How Organizations UseInformation Systems Strategically
So far you’ve learned about what is meant by information system and
how IT matters in organizations, as well as how businesses align their
strategy with the use of information technology. It’s important to keep in
mind that organizations have basically two ways to increase profits
—either raise prices or reduce expenses (or a combination of the two).
Organizations can’t just focus on money coming in because there are
expenses that must be paid out of that income resulting in a net income
(Gross Income ₋ Expenses = Net Income). Even governmental agencies
and nonprofit companies need to take in money (governmental budgets,
taxpayers, donations, etc.), pay the expenses incurred in achieving the
organization's mission, and have money left over to reinvest in the
business.
In the section Does IT Matter?, the concept of the value chain was
presented. Each of the five primary areas of the value chain along with
the support activities (frequently referred to as back‐office functions)
provide opportunities to improve profitability and identify where
technology can help improve processes. Each business would define
specifically what its primary activities are and then analyze where there
are opportunities within each area.
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Porter's Value Chain
Series of activities that contribute to the overall value of a product or service
Does IT Matter? also introduced Porter’s Five Forces, a framework to
help organizations assess its environment. Understanding how the five
forces impact the organization can help organizations determine where to
focus to increase their competitive advantage. For example, if operating
in a highly competitive environment (many companies offering the same
or very similar products or services), then the company could establish a
strategy to provide its goods and services at a lower cost or to target a
specific market niche. When a company has decided its strategy, then it’s
time to look at how to achieve that strategy. Here’s where the use of
information technology and information systems can come into play.
Improving the ability to deliver goods and services at a lower cost or in a
unique way can be enabled by information systems.
Licenses and Attributions
Chapter 7: Does IT Matter? (https://bus206.pressbooks.com/chapter
/chapter‐7‐does‐it‐matter/) from Information Systems for Business
and Beyond by David T. Bourgeois is available under a Creative
Commons Attribution 3.0 Unported (https://creativecommons.org
/licenses/by/3.0/) license. © 2014, David T. Bourgeois. UMGC has
modified this work and it is available under the original license.
© 2023 University of Maryland Global Campus
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