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Why we need strategy for information system and information

technology?

An Individual Assignment

By

I.H.M.S.kumara.

UWU/IIT/10/0023.

Academic year: 2009/2010.

3rd

Year 2nd

semester.

19-06-2013

Mr: D.N.N.Ronhan

(Lecturer)

Business strategy –IIT351-2

Bachelor of Industrial Information Technology

Uva Wellassa University.

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Contents Introduction ............................................................................................................................................ 3

01. Information system and information technology ............................................................................. 4

02. Business strategy levels .................................................................................................................... 7

03. Alignment of IS and IT with business strategies ............................................................................... 7

03.1 Model of an Executive Support System .......................................................................................... 8

03.2 Decision Support System ................................................................................................................ 8

03.3 Management information system .................................................................................................. 9

03.4. Office automation system .......................................................................................................... 9

03.5 Transaction processing system ....................................................................................................... 9

04. Strategies for the implementation of IT Department ..................................................................... 10

05.Strategies for enterprise application ............................................................................................... 12

05.1 Enterprise system ..................................................................................................................... 13

05.2 Supply chain management systems .......................................................................................... 13

05.3 Customer relationship management systems .......................................................................... 14

05.4 Knowledge management system .............................................................................................. 14

06. Information Systems for Competitive Advantage........................................................................... 14

06.1 The Value web strategy model: ................................................................................................ 14

06.2 The Virtual company strategy ................................................................................................... 15

06.3 The ecosystems strategic Model............................................................................................... 15

06.4 The Strategic information system ............................................................................................. 16

07. Reasons for strategy needs to managing information.................................................................... 17

Conclusion ............................................................................................................................................. 18

Reference .............................................................................................................................................. 19

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Introduction

In the knowledge economy concept the knowledge become the main resource. Accurate

information are become essential input for knowledge generating process. Information

technology and system play the important role in the accurate information generating process.

In this content business organization mostly consider regarding the information to take

correct decision. So they invest more money to the develop information system.

The business has more strategies to achieve goals. Business uses the information which is

generating by the information system. If IS provide wrong information the business could not

be able to achieve the goals.

Information system developers and managers have responsibility to establish the suitable

information system which can be aligning with the business organization. When develop the

information system, developers have to use different strategies according to the organization

business strategies. Sometime according to the information system requirement the

organization structure have to be changed. In this situation the we have to consider regarding

the business strategies as well as information system strategic concept.

This report will discuss regarding the Information system, Information technology, strategic

concept and application.

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01. Information system and information technology

Information technology is the application of computers and telecommunications equipment to

store, retrieve, transmit and manipulate data. This is often used by the business organization

as well as for personal purpose. Information system is the collection or network of hardware

and software that people and organizations use to collect, filters, and process, create, and

distribute data. The both information technology and information system concept are more

use full for the modern business organizations. The correct information is essential recourse,

when business organization achieve it specific goals.

The relationship with organization and information system can be identify as given below

finger.IS always interact with the organization environment, supplier, customer, stockholder

compilers and regular agencies .IS and the organization influence each other.

figure01: relationship with IS and Business organization.

(Source: Management Information Systems, Dr. Richard Boateng )

Not only IS, information technology and business organization also have complex

relationship. It infused by many factors such including the organization’s structure, business

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processes, politics, culture, surrounding environment, and management decisions. Below

finger show the relationship between information technology and organization.

Figure02: Relationship between business and IT (Source: Management Information

Systems, Dr. Richard Boateng)

Sometime new changes can be happen in the business organization because of the new

information technology effects. The organization managers have to decide which systems

will be built, what they will do, and how they will be implemented. Information Technology

contributes to strategic management in many ways. There eight factors can be identify as the

role of IT (Turban et al, 2006)

1. Innovative applications

IT can create the innovation application wish are can help to the business organization.

2. Competitive weapons. Is can make the completive advantages than the competitors

3. Changes in processes IT provide facilities to the change the business process

4. Links with business partners :IT can link the business pertness

5. Cost reductions: IT can reduce the cost of the business process

6. Relationships with suppliers and customers: It provide the better communication

channels

7. New products IT can develop or create new product which are requested by the

customers

8. Competitive intelligence IT provide facilitates to collect the information and analyst and

make decision regarding market product etc.

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In the today most of business organization are invest more money on the information

technology to get the advantage .below graph show the total money investment trend in the

business organization.

