1. Management Information System
Chapter 4 Organizational Strategy, Information Systems and Completive Advantage

2. Learning Objectives
L1: Organizational strategy determine information systems requirements.
L2: Porter’s five forces model
L3: Competitive strategy
L4: Competitive strategy determine value chain structure
L5: Value chains determine business processes and information systems
L6: Information systems provide competitive advantages

3. L1: Organizational Strategy Determine Information Systems Structure
Industry structure determines competitive strategies.
Competitive strategy determines value chains and business processes.
Business processes determine supporting information systems.

4. L2: Porter Five Forces Model
Porter’s five forces
Competitive Forces
Competition from vendors of substitutes
Competition from new competitors
Competition from existing rivals
Bargaining Power Forces
Bargaining power of suppliers
Bargaining power of customers

5. PORTER’S COMPETITIVE FORCES MODEL

6. Traditional competitors
All firms share market space with competitors who are continuously devising new products, services, efficiencies, and switching costs.
New market entrants
Some industries have high barriers to entry, for example, computer chip business.
New companies have new equipment, younger workers, but little brand recognition.

7. Substitute products and services
Substitutes customers might use if your prices become too high, for example, iTunes substitutes for CDs
Customers
Can customers easily switch to competitor’s products? Can they force businesses to compete on price alone in transparent marketplace?
Suppliers
Market power of suppliers when firm cannot raise prices as fast as suppliers

8. L3: Competitive Strategy
Four generic strategies for dealing with competitive forces, enabled by using IT:
Low-cost leadership across the industry
Product differentiation across the industry
Focus low cost on an industry segment
Product differentiation in an industry segment

9. Porter’s Four Competitive Strategies

10. Low-cost leadership
Produce products and services at a lower price than competitors
Example: Walmart’s efficient customer response system
Product differentiation
Enable new products or services, greatly change customer convenience and experience
Example: Google, Nike, Apple

11. Product differentiation in an industry segment
Focus on an industry segment
Use information systems to enable a focused strategy on a single market niche with lowest cost.
Product differentiation in an industry segment
Use information systems to enable a differentiation strategy on an industry segment.

12. L4: Competitive Strategy Determine Value Chain Structure
Competitive strategy implemented by creating value
Value
Margin = Value – cost
Value chain

13. Bicycle Maker’s Value Chain

14. Summary of Value Chain Primary Activities

15. Support Activities in the Value Chain
Support Activity
Description
Technology
R & D, New Techniques, Methods, Procedures
Procurement
Raw Materials
Human Resources
Training, Recruiting, Compensation
Firm Infrastructure
General Management, Finance, Accounting, Legal, Government Affairs

16. L5: Value Chains Determine Business Processes and Information Systems
Business processes implement value chains or portions of value chains.
Each value chain supported by one or more business process.

17. Value Chain for Bicycle Rental Company

18. Experiencing MIS InClass Exercise: Competitive Strategy Over the Web
Industry Structure
Competitive Strategy
Value Chains
Business Processes
Information Systems
Telecommunication industry in UAE
Airline industry in UAE
Banking industry in UAE

19. L6: Information Systems Provide Competitive Advantages

20. Guide: Your Personal Competitive Advantage
Who will be your competitors when you seek a job after graduating from college?
What will be your competitive advantage in the job market?
What can you do before you graduate to develop your competitive advantage?

21. Review Questions
Q1: How does organizational strategy determine information systems requirements?
Q2: What five forces determine industry structure?
Q3: What is competitive strategy?
Q4: How does competitive strategy determine value chain structure?
Q5: How do value chains determine business processes and information systems?
Q6: How do information systems provide competitive advantages?