Prepared by: Abdinasir Ahmed copyright© CA184

Chapter 1
Review Questions
1. How are information systems transforming business and what is their relationship to
globalization?
Describe how information systems have changed the way businesses operate and their
products and services.
Ans: Wireless communications, including computers and mobile hand-held computing devices,
are keeping managers, employees, customers, suppliers, and business partners connected in
every way possible. Email, online conferencing, the Web, and the Internet, are providing new
and diverse lines of communication for all businesses, large and small. Through increased
communication channels and decreased costs of the communications, customers are demanding
more of businesses in terms of service and product, at lower costs. E-commerce is changing the
way businesses must attract and respond to customers.
Identify three major new information system trends.
Three information system trends that are influencing the way businesses interact with employees,
customers, suppliers, and business partners include emerging mobile digital platforms, growth of
online software-as-a-service, and the growth of cloud computing.
Table 1-1, page 7, outlines new MIS changes and their impact on business. The table is
organized by the three dimensions of information systems: technology, management, and
organizations.
Describe the characteristics of a digital firm.
• Significant business relationships with customers, suppliers, and employees are digitally
enabled and mediated.
• Core business processes are accomplished through digital networks spanning the entire
organization or linking multiple organizations.
• Key corporate assets – intellectual property, core competencies, and financial and human
assets – are managed through digital means.
• They sense and respond to their environments far more rapidly than traditional firms.
• They offer extraordinary opportunities for more flexible global organization and
management, practicing time-shifting and space-shifting.
Describe the challenges and opportunities of globalization in a “flattened” world.
Customers no longer need to rely on local businesses for products and services. They can shop
24/7 for virtually anything and have it delivered to their door or desktop. Companies can operate
24/7 from any geographic location around the world. Jobs can just as easily move across the state
or across the ocean. Employees must continually develop high-level skills through education and
on-the-job experience that cannot be outsourced. Business must avoid markets for goods and
serves that can be produced offshore much cheaper. The emergence of the Internet into a full-

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blown international communications system has drastically reduced the costs of operating and
transacting business on a global scale.

2. Why are information systems so essential for running and managing a business today?
List and describe six reasons why information systems are so important for business today.
Six reasons why information systems are so important for business today include:
(1) Operational excellence
(2) New products, services, and business models
(3) Customer and supplier intimacy
(4) Improved decision making
(5) Competitive advantage
(6) Survival
Information systems are the foundation for conducting business today. In many industries,
survival and even existence without extensive use of IT is inconceivable, and IT plays a critical
role in increasing productivity. Although information technology has become more of a
commodity, when coupled with complementary changes in organization and management, it can
provide the foundation for new products, services, and ways of conducting business that provide
firms with a strategic advantage.
3. What exactly is an information system? How does it work? What are its management,
organization and technology components?
Define an information system and describe the activities it performs.
Ans: An information system is a set of interrelated components that work together to collect,
process, store, and disseminate information to support decision making, coordination, control,
analysis, and visualization in an organization. In addition to supporting decision making,
information systems may also help managers and workers analyze problems, visualize complex
subjects, and create new products.
List and describe the organizational, management, and technology dimensions of
information systems.
• Organization: The organization dimension of information systems involves issues such as
the organization’s hierarchy, functional specialties, business processes, culture, and
political interest groups.
• Management: The management dimension of information systems involves setting
organizational strategies, allocating human and financial resources, creating new products
and services and re-creating the organization if necessary.

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• Technology: The technology dimension consists of computer hardware, software, data