“Information technology investment, defined as hardware, software, and

communications equipment, grew from 32% to 51% between 1980 and 2008.Source:

Based on data in U.S. Department of Commerce, Bureau of Economic Analysis,

National Income and Product Accounts, 2008. “

Figure03: Invest trends on the IT in organization

(Management Information Systems, Dr. Richard Boateng Copyright © 2010 Pearson

Education, Inc. Publishing as Prentice Hall, )

When try to achieve the organization business strategy the correct information play the most

significant roll. So it is essential to provide efficient information to the managers to do this

task. So organization rapidly invests on the IT to establish the information system to their

organization to achieve bellow mention strategic business objectives.

I. Operational excellence: organization can improve their productivity as well as

efficiency in the business process.IS can be improving the production process and

daily activates.

II. New products, services, and business models: IS/IT can be help to develop new

products, services and Business model. business model explain the way company

produces, delivers, and sells product or service to create wealth to organization

III. Customer and supplier intimacy: The Company can make close relationship with the

supplier and customer and retain them for long time.

IV. Improved decision making: managers can get higher accurate information to take

clear decision

V. Competitive advantage: By providing the better product ,responding to the customers

and suppliers real time, and delivering best service business can get completive

advantage than other organization

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VI. Survival: IT need to the organization to face the industrial level change ,to fulfill the

government regulation and other external environment change.

02. Business strategy levels

When implementation the information system it should be align with the organization

objectives. Otherwise the organization cannot be able to archive the organization objectives.

Most of the business organization are implementing the IS but they become failure to achieve

their cooperate objectives. We need the specific strategies for the information system and

technology which are aligning with cooperate strategies as well.

Organization can be seen main three level of strategies as cooperate level, business level,

operational level.

The cooperate level consider the selection of businesses in which the company should

compete and with the development and coordination of that portfolio of businesses. This level

have responsible for creating value to the businesses. So this level try to make strategies by

managing portfolio of businesses, ensuring that the businesses are successful over the long-

term, developing business units, and ensuring that each business is compatible with the

portfolio.

Business level strategy: A strategic business unit can be a division, product line, or other

profit center that can be planned independently from the other business units of the

organization. In this level, the strategic issues are less about the coordination of operating

units and more about developing and sustaining a competitive advantage for the goods and

services that are produced.

Operational level consider the strategies of department such as marketing, finance,

operations, human resources, and Research and development .Here involve the development

and coordination of resources After develop the hire level strategies this level convert that in

to the effective a discrete action plans.

03. Alignment of IS and IT with business strategies

To achieve the business strategies, we can use the type of information system according the

organization strategy level. The Senior Managers and Chief Executive officers are involve

make the cooperate level business strategies. So the Executive support system is most

applicable for this level. It is help to address non-routine decisions requiring judgment,

evaluation, and insight regarding organization. It incorporates data about external events as

well as summarized information from internal MIS and DSS.

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03.1 Model of an Executive Support System

(Figure 04: ESS: Management Information Systems, Dr. Richard Boateng, 2010)

The middle level managers, staff managers knowledge works, scientific, professional and

clerical works can be seen in the middle management level of organization. They involve

taking business level strategy decisions. So the Management information systems, decision

support system, Office automation system can be apply to take the business level strategy.

03.2 Decision Support System This IS provided facilities to the middle managers to take the non-routing decision. External

information, information form the MIS and TPS are used by this system. Middle manager can

make analytical decision regarding the business process.

Ex/what change need to do in the production process if the next month demand become

double?

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03.3 Management information system:

This system also provides the facilities to the middle level managers to provide reports on

firm’s current performance, based on data from TPS. Also provide answers to routine

questions with predefined procedure .this system typically have little analytic capability.

03.4. Office automation system:

These information systems can the make collaborations among the office functions.it digitally

create, collect, store, manipulate, and relay office information needed for accomplishing basic

tasks. Such as communication, printing, data filing, fax, report transferring, telephone and

telephone switchboard operations. Especially local area network system to establish this

system and it help to increase the efficacy of the office operation in organization.

03.5 Transaction processing system Data workers, operation managers, personal supervisor are involving the operational level

strategic marking. So the transaction processing system can provide facilitates to this level.

