Management Information System

Information system

 It is an organized combination of people, hardware, software,

communication networks and data that collects, transform and
share information in organization for a specific purpose.
Information System & Its role in Business

Information system perform three vital role in any type of organization.

 Support business operation: E.g. Retail store use information system to
record customer purchase, keep track of inventory and evaluate sales.
 Support Decision making: E.g. Decision on what need to be added or
discontinued or what kind of investment they require so they gain
advantage over other retailers in the competition for customers.
 Support strategies for competitive advantage: E.g. Decision to install
touch-screen catalog ordering system in all stores with web sites for
online shopping. This attract new customers and that give a business
comparative advantage over its competitors.
System

 A system is a group of interrelated components working together towards

a common goal by accepting inputs and producing outputs in an
organized process.

System has three basic components:

 Input – Data, Raw material, human effort.

 Processing- Manufacturing process, calculation , manipulation.
 Output- reports, finished goods, services.

System has two additional Components:

 Feedback – data about sales performance is feedback to sales manager.

 Control- monitoring and evaluating to determine whether the system is
moving towards the achievement of goal.
 A business is an organizational system where economic resources ( input)
are transformed by various organizational processes ( processing) into
goods and services ( output).
 Information system provide information ( feedback) on the operation of the
system to management for the direction and maintenance of the system
( control).

Economic Resources - People, Money, Material

Organizational Processes – Production, Marketing, Finance, HR
Goods & Services- Products, Services, Information
 Information system Resources

 People Resources: People are required for the operation of all information
system. These people resources include end users and IS specialist.

End Users: They are people who use an information system or information it
produces. They can be accountant, salesperson, clerks, customers or
managers.

IS specialists: They are people who develop and operate information system.
They include system analyst, programmers and other technical persons.

System analyst design information system based on information

requirements of end users.
Programmers prepare program based on the specification of system analyst.
 Hardware resources: It include all physical devices and material used
in information processing.
Computer system: It consists of CPU, video monitors, printers, scanners,
keyboard, mouse, floppy disk, track ball etc.
 Software resources: It include all set of information processing
instructions as well as instruction to control hardware. E.g. of software
resources:
System software: OS that control and support the operation of computer.

Application software: These are program that direct processing for

particular use of computers by end users. e.g. Payroll program.
 Data Resources: Data is the raw material for information system. E.g.
Product description, customer records, employee files and inventory
database.
 Network resources: Networking is essential for successful operation of
organization and their computer based information system. Network
resources includes:

Communication media : Twisted pair cable, coaxial cable, fiber-optics

cable and communication satellite system.

Network support: Modem, hub, routers, NIC,TCP/IP and other

communication control software.
 Information products: Management reports and business documents
using text and graphics display etc.
 Information system activities

 Input of data resources: E.g. Data about sales transaction can be

recorded on source document such as sales forms. Then salesperson
capture sales data using computer keyboards or scanning device.
 Processing of data into information: E.g. Data received about sales
can be :
(1) added to a total sales result.
(2) compared to standard to determine eligibility for a sales discount.
(3) sorted in numerical order based on product identification number.
(4) classified into product categories ( such as foods or non foods
items) (5) summarize to provide a sales manager with information
about
various products categories.
(6) use to update sales record
 Output of information products: Information in various forms is
transmitted to end users and made available to them in output activity.
Common information products are video display, paper documents,
message,, forms, reports, graphics display etc.
 Storage of data resources: It is the basic system components of
information system. Storage is the information system activity in which data
and information are retained in an organized manner for later use. Common
data elements are fields, records, files and database.
Levels of information system

 Personal information system: An individual is using personal

computer to perform some business functions. Components are
data, program and individual person.
 Workgroup information system: In this personnel computer
connected together in a LAN . Many users collect , share data
using the interconnected hardware. ( e.g. Sales Department).
 Enterprise Information system: In this system is based around a
centralized database with computers for users in each department.
Types of Information system
 Operation Support System

 Transaction Processing System: This system record and process

data resulting from business transaction.

E.g. Information system that process sales , purchase , and

inventory changes.

