Strategic Information Systems
Information Systems:Information System is a set of components that collect information at different levels of organization, consolidate it and distribute it all across organization to support decision making, coordinating activities and controlling workflow in an organization.
Strategic Information Systems:Strategic information systems modify an organization’s goals, operations, products, services or environmental relationships to help the organization gain a competitive edge (Laudon 2002, p. 85).Impact of Information Systems on OrganizationsAn Information System can become a company’s core competency by significantly improving its product. It can enhance distribution channel management. Implementing an information system may start with large scale changes and business process re-engineering. Some businesses go as far as changing the entire business model.
The aim of an organization should be to achieve a competency by making information system its core function.Supplier management becomes simple if IS updates the purchasing department regarding current status of inventory level of each material. Firm can bring down its inventory storage costs and enjoy quicker delivery from suppliers. Similarly, buyers and distributors of product can share information regarding in-store product level that company can replenish before the buyer is out of stock.Information Systems also have capability to impact the production process.
Large scale productions can be organized through automated systems which help in cutting costs in overhead and achieving breakeven at lower production levels. This enables organization to produce economies of scale in its manufacturing procedure. Furthermore, this cost advantage increases company’s revenues and its profitability.Employee management becomes easier and effective. Not only internal communications are enhanced but human resource inventory can be maintained just as inventory of other resources is maintained.
Any change in information initiated from one department of organization will automatically prompt another reducing tedious paper work. For example, if an employee has received increment in pay then Human Resource department can make relevant changes and Finance department will automatically be prompted to make their payment invoice as per new level.Organizations that directly deal with their end-user specially those in service industries such as banking, airline, hospitality or freight delivery can benefit highly through Information systems. Through tracking a consumers buying behavior and their prior experience with the organization enables customer service personnel to personalize and improve service level for the customer.Once a company is able to develop and sustain such advantages over its competition, it is plausible for it to become a market leader.
Also, if an organization with such competencies is operating in an industry, the industry often becomes unattractive for new entrants. Thus, increased entry barriers reduce threat of any further competition.Levels of Strategic Information Systems and Their ImpactA Strategic information system modifies traditional models of strategies and replaces them with new information flows. These changes occur at three levels in a Strategic Information System; business level, firm level and industry level. A combination of different strategic systems at these levels make up an entire organizations Strategic Information System.Business-Level Strategy is formulated by evaluating that how can a business compete effectively in the market.
Business can choose amongst three basic strategies at business level. First, they could become a low cost producer. Secondly, they can differentiate their product by innovating it, adding new features to it, enhancing after sales service etc. Thirdly, the can expand a products consumer base by exploring new markets domestically or globally or moving to target niches. At the business level the most effective tool is value chain analysis.
A company can analyze that which activities are its core competence and where information systems are going to impact. Most companies choose to emphasize more on their primary activities that add a value to their product for their end-user such as inbound and outbound logistics, operations, sales, marketing and customer service.A firm can enhance its products and services using the information systems to create a unique product. That is strategic information systems can be used to create product differentiations. It prevents competition from responding immediately, therefore, a firm can enjoy that competitive advantage for a longer period of time then creating competency based on cost.
Businesses can also create new market niches by identifying a specific target for a product or service that it can serve in an effective manner.Through focused differentiation the firm can provide a specialized product or service for a smaller target market better the competitor. Sophisticated strategic information systems tools can enable managers to understand consumer behavior and analyze their buying patterns to discover any un-served niche. A strong business-level strategy involves in linking the value chains of vendors and suppliers to the firm’s value chain. Integration of value of value chain helps maintaining low inventory level, reduce costs and become efficient in procuring material and filling orders.Firm-Level Strategy is a higher level of strategic planning where a firm makes a uni-directional strategy for all its strategic business units.
A firm needs to analyze that how can these business units reach a higher level of productivity and how can information systems contribute to it. This strategy has two main focuses; synergy and core competency.A firm can synergize by using output of one business as input of another business or two organizations can consolidate markets and expertise. This helps in lowering cost and generating profits. One use of information systems in these situations is to combine operations of seemingly diverse business units so that they can complement each other functionality.
Core competency can be achieved by developing a knowledge base regarding any aspect of business that competition is not as yet aware of. The ability of information systems to share information across all business units is one competency itself. Such systems develop on existing competencies and help employees become aware of any new and best practices used in another business unit of the firm.Industry Level Strategy encourages the industry players to evaluate that in situations do they need to compete and when should they cooperate. Firms can cooperate to develop industry standard in different areas to build customer awareness.
They can also do that to increase industry entry barriers for new firms and protecting market for themselves. These can be done through information partnerships and network economics.In information partnerships to companies merge information and start sharing it while continue to work independently in their respective business area. They don’t actually merge. Such partnerships can help companies gain access in new markets, customers and create new opportunities for cross selling and merchandising products. These alliances can be mutually beneficial.
Another tool is Network Economics. It means that adding new partners in information systems network has zero marginal costs buy larger gains as a result of information sharing (Laudon 2002, p. 93).Negative Impact of Information SystemsDespite all positive and winning aspects of Strategic Information Systems it comes with some inherent drawbacks as well. Some of them are discussed below briefly.
The first issue that some firms feel threatened off and might face is Security. Large scale information sharing also makes sensitive information susceptible to alien intervention. Threat of hackers and competition using the information against firm is ever present.Implementing a Strategic information system that requires a firm to change its business procedures also brings changes in its decision making methodology. Most often organizations chain of command and delegation of authority changes, this might cause insecurity in some employees.
These changes can also take months or even years to sink-in within the organization and sometimes managers have to wait for a longer period before benefits of information systems are actually reaped. These changes will also modify the way an organization makes its policy.Once productivity levels are measured using information systems they become highly quantifiable which largely impacts organizations approach to future policy making and selecting a direction for organization.Finally, the highest impact can be over people of the organization. The human resources need to educated and prepared for implementation of a new system and understand its benefit. Organizations culture should also be supportive enough to accommodate these changes.
Firms should consider implications of radically changing their business models because while it means increased productivity and profits on one side it also means losing some of its core human resources as a result. Also, a firm can never analyze the actual benefits of an information system until it is fully functional. Therefore, most conservative managers refrain from employing sophisticated information systems resources.;BibliographyLaudon, K 2002, Management Information Systems: Managing the Digital Firm, Pearson Education Inc., Singapore.