This TPS can perform and record daily routine transactions necessary to conduct business

(Examples: sales order entry, payroll, and shipping) It allows managers to monitor status of

operations and relations with external environment. It helps to predefined, structured goals

and decision making

Figure 06: A Payroll TPS

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Source: Management Information Systems, Dr. Richard Boateng Copyright © 2010

Pearson Education, Inc. Publishing as Prentice Hall

As business organization we need to consider the most relevant information system type

according to the business information requirement. Size of business, Information needs,

Business strategy level, management level, Cost of establishment are some of most essential

factors. Low level operation managers not required the Decision support system or Executive

information system. They can work with the systems which can perform their task and

information needs. Otherwise Information system cannot provide effective support to the

business strategies. Then business cannot achieve it goals with the Information system.

04. Strategies for the implementation of IT Department The information system can change the hierarchical structure of the business. Business

organization can see the production, sells and marketing human resource, finance and

accounting function .when we implement the information system it can be implement in

different ways inside the organization. Especially the small organization may not be require

separate IS department. But we have to establish the informal groups according to the

requirement. In the large organization we can identify below mention strategies to implement

the IS department.

I. Decentralized:

Implement Information Technology department in the each function area separately. Each

department has to report to Chief information officer.

figure07: Decentralize IT department

Management Information Systems, Dr. Richard Boateng , Copyright © 2011 Pearson

Education )

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II. Separate department under central

control

Under this organization, the

information systems

department is a unified

department under the control

of the CEO and Board of

Directors.

III. Each division has separate group but

all under central control

In this organization, usually found in very

large companies, separate divisions each

have their own information systems

department dedicated to that division alone.

These divisional groups are still centrally

controlled.

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Need to select best strategy for implementation the IS department according to the business

organization. Below mention factor need to be consider.

The business size: small, medium, large

Establishment cost when we establish separate department it may more costly method than

the centralize establishment

Business activity type: production, service provide, good distribution, Transport,

Business strategy :|if management hope to expands the organization for different countries

that will request separate IT department for different counties, or if the production

department need to make maintain the production process with specific Information system

that can be effect to the establishment of the Separate It department.

05.Strategies for enterprise application

Enterprise applications are used to manage the information used in the systems discussed

previously. In other words, enterprise applications are used to ensure that TPS, MIS, DSS,

and ESS work together smoothly. This strategy can apply for all over the organization. This

includes the all level of management in business. This enterprise application can works across

the all over organization.it finally provide facilitates to the all function in the business such as

marketing, production, human recourse ,research and development as well as accounting and

finance.

Figure 10: Enterprise Application Architecture

Management Information Systems, Dr. Richard Boateng Copyright © 2010 Pearson

Education, Inc. Publishing as Prentice Hall,

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Above figure representing architecture of integrated enterprise system. The basic point is

that enterprise systems are very large and diverse databases that pull information from many

parts of the firm, and many systems, and then dispense that information to a very wide variety

of groups. More advantages can be seen in this system.

One information system can sufficient all information requirement.

integrated with all function

Essay to maintain the system

effectively can assess the more function in the organization

The figure ovals represent the business functions and organizational levels affected by

enterprise applications. The horizontal oval extends outside of the triangle because even

business functions involving outside entities may be automated by enterprise applications.

The outside entities can be suppliers, customers, distributers, other partners, service

providers. In this strategy use the new information system types which are can be used to

make integration between the business function. There are four major application can be

identify.

• Enterprise systems

• Supply chain management systems

• Customer relationship management systems

• Knowledge management systems

05.1 Enterprise system:

This system collects data from different firm functions and stores data in single central data

base and provides the information to essential parties. This can resolves problem of

fragmented, redundant data sets and systems. Also this enable to coordination of daily

activities, give efficient response to customer and provide valuable information for

improving management decision making.

“Enterprise systems integrate the key business processes of an entire firm into a single

software system that enables information to flow seamlessly throughout the

organization. These systems focus primarily on internal processes but may include

transactions with customers and vendors

05.2 Supply chain management systems This system helps to make relationships between suppliers and the business. It help to

manage the information about Orders, production, inventory levels, delivery of products and

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services. This can include the Information flow, Martial flow. Financial flows. This system

provides facilitate to this flows.

05.3 Customer relationship management systems CRM system is the most attractive customer related system that helps to keep customer

information and try to retain the customer throughout their life time with the business. It

provide information to coordinate all of the business processes that deal with customers in

sales, marketing, and service to optimize revenue, customer satisfaction, and customer

retention. These systems use the multiple communication channels.

05.4 Knowledge management system: This helps to the knowledge workers to

capture, storage, distribute, and apply knowledge and get strategic benefit to the business.

