McLeod CH02

© 2007 by Prentice Hall© 2007 by Prentice Hall Management Information Systems, 10/e RManagement Information Systems, 10/e Raymond McLeod and George Schell aymond McLeod and George Schell

11

Management Management Information Systems, Information Systems,

10/e10/eRaymond McLeod Jr. and George P. Raymond McLeod Jr. and George P.

Schell Schell

© 2007 by Prentice Hall© 2007 by Prentice Hall Management Information Systems, 10/e RManagement Information Systems, 10/e Raymond McLeod and George Schell aymond McLeod and George Schell

22

Chapter 2Chapter 2Information Systems for Competitive Information Systems for Competitive

AdvantageAdvantage

© 2007 by Prentice Hall Management Information Systems, 10/e Raymond McLeod and George Schell

3

Learning ObjectivesLearning Objectives

► Know the general systems model of the firm.Know the general systems model of the firm.► Understand the eight-element environmental Understand the eight-element environmental

model as a framework for understanding the model as a framework for understanding the environment of a business organization.environment of a business organization.

► Understand that supply chain management Understand that supply chain management involves the planning and coordination of involves the planning and coordination of physical resources that flow from the firm’s physical resources that flow from the firm’s suppliers, through the firm, and to the firm’s suppliers, through the firm, and to the firm’s customers.customers.

► Recognize that competitive advantage can be Recognize that competitive advantage can be achieved with virtual as well as physical achieved with virtual as well as physical resources.resources.


4

Learning Objectives (Cont’d)Learning Objectives (Cont’d)

► Understand Michael E. Porter’s concepts of Understand Michael E. Porter’s concepts of value chains and value systems.value chains and value systems.

► Know the dimensions of competitive Know the dimensions of competitive advantage.advantage.

► Recognize the increasing challenges from Recognize the increasing challenges from global competitors and the importance of global competitors and the importance of information and coordination in meeting information and coordination in meeting those challenges.those challenges.

► Understand the challenges of developing Understand the challenges of developing global information systems.global information systems.


5

Learning Objectives (Cont’d)Learning Objectives (Cont’d)

► Know the basic types of information Know the basic types of information resources available to the firm.resources available to the firm.

► Know the dimensions of information that Know the dimensions of information that should be provided by an information should be provided by an information system.system.

► Know how to manage knowledge in the form Know how to manage knowledge in the form of legacy systems, images, and knowledge.of legacy systems, images, and knowledge.

► Understand how a firm goes about strategic Understand how a firm goes about strategic planning – for the firm, its business areas, planning – for the firm, its business areas, and its information resources.and its information resources.


6

Figure 2.1 The General Figure 2.1 The General System Model of the FirmSystem Model of the Firm


7

The General Systems Model of The General Systems Model of the Firm the Firm

►Physical resource flow includes Physical resource flow includes personnel, material, machines, and personnel, material, machines, and money.money.

►Virtual resource flow includes data, Virtual resource flow includes data, information, and information in the information, and information in the form of decisions.form of decisions.


8

The General Systems Model of The General Systems Model of the Firmthe Firm

►Firm’s control mechanism includeFirm’s control mechanism include Performance standards to meet if the firm Performance standards to meet if the firm

wants to achieve overall objectives.wants to achieve overall objectives. Firm’s management.Firm’s management. Information processor that transform data Information processor that transform data

into information.into information.

►Feedback loop is composed of the Feedback loop is composed of the virtual resources.virtual resources.


9

The Firm in Its EnvironmentThe Firm in Its Environment

► Environmental elementsEnvironmental elements are are organizations and individuals that exist organizations and individuals that exist outside the firm and have a direct or indirect outside the firm and have a direct or indirect influence on it.influence on it. Such as suppliers, customers, labor Such as suppliers, customers, labor

unions, financial community, stockholders unions, financial community, stockholders and owners, competitors, and and owners, competitors, and governments.governments.

►Global communityGlobal community is the geographic area is the geographic area where the firm performs its operations.where the firm performs its operations.


10

Figure 2.2 Eight Environmental Figure 2.2 Eight Environmental ElementsElements


11

Environmental Resource Environmental Resource FlowsFlows

► Information flows from customers. Often.Information flows from customers. Often.►Material flow to customers. Often.Material flow to customers. Often.►Money flow to stockholders. Often.Money flow to stockholders. Often.►Raw materials flow from suppliers. Often.Raw materials flow from suppliers. Often.►Money flow from government. Less often.Money flow from government. Less often.►Material flow to suppliers. Less often.Material flow to suppliers. Less often.►Personnel flow to competitors. Less often.Personnel flow to competitors. Less often.


