Chapter 2 Using Information Technology Using Information Technology for Competitive Advantage for Competitive Advantage Copyright 2001, Prentice-Hall, Inc. MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell 2-1
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Chapter 2Using Information Technology Using Information Technology
for Competitive Advantagefor Competitive Advantage
Copyright 2001, Prentice-Hall, Inc.
MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell
2-1
What is a Firm?What is a Firm?
■ Physical SystemPhysical System– Closed-loopClosed-loop– Controlled by managementControlled by management– Uses feedback to ensure objectives metUses feedback to ensure objectives met– Open because of environmental interactionOpen because of environmental interaction
■ Managed through use of a conceptual Managed through use of a conceptual systemsystem
2-2
Importance of EnvironmentImportance of Environment
■ Very reason for a firm’s existenceVery reason for a firm’s existence■ Firm takes resources from environment, Firm takes resources from environment,
transforms them, and returns goods and transforms them, and returns goods and services to environmentservices to environment
2-3
Society
FinancialCommunity
Government GlobalCommunity
Suppliers TheFirm
Laborunions
Stockholders or owners
Customers
Competitors
The Firm’s Environment
2-4
The Firm Is Connected to Its The Firm Is Connected to Its Environment by Resource FlowsEnvironment by Resource Flows
■ Physical and conceptual Physical and conceptual ■ Some flows are majorSome flows are major■ Some should not occur at allSome should not occur at all■ All resources that enter the firm from the All resources that enter the firm from the
environment eventually return to the environment eventually return to the environmentenvironment
2-5
Competitive AdvantageCompetitive Advantage
■ Computer field perspectiveComputer field perspective– Use of information to gain leverage in Use of information to gain leverage in
marketplacemarketplace– Relies on more than physical resourcesRelies on more than physical resources
■ Addressed with strategic objectivesAddressed with strategic objectives
2-6
A Value ChainA Value Chain
Firm Infrastructure
Human resource management
Technology development
Procurement
Inboundlogistics
Operations Outboundlogistics
Marketingandsales
Service
Margin
Mar
gin
SupportActivities
Primary Activities2-7
Source : Michael E. Porter
Channelvaluechains
Suppliervaluechains
Buyervaluechains
Firmvaluechain
A Value SystemA Value System
2-8Source : Michael E. Porter
The Information ResourcesThe Information Resources
Two views of information managementTwo views of information management
1. Manage data by implementing computer-1. Manage data by implementing computer-based database management systems based database management systems
(DBMS)(DBMS)2. Manage resources that produce the 2. Manage resources that produce the
informationinformation
2-9
The Information ResourcesThe Information Resources
Facilities
Software DatabaseHardware
InformationSpecialists
Users
Information
2-10
The Information Resource The Information Resource Manager -- the CIOManager -- the CIO
■ Chief Information Officer (CIO) is not Chief Information Officer (CIO) is not simply a title, but rolesimply a title, but role
■ Manager of information servicesManager of information services■ Contributes managerial skills Contributes managerial skills
– Solves information resources problemsSolves information resources problems– Solves problems in other areas of firm’s Solves problems in other areas of firm’s
operationsoperations
2-11
The CIO AttitudeThe CIO Attitude
■ The business is what countsThe business is what counts■ Build partnerships/ties with the rest of the Build partnerships/ties with the rest of the
firmfirm■ Improve basic business processesImprove basic business processes■ Communicate in business terms, not IS Communicate in business terms, not IS
jargonjargon■ Provide reliable IS servicesProvide reliable IS services■ Be positive, not defensiveBe positive, not defensive
2-12
Strategic PlanningStrategic Planning
■ Long-range planningLong-range planning– Intends to give firm most favorable position in Intends to give firm most favorable position in
its environmentits environment– Specifies strategies for achieving objectivesSpecifies strategies for achieving objectives
■ Need for each business area to create its Need for each business area to create its own strategic planown strategic plan
2-13
Strategicplanning for
information resources
Strategicplanning for marketingresources
Strategicplanning for
manufacturingresources
Strategicplanning for
human resources
Strategic planning for
financial resources
The Functional Areas Should Cooperate The Functional Areas Should Cooperate in Developing Their Strategic Plansin Developing Their Strategic Plans
2-14
Strategy Set TransformationStrategy Set TransformationOrganizational strategy set
MISstrategy set
Mission
Objectives
Strategy
Other strategicorganizationalattributes
Systemobjectives
Systemconstraints
System design strategies
MISstrategicplanningprocess
2-15
Strategy Set Transformation: Strategy Set Transformation: Basic FlawBasic Flaw
■ Business areas do not always have the Business areas do not always have the resources to ensure accomplishment of resources to ensure accomplishment of strategic objectivesstrategic objectives
2-16
SPIRSPIR
■ Strategy set transformation; support the Strategy set transformation; support the firm’s objectivesfirm’s objectives
■ Strategic planning for information resources Strategic planning for information resources (SPIR)(SPIR) develops firm and IS strategic plans develops firm and IS strategic plans concurrentlyconcurrently– SPIR contentSPIR content
» 1. What is to be achieved1. What is to be achieved» 2. What will be required2. What will be required