Also it can manage and distributing documents, graphics, and other digital knowledge

objects. Especially expertise employee such as design engineers, scientists, doctors, is using

this to take decisions.

06. Information Systems for Competitive Advantage

Reduce costs, Raise barriers to market entrants, Establish high switching costs, Create new

products or services, Differentiate products or services, Enhance products or services,

Establish alliances, Lock in Suppliers or Buyers are some common way to get competitive

advantages to the organizations.

There are some new ways to get completive advantage via the Information system. We can

use the new strategies with the information system and technology to gain these competitive

advantages. The below mention information system can be used to achieve the competitive

advantage to the business organization.

06.1 The Value web strategy model: This is new strategic concept to achieve competitive advantages than the traditional value

chain concept. Here we make collection of independent firms using Information Technology

to coordinate value chains to produce product or service collectively. More customers can be

use and also have less linear operation than traditional value chain.

. “The value web is a networked system that can synchronize the value chains of

business partners within an industry to respond rapidly to changes in supply and

demand.” (Management Information Systems, Dr. Richard Boateng )

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Figure 11: Value wed strategy

06.2 The Virtual company strategy Virtual company uses networks to ally with other companies to create and distribute products

without being limited by traditional organizational boundaries or physical locations

In this concept the business does not actually own any factories, machines, or other similar

infrastructure. By using the IS this business provide the gods and service to the customers.

Also this organization no need to consider the geotropically boundaries.it is more

comparative advantage for the business.

06.3 The ecosystems strategic Model In this IS concept the same set of firms that are provide related product and service are

integrated together. Then they provide better service to the customers in this model, multiple

industries work together to deliver value to the customer. IT plays an important role. It make

strong network of interactions among the participating firms.

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figure 12: The echo system strategic model( Source: Management Information Systems, Dr.

Richard Boateng )

06.4 The Strategic information system Strategic information system (SIS) is any information systems that can help an organization

achieve a long-term competitive advantage. SIS can gain the new opportunities to the

business. By using the SIS organization can plans the strategy of its future operations and

strategic decision making. This system can make by developing or modifying the existing

information system or used the existing system for strategic advantages. When the

information system be a strategic information system it should be full fill the two conditions.

The information system must serve an organizational goal rather than simply provide

information

The organization’s IS unit must work with managers of other functional units to

continue the organizational goal.

This concept is vast than the IS concept according to above two conditions.so It is better

establish the IS as SIS. There are four critical factors in developing and strategic Information

System. Initiation, data collection, strategy formulation, short-term development. These

factors can give the competitive advantage to the business organization to the emperies the

immediate development.

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07. Reasons for strategy needs to managing information

Tidal wave of information

In the world day by day the information gathering and need is increasing. so the business

organization have to face this rapidly change .so business have to maintain, store and response to

this growth. To face that situation organization need strategy to manage information. Then it

requires the essence of the effective information system.

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Conclusion

Information system and information technology is most interactive concept. Information

system can be seen in side the Information technology concept .both have close relationship

with the business organization. Business organization needs the effective information to take

the business strategic decisions. The IS and IT are used by the organization to generate the

information as well as archive specific business strategic objectives. Thought the organization

invest on the IS to get the more benefit and achieve Business objectives most of business

become failure. So it is essential to provide adequate and relevant information to the

organization business by IS. Also Organization strategies should be best fit with the IS.

Among the different type of the IS, organization should use the most relevant IS type with the

most relevant Management levels. The business requires a critical way to establish the IT

department according to the business. Here we need to consider the essence of strategies for

IS and IT. There are new strategic IS model to gain a competitive advantage to the business

Strategic information system can provide the long time benefit to the organization.it help to

gain new opportunities for long time to the organization. So establishment of IS is require

more fact to consider according to the business organization and the correct strategies can

help to become overall success of the business

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Reference

Strategic Information Systems Alignment: Alignment of IS/IT with Business Strategy,

Abdisalam Issa-Salwe*, Munir Ahmed*, Khalid Aloufi* and Muhammad Kabir Journal

of Information Processing Systems, Vol.6, No.1, March 2010

Management Information Systems, Dr. Richard Boateng (richard@pearlrichards.org)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall,

www.vivaafrica.net

Two Strategic Uses of Information Systems, Copyright © 2005 by Thomson Course

Technology. All rights reserved

Competitive Advantages and Strategic Information Systems, Mahdi Salehi, Ph. D.

(Corresponding author)

Business Strategy and Information Technology, edited by Ewan Sutherland, Yves

Morieux. e-book