Chapter 3: Information Systems for Competitive Advantage

An organization's goals and objectives are determined by its competitive strategy. Competitive strategy determines the structure,features,and functions of every information system.
Five force model is used to assess an industry structure.
Five Force Model


The intensity of each of the five forces determines the characteristics of the industry,how profitable it is, and how sustainable that profitability will be.



An organization responds to the structure of it's industry by choosing a competitive strategy.

Porter's Model of Four Competitive Strategies




According to Porter, to be effective, the organization's goals,objectives,culture,and activities must be consistent with the organization strategy.

Value- the amount of money that a customer is willing to pay for a resource,product,or service.
Margin- the difference between the value that an activity generates and the cost of the activity.
A value chain is a network of value-creating activities. That generic chain consists of five primary activities and four support activities.

Primary Activities
Inbound logistics- receiving,storing, and disseminating inputs to the product.
Operations/Manufacturing- transforming inputs into the final product.
Outbound logistics- collecting,storing,and physically distributing the product to buyers.
Sales and Marketing- inducing buyers to purchase the product and providing a means for them to do so.
Customer Service- assisting customer's use of the product and thus maintaining and enhancing the product's value.
Support activities contribute indirectly to the production,sale, and service of the product.

A business process is a network of activities that generate value by transforming inputs into outputs. The cost of the business process is the cost of the inputs plus the cost of the activities. The margin of the business process is the value of the output minus the cost.
A business process is a network of activities;each activity transforms input resources into output resources. Resources flow between or among activities. Facilities store resources;some facilities,such as inventories,store physical items.

Organizations gain a competitive advantage by creating new products or services,by enhancing existing products or services,and by differentiating their products and services from those of their competitors.
Organizations can lock in customers by making it difficult or expensive for customers to switch to another product. This strategy is called establishing high switching costs. Competitive can also be gained by creating entry barriers that make it difficult and expensive for new competition to enter the market. Other ways to gain competitive advantage is by reducing cost and establishing alliances.