CH 13

Introduction to Information
Technology
2nd Edition
Turban, Rainer & Potter
© 2003 John Wiley & Sons, Inc.
Chapter 13:
Strategic Systems and
Reorganization
Prepared by:
Roberta M. Roth, Ph.D.
University of Northern Iowa
Introduction to Information Technology, 2nd Edition

13-1
Chapter Preview
 In this chapter, we will study:
 How IT can support an organization’s
strategy
 A model that helps reveal competitive
strategies that IT can support
 Real examples of strategic information
systems
 How organizations must adapt their
structures with IT support to remain
competitive
 How business processes can be revised with
IT support to enhance competitiveness
 How IT can enable new organizational forms
(e.g., the Virtual Corporation)
13-2
Strategic Information Systems
Strategic Information Systems –
systems that support or shape an
organization’s competitive strategy
May significantly change the way
the business operates
Makes substantial contribution
toward achieving strategic goals
May increase performance and
productivity significantly
13-3
Strategic Information Systems
Outward focus: aimed at direct
competition in an industry
Inward focus: enhance the competitive
position of the firm through…
Increasing employee productivity
Improving teamwork
Enhancing communication
Strategic Alliances - two or more
companies share an inter-organizational
system for mutual benefit
13-4
Competitive Strategy & IT
Strategy is the creation of a
unique and valuable position,
involving a set of activities
different than what rivals do
IT creates competitive advantage
by giving companies new ways to
outperform their rivals
 Create new applications
 Enable reengineering of business
processes
 Enable
Introduction innovation
to Information Technology, 2nd Edition
13-5
© 2003JohnProvide
Wiley & Sons, Inc. competitive intelligence
Competitive Intelligence
Gather information about
competitors’ performance and
activities
Gather information about markets,
technologies, and governmental
actions
Often enabled by use of intelligent
agents
Not the same as industrial
espionage
13-6
Competitive Intelligence on the
Internet
Intelligence Search Strategy Description
Review competitor’s Web sites Reveal information about
marketing information
Analyse related newsgroups Find out what people think about a
company and its products
Examine publicly available By entering a number of databases
financial documents and analyse findings
Do market research at your Pose questions to Web site visitors
own Web site
Use an information delivery service Find what is published on the
to gather news on competitors Internet about competitors
Use corporate research companies Provide information ranging from
risk analysis to stock market
analysts’ reports about competitors
13-7
Porter’s Competitive Forces Model
and IT
 Porter’s Competitive Forces Model
 Competition - at the core of a firm’s success
or failure
 Used to develop strategies for companies to
increase their competitive edge
 Demonstrates how IT can enhance the
competitiveness of corporations
 5 major forces:
Threat of entry of new competitors Threat of substitute products or services
Bargaining power of suppliers Bargaining power of customers (buyers)
Rivalry among existing firms in the industry

13-8
Porter’s Five Forces Model

13-9
Porter’s Competitive Forces Model
and IT
 Response Strategies (Per Porter and Others)
– may be supported in part by IT
 Cost leadership strategy - producing at
lowest cost
 Differentiation strategy - being unique
 Focus strategy - selecting a narrow-scope
segment
 Growth strategy - increasing market share
 Alliances strategy - working with business
partners
 Innovation strategy - developing new
products
 Internal efficiency strategy - improving the
manner in which business processes are
executed
13-10
 Customer-oriented strategy - concentrating
Impact of IT on Competitive Forces
Key Forces Affecting Business Potential IT
the Industry Implications Responses
Threat of new • Additional capacity • Exploit existing economies
entrants • Reduced prices of scale
• New basis for • Differentiate products /
competition services,
• Control distribution channels
• Segment markets
High power • Raise prices/costs • Implement sourcing systems
suppliers • Reduce quality of • Extend quality control into
supply suppliers’ operations
• Reduce availability • Use forward planning with
suppliers
High power • Forces prices down • Differentiate and improve
buyers • Higher quality products/ services
demanded • Increase switching costs of
• Service flexibility buyers
required • Facilitate buyers product
• Encourage competition selection
13-11
Impact of IT on Competitive Forces
Key Forces Affecting Business Potential IT
the Industry Implications Responses
Substitute products • Limits potential and • Use differentiation strategy

