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and distribution of the firm’s products and services, which create value for the
customer. Support activities make the delivery of primary activities possible and
consist of organization infrastructure. A firm’s value chain can be linked to the value
Explain how the value chain model can be used to identify opportunities for
information systems.
Information systems can be used at each stage of the value chain to improve
operational efficiency, lower costs, improve profit margins, and forge a closer
relationship with customers and suppliers. Organizations can use information systems
to help examine how value-adding activities are performed at each stage of the value
chain. Information systems can improve the relationship with customers (customer
Define the value web and show how it is related to the value chain.
A value web is a collection of independent firms that use information technology to
coordinate their value chains to collectively produce a product or service. It is more
customer driven and operates in a less linear fashion than the traditional value chain.
Explain how the value web helps businesses identify opportunities for strategic
information systems.
Information systems enable value webs that are flexible and adaptive to changes in
supply and demand. Relationships can be bundled or unbundled in response to
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Describe how the Internet has changed competitive forces and competitive
advantage.
The Internet has nearly destroyed some industries and severely threatened others. The
Internet has also created entirely new markets and formed the basis of thousands of
new businesses. The Internet has enabled new products and services, new business
models, and new industries to rapidly develop.
Because of the Internet, competitive rivalry has become much more intense. Internet
technology is based on universal standards that any company can use, making it easy
Explain how information systems promote synergies and core competencies.
A large corporation is typically a collection of businesses that are organized as a
collection of strategic business units. Information systems can improve the overall
Describe how promoting synergies and core competencies enhances competitive
advantages.
The concept of synergy is that when the output of some units can be used as inputs to
other units, or two organizations can pool markets and expertise, these relationships
lower costs and generate profits. In applying synergy to situations, information
systems are used to tie together the operations of disparate business units so that they
can act as a whole.
A core competency is an activity for which a firm is a world-class leader. In general,
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Explain how businesses benefit by using network economics.
In a network, the marginal costs of adding another participant are almost zero,
whereas the marginal gain is much larger. The larger the number of participants in a
network, the greater the value to all participants because each user can interact with
more people.
The availability of the Internet and networking technology has inspired strategies that
take advantage of the abilities of the firm to create networks or network with one
another. In a network economy, information systems facilitate business models based
Define and describe a virtual company and the benefits of pursuing a virtual
company strategy.
A virtual company uses networks to link people, assets, and ideas, enabling it to ally
with other companies to create and distribute products and services without being
limited by traditional organizational boundaries or physical locations. One company
can use the capabilities of another company without being physically tied to that
company. The virtual company model is useful when a company finds it cheaper to
3-4 What are the challenges posed by strategic information systems and how should
they be addressed?
List and describe the management challenges posed by strategic information
systems.
Information systems are closely intertwined with an organization’s structure, culture,
and business processes. New systems disrupt established patterns of work and power
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relationships, so there is often considerable resistance to them when they are
introduced.
Implementing strategic systems often requires extensive organizational change and a
transition from one sociotechnical level to another. Such changes are called strategic
Explain how to perform a strategic systems analysis.
Managers should ask the following questions to help them identify the types of
systems that may provide them with a strategic advantage.
1. What is the structure of the industry in which the firm is located? Analyze the
2. What are the business, firm, and industry value chains for this particular
firm? Decide how the company creates value for its customers; determine how
3. Have we aligned IT with our business strategy and goals? Articulate the
firm’s business strategy and goals; decide if IT is improving the right business
Discussion Questions
3-5 It has been said that there is no such thing as a sustainable competitive
advantage. Do you agree? Why or why not?
Student answers to this question will vary.
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3-6 It has been said that the advantage that leading-edge retailers such as Dell and
Walmart have over their competition isn’t technology; it’s their management. Do
you agree? Why or why not?
Student answers to this question will vary.
3-7 What are some of the issues to consider in determining whether the Internet
would provide your business with a competitive advantage?
Student answers to this question will vary.
Hands-On MIS Projects
Management Decision Problems
3-8 Macy’s Inc.: Wants to tailor merchandise more to local tastes based on sales patterns
in each individual store. How could information systems help management
implement this new strategy? What pieces of data should these systems collect to help
management make merchandising decisions that support this strategy?