They produce customer statement , sales receipts, purchase order ,

financial statement etc.
 TPS process transaction in two ways:

 Batch Processing:
Transaction data is accumulated over a period of time and
processed periodically.

 Real time processing :

Data is processed immediately after a transaction occurs.

E.g. system at many retail store use electronic cash register terminal
to electronically transmit sales data over telecommunication links to
regional computer center for immediate ( real-time) or weekly
( batch) processing.
 Process Control System: This system monitor and control
physical processes. In which decision adjusting a physical
production process are automatically made by computers.

E.g. Automatic inventory reorder decision.

 Office Automation System: It is a type of information system
that use a variety of information technologies to help people work
together.
It use e-mail, chat, videoconferencing to share ideas , share
resources etc.
Goal of this system is to use IT to enhance the productivity and
creativity of teams and workgroup in modern business enterprise.
 Management Support system: When information system focus
on providing information and support for effective decision
making by managers ,they are called management support
system.

Management Information System: MIS are most common form of

management support system.
It provide end users with information that support their day to day
decision making needs.
It provide variety of reports.
E.g. weekly sales analysis reports etc.
Role of MIS

 Role of MIS in organization can be compared to the role of heart

in the body. The information is the blood and MIS is the heart.
 MIS ensure that inappropriate data is collected from various
sources, processed and sent further to all the needy destination.
 The system is expected to fulfill the information needs of an
individual, group of individuals, managers etc.
MIS reports

 Three types of report provided by system:

Periodic Scheduled Reports: It provide information to managers

in pre specified format designed to provide managers with
information on regular basis. E.g. Weekly sales analysis reports
and monthly financial statements.

Exception Reports: Reports are produced only when exceptional

condition occur. E.g. Credit Manager can be provided with
reports that contain only information on customers who exceeds
their credit limits.
Supporting the Manager and Decision making
Management and Managers

 Management is the process by which certain goals are achieved

through the use of resources ( people, money, material, time etc).
 Manager success is measured by the ratio between output and
input for which is responsible.

Productivity = Output ( products, services produced)

----------------------------------------------
Inputs ( resources utilized)
 Management decision making

 The success of management depends on the execution of managerial

function such as planning, directing and controlling etc.
 To carry out these function manager engage in continuous process of
decision.

Before information system managers make decision by experience,

learning by trial and errors etc.
But environment is now changing and it become complex so
decision making become difficult. Due to below reasons.
 The number of alternatives is much larger than ever before due to
improved technology and communication system. More alternative
means it is difficult to select one alternative .
 Cost of making errors can be large due to complexity of operation,
automation and chain reaction that error cause in many part of the
organization. Therefore trail and error may be too expensive.
 Process of making decision

 When making a decision , the decision makers goes through a systematic process.
 Process consists of Four phases: Intelligence phase, design phase, choice phase and
implementation phase.
 Decision making process starts with intelligence phase, where reality is examined
and the problem is identified and defined.
 In Design phase model representing the system is constructed. This is done by
making assumptions that simplify reality and putting the relationship among
variable in writing.
Model is created, criteria are set for evaluation of alternatives course of action that
are also being identified.
 Choice phase identifying a solution to the model. Once proposed solution seems
reasonable than last phase implementation.
 Successful implementation results in solving the problem.
 Intelligence phase

Organizational objectives
Data collections
Problem identification

Design phase
Formulate a model
Set criteria
Search for alternative

Choice phase
Solution to the model
Selection of best alternative
Plan for implementation
 Models and their benefits

 Models: A model is a simplified representation of reality.

Benefits of models:
 The cost of modeling is much lower than the cost of similar experimentation
conducted with real system.
 Manipulation of model is much easier than manipulation of real system. e.g.
experimentation is therefore easier to conduct, and it does not interfere with
daily operation of organization.
 The cost of making mistake during trial and error experiment is much less when
models are used rather than real system.
Why Managers need the support of IT

It is impossible to make decision without information. Making

decisions while processing information manually is difficult due
to following reasons:
 The number of alternatives to be considered to be increasing, due
to improvement in technology and communication, and the
development of global market.
 Many decisions must be made under time pressure. Frequently it
is not possible to manually process the needed information fast
enough to be effective.
 Due to fluctuations and uncertainty in the decision environment,
it is frequently necessary to conduct a analysis to make good
decision. Such analysis require use of IT.
 How to determine the information needs
of Managers

 In phase 1: A structured interview is conducted to determine manager

information needs.