threatened profit • Incorporate IT into
• Imposes price ceilings product, service, or method
of provision
Intense competition • Price competition • Improve price/performance
from rivals • Need to develop new • Redefine products and
products and services services to increase value
• Distribution and • Redefine market segments
service become • Differentiate products and
critical services in distribution
• Customer loyalty channels and to consumers
required • Get closer to the end
consumer - understand the
user requirements

13-12
Sustaining a Competitive
Advantage
 Early examples of SIS were difficult to
sustain
 Outward systems will probably eventually be
duplicated by competition
 Combining SISs with structural changes
in the organization can provide a
sustainable strategic advantage
 Inward systems can be kept secret
 Install a comprehensive, complex,
innovative, and expensive system that
cannot easily be duplicated
13-13
Competing Globally
Global opportunities also increase
competitive pressure
Global strategies and IT must be
aligned for success
Electronic commerce provides
many options for global competitive
advances

13-14
The Need for Organizational
Change
 Organizational structures and processes
established in the Industrial Revolution
are no longer effective, due to…
 Globalization
 Pressure for rapid change
 Increasingly demanding customers
 Opportunities afforded by IT
 Focus on vertical, functional organization
is inappropriate
 Need integration that spans
departmental and organizational
boundaries
13-15
Business Process Reengineering
 Solution based on fundamental
rethinking and radical redesign of
business processes to achieve dramatic
improvements in measures of
performance
 Elements:
 Job Enrichment
 Employee Empowerment
 Process Simplification
 Mass Customization
 Reduced Cycle Time

13-16
BPR - The Enabling Role of
Information Technology
 The IT tools for BPR
Simulation and visual simulation tools
- to support the modeling activities of BPR
Flow diagrams – depict information flows
Work analysis - analyze current and
proposed processes
Workflow software – depict flow of work
from place to place through the organization

13-17
Changes in Work Rules Brought by IT
Old Rule New Rule
Intervening
Information Technology
Shared databases, Information
appears in only client/server appears
one place at one architecture, simultaneously
time electronic mail wherever
Only an expert can Expert systems, neural needed can
Novices
perform complex computing perform
work. complex work.
Managers make all Decision support systems, Decision making
decisions. enterprise support is part of
systems, expert systems everyone’s job
Field personnel need Wireless communication Field personnel
offices to receive, and portable computers, can manage
send, store, and information highways, information
process information. electronic mail from any
location.
You have to locate Tracking technology, Items are
items manually. groupware, workflow located
software, client/server automatically
Plans get revised High-performance Plans get
periodically. computing systems revised
instantaneously
whenever
Introduction to Information Technology, 2nd Edition needed.
13-18
Changes in Work Rules Brought by IT
Old Rule New Rule
Intervening
People must Technology
Groupware and People can work
come to one group support together from
place to work systems, different
together. telecommunication, locations.
electronic mail,
Customized CAD-CAM, CASE tools,
client/server Customized
products and online systems for JIT products can be
services are decision making, expert made fast and
expensive and take systems inexpensively
a long time to (mass
A long period of time
develop. CAD-CAM, electronic data Time-to-market
customization).
is spanned between interchange, groupware, can be reduced
the inception of an imaging (document) by 90 percent
idea and its processing
implementation
(time to market)
Work should be Robots, imaging Work can be
moved to countries technologies, object- also done in
where labor is oriented programming, countries with
inexpensive (off- expert systems high wages and
shore production). salaries.