2-17
Strategic Planning for Strategic Planning for Information ResourcesInformation Resources
Business strategy
InformationresourcesandISstrategy
Influence on BusinessStrategy
Influence onInformation Resources
2-18
Strategic Plan Framework for Strategic Plan Framework for Information ResourcesInformation Resources
Strategic Plan for Information
Resources
AISObjectives
MISObjectives
DSSObjectives
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 The Strategic Implications of End-User Computing (EUC)End-User Computing (EUC)
■ Levels of end users in terms of capabilitiesLevels of end users in terms of capabilities
– menu-level end usersmenu-level end users– command-level end userscommand-level end users– end-user programmersend-user programmers– functional support personnelfunctional support personnel
■ EUC application considerationsEUC application considerations– shifts workload so that end-users and shifts workload so that end-users and
information specialists’ talents are better usedinformation specialists’ talents are better used– reduces communications gapreduces communications gap
2-20
EUC RisksEUC Risks
■ Poorly aimed systemsPoorly aimed systems■ Poorly designed/ documented systemsPoorly designed/ documented systems■ Inefficient use of information resourcesInefficient use of information resources■ Loss of data integrityLoss of data integrity■ Loss of securityLoss of security■ Loss of controlLoss of control
2-21
Information Resources Information Resources Management (IRM) ConceptManagement (IRM) Concept
■ Realization that firm’s information Realization that firm’s information resources go far beyond the information resources go far beyond the information itselfitself
■ Activity pursued by managers at all levelsActivity pursued by managers at all levels■ Identifying, acquiring, and managing Identifying, acquiring, and managing
information resources needed to satisfy information resources needed to satisfy information needsinformation needs
2-22
IRM - Required ElementsIRM - Required Elements
■ A recognition that competitive advantage A recognition that competitive advantage can be achieved by means of superior can be achieved by means of superior information resourcesinformation resources
■ A recognition that information services is a A recognition that information services is a major functional areamajor functional area
■ A recognition that the CIO is a top-level A recognition that the CIO is a top-level executiveexecutive
2-23
IRM-Required Ingredients (cont.)IRM-Required Ingredients (cont.)
■ A consideration of the firm’s information A consideration of the firm’s information resources when engaging in strategic resources when engaging in strategic planningplanning
■ A formal strategic plan for information A formal strategic plan for information resourcesresources
■ A strategy for stimulating and managing A strategy for stimulating and managing end-user computingend-user computing
2-24
The firm’s executivesCIO Other executivesOther executives
Central computing resources
Disbursed computingresources
FUNCTIONAL AREASFUNCTIONAL AREAS
Users engaged in end-user computing Other users
ENVIRONMENTAL INFLUENCESENVIRONMENTAL INFLUENCES
Internal influences Firm’s strategic plan
INFORMATION RESOURCESINFORMATION RESOURCES
DATA AND INFORMATIONDATA AND INFORMATION
The IRM The IRM ModelModel
Informationservices
Humanresources
Manufacturing MarketingFinance
The environment of the firm
2-25
IRM Model: Firm EnvironmentIRM Model: Firm Environment
■ Provides setting for achieving competitive Provides setting for achieving competitive advantageadvantage
■ Executives are aware of need to manage Executives are aware of need to manage resource flows to meet needs of resource flows to meet needs of environmental elementsenvironmental elements
2-26
IRM Model: Firm’s ExecutivesIRM Model: Firm’s Executives
■ Includes CIOIncludes CIO■ Guides firm toward objectivesGuides firm toward objectives■ Key activity is strategic planningKey activity is strategic planning
2-27
IRM Model: Business AreasIRM Model: Business Areas
■ Information services is a major business Information services is a major business areaarea
■ Each area develops own strategic plansEach area develops own strategic plans■ One business area strategic plan is for One business area strategic plan is for
information resourcesinformation resources
2-28
IRM Model: Information IRM Model: Information ResourcesResources
■ Strategic plan for information resources Strategic plan for information resources details acquisition and managementdetails acquisition and management
■ Information resourcesInformation resources– CentralizedCentralized– Dispersed throughout firmDispersed throughout firm
2-29
IRM Model: UsersIRM Model: Users
■ Details data and information flows between Details data and information flows between resources and usersresources and users
■ Some users engage in end-user computing Some users engage in end-user computing
2-30
SummarySummary■ Environment of a firm consists of eight Environment of a firm consists of eight
elementselements■ Firms attempt to achieve competitive Firms attempt to achieve competitive
advantageadvantage– Margin - value of products and services over Margin - value of products and services over
costcost– Value chainValue chain
■ Information resourcesInformation resources– Hardware, software, facilities, database, Hardware, software, facilities, database,
information specialists, information, and usersinformation specialists, information, and users2-31
Summary [cont.]Summary [cont.]■ Executives perform strategic planningExecutives perform strategic planning
– SPIRSPIR■ All firm’s managers need to engage in IRMAll firm’s managers need to engage in IRM
– Recent revelationRecent revelation– Integrating conceptIntegrating concept
2-32
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