
Documents Act)

Copyright ©2021 John Wiley & Sons Canada, Ltd. 37

Protection against Terrorist Attacks

• Information technology used to identify and protect against

terrorists and cyberattacks
• Association of Certified Fraud Examiners (www.acfe.com)
• Canada’s Canada Border Service Agency (CBSA)
• Department of Homeland Security’s (DHS) Office of
Biometric Identity Management (OBIM) program

Copyright ©2021 John Wiley & Sons Canada, Ltd. 38

Ethical Issues

• General standards of right and wrong

• Issues include:
o Information-processing activities
o Monitoring employee email
o Privacy of customer data

Copyright ©2021 John Wiley & Sons Canada, Ltd. 39

Organizational Responses

• Strategic systems
• Customer focus
• Make-to-order and mass customization
• E-business and e-commerce

Copyright ©2021 John Wiley & Sons Canada, Ltd. 40

IT’s About Business 2.3:
Cruise Ships Embrace Technology
Consider:
• How security-related techniques such as facial recognition
can improve the customer experience
• How inventory management tools like radio-frequency
identification (RFID) can be used with a payment system

Copyright ©2021 John Wiley & Sons Canada, Ltd. 41

2.4 Competitive Advantage and
Strategic Information Systems
Terms: Competitive Strategy, Strategic Information Systems
(SIS)
• Porter’s Competitive Forces Model
• Porter’s Value Chain Model
• Strategies for Competitive Advantage
• Business–Information Technology Alignment

Copyright ©2021 John Wiley & Sons Canada, Ltd. 42

Porter’s Competitive Forces Model

1. Threat of entry of new competitors

2. Bargaining power of suppliers
3. Bargaining power of customers (buyers)
4. Threat of substitute products or services
5. Rivalry among existing firms within the industry

Copyright ©2021 John Wiley & Sons Canada, Ltd. 43

FIGURE 2.3 Porter’s Competitive Forces
Model
FIGURE 2.3 Porter’s competitive forces model.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 44

Porter’s Value Chain Model

• Value chain
o A sequence of activities through which the organization’s
inputs are transformed into valuable outputs
• Primary activities
o Relate to production and distribution of products and
services
• Support activities
o Support primary activities contributing to competitive
advantage

Copyright ©2021 John Wiley & Sons Canada, Ltd. 45

FIGURE 2.4 Porter’s Value Chain Model
FIGURE 2.4 Porter’s value chain model.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 46

Primary Activities

• Five primary activities for manufacturing

1. Inbound logistics (inputs)
2. Operations (manufacturing and testing)
3. Outbound logistics (storage and distribution)
4. Marketing and sales
5. Services

Copyright ©2021 John Wiley & Sons Canada, Ltd. 47

Support Activities

• Four support activities

1. Firm infrastructure (accounting, finance, management)
2. Human resources management
3. Product and technology development (R&D)
4. Procurement

Copyright ©2021 John Wiley & Sons Canada, Ltd. 48

Strategies for Competitive Advantage

• Cost leadership
• Differentiation
• Innovation
• Operational effectiveness
• Customer orientation

Copyright ©2021 John Wiley & Sons Canada, Ltd. 49

FIGURE 2.5 Strategies for competitive
advantage
FIGURE 2.5 Strategies for competitive advantage.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 50

Business–Information Technology
Alignment
Six characteristics of excellent alignment:
1. Organizations view IT as an engine of innovation that continually transforms
the business, often creating new revenue streams
2. Organizations view their internal and external customers and their customer
service function as supremely important
3. Organizations rotate business and IT professionals across departments and
job functions
4. Organizations provide overarching goals that are completely clear to each IT
and business employee
5. Organizations ensure that IT employees understand how the company makes
(or loses) money
6. Organizations create a vibrant and inclusive company culture

Copyright ©2021 John Wiley & Sons Canada, Ltd. 51

Information Technology Governance

• Helps organizations effectively manage their IT operations

to align with business strategies
• Part of an organization’s overall corporate governance
• Provides a framework and structure for organizations to
ensure that IT investments support business objectives
• Includes using an IT steering committee

Copyright ©2021 John Wiley & Sons Canada, Ltd. 52

IT’s About Business 2.4:
Bank of America Transforms its Information
Technology
Consider:
• Digital transformation requires updating IT software and
physical infrastructure. How does this relate to the IT
infrastructure that you use?
• How can artificial intelligence provide improved customer
service?

Copyright ©2021 John Wiley & Sons Canada, Ltd. 53

Closing Case: Domino’s Pizza

Think about:
• How do Domino’s Pizza’s problems relate to Porter’s Value
Chain Model?
• How has Domino’s Pizza improved its efficiency and
effectiveness?

Copyright ©2021 John Wiley & Sons Canada, Ltd. 54

Copyright

Copyright © 2021 John Wiley & Sons Canada, Ltd. or the author. All rights
reserved. Students and instructors who are authorized users of this course are
permitted to download these materials and use them in connection with the
course. No part of these materials should be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, except as permitted by law. Advice on
how to obtain permission to reuse this material is available at
http://www.wiley.com/go/permissions.

Copyright ©2021 John Wiley & Sons Canada, Ltd. 55