Chapter 2 : Organizational Strategy,

Competitive Advantage, and

Information Systems
ISP500 Foundation of Information Systems

Dr. Elin Eliana Abdul Rahim

 Chapter Outline

Business Processes

Business Process Reengineering, Business Process

Improvement, and Business Process Management

Business Pressures, Organizational Responses,

and Information Technology Support

Competitive Advantage and Strategic Information

Systems
Business Processes
Business Process
A business process is an ongoing collection of related activities that create a product or a
service of value to the organization, its business partners, and/or its customers. The process
involves three fundamental elements:

Inputs: Materials,
services, and Resources: People and
Outputs: The product
information that flow equipment that
or a service created by
through and are perform process
the process
transformed as a result activities
of process activities
Cross Functional Business Process

Cross-functional business processes : no single functional area is responsible for

their execution. Rather, multiple functional areas collaborate to perform the process.
For a cross-functional process to be successfully completed, each functional area
must execute its specific process steps in a coordinated, collaborative way.
 Cross Functional Business Process
Example:
The procurement process includes all of the tasks involved in acquiring needed materials externally from a vendor.
Procurement comprises five steps that are completed in three different functional areas of the firm: warehouse,
purchasing, and accounting.
Step 2
Step 1 In turn, the
The process purchasing
begins when department Step 3
the warehouse identifies a When the Step 5
Step 4
recognizes the suitable vendor Accounting
The vendor
need to vendor, receives the sends payment
then sends an
procure creates a purchase to the vendor,
invoice, which
materials. The purchase order, it ships thereby
is received by
warehouse order based the materials, completing the
the accounting
documents on the which are procurement
department.
this need and purchase received in the process.
send it to the requisition, warehouse.
purchasing and sends the
department. order to the
vendor.
Business Process
Example of Business Processes : Single functional area
Information Systems and Business Process
Information systems facilitate communication and coordination among different functional areas, and allow
easy exchange of, and access to, data across processes. Information systems play a vital role in three areas:

• Executing the process - IS helps execute processes by informing people when it

is time to complete a task, by providing the necessary data to complete the task, and, in some
cases, by providing the means to complete the task.
• Capturing and storing process data - processes create data such as dates, times, product numbers, quantities, prices,
and addresses, as well as who did what, when, and where. Iss capture and store these data, commonly referred to as
process data or transaction data. Some of these data are generated and automatically captured by the IS.

• Monitoring process performance - IS performs this role by evaluating information about a process. This information
can be created either at the instance level (i.e., a specific task or activity) or at the process level (i.e., the process as a
whole).
Business Process Reengineering, Business Process
Improvement, and Business Process Management
 Measures of competitive performance in an
organization
Excellence in executing business processes is widely recognized as the underlying basis for all
significant measures of competitive performance in an organization. Consider the following
measures, for example:
• Customer satisfaction: The result of optimizing and aligning business processes to fulfill customers’
needs, wants, and desires.
• Cost reduction: The result of optimizing operations and supplier processes.
• Cycle and fulfillment time reduction: The result of optimizing the manufacturing and logistics
processes.
• Quality: The result of optimizing the design, development, and production processes.
• Differentiation: The result of optimizing the marketing and innovation processes.
• Productivity: The result of optimizing each individual’s work processes.
How does an organization
ensure business process
excellence?
Business Process Reengineering, Business Process
Improvement, and Business Process Management
Information technology is the key enabler for business to radically redesign their business processes to
reduce costs and increase quality
This radical redesign, called business process reengineering (BPR)
• for enterprises to examine their business processes from a “clean sheet” perspective and then determine
how they can best reconstruct those processes to improve their business functions
• too difficult, too radical, too lengthy, and too comprehensive.

