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Chapter 3 Strategy and Information Systems
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According to Porter, to be effective, the organization’s goals, objectives, culture, and activi-
ties must be consistent with the organization’s strategy. To those in the MIS field, this means
that all information systems in the organization must reflect and facilitate the organization’s
competitive strategy.

Q3-4 How Does Competitive Strategy Determine
Value Chain Structure?

Organizations analyze the structure of their industry, and, using that analysis, they formulate a
competitive strategy. They then need to organize and structure the organization to implement that
strategy. If, for example, the competitive strategy is to be cost leader, then business activities need to
be developed to provide essential functions at the lowest possible cost.
A business that selects a differentiation strategy would not necessarily structure itself around
least-cost activities. Instead, such a business might choose to develop more costly processes, but
it would do so only if those processes provided benefits that outweighed their costs. Joni at Falcon
Security knows that buying the best commercial drones is expensive, and she judges the costs
worthwhile. She may find that 3D printing Falcon's own custom drones to be worthwhile, too.
Porter defined value as the amount of money that a customer is willing to pay for a resource,
product, or service. The difference between the value that an activity generates and the cost of the
activity is called the margin. A business with a differentiation strategy will add cost to an activity
only as long as the activity has a positive margin.
A value chain is a network of value-creating activities. That generic chain consists of five
primary activities and four support activities.

Primary Activities in the Value Chain

To understand the essence of the value chain, consider one of Falcon Security's suppliers, a
medium-sized drone manufacturer (see Figure 3-6). First, the manufacturer acquires raw materials
using the inbound logistics activity. This activity concerns the receiving and handling of raw materi-
Figure 3-6 als and other inputs. The accumulation of those materials adds value in the sense that even a pile of
Drone Manufacturer’s unassembled parts is worth something to some customer. A collection of the parts needed to build a
Value Chain

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