RESPNSE 3

1/13/22, 2:35 PM How Organizations Use Information Systems Strategically

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How Organizations Use Information 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.

Porter's Value Chain

Series of activities that contribute to the overall value of a product or service

Learning Resource

1/13/22, 2:35 PM How Organizations Use Information Systems Strategically

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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.

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