Business Process Improvement

How does an organization

ensure business process
excellence?
Business Process Reengineering, Business Process
Improvement, and Business Process Management
Business process improvement (BPI)
• less radical, less disruptive, and more incremental approach
• BPI is usually performed by teams of employees that include a process expert—usually the
process owner (the individual manager who oversees the process)—as well as other individuals
who are involved in the process.

A successful BPI project generally follows five basic phases:

Measur
Define Analyze Improve control
e
Business Process Reengineering, Business Process
Improvement, and Business Process Management
Define Measure Analyze Improve control

• Define - the BPI team documents the existing “as is” process activities, process resources, and process inputs
and outputs, the customer and the customer’s requirements for the process output, together with a description of
the problem that needs to be addressed.
• Measure - the BPI team identifies relevant process metrics, such as time and cost to generate one output
(product or service) and collects data to understand how the metrics evolve over time.
• Analysis - the BPI team examines the “as is” process map and the collected data to identify problems with the
process (e.g., decreasing efficiency or effectiveness) and their root causes. The team can employ IT applications
such as statistical analysis software or simulation packages in this phase.
• Improve - the BPI team identifies possible solutions for addressing the root causes, maps the resulting “to be”
process alternatives, and selects and implements the most appropriate solution. Common ways to improve
processes are eliminating process activities that do not add value to the output and rearranging activities in a
way that reduces delays or improves resource utilization.
• Control - the team establishes process metrics and monitors the improved process after the solution has been
implemented to ensure the process performance remains stable. An IS system can be very useful for this
purpose.
Business Process Reengineering, Business Process
Improvement, and Business Process Management
• To sustain BPI efforts over time, organizations can adopt

business process management (BPM), a management system that includes

methods and tools to support the design, analysis, implementation, management, and
continuous optimization of core business processes throughout the organization.

• Important components of BPM are process modeling, which is a graphical depiction of all of the steps in a
process. Process modeling helps employees understand the interactions and dependencies among the people
involved in the process, the information systems they rely on, and the information they require to optimally
perform their tasks. Process modeling software can support this activity.
Business Pressures, Organizational Responses,
and Information Technology Support
Business Pressures, Organizational Responses,
and Information Technology Support

Modern organizations compete in a

challenging environment.
To remain competitive, they must react
rapidly to problems and opportunities that arise from extremely
dynamic conditions.
Business Pressures, Organizational Responses,
and Information Technology Support
Business Pressures, Organizational Responses,
and Information Technology Support
Market Pressures. Market pressures are generated by the global economy, intense competition, the
changing nature of the workforce, and powerful customers. Let’s look more closely at each of these
factors.

Globalization. Globalization is the integration and interdependence of economic, social, cultural, and
ecological facets of life, made possible by rapid advances in information technology.

The Changing Nature of the Workforce. The workforce, particularly in developed countries, is becoming
more diversified.
Powerful Customers. Consumer sophistication and expectations increase as customers become more
knowledgeable about the products and services they acquire. Customers can use the Internet to find
detailed
information about products and services, to compare prices, and to purchase items at electronic auctions.
Business Pressures, Organizational Responses,
and Information Technology Support
Technology Pressures. The second category of business pressures consists of those pressures related
to technology. Two major technology-related pressures are technological innovation and information
overload.

Technological Innovation and Obsolescence. Few and improved technologies rapidly create or
support substitutes for products, alternative service options, and superb quality. As a result, today’s
state-of-the-art products may be obsolete tomorrow. For example, how fast are new versions of your
smartphone being released .

Information Overload. The amount of information available on the Internet doubles approximately
every year, and much of it is free. The Internet and other telecommunications networks are bringing
a flood of information to managers. To make decisions effectively and efficiently, managers must be
able to access, navigate, and utilize these vast stores of data, information, and knowledge.
Business Pressures, Organizational Responses,
and Information Technology Support
Societal/Political/Legal Pressures. The third category of business pressures includes social
responsibility, government regulation/deregulation, spending for social programs, spending to
protect against terrorism, and ethics. This section will explain how all of these elements affect
modern businesses.