management technology, and networking/telecommunications technology.
Distinguish between data and information and between information systems literacy and
computer literacy.
• Data are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form that
people can understand and use.
• Information is data that has been shaped into a form that is meaningful and useful to
human beings.
• Information systems literacy is a broad-based understanding of information systems. It
includes a behavioral as well as a technical approach to studying information systems.
• In contrast, computer literacy focuses primarily on knowledge of information technology.
It is limited to understanding how computer hardware and software works.
Explain how the Internet and the World Wide Web are related to the other technology
components of information systems.
Ans: The Internet and World Wide Web have had a tremendous impact on the role information
systems play in organizations. These two tools are responsible for the increased connectivity and
collaboration within and outside the organization. The Internet, World Wide Web, and other
technologies have led to the redesign and reshaping of organizations. They have helped
transform the organization’s structure, scope of operations, reporting and control mechanisms,
work practices, work flows, and products and services.
4. What are complementary assets? Why are complementary assets essential for ensuring
that information systems provide genuine value for an organization?
Define complementary assets and describe their relationship to information technology.
Ans: Complementary assets are those assets required to derive value from a primary investment.
Firms must rely on supportive values, structures, and behavior patterns to obtain a greater value
from their IT investments. Value must be added through complementary assets such as new
business processes, management behavior, organizational culture, and training.
Describe the complementary social, managerial, and organizational assets required to
optimize returns from information technology investments.
Table 1-3 (page 27) lists the complementary social, managerial, and organization assets required
to optimize returns from information technology investments. Here are a few of them:
Organizational assets:
• Supportive culture that values efficiency and effectiveness
• Appropriate business model
• Efficient business processes
• Decentralized authority

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Managerial assets:
• Strong senior management support for technology investment and change
• Incentives for management innovation
• Teamwork and collaborative work environments
Social assets:
• The Internet and telecommunications infrastructure
• IT-enriched educational programs raising labor force computer literacy
• Standards (both government and private sector)
5. What academic disciplines are used to study information systems? How does each
contribute to an understanding of information systems? What is a sociotechnical systems
perspective?
List and describe each discipline that contributes to a technical approach to information
systems.
Ans: A technical approach to information systems emphasizes mathematically-based models to
study information systems and the physical technology and formal capabilities of information
systems.
Students should know the differences between computer science (theories of computability,
computation methods, and data storage and access methods), management science (development
of models for decision making and managerial practice), and operations research (mathematical
techniques for optimizing organizational parameters such as transportation, inventory control and
transaction costs).
List and describe each discipline that contributes to a behavioral approach to information
systems.
Ans: A behavioral approach to information systems focuses on questions such as strategic
business integration, behavioral problems of systems utilization, system design and
implementation, social and organizational impacts of information systems, political impacts of
information systems, and individual responses to information systems. Solutions to problems
created by information technology are primarily changes in attitudes, management,
organizational policy, and behavior.
Describe the sociotechnical perspective on information systems.
Ans: A sociotechnical perspective combines the technical approach and behavior approach to
achieve optimal organizational performance. Technology must be changed and designed to fit
organizational and individual needs and not the other way around. Organizations and individuals
must also change through training, learning, and allowing technology to operate and prosper.

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Chapter 2
Review Questions
1. What are business processes? How are they related to information systems?
Define business processes and describe the role they play in organizations.?
Ans: A business process is set of activities required to produce the product and service. So we
can determined how good business performs depends on how well its business process are
designed.
-The business process can be assets or liability. For example when apply business process in our
project that is talk about “Human resources database management system”. We can mention
different business process that is related to human resources such as:
❖ evaluating employees.
❖ Hiring employees.
❖ enrolling employees.

Describe the relationship between information systems and business processes?

Ans: There are clear relationship between information system and business process that make an
organization more efficient, such as the data and information system we can used more quickly
when information system are used to change the flow information . in addition the tasks can
speeding up the completion of business processes.

