UNIT V : STRATEGIC INFORMATION

SYSTEM
Er. Ashok Dware
 Strategic Information System
• A computer system that helps
a business to achieve a particular aim,
or gain an advantage over similar organization
• strategic information system assists a firm in
realizing its long-term competitive goals.
• It is typically utilised to speed up the reaction
time to environmental changes and aid it in
achieving a competitive advantage.
• Most information systems are looked on as support activities to
the business. They mechanize operations for better efficiency,
control, and effectiveness, but they do not, in themselves,
increase corporate profitability.
• They are simply used to provide management with sufficient
dependable information to keep the business running
smoothly, and they are used for analysis to plan new
directions.
• Strategic information systems, on the other hand, become an
integral and necessary part of the business, and they affect the
profitability and growth of a company. It deliver a service or
product that is at a lower price, differentiated and mainly
concentrates on a demanding market section, or which is
innovative.
 Strategies for developing
Strategic Information Systems
• Analyze competative advantage
• Analyze competative forces
• Study value chain
 Competitive Advantage
1. Deliver a product or a service at a lower cost. This does
not necessarily mean the lowest cost, but simply a cost
related to the quality of the product or service that will be
both attractive in the marketplace and will yield sufficient
return on investment. The cost considered is not simply the
data processing cost, but is the overall cost of all corporate
activities for the delivery of that product or service. There
are many operational computer systems that have given
internal cost saving and other internal advantages, but they
cannot be thought of as strategic until those savings can be
translated to a better competitive position in the market.
 Competitive Advantage
2. Deliver a product or service that is differentiated.
Differentiation means the addition of unique
features to a product or service that are
competitive attractive in the market. Generally
such features will cost something to produce, and
so they will be the setting point, rather than the
cost itself. Seldom does a lowest cost product also
have the best differentiation. A strategic system
helps customers to perceive that they are getting
some extras for which they will willingly pay.
 Competitive Advantage
3. Focus on a specific market segment. The idea is to identify
and create market niches that have not been adequately filled.
Information technology is frequently able to provide the
capabilities of defining, expanding, and filling a particular niche or
segment. The application would be quite specific to the industry.
4.Innovation: Develop products or services through the use of
computers that are new and appreciably from other available
offerings. Examples of this are automatic credit card handing at
service stations, and automatic teller machines at banks. Such
innovative approaches not only give new opportunities to attract
customers, but also open up entirely new fields of business so
that their use has very elastic demand.
 Competitive Forces
1. Competitive Rivalry. This looks at the number and
strength of your competitors. How many rivals do you have? Who
are they, and how does the quality of their products and services
compare with yours?
Where rivalry is intense, companies can attract customers with
aggressive price cuts and high-impact marketing campaigns.
Also, in markets with lots of rivals, your suppliers and buyers can
go elsewhere if they feel that they're not getting a good deal from
you.
On the other hand, where competitive rivalry is minimal, and no
one else is doing what you do, then you'll likely have tremendous
strength and healthy profits.
 Competitive Forces
2. Supplier Power. This is determined by how easy it
is for your suppliers to increase their prices. How many
potential suppliers do you have? How unique is the
product or service that they provide, and how
expensive would it be to switch from one supplier to
another?
The more you have to choose from, the easier it will be
to switch to a cheaper alternative. But the fewer
suppliers there are, and the more you need their help,
the stronger their position and their ability to charge
you more. That can impact your profit.
 Competitive Forces
3. Buyer Power. Here, you ask yourself how easy
it is for buyers to drive your prices down. How
many buyers are there, and how big are their
orders? How much would it cost them to switch
from your products and services to those of a
rival? Are your buyers strong enough to dictate
terms to you?
When you deal with only a few savvy customers,
they have more power, but your power increases if
you have many customers.
 Competitive Forces
4.Threat of Substitution. This refers to the
likelihood of your customers finding a
different way of doing what you do. For
example, if you supply a unique software
product that automates an important
process, people may substitute it by doing
the process manually or by outsourcing it. A
substitution that is easy and cheap to make
can weaken your position and threaten your
profitability.
 Competitive Forces
5. Threat of New Entry. Your position can
be affected by people's ability to enter your
market. So, think about how easily this could
be done. How easy is it to get a foothold in
your industry or market? How much would it
cost, and how tightly is your sector
regulated?
 Value Chain Analysis
• Value chain analysis is a way to visually analyze a
company's business activities to see how the
company can create a competitive advantage for
itself.
• Value chain analysis helps a company understands
how it adds value to something and subsequently
how it can sell its product or service for more than the
cost of adding the value, thereby generating a profit
margin. In other words, if they are run efficiently the
value obtained should exceed the costs of running
them i.e. customers should return to the organisation
and transact freely and willingly.
Value Chain Analysis
 Value Chain Analysis
Primary Activities : Primary activities are
directly concerned with creating and
