The Strategic Role of Information Systems

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Laudon Laudon CH 2

• The Strategic Role of Information Systems

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L L 2 Kinds of Information Systems
KIND OF SYSTEM
GROUPS SERVED
STRATEGIC LEVEL

SENIOR MANAGERS
MANAGEMENT LEVEL
MIDDLE
MANAGERS
KNOWLEDGE LEVEL
KNOWLEDGE


DATA WORKER





OPERATIONAL

OPERATIONAL LEVEL

MANAGERS
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LL 2 Kinds of Information Systems

• Operational Level Systems
• keep track of elementary activities and
  transactions of the organization
• system type is called Transaction Processing
  Systems (TPS)
• examples hotel reservation systems, order
  tracking systems

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LL 2 Kinds of Information Systems

• Knowledge Level Systems
• help to integrate knowledge into the business
  (Knowledge Work System, KWS)
• help to control the flow of paperwork (Office
  Automation Systems, OAS)
• examples CAD Systems, word processing/ desktop
  publishing, document imaging systems

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LL 2 Kinds of Information Systems

• Management Level Systems
• provide the management level with reports and
• serve monitoring and controlling functions (MIS)
• help making decisions (Decision Support Systems,
  DSS)
• examples report functions of Excel and Access,
  solver and scenario manager in Excel

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LL 2 Kinds of Information Systems

• Strategic Level Systems
• serves strategic issues and long-term trends
  (e.g. 5-year period) (Executive Support Systems,
  ESS)
• typical questions
• What business should we be in?
• What are the competitors doing?
• What will employment levels be in 5 years?
• examples ?

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L L 2Kinds of Information Systems
Sales and Marketing Systems
STRATEGIC LEVEL
Monitoring of sales trends,
planning new products,
monitoring of competitors performance
MANAGEMENT LEVEL Advertising and
promotional campaigns,

pricing
decisions
KNOWLEDGE LEVEL Identifying customers
and markets using

data on demographics, markets, consumer
behavavior and trends





OPERATIONAL Assistance in locating/
contacting prospective customers,

LEVEL
tracking sales, processing orders,
customer service
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l l 2Kinds of Information Systems
Human Resources Information Systems
STRATEGIC LEVEL Planning
long-term labor force needs of
the organization (skills, educational
level, types and number of positions,
costs)
MANAGEMENT LEVEL Monitor range and
distribution of employee
wages, salary and benefits
KNOWLEDGE LEVEL Design career paths
for employees, job design
and reporting relationships





OPERATIONAL Track recruitment and
placement of firms employees,

LEVEL
track employee training, skill,
performance appraisals
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LL 2 Strategic Role of Information Systems

• Strategic information systems
• dont focus on long-term decision making (like
  strategic level systems)
• make use of strategic opportunities
• change the way a firm conducts its business
• can provide competitive advantage

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Ll 2 Strategic Role of Information Systems

• Two models to identify strategic opportunities
• competitive forces model
• value chain model

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LL 2 Competitive Forces Model

• External competitive forces
• new market entrants
• pressure from substitute products/ services
• bargaining power of suppliers and customers
• positioning of industry competitors

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LL2 Competitive Forces Model
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LL 2 Strategies to counter competitive forces

• Develop brand loyalty by product differentiation
• unique new and distinguishable products
• custom-tailored products
• Information systems are the basis for creating
  these products
• examples ATM-machines, custom jeans by Levis

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LL 2 Strategies to counter competitive forces

• Create new market niches by focused
  differentiation
• provide specialized products for narrow target
  markets in a superior way
• Information systems produce data to improve sales
  and marketing techniques
• examples American Express relationship billing,
  Fingerhuts customized catalogue offers, Kraft
  Foods selected coupons

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LL 2 Strategies to counter competitive forces

• Linkages to customers and suppliers
• raise switching costs and reduce bargaining power
  for customers/ suppliers
• lock customers into firms products, tie
  suppliers into delivery timetable and price
  structure

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LL 2 Strategies to counter competitive forces

• Manufacturer information systems integrate
  customer/ supplier operation
• examples Baxter Healthcares stockless
  inventory, GMs just-in-time delivery

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LL 2 Strategies to counter competitive forces

• Low-cost production
• produce goods and services at prices lower than
  competitors
• Information systems optimize inventory
  replenishment/ orders
• examples Wal-Marts continuous inventory
  replenishment system

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LL 2 Strategic Uses of the Internet

• Product differentiation virtual banking
  (Deutsche Bank, 1st. Nat. Bank Durango)
• Focused differentiation ?
• Links to customers/ suppliers FedEx track
  system
• Low-cost producer Avex Electronics EDI-System

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LL 2 Value Chain Model

• Firms are chains of activities, adding value to
  products/ services
• primary value creating activities in the
  production/ distribution process
• secondary supporting activities
• Identify the most value adding leverage points
  in a chain to enhance competitive position

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LL 2 Value Chain Model

• Information systems support the most value adding
  activities
• example Gilettes low cost, high
  quality-system

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LL 2 How Information Systems promote Quality

• Producer perspective Conformance to specs
• Customer satisfaction quality of product and
  service
• Total quality management
• quality control is an end in itself

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LL 2 How Information Systems promote Quality

• Total quality management
• quality is the responsibility of all poeple in an
  organization
• Engineers try to avoid design errors
• Production workers try to spot defects
• Sales people try to present the product properly
• basic measures to improve quality
• Simplify product/ production process (fewer is
  better)
• Reduce cycle time
• Establish benchmarks

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LL 2 How Information Systems promote Quality

• Mapping production and administrative processes
• Analyze data (e.g. customer return transactions)
• Use of Computer Aided Design (CAD) software
• designing precise products, testing products
• improve quality, precision