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2. How do systems serve the various levels of management in a business?
Describe the characteristics of transaction processing systems (TPS) and the roles they play
in a business.?
Ans: Transaction processing systems are systems that perform and record daily routine
transactions necessary to conduct business, they serve the organization operational. Example,
sales order entry and payroll. Transaction processing system are major producer of information
of other types of systems, manager need this system to monitor the status of operations and
relations with external environment.
Describe the characteristics of management information systems (MIS) and explain how
MIS differ from TPS and from DSS.?
Ans: Management information system provides middle manager with reports on the organization
current performance. This information is used to monitor and control the business. MIS can
provide answers to routine questions with predefined procedure for answering them. MIS system
are not flexible and have little analytical capability.
MIS deal with compressed data from the TPS while MIS have internal orientation, DDS will
often use data from external sources.
MIS are generally not flexible and provide little analytical capabilities, DSS are flexible.
Describe the characteristics of decision support systems (DSS) and how they benefit
businesses.
Decision support system support nonroutine decision making for middle manager. DDS use data
for TPS,MIS and external sources. Also, it focus on problems that are unique and quickly
changing.
Describe the characteristics of executive support systems (ESS) and explain how these
systems differ from DSS.
Executive support system help senior managers address strategic issues and long term trends.
ESS address nonroutine decision and designed to incorporate data about external events, such as
new tax laws or competitors, but they also draw summarized information from internal MIS and
DSS.
3- How do systems that link the enterprise improve organizational performance?
Explain how enterprise applications improve organizational performance?
Ans: The successful organization focuses on the efficient execution of its processes, customer
service, and speed to market. Enterprise applications provide an organization with a consolidated
view of its operations across different functions, levels, and business units. Enterprise
applications allow an organization to efficiently exchange information among different
functional areas.

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Define enterprise systems, supply chain management systems, customer relationship
Management systems, and knowledge management systems and describe their business
benefits?
Ans:Enterprise systems are very important to makes for information that was previously
fragmented in different systems to be shared across the firm and for different parts of the
business to work more closely together. And it has a different Business benefit include:
- Information flows easy throughout an organization, improving coordination, efficiency, and
decision making.
- Gives company the flexibility to respond rapidly to customer requests.
- Increases customer satisfaction by improving product shipments, minimizing costs and
improving organization performance.
- Improves decision making by improving the quality of information for all levels of
management.
Supply chain management systems: help businesses better manage relationships with their
suppliers. Supply chain management systems achieve to get the right amount of products from
the companies source to their point of uses with the least amount of time and with the lowest
cost. Also it can provides information to help suppliers, purchasing firms, distributors, and
logistics companies share information about orders, production and delivery of products and
services. It has Business benefits:
- Decide when and what to produce, store, and move the product and service.
- Quickly communicate orders
- follow up inventory levels.
- Reduce inventory, transportation.
- Quickly communicate changes in product design.
Customer relationship management systems: enable a business to better manage all
relationships with existing and potential customers so this relationship very important and it has
several benefits:
- provide information to organize all the business processes that deal with customers in sales,
marketing, and service to optimize revenue, customer satisfaction, and customer retention.
- Giving the customer a consolidated view of the company.
- Detailed and accurate knowledge of customers and their preferences help firms increase the
effectiveness of their marketing campaigns and provide higher-quality customer service and
support.

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Knowledge management systems: enable organizations to better manage processes for
applying knowledge and expertise. This knowledge also links the firm to external sources of
knowledge. Business benefits include:
- KMS support processes for acquiring, storing, distributing, and applying knowledge, as well as
processes for creating new knowledge and integrating it into the organization.
- use intelligent techniques that create knowledge and experience for use by other members of
the organization.
Explain how intranets and extranets help firms integrate information and business
rocesses?
Ans: Because intranets and extranets share the same technology and software platforms as the
Internet, they are easy and inexpensive ways for companies to increase integration .Also provide
ways to distribute information and store corporate policies, programs, and data. Both types of
nets can be customized by users and provide a single point of access to information from several
different systems. Businesses can connect the nets to transaction processing systems easily and
quickly.
4. Why are systems for collaboration and teamwork so important and what technologies
do they use?
Define collaboration and teamwork and explain why they have become so important in
business today.
Ans: Collaboration: is working practice where by individuals work together to a common
purpose to achieve business benefit. When it's done right in workplace environment,
collaboration is all about mutual contribution and mutual benefit toward a shared vision as well
as just solving shared challenges often, we end up with a solution or a new creation we never
would have arrived at individually. It focuses on task or mission accomplishment, Collaboration
can be short-lived or longer term. Depending on the nature of the task and the relationship
among participants. It can be one-to-one or many-to-many.
-Teamwork is those behaviors that facilitate effective team member interaction with team that
working is group of two or more individuals who perform some work related task to achieved
goal that set up.
-Collaboration and teamwork are important because:
Changing nature of work: These kinds of jobs require face-to-face interaction with other
employees, managers, vendors, and customers. And exchange the idea and communication with
worker.
Changing organization of the firm: Work is no longer organized in a hierarchical fashion as
much as it is now organized into groups and teams who are expected to develop their own
methods for accomplishing tasks.