12

Managing the Physical Managing the Physical Resource Flows–Supply Chain Resource Flows–Supply Chain

ManagementManagement►Supply chainSupply chain is the pathway that is the pathway that

facilitates the flow of physical facilitates the flow of physical resources from suppliers to the firm resources from suppliers to the firm and then to customers.and then to customers.

►Supply chain managementSupply chain management manages the resources through the manages the resources through the supply chain to ensure timely and supply chain to ensure timely and efficient flow.efficient flow.


13

Supply Chain Management Supply Chain Management ActivitiesActivities

►Forecasting customer demandForecasting customer demand►Scheduling productionScheduling production►Establishing transportation networksEstablishing transportation networks►Ordering replenishment stock from Ordering replenishment stock from

supplierssuppliers►Receiving stock from suppliersReceiving stock from suppliers


14

Supply Chain Management Supply Chain Management Activities (Cont’d)Activities (Cont’d)

►Managing inventory–raw materials, Managing inventory–raw materials, work-in-process, and finished goodswork-in-process, and finished goods

►Executing productionExecuting production►Transporting resources to customersTransporting resources to customers►Tracking the flow of resources from Tracking the flow of resources from

suppliers, through the firm, and to suppliers, through the firm, and to customerscustomers


15

Supply Chain ManagementSupply Chain Management

►Firm’s information systems can be Firm’s information systems can be used to perform the supply chain used to perform the supply chain activities.activities.

►Electronic systems provide the ability Electronic systems provide the ability to track the flow of the resources as it to track the flow of the resources as it occurs.occurs.

► Is a crucial aspect of a firm’s ERP Is a crucial aspect of a firm’s ERP system.system.


16

Competitive AdvantageCompetitive Advantage

►Competitive advantageCompetitive advantage refers to the refers to the use of information to gain leverage in use of information to gain leverage in the marketplace.the marketplace. Uses virtual as well as physical Uses virtual as well as physical

resources.resources. Is used to meet the strategic Is used to meet the strategic

objectives of the firm.objectives of the firm.


17

Porter’s Value ChainsPorter’s Value Chains

►Value chainValue chain is created to achieve is created to achieve competitive advantage.competitive advantage. Consists of the primary and support Consists of the primary and support

activities that contribute to margin.activities that contribute to margin.►MarginMargin is the value of the firm’s is the value of the firm’s

products and services minus their products and services minus their costs, as perceived by the firm’s costs, as perceived by the firm’s customers.customers. Increased margin is the objective of the Increased margin is the objective of the

value chain.value chain.


18

Figure 2.3 A Value ChainFigure 2.3 A Value Chain


19

Porter’s Value ActivitiesPorter’s Value Activities

►Primary value activitiesPrimary value activities manage manage the flow of physical resources through the flow of physical resources through the firm.the firm.

►Support value activitiesSupport value activities include the include the firm’s infrastructure.firm’s infrastructure. Each value activity includes purchased Each value activity includes purchased

inputs, human resources, and technology. inputs, human resources, and technology.


20

Expanding the Scope of the Expanding the Scope of the Value ChainValue Chain

►Interorganizational systemInterorganizational system ( (IOSIOS) is ) is the linking of the firm’s value chain to the linking of the firm’s value chain to those of other organizations.those of other organizations.

►Business partnersBusiness partners are the are the participating firms in the IOS.participating firms in the IOS.

►Value systemValue system is the linking of the is the linking of the firm’s value chain with those of its firm’s value chain with those of its distribution channel members.distribution channel members.


21

The Dimensions of The Dimensions of Competitive AdvantageCompetitive Advantage

►Strategic advantageStrategic advantage has a has a fundamental effect in shaping the fundamental effect in shaping the firm’s operations.firm’s operations.

►Tactical advantageTactical advantage is when the firm is when the firm implements a strategy better than its implements a strategy better than its competitors.competitors.

►Operational advantageOperational advantage deals with deals with everyday transactions and processes.everyday transactions and processes.


22

Challenges from Global Challenges from Global CompetitorsCompetitors

►Multinational corporationMultinational corporation ( (MNCMNC) is ) is a firm that operates across products, a firm that operates across products, markets, nations, and cultures.markets, nations, and cultures. It consists of a parent company and its It consists of a parent company and its

subsidiaries.subsidiaries. Information processing is crucial to Information processing is crucial to

minimize minimize uncertaintyuncertainty. .


