MANAGEMENT INFORMATION SYSTEMS 8/E

Raymond McLeod, Jr. and George Schell

Chapter 2
Using Information Technology
for Competitive Advantage

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Copyright 2001, Prentice-Hall, Inc.
 What is a Firm?

Physical System
Closed-loop
Controlled by management
Uses feedback to ensure objectives met
Open because of environmental interaction
Managed through use of a conceptual
system

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 Importance of Environment

Very reason for a firms existence

Firm takes resources from environment,
transforms them, and returns goods and
services to environment

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 The Firms Environment
Society
Government
Financial Global
Community Community

Suppliers The Customers

Firm
Labor
unions Competitors
Stockholders
or owners 2-4
 The Firm Is Connected to Its
Environment by Resource Flows

Physical and conceptual

Some flows are major
Some should not occur at all
All resources that enter the firm from the
environment eventually return to the
environment
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 Competitive Advantage

Computer field perspective

Use of information to gain leverage in
marketplace
Relies on more than physical resources
Addressed with strategic objectives

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 A Value Chain

Firm Infrastructure

Ma
Support Human resource management

rgin
Activities Technology development
Procurement

Inbound Operations Outbound Marketing Service

and

rgin
logistics logistics
sales

Ma
Primary Activities 2-7
Source : Michael E. Porter
 A Value System

Supplier Firm Channel Buyer

value value value value
chains chain chains chains

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Source : Michael E. Porter
 The Information Resources
Two views of information management

1. Manage data by implementing computer-

based database management systems
(DBMS)
2. Manage resources that produce the
information

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 The Information Resources

Hardware
Software Database

Information
Specialists Information
Users
Facilities 2-10
 The Information Resource
Manager -- the CIO
Chief Information Officer (CIO) is not
simply a title, but role
Manager of information services
Contributes managerial skills
Solves information resources problems
Solves problems in other areas of firms
operations

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 The CIO Attitude

The business is what counts

Build partnerships/ties with the rest of the
firm
Improve basic business processes
Communicate in business terms, not IS jargon
Provide reliable IS services
Be positive, not defensive

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 Strategic Planning

Long-range planning
Intends to give firm most favorable position in
its environment
Specifies strategies for achieving objectives
Need for each business area to create its
own strategic plan

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 The Functional Areas Should Cooperate
in Developing Their Strategic Plans
Strategic
planning for
information resources

Strategic Strategic
planning for planning for
marketing financial resources
resources

Strategic Strategic
planning for planning for
manufacturing human
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resources resources
Strategy Set Transformation
Organizational MIS
strategy set strategy set
Mission System
objectives
Objectives
System
Strategy constraints
MIS
Other strategic System
strategic planning design
organizational process strategies
attributes
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 Strategy Set Transformation:
Basic Flaw
Business areas do not always have the
resources to ensure accomplishment of
strategic objectives

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 SPIR

Strategy set transformation; support the

firms objectives
Strategic planning for information resources
(SPIR) develops firm and IS strategic plans
concurrently
SPIR content
1. What is to be achieved
2. What will be required
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 Strategic Planning for
Information Resources

Influence on
Information
Resources Information
Business resources
strategy and
Influence on IS
Business strategy
Strategy

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 Strategic Plan Framework for
Information Resources
Strategic Plan
for Information
Resources

Virtual Knowledge-
AIS MIS DSS
Office based systems
Objectives Objectives Objectives Objectives
Objectives

Required Required Required Required Required

Information Information Information Information Information
Resources Resources Resources Resources Resources

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 The Strategic Implications of
End-User Computing (EUC)
Levels of end users in terms of capabilities
menu-level end users
command-level end users
end-user programmers
functional support personnel
EUC application considerations
shifts workload so that end-users and information
specialists talents are better used
reduces communications gap

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 EUC Risks

Poorly aimed systems

Poorly designed/ documented systems
Inefficient use of information resources
Loss of data integrity
Loss of security
Loss of control

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 Information Resources
Management (IRM) Concept
Realization that firms information
resources go far beyond the information
itself
Activity pursued by managers at all levels
Identifying, acquiring, and managing
information resources needed to satisfy
information needs

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 IRM - Required Elements

A recognition that competitive advantage

can be achieved by means of superior
information resources
A recognition that information services is a
major functional area
A recognition that the CIO is a top-level
executive

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 IRM-Required Ingredients (cont.)

A consideration of the firms information

resources when engaging in strategic
planning
A formal strategic plan for information
resources
A strategy for stimulating and managing
end-user computing

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 The IRM
The environment of the firm
Model
ENVIRONMENTAL INFLUENCES
The firms executives
CIO Other executives
Internal influences Firms strategic plan
FUNCTIONAL AREAS
Information Finance Human Manufacturing Marketing
services resources
INFORMATION RESOURCES
Central computing Disbursed computing
resources resources

DATA AND INFORMATION

Users engaged in
end-user computing Other users
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 IRM Model: Firm Environment

Provides setting for achieving competitive

advantage
Executives are aware of need to manage
resource flows to meet needs of
environmental elements

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 IRM Model: Firms Executives

Includes CIO
Guides firm toward objectives
Key activity is strategic planning

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 IRM Model: Business Areas

Information services is a major business

area
Each area develops own strategic plans
One business area strategic plan is for
information resources

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 IRM Model: Information
Resources
Strategic plan for information resources
details acquisition and management
Information resources
Centralized
Dispersed throughout firm

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 IRM Model: Users

Details data and information flows between

resources and users
Some users engage in end-user computing

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 Summary
Environment of a firm consists of eight elements
Firms attempt to achieve competitive advantage
Margin - value of products and services over cost
Value chain
Information resources
Hardware, software, facilities, database, information
specialists, information, and users

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 Summary [cont.]
Executives perform strategic planning
SPIR
All firms managers need to engage in IRM
Recent revelation
Integrating concept

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