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Changing scope of the firm: Changing scope of the firm. Work is more geographically
separated than before.
Changing culture of work and business: Differed teams produce better outputs, faster than
working a lone
Growth of professional work: Professional jobs in the service sector require close coordination
and collaboration.
Emphasis on innovation: Although we tend to attribute innovations in business and science to
great individuals, these great individuals are most likely working with a team of brilliant
colleagues, and all have been preceded by a long line of earlier innovators and innovations.
List and describe the business benefits of collaboration
The benefits for the global community:
➢ Assists research collaboration through facilitating free exchange of scholarly information
➢ Aids in the public understanding of research endeavors and activities.
The business benefits of collaboration are listed:
➢ Productivity: People working together can complete a complex task faster than the same
number of people working in isolation from one another. There will be fewer errors.
➢ Quality: People working collaboratively can communicate errors, and correct actions
faster, when they work together than if they work in isolation. Can lead to a reduction in
buffers and time delay among production units.
➢ Innovation: People working collaboratively in groups can come up with more innovative
ideas for products, services, and administration than the same number working in
isolation from one another.
➢ Customer service: People working together in teams can solve customer complaints and
issues faster and more effectively than if they were working in isolation from one
another.
➢ Financial performance (profitability, As a result of all of the above, collaborative
firms have sales, and sales growth): superior sales growth and financial performance.
Describe a supportive organization culture and business processes for collaboration
Ans: Historically, organizations were built on hierarchies which did not allow much decision
making, planning, and organizing at lower levels of management or by employees.
Communications were generally vertical through management levels rather than horizontal
between groups of employees. A collaborative culture relies on teams of employees to
implement and achieve results for goals set by senior managers. Policies, products, designs,
processes, and systems are much more dependent on teams at all levels of the organization to
devise, to create, and to build. Rather than employees being rewarded for individual results, they
are rewarded based on their performance in a team. The function of middle managers in a
collaborative business culture is to build the teams, coordinate their work, and monitor their
performance. In a collaborative culture, senior management establishes collaboration and

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teamwork as vital to the organization, and it actually implements collaboration for the senior
ranks of the business as well.
List and describe the various types of collaboration and communication systems.
• E-mail and Instant Messaging (IM)
E-mail and instant messaging have been embraced by corporations as a major communication
and collaboration tool supporting interaction jobs. Their software operates on computers, cell
phones, and other wireless handheld devices and includes features for sharing files as well as
transmitting messages. Many instant messaging systems allow users to engage in real-time
conversations with multiple participants simultaneously
• Social Networking
We’ve all visited social networking sites such as MySpace and Facebook, which feature tools to
help people share their interests and interact. Social networking tools are quickly becoming a
corporate tool for sharing ideas and collaborating among interaction-based jobs in the firm.
Social networking sites such as Linkedin.com provide networking services to business
professionals, while other niche sites have sprung up to serve lawyers, doctors, engineers, and
even dentists.
• Wikis
Are a type of Web site that makes it easy for users to contribute and edit text content and
graphics without any knowledge of Web page development or programming techniques. The
most well-known wiki is Wikipedia, the largest collaboratively edited reference project in the
world. It relies on volunteers, makes no money, and accepts no advertising. Wikis are ideal tools
for storing and sharing company knowledge and insights.
• Virtual Worlds
Such as Second Life, are online 3-D environments populated by “residents” who have built
graphical representations of themselves known as avatars. Organizations such as IBM and
INSEAD, an international business school with campuses in France and Singapore, are using this
virtual world to house online meetings, training sessions, and “lounges.” Real-world people
represented by avatars meet, interact, and exchange ideas at these virtual locations.
Communication takes place in the form of text messages similar to instant messages.
5. What is the role of the information systems function in a business?
Describe how the information systems function supports a business.
Ans: The information systems departments are the formal organizational unit responsible for
information technology services. The information systems department is responsible for
maintaining the hardware, software, data storage, and networks that comprise the firm’s IT
infrastructure.