23

The Special Need for The Special Need for Coordination in a MNCCoordination in a MNC

►Coordination is key to achieving Coordination is key to achieving competitive advantage globally.competitive advantage globally.

►Advantages of coordination include:Advantages of coordination include: Flexibility in responding.Flexibility in responding. Ability to respond market by market.Ability to respond market by market. Ability to keep abreast of market needs Ability to keep abreast of market needs

globally.globally. Reduce overall costs of operation.Reduce overall costs of operation.


24

Challenges in Developing Challenges in Developing Global Information Systems Global Information Systems ►Global information systemGlobal information system ( (GISGIS) )

describes an information system that describes an information system that consists of networks that cross consists of networks that cross national boundaries.national boundaries. ChallengesChallenges

►Politically imposed constraints.Politically imposed constraints.►Cultural and communications barriers.Cultural and communications barriers.


25

GIS Challenges (Cont’d)GIS Challenges (Cont’d)

►Restrictions on Restrictions on hardware purchases and importshardware purchases and imports Data processingData processing Data communicationsData communications

►Transborder data flowTransborder data flow (TDF)(TDF) is the is the movement of machine-readable data movement of machine-readable data across national boundaries.across national boundaries.


26

GIS Subsidiary ChallengesGIS Subsidiary Challenges

►Technological problems due to level of Technological problems due to level of technology in subsidiary countriestechnology in subsidiary countries Telecommunications speed and Telecommunications speed and

qualityquality Software copyrights and licensesSoftware copyrights and licenses

►Lack of support from subsidiary Lack of support from subsidiary managersmanagers


27

Knowledge ManagementKnowledge Management

► Information resources consist of hardware, Information resources consist of hardware, software, information specialists, users, software, information specialists, users, facilities, databases, and information.facilities, databases, and information.

►Knowledge managementKnowledge management ( (KMKM) is ) is acquiring data, processing data into acquiring data, processing data into information, using and communicating information, using and communicating information in the most effective way, and information in the most effective way, and discarding information at the proper time.discarding information at the proper time.


28

The Dimensions of The Dimensions of InformationInformation

►RelevancyRelevancy–pertains to the problem at –pertains to the problem at hand.hand.

►AccuracyAccuracy–strive for 100%.–strive for 100%.►TimelinessTimeliness–should be available for –should be available for

decision making before a crisis situations decision making before a crisis situations develop or opportunities are lost. develop or opportunities are lost.

►CompletenessCompleteness–the correct amount of –the correct amount of aggregation and supports all areas of aggregation and supports all areas of the decision being made.the decision being made. Information overloadInformation overload is having too much is having too much

information.information.


29

The Changing Nature of The Changing Nature of Knowledge ManagementKnowledge Management

►Legacy information systemsLegacy information systems are are earlier systems software and hardware earlier systems software and hardware that are incompatible or partially that are incompatible or partially incompatible with current information incompatible with current information technology.technology. Produce primarily historical information.Produce primarily historical information. Data may not be available in digital Data may not be available in digital

format.format.► Image managementImage management


30

Strategic Planning for Strategic Planning for Information Resources (SPIR)Information Resources (SPIR)►Chief Information Officer (CIO)Chief Information Officer (CIO)►Chief Technology Officer (CTO)Chief Technology Officer (CTO)►Strategic PlanningStrategic Planning

Enterprise–executive committeeEnterprise–executive committee Business areas–resources for human, Business areas–resources for human,

information, financial, marketing, information, financial, marketing, manufacturingmanufacturing


31

The SPIR ApproachThe SPIR Approach

►Concurrent development of strategic Concurrent development of strategic plans for information services and the plans for information services and the firm so that the firm’s plan reflects the firm so that the firm’s plan reflects the support to be provided by information support to be provided by information services.services.

►The IS plan reflects future demands for The IS plan reflects future demands for systems support.systems support.


32

Figure 2.7 Strategic Planning for Figure 2.7 Strategic Planning for Information ResourcesInformation Resources


33

Core Content of a Strategic Core Content of a Strategic Planning for Information Planning for Information

ResourcesResources►The objectives to be achieved by each The objectives to be achieved by each

category of systems during the time category of systems during the time period.period.

►The information resources necessary The information resources necessary to meet the objectives.to meet the objectives.

►Self-contained report (See example Self-contained report (See example Figure 2.8 in textbook).Figure 2.8 in textbook).

McLeod CH02

Documents

global information systems

dimensions of information

information processor

importance of information

e raymond mcleod

value systems

general systems model

george schell figure