Methods for conducting structured interviews are:

Business system planning.

Critical success factor method
 In phase II: model for information is constructed. Then this model shown to
managers who than make suggestion for improvements. The model is then
modified again shown to managers. Testing and modification go through
several rounds until the detailed requirement are established.
 Enterprise Analysis ( Business system
Planning )

 Enterprise Analysis ( business planning system ) argues that the

information requirement of a firm can only understood by
looking the entire organization in term of organizational units,
processes, and data elements.
 It help to identify key entities and attributes of organizational
data.
 Method used in this approach is to take large sample of managers
and ask them how they use information , where they get
information, what their objective are , how they make decision,
what their data needs are.
CSF and key performance indicators

 CSF: The factors that must be considered in attaining the

organizational goals are called CSF.

Such factor can be strategic, managerial or operational and they

are derived mainly from three sources- organizational factors,
industry factors and environment factors.

Success factors can be corporate level as well as other levels

( division, plant, departments).
Key performance indicators

CSF Key performance indicators

Profitability Profitability measures for each department, product region etc.
comparison among dept., and products comparisons with
competitors.
Financial Financial ratios, balance sheet analysis, rate of return on
investment.
Market Market share, advertisement analysis, product pricing, weekly
( daily) sales results etc.
Planning Corporate partnership ventures, growth / share analysis.
Economic Market trends, foreign exchange values, labor cost trends.
Analysis
Consumer Consumer confidence level, purchasing habits etc.
Trends
 Critical success factor

 An important approach of CSF is that there is a small number of

objective that managers can easily identify and information
system can focus on it.
 Method used in CSF analysis is personal interview – three or
four with number of top mangers to identify their goals .
 These personal CSF are aggregated to develop a picture of the
firm CSF. Then system are built to deliver information on these
CSF.
 CSF once identified can be monitored, measured and compared to
standard. Each CSF can be measured by one or several key
performance indicators.
Decision support in business

Level of management decision making

 Top management : Board of directors , CEO and top executives
develop overall organizational goals, strategies and objectives.
 Middle management: Managers, they develop short range plans,
schedules and objectives for their sub-units of the company.
They allocate resources and monitor the performance of their
organizational sub-units.
 Operational management: Supervisors , sales executives , develop
short range plans such as weekly production schedules.
They direct the use of resources and perform the task according to
procedures and within the budget and on schedule time.
Decision structure

 Operational management: Decision at this level is Structured.

Structure decision involve situation where the procedures to
follow when decision is needed can be specified in advance.

E.g. Inventory reorder decision.

 Middle management: Decision at this level is Semi structured.
Some decision procedures can be specified , but not enough to
lead to a definite decision.
E.g. Setting market budgets for consumer products.

 Top management: decision at this level is Unstructured.

Unstructured decision involve situation where it is not possible to
specify in advance most of the decision procedures to follow.
e.g. decision related to long term strategy.
Development projects for the next year
 Structured Problems and their Software

Problem Software

Allocation of resources Linear, nonlinear programming

Project management PERT

Inventory control Inventory management model

Forecasting results Forecasting models, regression

analysis
Transporting and distributing goods Transportation models

Matching item to each other Assignment Model

Predicting market share Markov chain analysis, simulation

 DSS

 Decision support system is an computer based system which help

decision makers utilize data and models to solve unstructured
problem.
 DSS are computer based information system that provide information
support to managers during decision making process.
 Decision Support system: It allow decision makers to retrieve data
and test alternative solution during the process of problem solving.
E.g. Airline DSS helps manager to decide how much to overbook and
how to set price for each seat so that plane is filled up and profit are
maximized.
 DSS rely on model base as well as database as system resources.
 DSS model base is a software component that consists of model
used in computational purpose and analytical routine that
mathematically express relationship among variables.

