Slide 1Study QuestionsQ1 – How does organizational strategy determine IS structure?Q2 – What Five Forces Determine Industry Structure?Q3 – What is Competitive Strategy?Q4 – What is a Value Chain?Q4 – What is a Value Chain (Primary and Support Activities)?Q4 – What is a Value Chain; e.g., Bicycle Manufacturer?Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?Slide 12Slide 13Slide 14Q7 – How Do Information Systems Provide Competitive Advantages?Ethics Guide – The Digital DivideSummaryReview: Select the appropriate term for each itemUsing MIS 2e Chapter 3: Information Systems for Competitive Advantage David KroenkeThis presentation has been modified from the original and should be downloaded from the Course Documents area in BlackboardQ1 – How does organizational strategy determine information systems structure?Q2 – What five forces determine industry structure?Q3 – What is competitive strategy?Q4 – What is a value chain? Q5 – How do business processes generate value?Q6 – How does competitive strategy determine business processes and the structure of information systems?Q7 – How do information systems provide competitive advantages?Ethics Guide – The Digital DivideStudy Questions3-2Chapter 3: Information Systems for Competitive AdvantageMichael Porter developed three different models (industry structure, competitive strategy, and value chains) that laid the groundwork to create integrated, cross-departmental business systems. As can be seen, the structure of an industry determines an organization’s competitive strategy, giving rise to value chains and business processes, which results in the structure of the information system. Q1 – How does organizational strategy determine IS structure?3-3Chapter 3: Information Systems for Competitive AdvantagePorter’s five forces model determines industry profitability. Organizations examine the effects of these forces and their relative strength to arrive at a competitive strategy. The forces may be strong or weak.The threat of substitutions is strong for an auto-rental company catering to frequent travelers; the force is very weak for a drug company with a patent on the only effective drug for a specific diseaseThe bargaining power of customers is a strong force if you are an appliance company selling to Wal-Mart; it is weak if you are an oil company selling gas to consumersThe threat of threat of a new vendor is weak for an NFL franchise; the force is very strong if you are the corner latte standThe rivalry among existing firms is a strong force for used car dealers in a city or town; it is weak (non-existent) if you are the IRSThe bargaining power of suppliers is a strong force for a PC manufacturer dealing with Microsoft; it is a weak force for bread manufacturers dealing with grain farmers in a surplus yearQ2 – What Five Forces Determine Industry Structure?3-4Chapter 3: Information Systems for Competitive AdvantageQ3 – What is Competitive Strategy?Walmart provides the lowest cost in the retail industry Lexus competes on how its products are better and more luxurious across the industrySouthwest Airlines is the cost leader for certain portions of the airline industryApple’s iPhone competes by being different from other cell phonesA company can choose one of four competitive strategies to help it respond to the structure of its industry.3-5Chapter 3: Information Systems for Competitive AdvantageQ4 – What is a Value Chain?A value chain is a network of activity within an organization that implements the business strategy. Each stage of the primary chain accumulates costs and adds value. Margin is the difference between cost and value. Support activities enable the primary activities to take place3-6Chapter 3: Information Systems for Competitive AdvantagePrimary Activities are functional areas in the organization that process inputs and produce outputs. Inbound Logistics – receiving and stocking of raw materials and partsOperations/Manufacturing – processing orders and raw materials into finished productOutbound Logistics – distribution of the finished product to customers Marketing and Sales – creating demand for the product (pre-sale)Customer Service –Product or customer support (post-sale)Support Activities contribute indirectly to the production, sale, and service and enable the primary activities to take place:Infrastructure – hardware and software to support primary activitiesHuman Resources – employee management (hiring, interview scheduling, and benefits management)Technology Development – the design and development of applications that support the organizationProcurement – purchase of goods or services that are required as inputs to primary activitiesQ4 – What is a Value Chain (Primary and Support Activities)?3-7Chapter 3: Information Systems for Competitive AdvantageQ4 – What is a Value Chain; e.g., Bicycle Manufacturer?Each stage of the primary chain accumulates costs and adds value. Margin is the difference between cost and value. Each activity chain links to other activities in the chain. Linkages are the interactions across the value activities. Understanding a company’s linkages helps it succeed in designing or redesigning its business processes.3-8Chapter 3: Information Systems for Competitive AdvantageQ5 – How Do Business Processes Generate Value?A business process is a network of activities that generate value by transforming inputs into outputs. The various activities access different databases determine the information system.3-9Chapter 3: Information Systems for Competitive AdvantageQ5 – How Do Business Processes Generate Value?The purchase-bicycle-parts activity has been redesigned to query the finished goods inventory to include information about customer demand in the ordering decision for raw materials. Linkages are interactions across value activities; e.g., manufacturing systems use linkages to reduce inventory by using sales forecasts to plan production, then use production to plan raw materials. Understanding a company’s linkages helps it succeed in designing or redesigning its business process.3-10Chapter 3: Information Systems for Competitive AdvantageEach network of activity transforms input resources into output resources; i.e., bicycle parts are transformed into a bicycle through a