delivering a product. They can be grouped
into five main areas: inbound logistics,
operations, outbound logistics, marketing
and sales, and service. Each of these
primary activities is linked to support
activities which help to improve their
effectiveness or efficiency
 Primary Activities
1.Inbound logistics
• Refers to goods being obtained from the
organisation's suppliers and to be used for
producing the end product.
2. Operations
• Raw materials and goods are
manufactured into the final product. Value
is added to the product at this stage as it
moves through the production line.
 Primary Activities
3. Outbound logistics
• Once the products have been
manufactured they are ready to be
distributed to distribution centres,
wholesalers, retailers or customers.
Distribution of finished goods is known as
outbound logistics.
 Primary Activities
4. Marketing and Sales
• Marketing must make sure that the
product is targeted towards the correct
customer group. The marketing mix is
used to establish an effective strategy, any
competitive advantage is clearly
communicated to the target group through
the promotional mix.
 Primary Activities
5. Services
• After the product/service has been sold
what support services does the
organisation offer customers? This may
come in the form of after sales training,
guarantees and warranties.
 Support Activities
Support activities assist the primary
activities in helping the organisation achieve
its competitive advantage. There are four
main areas of support activities:
procurement, technology development
(including R&D), human resource
management, and infrastructure (systems
for planning, finance, quality, information
management etc.). They includ
 Support Activities
1. Firm infrastructure
• Every organisations needs to ensure that
their finances, legal structure and
management structure work efficiently and
helps drive the organisation forward.
Inefficient infrastructures waste resources,
could affect the firm's reputation and even
leave it open to fines and sanctions.
 Support Activities
2. Human resource management
• The organisation will have to recruit, train and
develop the correct people for the organisation to
be successful. Staff will have to be motivated and
paid the 'market rate' if they are to stay with the
organisation and add value. Within the service
sector such as the airline industry, employees are
the competitive advantage as customers are
purchasing a service, which is provided by
employees; there isn't a product for the customer
to take away with them.
 Support Activities
3. Technology development
• The use of technology to obtain a
competitive advantage is very important in
today's technological driven environment.
Technology can be used in many ways
including production to reduce cost thus
add value, research and development to
develop new products and the internet so
customers have 24/7 access to the firm.
 Support Activities
4. Procurement
• This department must source raw
materials for the business and obtain the
best price for doing so. The challenge for
procurement is to obtain the best possible
quality available (on the market) for their
budget.
 Characteristics
1. Automation
of SIS
IT professionals design strategic information management
systems to automate the management of incoming and outgoing
information to the greatest possible degree. While each
company has its own unique IT needs, strategic information
management systems typically include built-in controls that filter,
sort, categorize and store information in easy-to-manage
categories.
2. Customization
Strategic information management systems are typically
customized to meet the unique needs of each individual
company. Incoming and outgoing data can be sorted and cross-
referenced according to a wide range of individually specified
controls and parameters, which include the company's business
verticals and horizontals, individual clients, demographics,
geographic location and business function.
 Characteristics of SIS
3. Organization and Access
Strategic information management systems are extensively
categorized, allowing for an optimal level of organization.
Access controls can be as strict or as lax as the client
wants, allowing for company-wide access to information
databases or limiting information accessibility to key
personnel. User-specific controls can also be set, in case
employees need access to certain information but
management wants to limit their access to sensitive data.
 Characteristics of SIS
4. Benefits
The benefits of strategic information management can be
felt from the executive level right down to the functional
staff level. It can help businesses expand their operations
into new areas, set goals, measure performance and
improve overall productivity.

5. Primarily Enterprise resource planning solutions that

integrate the business processes to meet the enterprise
objectives for the optimisation of the enterprise resources.
Strategic Information System Plan
Strategic Information System Plan
Strategic Information System Plan
 Strategic Information System
Plan
1) Strategic Business Planning:
Prerequisite to systems planning:
• It outlines an organization’s overall direction,
philosophy, and purpose.
• It examines its current status in terms of its
strengths, weakness, opportunities, and
threats.
• It sets long-term objectives.
• It formulates short-term tactics to reach them.
Strategic Information System Plan
2) Information Systems Assessment:
Evaluation of the system to assess its status
(current information systems resources) in terms
of original or current expectations and how they
are serving the organization.

3) Information Systems Vision: Ideal role that

should be pursued for use of information
systems resources.
Strategic Information System Plan
4) Information Systems Guidelines: Set of
statements that clarify use of organization’s
technical and information systems
resources.
5) Strategic Initiatives: Three to five year
long-term proposals that specify new
initiatives for information systems
organization.
 Advantages of Strategic
Information System Plan
• Identify important application to invest
• Help organizations use its IS to carry out
existing business strategy
• Help organization define business strategy