Strategic Management of Information Systems - Research Paper Example

Introduction: Strategic management of information systems concerns itself with development and management of systems which contribute significantly to achieving the overall objective and goal of an organization. On this basis, the knowledge of this area of study is recent, and very dynamic. It is important to understand that strategic management of IS are very instrumental for an organization to achieve its strategic objectives, and competitive advantage (Wong, 2013). This report provides a critical analysis on the role of porter’s strategic advantage competitive theory, in the evolution and development of strategic management of IS. This report provides the importance of studying and critically analyzing porter’s competitive advantage. This is an example of a model for strategic management of IS. It also identifies three major research questions and problems, associated with this study. This paper also has a literature review, which is an empirical evidence on the various research conducted in this topic. This report also identifies the key findings from these researches, and their implications in strategic management of IS. This report also identifies the various limitations for this study, and it provides a recommendation on the future implications of the study. This paper has a conclusion, which contains a summary of the major points highlighted and depicted in this report. Importance of the Topic: It is important to understand that the importance of Information System has evolved over the years. Initially, Information Systems was concerned with the automation of computer mechanical processes. This later changed to integration of computer systems to organizations for purposes of improving the communication efficiency of an organization under consideration. During the period of the 1980s, another potential and use of Information System was discovered, and this is in the implementation of the strategy of an organization, and fulfilling the goals and objectives of the business under consideration (Wong, 2013). However, it is important to understand that it is not s particular or certain Information System that is responsible for meeting the goals and objectives of a company, but a combination of a group of information systems, that the organization uses to achieve its objectives and goals (Huggins, 2011). The functions of these systems included gathering of data, analysis and maintenance of the data under consideration, collecting intelligence and information concerning the suppliers, competitors, customers, and other stake holders of an organization (Wong, 2013). A variety of theories have evolved to explain the evolution of strategic management of IS, and its use. One such theory is the monopolistic competition theory, developed by Chamberlain (Huggins, 2011). This theory denotes that organizations are heterogeneous, and they normally compete with each other based on their superiority of assets, which includes organizational culture, technical knowledge, ability to form a teamwork, and reputation (Huggins, 2011). On this basis, competition between organizations involved actively using the strengths and capabilities of an organization to achieve growth, and win over the target market. Information system is therefore an important element responsible for achieving the growth under consideration. On this basis, the context upon which the strategic information system is being used is the competitive advantage strategy developed by Porter. On this basis, there is a need of understanding the porter’s competitive advantage theory, and how it relates to strategic management information system. Research Questions: This report aims to answer the following questions, What is the importance of information systems in an organization? How does Porters competitive advantage theory address this issue of information systems? Does effective use of information systems give an organization a competitive advantage over its competitors? Literature Review: According to Porter, the performance of an organization is determined by their ability to manipulate and cope with the five forces that shape the market (Warren, 2006). These five forces that shape the market are the bargaining capability and power of the suppliers, and that of the buyer. Other factors are threats that emanate from new competitors and entrants into the market, threats that came from substitute products, and rivalry that exists between existing firms. Porter denotes that there are two important strategies that a company can use for purposes of achieving competitive advantage (Huggins, 2011). These two strategies are product differentiation, and low cost strategies. Porter further denotes a company that uses either of these two strategies will be able to sustain their competitive advantage over a long period of time (Huggins, 2011). An organization can use information technology for purposes of lowering the costs of their production, and creating product differentiation. For example, due to the use of information technology, a company can improve on its marketing strategies by using centralized control systems. This would help to monitor the performance of its products, and that of its marketing team, at a cheaper cost. This in turn would reduce the operational costs of the organization leading to profitability. Warren (2006) argues that this concept cannot only be applied in the marketing department of an organization, but also in other departments such as administration, finance, personnel, etc. Stowell (2008) further denotes that another factor that can lead to an organization achieving a competitive advantage is a concept referred to as competitive scope. This involves analyzing the range of products that the organization offers, the distribution channels that the organization employs, the geographical location that the organization sales its products, the type of customers that the organization serves, etc (Huggins, 2011). Porter denotes that if an organization is able to employ the strategies of cost leadership, and differentiation, then chances are high that the organization under consideration will be able to improve on the quality of its product, therefore creating value for its customers (Huggins, 2011). It is important to understand that the value an organization creates in its products is measured by looking at the number of customers who are willing to buy the services or products of the organization. On this basis, an organization achieves profitability if the value it attains from the sale of its products, is more than the collective costs that the organization incurred while carrying out its activities. However, Stowell (2008) does not agree with this idea, and he denotes that a company will measure the value it creates in products through the kind of satisfaction that employees get. This is because an increase in the number of employees does not necessarily mean that the company manages to satisfy its customers, but it could be a sign that the products of the company are cheaper when compared to the products of its rival companies (Arenas and Schwartzbach, 2007). In order for an organization to gain competitive advantage over its competitors, the organization under consideration must provide a comparable service or product to its target customers, however, at a lower cost than its competitors, or in an efficient manner (Chou, 2007). The products of the organization must also be unique, when compared to that of its customers, and of high quality.. It is virtually impossible to achieve this objective without integrating an