E.g. how changes to selected variable affects other variable.

If we cut advertising by 10% what would happen to sales.

Making repeated changes to selected variable until a chosen

variable reaches a target value.

Let try to increase in advertising cost until sales reach 1 million.

 DSS software typically contains built in analytical modeling and
also enable you to build your own models.

 DSS Packages e.g.

Insurance: Risk advisor .

Telecom: NCR custom retention program.

Analytical Modeling

 What –if analysis: observing how changes to selected variables

affects other variables.

E.g. If we cut advertising by 10 percent what would happen to

sales.
 Sensitive analysis: Observing how repeated changes to a single
variable affect other variables.

E.g. Let’s cut advertising by $100 repeatedly so we can see it s

relationship to sales.
 Goal-seeking analysis: Making repeated changes to a selected
variable until a chosen variable reaches a target value.

E.g. Let’s try to increase advertising until sales reaches $1

million.
Characteristics of DSS

 DSS provides support for decision makers mainly in semi

structured and unstructured situations by bringing together human
judgment and computerized information.
 Support to provide for various managerial levels, from top
executive to managers.
 A DSS is easy to construct ( even by end users). User
friendliness, flexibility, strong graphic capabilities and language
that resemble English can greatly increase the usability of DSS.
Components of DSS

 Data management: It include database which contain relevant

data for situation, managed by DBMS.
 User interface: User can communicate and command the DSS.
 Model management: This include software package with
financial, statistical models that provide the system analytical
capabilities.

These components constitute the software portion of DSS. They

are housed in computer and can be facilitated by additional
hardware and software.
Who use DSS

 Decision makers use DSS in two ways.

In terminal mode decision makers is the direct users of system.

In intermediary mode decision maker use the system through

intermediaries, who perform the analysis and interpret and report
the result.
The decision makers does not need to know how the intermediary
used the system to arrive at the requested information.
 Three type of intermediaries are:
Staff assistant: Person have specialized knowledge about
management problems and some experience with decision
support technology.
Expert tool users: Person is skilled in the application of one or
more types of specialized problem solving tools.

Business Analyst: This person has general knowledge of the

application area, administration skills in DSS construction tools.
Technology level of DSS

 Specific DSS: The final product or DSS application that actually

accomplishes the work called specific DSS.
 DSS generators: They are integrated package of software that
provide a set of capabilities to build a specific DSS quickly,
inexpensively and easily.
 DSS tools: It is the lowest level of DSS technology. They are the
software utilities or tools. These elements facilitate the
development of either a DSS generator or specific DSS.
E.g. DSS tools are programming language, graphics, query
system, random number generators and spreadsheets.
 Building DSS

 The development process of DSS is similar to the development of any other

applications.
 This involves series of short construction steps with immediate feedback from
users on issues ranging form the correct information needs to the way the output
is to be presented.

This approach involves four activities:

 Select an important sub problem:
The user and the builder jointly identify a sub problem for which the initial DSS
is constructed. The sub problem should be small enough so that the nature of the
problem, the need for computer based support, and the nature of that support are
clear.
 Develop a small but useable system to assist the decision makers:
No major system analysis is involved. The system should be simple.

 Evaluate the system and improve it, then evaluate it again:

At the end of each cycle, the system is evaluated by the user and the builder.
The evaluation mechanism is what keeps the cost and the effort of developing
a DSS consistent with its value.
 Expand and modify the system in cycles:
All the analysis-design-construction-implementation-evaluation steps are
repeated in each successive refinement.

This process is repeated several timers until a stable system evolves.

There is always balance of effort and cooperation between the user and the
builders, the users takes the lead in utilization and evaluation activities while
the builder is stronger in design and implementation phases.
MIS and DSS

MIS DSS

Provide information about the Provide information and

performance of the organization. decision support techniques to
analyze specific problem.
Pre specified format Flexible format

Information produced by Information produced by

extraction and manipulation of analytical modeling of business
business data data.
Executive Information system

 EIS is a computer based system that serves the information needs

of top executives.
 EIS is very user friendly is supported by graphics, and provide “
exceptions reporting” and drill down capabilities.
 It is also easily connected with on-line information services and
electronic mail.
Need of EIS

 Need for timely information .