Social Responsibility. Social issues that affect businesses and individuals range from the state of the
physical environment to company and individual philanthropy, to education. Some corporations and
individuals are willing to spend time and/or money to address various social problems. These efforts
are known as organizational social responsibility or individual social responsibility
Business Pressures, Organizational Responses,
and Information Technology Support
Compliance with Government Regulations. Another major source of business pressures
is government regulations regarding health, safety, environmental protection, and equal opportunity.
Businesses tend to view government regulations as expensive constraints on their
activities. In general, government deregulation intensifies competition.

Protection against Terrorist Attacks. Since September 11, 2001, organizations have been
under increased pressure to protect themselves against terrorist attacks. In addition, employees
who are in the military reserves have been called up for active duty, creating personnel problems.
Information technology can help protect businesses by providing security systems and
possibly identifying patterns of behavior associated with terrorist activities, including cyberattack.
Ethical Issues. Ethics relates to general standards of right and wrong. Information ethics
relates specifically to standards of right and wrong in information processing practices. Ethical
issues are very important because, if handled poorly, they can damage an organization’s image and
destroy its employees’ morale. The use of IT raises many ethical issues, ranging from
monitoring e-mail to invading the privacy of millions of customers whose data are stored in
private and public databases.
Business Pressures, Organizational Responses,
and Information Technology Support
Organizational Responses. Organizations are responding to the various pressures just discussed by
implementing IT such as strategic systems, customer focus, make-to-order and mass customization,
and e-business.
Strategic Systems. Strategic systems provide organizations with advantages that enable
them to increase their market share and/or profits, to better negotiate with suppliers, and to
prevent competitors from entering their markets.
Customer Focus. Organizational attempts to provide superb customer service can make
the difference between attracting and retaining customers versus losing them to competitors.
Numerous IT tools and business processes have been designed to keep customers happy. (Recall that
a business process is a collection of related activities that produce a product or a service
of value to the organization, its business partners, and/or its customers.)
Make-to-Order and Mass Customization. Make-to-order is a strategy of producing
customized (made to individual specifications) products and services. The business problem
is how to manufacture customized goods efficiently and at a reasonably low cost. Part of the
solution is to change manufacturing processes from mass production to mass customization.
In mass production, a company produces a large quantity of identical items.
Business Pressures, Organizational Responses,
and Information Technology Support
E-Business and E-Commerce. Conducting business electronically is an essential strategy for
companies that are competing in today’s business environment. Electronic commerce (EC or e-
commerce) describes the process of buying, selling, transferring, or exchanging products, services,
or information via computer networks, including the Internet. E-business is a somewhat broader
concept. In addition to the buying and selling of goods and services, e-business also refers to
servicing customers, collaborating with business partners, and performing electronic transactions
within an organization
Competitive Advantage and Strategic
Information Systems
Competitive Advantage and Strategic
Information Systems
A competitive strategy is a statement
that identifies a business’s approach
to compete, its goals,
and the plans and policies that will
be required to carry out those goals (Porter, 1985).
A competitive
strategy focuses on achieving a desired
outcome when competitors want
to prevent you from
reaching your goal.
 Competitive Advantage and Strategic
Information Systems
Porter’s Value Chain Model
A value chain is a sequence of activities through which the
organization’s inputs, whatever they are, are transformed into
more valuable outputs, whatever they are.

Two categories: primary activities and support activities:

Primary activities relate to the production and distribution of
the firm’s products and services. The primary activities are
buttressed by support activities.
Unlike primary activities, support activities do not add value
directly to the firm’s products or services. Rather, as their
name suggests, they contribute to the the firm’s competitive
advantage by supporting the primary activities.
Porter’s Value Chain Model
 Reference
Introduction to Information Systems Supporting and Transforming Business
Sixth Edition
R. Kelly Rainer Jr., Brad Prince