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Chapter 3 Information Systems, Organizations, and Strategy 143

3. How do the value chain and value web models help businesses identify opportunities for strategic
information system applications?
The value chain model highlights specific activities in the business where competitive strategies
and information systems will have the greatest impact. The model views the firm as a series of primary
and support activities that add value to a firm’s products or services. Primary activities are directly
related to production and distribution, whereas support activities make the delivery of primary
activities possible. A firm’s value chain can be linked to the value chains of its suppliers, distributors,
and customers. A value web consists of information systems that enhance competitiveness at the
industry level by promoting the use of standards and industry-wide consortia, and by enabling
businesses to work more efficiently with their value partners.

4. How do information systems help businesses use synergies, core competencies, and network-based
strategies to achieve competitive advantage?
Because firms consist of multiple business units, information systems achieve additional efficiencies
or enhance services by tying together the operations of disparate business units. Information systems
help businesses leverage their core competencies by promoting the sharing of knowledge across
business units. Information systems facilitate business models based on large networks of users or
subscribers that take advantage of network economics. A virtual company strategy uses networks to
link to other firms so that a company can use the capabilities of other companies to build, market, and
distribute products and services. In business ecosystems, multiple industries work together to deliver
value to the customer. Information systems support a dense network of interactions among the
participating firms.

5. What are the challenges posed by strategic information systems and how should they be addressed?
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, and they can be
expensive to build. Many strategic information systems are easily copied by other firms so that strategic
advantage is not always sustainable.

Key Terms

Agency theory, 120 Primary activities, 132
Benchmarking, 133 Product differentiation, 125
Best practices, 133 Routines, 114
Business ecosystem, 138 Strategic transitions, 142
Competitive forces model, 124 Support activities, 132
Core competency, 137 Switching costs, 128
Disruptive technologies, 117 Transaction cost theory, 119
Efficient customer response system, 126 Value chain model, 131
Mass customization, 127 Value web, 135
Network economics, 137 Virtual company, 138
Organization, 112

Review Questions

1. Which features of organizations do managers • Identify and describe the features of
need to know about to build and use information organizations that help explain differences in
systems successfully? What is the impact of organizations’ use of information systems.
information systems on organizations? • Describe the major economic theories that
• Define an organization and compare the help explain how information systems affect
technical definition of organizations with the organizations.
behavioral definition.

MIS_13_Ch_03_Global.indd 143 1/17/2013 2:26:26 PM