 Need for access to operational data.
 Need for accurate information.
 Need to be able to identify historical data.
 Need for access to corporate database.
 Increased competition.
Capabilities of EIS

 Drill Down: It provide detail of any given information. E.g.

An executive may notice a decline in corporate sales in daily

report. To find the reason the executive may want to immediate
see the sales in each region, without the need of programmers.

If problematic regions are identified, the executive may want to

see further details ( e.g. by products or by salesperson).
 Status Access: In this mode latest data or reports on the status of
key indicators can be accessed at any time. Emphasis is placed on
the latest data.

This may require daily or even hourly operational tracking and

reporting.
 Trend Analysis: this can be done using forecasting models which
are included in EIS.

In analyzing data, it is extremely important to identify the trends.

Are sales increasing?, Is market share decreasing, Is the
competitor’s share of the market declining against ours?

The executive like to examine trends, especially when changes in

data are detected.
Vendors providing EIS

 Comshare
 SAS
 Pilot Executive
 Information Builders
Transaction Processing System

 TPS support routine business activity such as monitoring,

collecting, storing, processing information for business activities.
 TPS is the backbone of organization’s information system.
 Business transaction occurs when a company produce a product
or provide a services.

E.g. To produce a LCD, a manufacture need to buy materials, pay

for labor and electricity, ship LCD to customer, bill customers
and collect money.
A bank that maintain the company account must keep account
balance up-to-date, accept deposit and mail a monthly statement.
 Each transaction may generate a additional transaction.
E.g. purchasing material may change the inventory level, paying
an employee reduce the cash on hand.
Objective of TPS

 Primary goal of organization is to provide all the information to

needed functional areas so to keep the business running properly
and efficiently.
 To provide timely documents and reports, to provide necessary
data for top and middle system such as MIS, DSS, to assure
accuracy and integrity of data and also to protect data from
unauthorized users.
Characteristics of TPS

 Large amounts of data are input, processed and output.

 TPS processes information on a regular basis. Daily, weekly etc.
 High reliability is required because TPS can be viewed as blood
line of organization, interruption in the flow of TPS data can be
failure for the organization.
 A high level of security , integrity is needed. Issues such as
privacy of data are strongly related to TPS.
 High level of details is observable.
 Structured format for input and output of data. Output data are
formatted in standard way.
 Activities of TPS

 First data re collected by people and entered into the computer via any input
devices.
 System process the data in two ways : batch or real time processing.

Batch Processing:
Transaction data is accumulated over a period of time and processed
periodically.

 Real time processing :

Data is processed immediately after a transaction occurs.

E.g. system at many retail store use electronic cash register terminal to
electronically transmit sales data over telecommunication links to regional
computer center for immediate ( real-time) or weekly
( batch) processing.
 The data of TPS stored in two file: Transaction file and Master
file.

Transaction file: It contain the individual transactions that took

place during a specified time. E.g. a purchase order from a vendor
or the receivable amount of specified client on given data include
in transaction files.
The information in transaction file is updated whenever the
transaction occurs.

Master file: It is a Parent file. Every transaction of transaction file

are stored in master file.
 TPS for Ford Motor Company

 Existing system :
When the purchasing department wrote a purchase order, it sent copy to
accounts department.

Later on when material received, the inventory department sent a copy

of receiving documents to accounts department.

Meanwhile the vendor also sent an invoice to accounts department.

If the purchase order, receiving documents and invoice matched then

accounts department issued a payment in case of mismatching hold up
the payment.
 New System: Invoice less Processing.

When the purchasing department initiates an order, it enter the information into an
online database.

It doesn’t send a copy of purchase order to anyone.

When the goods arrive at the receiving point, the receiving clerk check the
database to see if the goods correspond to outstanding purchase order.
If so, he accept them and enter the transaction into the computer system, if he
can’t find a database entry for the received goods, or if there is mismatch, he
simply return the order.