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Compare the roles played by programmers, systems analysts, information systems
Managers, the chief information officer (CIO), chief security officer (CSO), and chief
Knowledge officer (CKO).
-Programmers are highly trained technical specialists who write the software instructions for
computers.
-Systems analysts consider the principal liaisons between the information systems groups and
the rest of the organization. The systems analysis job is to translate business problems and
requirements into information requirements and systems.
- Information systems managers lead teams of programmers and analysts, project managers,
physical facility managers, telecommunications mangers, or database specialists.
-Chief information officer (CIO) is a senior manager who oversees the use of information
technology in the firm.
-Chief security officer (CSO) is responsible for information systems security in the firm and has
the principle responsibility for enforcing the firm information security policy. The CSO is
responsible for educating and training users and IS specialists about security, keeping
Management aware of security threats and breakdowns, and maintaining the tools and policies
chosen to implement security.
-Chief knowledge officer (CKO) helps design programs and systems to find new sources of
knowledge or to make better use of existing knowledge in organizational and management
processes.
Chapter 3
Review Questions
1. Which features of organizations do managers need to know about to build and use
information systems successfully? What is the impact of information systems on
organizations?
Define an organization and compare the technical definition of organizations with the
behavioral definition.
Ans: Students can make use of Figures 3–2 and Figure 3–3 in answering this question. The
technical definition defines an organization as a stable, formal social structure that takes
resources from the environment and processes them to produce outputs. This definition of an
organization focuses on three elements: Capital, labor, and production and products for
consumption. The technical definition also implies that organizations are more stable than an
informal group, are formal legal entities, and are social structures.
The behavioral definition states that an organization is a collection of rights, privileges,
obligations, and responsibilities that are delicately balanced over a period of time through
conflict and conflict resolution. This definition highlights the people within the organization,
their ways of working, and their relationships.

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The technical definition shows us how a firm combines capital, labor, and information
technology. The behavioral definition examines how information technology impacts the inner
workings of the organization.
Identify and describe the features of organizations that help explain differences in
organizations’ use of information systems.
Common features for organizations include:
• Routines and business processes: Standard operating procedures have been developed
that allow the organization to become productive and efficient thereby reducing costs
over time.
• Organizational politics: Divergent viewpoints about how resources, rewards, and
punishments should be distributed bring about political resistance to organization change.
• Organizational culture: Assumptions that define the organizational goals and products
create a powerful restraint on change, especially technological change.
• Organizational environments: Reciprocal relationships exist between an organization and
environments; information systems provide organizations a way to identify external
changes that might require an organizational response.
• Organizational structure: Information systems reflect the type of organizational structure
- entrepreneurial, machine bureaucracy, divisionalized bureaucracy, professional
bureaucracy, or adhocracy.
Describe the major economic theories that help explain how information systems affect
organizations.
Ans: The two economic theories discussed in the book are transaction cost theory and agency
theory.
-The transaction cost theory is based on the notion that a firm incurs transaction costs when it
buys goods in the marketplace rather than making products for itself. Traditionally, firms sought
to reduce transaction costs by getting bigger, hiring more employees, vertical and horizontal
integration, and small-company takeovers. Information technology helps firms lower the cost of
market participation (transaction costs) and helps firms shrink in size while producing the same
or greater amount of output.
-The agency theory views the firm as a nexus of contracts among interested individuals. The
owner employs agents (employees) to perform work on his or her behalf and delegates some
decision-making authority to the agents. Agents need constant supervision and management,
which introduces management costs. As firms grow, management costs rise. Information
technology reduces agency costs by providing information more easily so that managers can
supervise a larger number of people with fewer resources.