efficient information system within an organization, and strategies to manage the system under consideration. Stowell (2008) believes that an organization manages to design an information system that is compatible with the organization, and how to manage it, then chances are high that the organization will achieve a competitive advantage over its rivals within the industry of its operation. Company such as Nokia was able to turn its fortunes around in the 1990s, with the fall of communism (Chou, 2007). Initially, the company was engaged in wood logging and pulp business, but after the fall of communism, the company was under a threat from Russian companies which were able to get cheap wood products from numerous Russian forests (Sarngadharan and Minimol, 2010). To achieve a competitive advantage, the company managed to develop an information system that was able to help it monitor its remote logging activities within the forests. They later used this technology to develop a mobile company, which transformed the manner in which people communicate all over the world (Sarngadharan and Minimol, 2010). Sarngadharan and Minimol (2010) argue that cost reduction and differentiation are not the only strategies that an organization can achieve competitive advantage. They argue that there are other strategies developed by scholars that can effectively help an organization to achieve a competitive advantage over its rivals. An example is the Niche strategy, which allows an organization to focus on a particular product, and be the best in its production (Galliers, 1991). The alliance strategy on the other hand involves building of alliances and partnerships for purposes of taking advantage of the resources and facilities of the organizations partners. This is a strategy aimed at increasing the market share and growth of an organization. Another important strategy is the innovation strategy, where organizations encourage their employees to be innovative, for purposes of developing new products or improving on the quality of their existing products. It is important to denote that innovation strategy is the same as differentiation under the Porters competitive advantage theory (Kini, 1993). All these strategies cannot be successful, without the use of information system, and proper management of the information system under consideration. Key Findings from the Research: From this research, one of the major findings is that an organization can never obtain a competitive advantage over its rivals, without using an efficient information management system. For instance, Porter denotes that for an organization to achieve a competitive advantage over its rivals there is a need of the organization initiating some cost reduction strategies, and differentiation strategies. It is virtually impossible for an organization to reduce the cost of its production and operations without using an efficient information system. Take for example; if a company aims at advertising its products, there are channels that are very expensive such as the use of the electronic media like television and radios. Using these channels by the organization would mean that the cost of doing business is high. This would in turn force the organization to increase the prices of its products for purposes of recovering the various costs incurred in marketing the product. However, the organization can use information system technology for purposes of promoting and advertising its products. For example, the company can decide to develop its own website, or use the internet and the social media for purposes of advertising its products (Sarngadharan and Minimol, 2010). These methods of advertising are always affordable, and on this basis the management might decide to lower the prices of its products, for purposes of achieving a competitive advantage over its rivals. On this basis, an organization that does not use information systems/technology for purposes of conducting business cannot effectively compete and out do its rivals. Differentiation on the other hand is an aspect of innovation. This is because it seeks to improve on the quality of an organization products, as compared to the products of organizations competitors. Differentiation therefore cannot occur without proper communication channels/strategies. An effective information system can help the management of an organization to communicate efficiently with its employees, and other stakeholders of the organization. For instance, an organization can use emails, the social such as Skype, and an internal electronic information system that can help in communicating the policies of an organization in an efficient manner. Limitations of the Study and Recommendations: This research had two major limitations. The first limitation is that little literature research has been done on this aspect of information management system. On this basis, the information obtained from most books were derived from secondary sources, and not from primary sources, whereby the researcher conducted his own research, and came up with his own opinion concerning the issue under consideration. Another limitation is inability to find reliable and up to date sources that could help in conducting this study in a very efficient manner. The reasons for being unable to find these sources are because of the limited research in this area of information management system, and its models. To solve this kind of problem, there is a need of education institutions sponsoring a research on the study of information management system, and its models. Conclusion: In conclusion, the Porters competitive advantage theory is an important model of strategic management of information system. The activities of the organization are influenced by their desire to stay ahead of their competitors, and to increase their share of market. To effectively achieve this objective, organizations will develop and implement an information system that has the capability of reducing the cost of their production, at the same time improving the quality of their products. This is the main argument that Porters makes when he advocates for his competitive advantage theory. On this basis, an organization that wants to achieve profitability, and became a leader in the market by beating of competition, must adopt an effective strategic management information system within its operations. Bibliography: Arenas, M., & Schwartzbach, M. I. (2009). Information systems preface. Information Systems, 34(7), 577. Chou, D. C. (2007). Field development in change management: how information systems contribute to the process of organisational change. International Journal of Information Systems and Change Management , 2(1), 100. Galliers, B. (1991). Introducing the journal of strategic information systems — the new approach to information systems management. The Journal of Strategic Information Systems, 1(1), 3. Huggins, R. (2011). Competition, competitive advantage, and clusters: the ideas of Michael Porter. Oxford: Oxford University Press. Kini, R. B. (1993). Strategic Information Systems. Information Systems Management, 10(4), 42- 45. Sarngadharan, M., & Minimol, M. C. (2010). Management information system (Rev. ed.). Mumbai [India: Himalaya Pub. House. Stowell, F. (2008). Do We Mean Information Systems or Systems of Information?. International Journal of Information Technologies and Systems Approach, 1(1), 25-36. Warren, M. (2006). Ethics in Information Systems. Australasian Journal of Information Systems, 13(2), 253-276. Wong, W. E. (2013). Emerging technologies for information systems, computing, and management. New York, NY: Springer. Read More