New approach matching done automatically. And computer prepare check and
send to the vendor.
Business Transaction in organization

 Payroll
Employee Time card
Employee Pay and deduction

 Purchasing
Purchase order
Payment

 Sales
Sales record
Invoice and billing
Accounts receivable
Sales return
Shipping
 Manufacturing
Production reports
Quality control report

 Finance & Accounting

Financial statements
Tax records
Expense accounts

 Inventory Management
Material usage
Inventory levels
Components Of TPS and Processes

 The ledger: Maintain the ledger involve large number of simple

transaction.
 Order processing: Order for goods or services flow to company
electronically, by phone or on paper.
 Account payable and receivable: It list the credit, debit and
balance of each customer or vendor.
 Receiving and shipping: whenever goods are received or shipped
transactions are created. E.g.. when item are shipped customer
need to be billed, inventory need to be updated.
 Inventory: There are three categories of inventory: finished
goods, work in process and raw material.
 Periodic reports and statements: cash-flow statements, payroll
summaries, productivities summaries etc.
 Fixed assets management: Organizations own a large amount of
fixed assets such as buildings, cars and machines. These assets
depreciate over a time. It is necessary to keep record of original
cost of each item, the depreciation rate used for tax purpose, book
value for each assets.
 Payroll: Preparing the periodic payroll was one of the first
application of computer in business. Preparing payroll is a routine
computer job that involve computing gross salary during a given
period , deduction etc.
Summary of attributes of information Quality

 Timeliness: Information should be provided when it is needed.

 Update: Information should be up-to-date when it is provided.
 Frequency: Information should be provided as often as needed.
 Time period: Information can be provided about past, present and
future time periods.
 Accuracy: Information should be free from errors.
 Relevance: Information should be related to the information
needs of a specific recipient for a specific situation.
 Completeness: All the information that is needed should be
provided.
 Performance: Information can reveal performance by measuring
activities, progress made or resource accumulated.
 Clarity: Information should be provide in a form that is easy to
understand.
 Detail: Information can be provided in detail or summary form.
 Order: information can be arranged in a predetermined sequence.
 Presentation: Information can be presented in numeric, graphics
form.
 Media: information can be provided in thee form of documents,
video display.
Strategies and IT

 A strategy means a specific decision regarding the development

of the resources to achieve the goal of the organization. The right
strategy beat the competition and ensure the attainment of goal
while wrong strategy fail to achieve the goal.
Example of strategy

 A computer manufacturer will have strategy of adding new

products every two or three years.
 A consumer goods manufacturer will have strategy of maximum
reach to the consumer and wide distribution of network.
 Some company have a strategy of remaining in the low price
range and catering to the masses.
 Some company have strategy of expanding very fast to capture
the market.
 Some company have strategy of creating a corporate brand image
to build a loyalty. E.g. Escorts, Kirloskar, Godrej, Tata, MTNL,
Bajaj.
 How IT support organization strategies

Use of information system technology in business improving the quality of

service to customers and suppliers in firm’s distribution, marketing, sales and
service activities. e.g.
 Lock in customer and suppliers: Investment in IT allow business to lock
customer and suppliers by building valuable new relationship with them.
Suppliers by extranet and customer by providing online sell and purchase i.e
e-commerce.
 By investment in IT can make customer or supplier dependent on the
continued use of interenterprise information system. E.g. Wal-Mart
Wal-Mart

 Wal-Mart invested in IT by making satellite network linkage to

sale system to all of its stores.
 This network connected all Wal-Mart stores, its headquarters and
distribution centers and all of its major suppliers.
 This system facilitate just-in-time process of inventory control,
means when item is sold by store, a message is immediately sent
to the suppliers of that item. This alert the suppliers to include a
replacement in next scheduled shipment to the nearest distribution
hub.
 This system provide immediate response to inventory needs and
reducing the amount of inventory required.
 Interenterprise information system use internet and other
networks to electronically link the business process of a company
with its customer and suppliers. Extranet between business and its
suppliers are example of strategic linkage.
 Internet, intranet, extranet, e-commerce web sites etc.

By using above technologies company respond to customer,

providing top quality customer services, keep track of their
customers, information anytime and any where.

