Theme 2:

Information
Systems
LO6: Describe the four major components
of an information system;

LO7: Explain the importance and

applications of information systems in
functional areas of an organisation;

LO8: Discuss how information technologies

are used to gain a competitive advantage.
LO6: Describe the four major components of an information
system;
1) Data: Consist of raw facts and is a component of an
information system
2) Database: the heart of an information system, is a collection
of all relevant data organized in a series of integrated
files .Database are also important for reducing personnel time
needed to gather ,process and interpret data manually.
3) Process: The purpose of an information systems process
component is generating the most useful type of information
for making decisions. The component generally incudes
transaction-processing reports and models fro decision analysis
that can be built into the system or accessed from external
sources
4) Information: The output of an information system –consists of
facts that have ben analyzed by the process component and
are therefore more useful to the MIS user
To me useful information have the following qualities:
 Timelines
 Integration with other data and information
 Consistency and accuracy
 Relevance
 LO7: Explain the importance and
applications of information systems in
functional areas of an organisation;

The importance of information systems

 Information is the second most important
resource(after the human element) in any
organization .
 Timely relevant and accurate information is
critical tool for enhancing a company’s
competitive position in the marketplace and
managing the four Ms the resources:
manpower, machinery, materials and
money
LO8: Discuss how information technologies
are used to gain a competitive advantage.
Michael Porter a professor at Harvard Business
School identified three strategies for
successfully competing in the marketplace
 Overall and leadership
 Differentiation
 Focus
 Examples of Information Systems
Example:1 A state university stores all student
data in a database . The collected data includes
each students first name , last name, age, gender ,
major , nationality and so forth . The process
component of the information system performs all
sorts of analysis on this data
For example: the university’s DBMS has a built-in
query capability that can generate the following
information
How many students are each majors?
Which major is the fastest growing?
What is the average age of the student body?
Among the international student , which country
is home to the highest number of students?
What is the ratio of gender identities in each
major?
 Systems
Example:2: Teletech , an
international textile company, uses a
database to store data on products,
suppliers ,sales personnel , costs
and so forth , The process
component of the information
system conducts analysis on the
data to provide the following
information about the preceding
month:
Which salesperson generated the
highest sales?
Which product generated the
highest sales? The lowest sales?
Which region generated the highest
sales?
 LO8:Discuss how information technologies are used to gain a competitive advantage

• Cost leadership pertains to a firm's ability to create

economies of scale though extremely efficient operations
that produce a large volume. Cost leaders include
organizations like Procter & Gamble, Walmart, McDonald's
and other large firms generating a high volume of goods that
are distributed at a relatively low cost (compared to the
competition).
• Differentiation is less tangible and easily defined, yet still
represents an extremely effective strategy when properly
executed. Differentiation refers to a firm's ability to create a
good that is difficult to replicate, thereby fulfilling niche
needs. This strategy can include creating a powerful brand
image, which allows the organization to sell its products or
services at a premium. Coach handbags are a good example
of differentiation; the company's margins are high due to the
markup on each bag (which mostly covers marketing costs,
not production).
• Market segmentation is narrow in scope (both cost
leadership and differentiation are relatively broad in scope)
and is a cross between the two strategies. Segmentation
targets finding specific segments of the market which are not
otherwise tapped by larger firms.
LO8: Discuss how information
technologies are used to gain a
competitive advantage.
Porter's Generic Competitive
Strategies (ways of competing)

 A firm's relative position within its industry determines

whether a firm's profitability is above or below the
industry average. The fundamental basis of above
average profitability in the long run is sustainable
competitive advantage.
 There are two basic types of competitive advantage
a firm can possess: low cost or differentiation.
 The two basic types of competitive advantage
combined with the scope of activities for which a firm
seeks to achieve them, lead to three generic
strategies for achieving above average performance in
an industry: cost leadership, differentiation, and focus.
The focus strategy has two variants, cost focus and
differentiation focus.
 Cost Leadership
1. Cost Leadership
 In cost leadership, a firm sets out to become the low
cost producer in its industry.
 The sources of cost advantage are varied and depend
on the structure of the industry.
 They may include the pursuit of economies of scale,
proprietary technology, preferential access to raw
materials and other factors.
 A low cost producer must find and exploit all sources of
cost advantage. if a firm can achieve and sustain overall
cost leadership, then it will be an above average
performer in its industry, provided it can command
prices at or near the industry average.
 Porter's Generic
Competitive Strategies
(ways of competing)
2. Differentiation
2. Differentiation
In a differentiation strategy a
firm seeks to be unique in its
industry along some dimensions
that are widely valued by
buyers.
It selects one or more attributes
that many buyers in an industry
perceive as important, and
uniquely positions itself to meet
those needs. It is rewarded for
its uniqueness with a premium
price.
 3. Focus
3. Focus
 The generic strategy of focus rests on the choice of
a narrow competitive scope within an industry. The
focuser selects a segment or group of segments in
the industry and tailors its strategy to serving them
to the exclusion of others.
The focus strategy has two variants.
 (a) In cost focus a firm seeks a cost advantage in its
target segment, while in (b) differentiation focus a
firm seeks differentiation in its target segment. Both
variants of the focus strategy rest on differences
between a focuser's target segment and other
segments in the industry. The target segments must
either have buyers with unusual needs or else the
production and delivery system that best serves the
target segment must differ from that of other
industry segments. Cost focus exploits differences in
cost behaviour in some segments, while
differentiation focus exploits the special needs of
buyers in certain segments
Porter’s Five Forces Model:
Understanding the Business
Environment
 Porter’s Five Forces
Model: Understanding the
Business Environment
Harvard Business School’s Michael Porter created a
comprehensive framework called the Five Forces Model
for analyzing an organization , its position in the
marketplace, and how information system could be used to
make the organization more competitive
The Five factors shown:
 Buyer Power
 Supplier Power
 Threat of substitute products or service
 Threats of new entrants
 Rivalry among existing competitors
Porter’s Five Forces Model: Understanding the Business Environment
Porter's Competitive Strategies