Chapter 2: Information Systems and the Modern Organization

In these post I will highlight the most important point in every section of chapter two

 2.1 Business Processes

    

•  A business process is a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers.

•   A cross-functional business process is one in which no single functional area is responsible for its execution.   

2.2 Business Process Reengineering and Business Process Management

•      Business process reengineering is a radical redesign of a business process that improves its efficiency and effectiveness, often by beginning with a “clean sheet.”

•      Business process management is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes.

2.3 Business Pressures, Organizational Responses, and IT Support

Business Pressure - The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities. Significant changes in any of these factors are likely to create business pressure on the organization.

The three types of business pressures faced are:

•        Market

o   The Global Economy and Strong Competition

o   The Changing Nature of the Workforce

o   Powerful Customers

•       Technology

o   Technological Innovation and Obsolescence

o   Information Overload

•   Societal pressures

o   Social Responsibility

o   Government Regulation and Deregulation

o   Protection Against Terrorist Attacks

o   Ethical Issues

2.4 Competitive Advantage and  Strategic Information Systems

• Competitive Advantage: An advantage over competitors in some measure such as cost, quality, or speed, leads to control of a market and to larger- than average profits.

• Strategic Information Systems (SIS) provides a competitive advantage by helping an organization to implement its strategic goals and to increase its performance and productivity.

*Porter’s Competitive Forces Model

• Threat of entry of new competitors is high when it is easy to enter a market and low when significant barriers to entry exist. 

•   A barrier to entry is a product or service feature that customers expect from organizations in a certain industry. 

• For most organizations, the Internet increases the threat that new competitors will enter a market.

•  The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices.

•   Internet impact is mixed.  Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers.

•  On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers.

•  The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices.

•   Internet increases buyers’ access to information, increasing buyer power.

•  Internet reduces switching costs, which are the costs, in money and time, to buy elsewhere.  This also increases buyer power.

• The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes.

• Information-based industries are in the greatest danger from this threat (e.g., music, books, software).  The Internet can convey digital information quickly and efficiently.

• The rivalry among firms in an industry is high when there is fierce competition and low when there is not.

*Porter’s Value Chain Model

This model identifies specific activities where organizations can use competitive strategies for greatest impact.

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•  Primary activities are those business activities that relate to the production and distribution of the firm’s products and services, thus creating value for which customers are willing to pay.  Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and customer service.

•   Support activities do not add value directly to a firm’s products and services, but support the primary activities.  Support activities include accounting, finance, management, human resources management, product and technology development (R&D), and procurement.

*Strategies for Competitive Advantage

• Cost Leadership: Produce products and/or services at the lowest cost in the industry.

• Differentiation: Offer different products, services or product features.

• Innovation: Introduce new products and services, add new features to existing products and services or develop new ways to produce them.

• Operational Effectiveness: Improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals.

• Customer-orientation: Concentrate on making customers happy.