These technology create a new channel for communication within

company, with customers and suppliers.

Customer use internet to lodge complaints, evaluate products,

request support and make track of their purchase.
Virtual company

 A virtual company is an organization that use IT to link people,

organizations and ideas.

 Need of virtual company:

In order to quickly exploit a new market opportunity, a business
may not have the time or resources to develop the manufacturing
and distribution infrastructure, people etc.

Only by quickly forming a virtual company through alliance and

assemble the components or to provide solution for customers
and capture the market.

E.g. Cisco
 Cisco

 Cisco is the world’s largest suppliers of telecommunications products.

What does Cisco manufacture? Nothing. Cisco is a virtual organization.

Cisco sells solutions to their customers, but their products come from an
virtual manufacturing company i.e. Jabil Circuit and Hamilton Standard two
large electronic suppliers and manufacturer.

E.g. An order placed for a Cisco products arrives at Cisco San Jose,
California, Florida via online ordering system. Jabil & Hamilton
immediately starts to build the products.
When the manufacturing process is completed, the product is tested and
checked against the order and then shipped directly to the customer by Jabil.
At shipment generation of Cisco invoice sent to customer and electronic bill
from both Jabil and Hamilton standard to Cisco..
 Competitive forces and strategies

 A company can survive and succeed in long run only if it successfully develop
strategies for competitive forces that shape the structure of competition in its
industry.
 Any business that wants to survive and succeed must develop and implement
strategies to effectively counter

The competitors within its industry.

The threat of new entrants in markets.
Threat by substitute products which might capture the market share.
The bargaining power of customers.- E.g. if the customer bargaining power gets
too strong, they can drive price to low levels or simply refuse to buy the products
or services.
The bargaining power of suppliers.- E.g. If the suppliers bargaining power get
strong , it can force the price of goods and services to high levels or simply starve
the business by controlling the flow of parts or raw material essential to the
manufacture the products.
Competitive strategies

 Cost leadership strategy: Becoming the low cost producer of

products and services in industry .
 Differentiation strategy: developing a way to differentiate a firm’s
products and services from its competitors.
 Innovation strategy: Finding a new way of doing business. This
may involve the development of unique products and services or
entry into unique markets.
it may also involve making change to the business processes for
producing or distributing products and services that are so
different from the way a business has been conducted . E.g. City-
bank for the first time introduce the internet banking in banking
sector.
 Growth strategy: expanding a company capacity to produce
goods and services, expanding into global market etc.
 Alliance strategies: Establishing new linkage with suppliers,
consultants and other companies. This linkage may include
merger and acquisitions, joint ventures or distributing agreement
between organization and trading partners.
 How IT can be used to implement the
competitive strategy

 Strategy: Cost Leadership

Company: Dell Computers, Princeline.com, eBay.com
Strategic use of IT: online order, online auctions.
Business Benefits: use of IT to lower the cost of customers or suppliers, it also
reduce the cost of business processes.
 Strategy: differentiation
Company: AVNET Marshall, Moen Inc., Consolidated Freightways.
Strategic use of IT: customer online shipment tracking, customer/ supplier e-
commerce.
Business benefits: Increase market share, developing new IT features differentiate
products and services.
 Strategy: Innovation
Company: Federal express, Amazon.com
Strategic use of IT: online discount stock trading, online package tracking and online
full services.
Business benefits: Market leadership by creating a new products and services that
include IT components.
 Strategy: Growth
Company: Citicorp, Wal-mart.
Strategic use of IT: Global intranet, ordering by global satellite network etc.
Business benefits: Increase in global market and market leadership bu using IT to
manage regional and global business expansion.
 Strategy: Alliance
Company: Wal-Mart / Procter & Gamble, Cisco system etc.
Strategic use of IT:
Automatic inventory by suppliers, virtual manufacturing alliances.
Business benefits: Reduced inventory cost increased sales and increase in market
share by creating virtual organizations of business partners, develop interenterprise
information system linked with Internet and extranet that support business
relationship with customers, suppliers, sub contractors.
Technology for MIS

 Computer Hardware
 Computer Software
 Telecommunication and Network
 Data Resource Management