By collecting small pieces of sales data such as size, style, price, and even the time of
purchases, each individual store can analyze local sales. Demographic information
pulled in from external sources would allow each store to analyze its local customers
3-9 T-Mobile: Despite aggressive campaigns to attract customers with lower mobile
phone prices, the company has been losing large numbers of its most lucrative two-
year contract subscribers. Management wants to know why so many customers are
leaving and what can be done to entice them back. Are customers deserting because
of poor customer service, uneven network coverage, wireless service charges, or
competition from carriers with Apple iPhone service? How can the company use
information systems to help find the answer? What management decisions could be
made using information from these systems?
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Using the strategic systems analysis in Section 3.4, management should consider
these organizational features:
• What are the competitive forces at work in the industry, specifically the
relative power of suppliers, customers, and substitute services over prices?
• Is the basis of competition quality, price, or brand?
• How is the industry currently using information technology and is the
organization behind or ahead of the industry in its application of information
systems?
• How is the company creating value for the customer?
• What are the organization’s core competencies?
Management should make these decisions to ensure the strategy works:
• Has senior management correctly articulated an appropriate business strategy
and goals for the organization?
Improving Decision Making: Using a Database to Clarify Business Strategy
Software skills: Database querying and reporting; database design.
Business skills: Reservation systems; customer analysis
3-10 This exercise encourages students to develop queries and reports to help them make
better use of transaction data to understand their business. From analyzing these data, the
hotel owners should be able to find ways of generating more revenue. The solutions
provided here were created using the query wizard and report wizard capabilities of
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database could also be modified to more clearly identify discounts for long stays or extra
charges for more than four guests. (The existing database reflects such discounts and
charges in the room rate.) Students should be encouraged to think creatively about what
Improving Decision Making: Using Web Tools to Configure and Price an
Automobile
Software skills: Internet-based software
Business skills: Researching product information and pricing
3-11 Answers will vary a great deal, and with the option of choosing a car other than the
Ford Focus, each student will more than likely turn in a different report. You might
suggest that the students set up an Excel spreadsheet to use when comparing the auto
information from each of the three Web sites. This will allow them to see from line-to–
Collaboration and Teamwork Project
3-12. In MyMISLab, you will find a Collaboration and Teamwork Project dealing
with the concepts in this chapter. You will be able to use Google Drive, Google Docs,
Google Sites, Google +, or other open source collaboration tools to complete the
assignment.
Case Study: Who’s the World’s Top Retailer? Walmart and Amazon
Duke it out
3-13 Analyze Walmart and Amazon.com using the competitive forces and value
chain models.
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Walmart: it is a traditional competitor with strong supplier intimacy. It continually
works to develop and strengthen its customer intimacy by offering low prices on a wide
variety of products that may or may not be offered elsewhere. It relies on its low-cost
Amazon: it is a new market entrant that uses substitute products and services to draw in
new customers and keep old ones coming back. Using a lot of third-party suppliers,
Amazon often plays the role of middle-man by simply taking orders and having the
supplier ship the goods to the customer. That strategy requires strong relationships with
3-14 Compare Walmart and Amazon’s business models and business strategies.
Walmart has built its empire through 4,000-plus brick-and-mortar stores. It has not been
that involved in online shopping but now it’s being forced to increase its Internet
presence based on Amazon’s success. Amazon can concentrate all of its corporate
resources on its Web business because it doesn’t have to support traditional brick-and-
mortar stores.
Amazon attracts new customers and keeps its old ones by offering low-price shipping
through its Prime annual subscription. Its shipping costs are lower than Walmart’s
ranging from $3 to $4 per package whereas Walmart’s online shipping can run $5 to $7
3-15 What role does information technology play in each of these businesses? How is
it helping them refine their business strategies?
Walmart is developing a smartphone app that will allow customers to order items from
Walmart.com if the local physical store is out of stock. Walmart’s Sam’s Clubs are
testing a new subscription service that will allow customers to order items online but not
have to pay shipping fees. Walmart is also working to improve links between its store
inventory, Web site, and mobile phone apps so that more customers can order online and
pick up their purchases at stores without waiting in line.
3-16 Will Walmart be successful against Amazon.com? Explain your answer.
Student answers will vary. The winner of this epic struggle will be which company
leverages its advantage better. While Walmart is struggling to improve its online
presence, its real focus remains its brick-and-mortar stores. While Amazon appears to be
ahead of Walmart in the e-commerce battle, it still doesn’t have physical stores to service
3-17 Describe the impact of the Internet on each of the five competitive forces.
Visit MyMISLab for suggested answers.
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3-18 Describe how differences in organizational structure would affect the kinds of
information systems used by an organization and give examples from three different
types of organizations.
Visit MyMISLab for suggested answers.