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Describe the major behavioral theories that help explain how information systems affect
organizations.
Behavioral theories, from sociology, psychology, and political science, are useful for describing
the behavior of individual firms. Behavioral researchers theorize that information technology
could change the decision-making hierarchy by lowering the costs of information acquisition and
distribution. IT could eliminate middle managers and their clerical support by sending
information from operating units directly to senior management and by enabling information to
be sent directly to lower-level operating units. It even enables some organizations to act as
virtual organizations because they are no longer limited by geographic locations. One behavioral
approach views information systems as the outcome of political competition between
organizational subgroups. IT becomes very involved with this competition because it controls
who has access to what information, and information systems can control who does what, when,
where, and how.
Explain why there is considerable organizational resistance to the introduction of
information systems.
There is considerable organizational resistance to new information systems because they change
many important organizational dimensions, such as culture, structure, politics, and work. Leavitt
puts forth a model that says that changes in technology are absorbed, deflected, and defeated by
organizational task arrangements, structures, and people. In this model the only way to bring
about change is to change the technology, tasks, structure, and people simultaneously. In a
second model, the authors speak of the need to unfreeze organizations before introducing an
innovation, quickly implementing the new system, and then refreezing or institutionalizing the
change.
Describe the impact of the Internet and disruptive technologies on organizations.
The Internet increases the accessibility, storage, and distribution of information and knowledge
for organizations; nearly any information can be available anywhere at any time. The Internet
increases the scope, depth, and range of information and knowledge storage. It lowers the cost
and raises the quality of information and knowledge distribution. That is, it lowers transaction
costs and information acquisition costs. By using the Internet, organizations may reduce several
levels of management, enabling closer and quicker communication between upper levels of
management and the lower levels. The Internet also lowers agency costs.
Disruptive technologies caused by technological changes can have different effects on different
companies depending on how they handle the changes. Some companies create the disruptions
and succeed very well. Other companies learn about the disruption and successfully adopt it.
Other companies are obliterated by the changes because they are very efficient at doing what no
longer needs to be done. Some disruptions mostly benefit the firm. Other disruptions mostly
benefit consumers.

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2. How does Porter’s competitive forces model help companies develop competitive
strategies using information systems?
Define Porter’s competitive forces model and explain how it works.
This model provides a general view of the firm, its competitors, and the firm’s environment.
Porter’s model is all about the firm’s general business environment. In this model, five
competitive forces shape the fate of the firm:
• traditional competitors
• new market entrants
• substitute products and services
• customers
• suppliers
Describe what the competitive forces model explains about competitive advantage.
Ans: Some firms do better than others because they either have access to special resources that
others do not, or they are able to use commonly available resources more efficiently. It could be
because of superior knowledge and information assets. Regardless, they excel in revenue growth,
profitability, or productivity growth, ultimately increasing their stock market valuations
compared to their competitors.
List and describe four competitive strategies enabled by information systems that firms can
pursue.
The four generic strategies, each of which is often enabled by using information technology and
systems include:
• Low-cost leadership: Lowest operational costs and the lowest prices.
• Product differentiation: Enable new products and services, or greatly change the customer
convenience in using existing products and services.
• Focus on market niche: Enable a specific market focus and serve this narrow target
market better than competitors.
• Strengthen customer and suppliers: Tighten linkages with suppliers and develop intimacy
with customers.
Describe how information systems can support each of these competitive strategies and give
examples.
• Low-cost leadership: Use information systems to improve inventory management, supply
management, and create efficient customer response systems. Example: Wal-Mart.
• Product differentiation: Use information systems to create products and services that are
customized and personalized to fit the precise specifications of individual customers.
Example: Google, eBay, Apple, Lands’ End.

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• Focus on market niche: Use information systems to produce and analyze data for finely
tuned sales and marketing techniques. Analyze customer buying patterns, tastes, and
preferences closely in order to efficiently pitch advertising and marketing campaigns to
smaller target markets. Example: Hilton Hotels, Harrah’s.
• Strengthen customer and supplier intimacies: Use information systems to facilitate direct
access from suppliers to information within the company. Increase switching costs and
loyalty to the company. Example: IBM, Amazon.com
Explain why aligning IT with business objectives is essential for strategic use of systems.
Ans: The basic principle of IT strategy for a business is to ensure the technology serves the
business and not the other way around. The more successfully a firm can align its IT with its
business goals, the more profitable it will be. Business people must take an active role in shaping
IT to the enterprise. They cannot ignore IT issues. They cannot tolerate failure in the IT area as
just a nuisance to work around. They must understand what IT can do, how it works, and
measure its impact on revenues and profits.
3. How do the value chain and value web models help businesses identify opportunities for
strategic information system applications?
Define and describe the value chain model.
The value chain model highlights specific activities in the business where competitive strategies
can best be applied and where information systems will most likely have a strategic impact. The
model identifies specific, critical leverage points where a firm can use information technology
most effectively to enhance its competitive position. The value chain model views the firm as a
series of basic activities that add a margin of value to a firm’s products or services. The activities
are categorized as either primary or support activities. Primary activities are most directly related
to production 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 chains of its
suppliers, distributors, and customers.
Explain how the value chain model can be used to identify opportunities for information
systems.
Ans: 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 relationship management systems) and with suppliers
(supply chain management systems) who may be outside the value chain but belong to an
extended value chain. Information systems can help businesses track benchmarks in the
organization and identify best practices of their particular industries. After analyzing various