13-19
Restructuring Entire Organizations
Customer
Account
manage
Customer r
demographics supporte
d by ...
Checkin Installm
g ent Expert system
account loans
s Backed up by ...
Savings Mortgag
account e loans
s
Trusts Etc Checkin Loan
g expect expect
Statem
ent
Reengineered bank Consolida
with integrated system ted Etc
statement
13-20
Networked Organization
 Resemble computer networks and are supported by
computerized systems
 Shift toward the networked organization due to the
movement toward an information-based economy
Networked Organization
Hierarchical Organization Informal
Formal
Loosely structured
Highly structured
Delegate/lead
Manage Ownership/participatio
Control n
Empower
Direct
Employees an asset
Employees a cost Information
Information shared ownership
management-owned
Hierarchical Flatter/ manageable
organizations organizations
Risk avoidance Risk management
Individual
contributions Team contributions

13-21
Networked Organization - Roles of
Managers and Subordinates
Hierarchical Flattened Network
Organization Organization Organization
Use of Authority
by the Manager
Area of Freedom
for Subordinates
Manager Manager Manage Manager Manage Manager Manager

makes presents r presents r permits allows
decisions ideas present problem, defines subordinatessituational
and and s gets limits; to function leadership to
announces invites tentativ suggestion asks within limits occur based
or “sells” question e s, makes group to defined by on which
it. s. decisio decision. make superior. node of the
1 2 n3 4 decision
5 6 network 7is
subject . best
to 2nd Edition
Introduction to Information Technology, equipped to
Turban, Rainer & Potter change. solve 13-22
© 2003 John Wiley & Sons, Inc. problem.
Empowerment
 Employees have decision-making or
approval authority in instances where
such authority formerly belonged to
managers
 Empowerment and Information
Technology
 Providing the right information at the right
time allows employees to make decisions
 Increase the availability of knowledge
 Tools enable employees to be more creative
and productive with higher quality work
 Training can be enhanced by IT
13-23
Ethical and Societal Issues
 Unethical tactics
 Pressuring competitor’s employees to reveal
information
 Using software that is the intellectual
property of other companies without
permission
 Using IT to monitor the activities of
employees and customers and in so doing
invading the privacy of individuals
 Societal Issues
 Reengineering efforts involve dramatic
changes in people’s jobs and working
relationships
 Jobs are eliminated
13-24
Virtual Corporations
 Characteristics of Virtual Corporations
(VC)
 Excellence - each partner brings its core competence
so an all-star winning team is created. No single
company can match what the virtual corporation can
achieve.
 Full utilization of resources - some resources of
the business partners may be underutilized when not
in a VC.
 Opportunism - the partnership is opportunistic. A VC
is organized to seize market opportunities.
 Lack of borders - it redefines traditional boundaries.
 Trust - business partners in a VC are far more reliant
on each other and more trusting than ever before.
 Adaptability to change - the VC can quickly adapt
to environmental changes because its structure is
relatively simple.
 Technology
13-25
- IT makes the VC effective and efficient.
Chapter Summary
 Strategic information systems can
provide an competitive advantage
 Porter’s Competitive Forces model
helps reveal competitive strategies that
may be supported with IT
 Reorganization supported by IT may be
needed to stay competitive
 IT can provide a number of key
innovations, including mass
customization, cycle time reduction,
empowerment, self-direct teams
 IT enables the creation of virtual
corporations
13-26
Copyright © 2003 John Wiley & Sons, Inc. All rights reserved. Reproduction
or translation of this work beyond that permitted in Section 117 of the 1976
United Stated Copyright Act without the express written permission of the
copyright owner is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons, Inc. The
purchaser may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these programs or from the
use of the information herein.

13-27

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Introduction to Information

Introduction to Information Technology, 2nd Edition

Bargaining power of suppliers Bargaining power of customers (buyers)

Rivalry among existing firms in the industry

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Substitute products • Limits potential and • Use differentiation strategy

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Manager Manager Manage Manager Manage Manager Manager

Introduction to Information Technology, 2nd Edition

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