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


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.

Learning Resource

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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? (

/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 (

/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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