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stages in the value chain, an organization can devise a list of candidate applications for
information systems.
Define the value web and show how it is related to the value chain.
Ans: 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. The value web is a
networked system that can synchronize the business processes of customers, suppliers, and
trading partners among different companies in an industry or in related industries.
Explain how the value web helps businesses identify opportunities for strategic information
systems.
Ans: 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 changing market
conditions. Firms can accelerate their time to market and to customers by optimizing their value
web relationships to make quick decisions on who can deliver the required products or services
at the right price and location. Information systems make it possible for companies to establish
and operate value webs.
Describe how the Internet has changed competitive forces and competitive advantage.
Ans: 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 for rivals to compete
on price alone and for new competitors to enter the market. Because information is available to
everyone, the Internet raises the bargaining power of customers, who can quickly find the
lowest-cost provider on the Web.
4. How do information systems help businesses use synergies, core competencies and
network-based strategies to achieve competitive advantage?
Explain how information systems promote synergies and core competencies.
Ans: 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 performance of these
business units by promoting synergies and core competencies.

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 Prepared by: Abdinasir Ahmed copyright© CA184
Describe how promoting synergies and core competencies enhances competitive
advantages.
Ans: 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, a core
competency relies on knowledge that is gained over many years of experience and a first-class
research organization or simply key people who stay abreast of new external knowledge. Any
information system that encourages the sharing of knowledge across business units enhances
competency.
Explain how businesses benefit by using network economics.
Ans: 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 Internet and networking technology has inspired strategies that take advantage
of the abilities of the firm to create networks or network with each other. In a network economy,
information systems facilitate business models based on large networks of users or subscribers
that take advantage of network economies. Internet sites can be used by firms to build
communities of users that can result in building customer loyalty and enjoyment and build
unique ties to customers, suppliers, and business partners.
Define and describe a virtual company and the benefits of pursuing a virtual company
strategy.
Ans: 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 acquire products, services, or capabilities from an
external vendor or when it needs to move quickly to exploit new market opportunities and lacks
the time and resources to respond on its own.
5. 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.
Ans: Information systems are closely intertwined with an organization’s structure, culture, and
business processes. New systems disrupt established patterns of work and power relationships, so
there is often considerable resistance to them when they are introduced.

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 Prepared by: Abdinasir Ahmed copyright© CA184
Implementing strategic systems often requires extensive organizational change and a transition
from one sociotechnical level to another. Such changes are called strategic transitions and are
often difficult and painful to achieve. Moreover, not all strategic systems are profitable. They are
expensive and difficult to build because they entail massive sociotechnical changes within the
organization. Many strategic information systems are easily copied by other firms so that
strategic advantage is not always sustainable. The complex relationship between information
systems, organizational performance, and decision making must be carefully managed.
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 competitive
forces at work in the industry; determine the basis of competition; determine the direction and
nature of change within the industry; and analyze how the industry is currently using information
technology.
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 the firm uses best practices to manage
its business processes; analyze how the firm leverages its core competencies; verify how the
industry supply chain and customer base are changing; establish the benefit of strategic
partnerships and value webs; clarify where information systems will provide the greatest value in
the firm’s value chain.
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 processes and activities in
accordance with the firm’s strategy; agree on the right metrics to measure progress toward the
goals.

18 | P a g e Prepared by: Abdinasir Ahmed COPYRIGHT© CA184