Strategic Information System: A Source of Competitive Advantage
Strategic Information System: A Source of Competitive Advantage
Strategic Information System: A Source of Competitive Advantage
net/publication/308786506
CITATION READS
1 16,980
2 authors, including:
Mohsin Altaf
University of Central Punjab
36 PUBLICATIONS 94 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
All content following this page was uploaded by Mohsin Altaf on 06 October 2017.
Abstract
This literature review highlights the importance of Strategic information system (SIS) in business strategies.
Strategic information system helps organizations to develop their generic strategies in order to attain competitive
advantages. On the other side, Literature review focus on the business model and the role of strategic
information system and highlights the role of information technology in the competitiveness of business model
and the role of information technology in business process re-engineering. This literature also highlighted the
importance of information technology in the development of Virtual organization.
Keywords: Strategic information system, Information Technology, Business Process Re-engineering, Virtual
Corporation, DEL
1. Introduction
According to Online Etymology Dictionary, Strategy came from Greek Word “strategia” meaning “art of troop
leadership, Generalship, Command.” People perceive Strategy as the Plan of Action or Roadmap (Mintzberg, H.
1987). In war, it’s considered as the plan of action designed to achieve complicated goals (Henderson, B.
D.1989). Most of disciplines including Management sciences borrowed that word. Business Environment is
more competitive today and war exists among companies (Hamel, G., & Prahalad, C. K. 1989). Business people
devise such a course of actions or strategies to win the game just like war but now the business people devise
plan to create and grab new opportunities. However, Information systems are built to resolve problems and on
the other hand information systems are built to grab opportunities (Ward, J. L., & Peppard, J. 2002). . It is very
difficult to create opportunity instead of identifying problems. To find opportunity, organization need intense
amount of vision and creativity to identify and seize opportunity (Oz. E. 2008). Information systems that grab
opportunities are called Strategic Information Systems (Hemmatfar, M., Salehi, M., & Bayat, M. 2010). In other
words SIS is defined as the “information system that support or change the enterprise’s strategy” (Hemmatfar,
M., Salehi, M., & Bayat, M. 2010). Strategic management is a technique that management adopts for long term
planning and the information system that support long term decision making in sense of information and
assistance. The term Strategic means long term planning to achieve long term benefits (Turban et al., 2006).
Hence, the objective of the piece of work is to highlighted the benefits of strategic information system in order to
take competitive advantage.
24
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
through cost reduction and through Economy of Scale. Only way to transfer the benefit of cost saving to
customer is process automation (ter Hofstede et al., 2009). Japanese uses first time robotics in their
assembly line just to reduce cost and make organization more productive (Cusumano, M. A. 1992).
Until their competitor employ automation technology in their plants, Japanese companies had
competitive advantage and selling high quality products at lower prices (Cusumano, M. A. 1992).
In services, Companies uses information system to improve their services (Pitt, L. F., Watson, R. T., &
Kavan, C. B. 1995). Domain name enables companies to provide detailed information about company
services and empower consumers to most of the services. Through information system consumer are
able to perform their most of the tasks Like ATM and Web Banking in banking sector, tracking system
in Courier services etc. It enables organizations and consumer to interact easily. Through information
systems, organizations are enabling to provide 7 days a week and 24 hour a day services to their
consumers without manual labor.
b. Barrier to Entry
Profitable industries are act like magnet for new investors (Porter, M. E. 1980). When numbers of
competitors are increases, competition shifted towards price and the profit margin decreases (Porter, M.
E. 1980). Therefore, organizations are might gain advantage over competitors by offering services
difficult to imitate. By using core competencies and strategic technology that might be expensive and
difficult to handle to others, provides sustainable competitive advantage to the company (Porter, M. E.
1998). Companies create barriers through number of ways like patents and trademarks, Copy Rights,
Domain names, Business model, Business processes, supply chain, distribution channel, firm size, cost
advantages independent to size, product differentiation etc (Porter, M. E. 1980). New entrants bear
high cost to enter in the market. For example DELL supply chain management embedded with
information system that handles most of their tasks that handle information, material and Money. They
apply Just in time inventory system (JIT) and eliminate middle man from their distribution channel and
save inventory cost and distributor commissions through the help of Information system. Through
Information system they supply low price and state of the art computer to their customers. The Supply
chain management of DELL Inc. creates barriers to new firms (Barringer, B. R. 2008).
c. Switching Cost
It’s a fix cost a bear to stop buying from one firm and switch to others (Barringer, B. R. 2008). The
cost a firm bears in the form of plenty is called explicit cost and the cost a firm face in the form of time
and money spend on adjustment is called implicit cost (Klemperer, P. 1995). Many suppliers are
providing Order Processing Systems to their buyers to handle routine orders. To switch from one
supplier to other supplier may bear cost in terms of money and time because Money and Time required
learning new Information systems.
d. Create Unique Product and Services
By the help of information technology, organizations have opportunity to experiment with new product,
services and processes (Bloch, 1996). Creation of new product and services provides great competitive
advantages. The competitive advantage remains unless and until other organizations in industry offer a
similar and identical product at comparable prices (Porter, M. E. 1998). Lotus was market leader unless
and until the Microsoft Excel with better features. Microsoft Excel not becomes market leader only
through aggressive marketing but through its features (Evans, D., Nichols, A., & Reddy, B. 2002).
Other Example includes eBay. The firm is dominant player in online auction. Firm got first mover
advantage and became very popular in online auction. Through First Move Advantage firm collect
numbers of subscribers and now have million of active users and difficult to competitors to copy the
services and processes (Barringer, B. R. 2008) but First mover advantage not always guarantee for
sustainable competitive advantage. Netscape was pioneer in web browsing but after built-in version of
Internet Explorer by Microsoft, the market share of Netscape diminished (Oz. E 2008).
e. Product Differentiation
Information technology helps organizations not only to differentiate itself through price but differentiate
itself through innovation, customer service and through processes (Bloch, 1996). Additionally, smith
(2000) describes information technology as the competitive weapon against rivals through creating
strong brand image.
Product differentiation means to make their product better than competitors (Holcombe, R. G. 2009). It
provides values better than customer (Holcombe, R. G. 2009). It does not mean values only in term of
Quality, but values in term of features, Status, Ingredients, Brand Names or anything that make product
unique (Kotler, P., & Armstrong, G. 2001). On the basis of differentiation, consumer ranked brands in
their minds which helps consumer to purchase brand on the basis on their preferences (Kotler, P., &
Armstrong, G. 2001). Companies also differentiate their selves on the basis of processes and service
delivery. With the help of Technology, most of the companies managed their Supply Chain effectively
25
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
and efficiently. With the help of strategic information system, Dell creates its business process and
supply chain more strategic.
f. Product/Market Enhancement
A firm growth strategy includes its market and product expansion to increase market share and
information technology facilitates firm growth strategy (Fruhling and Digman (2000). On the basis of
Information technology, firm are able to target its inter market segments and operate globally.
With the help of Strategic information system, organization can enhance their product and services
more effectively. For Example, National Database and Registration Authority (NADRA) was developed
to handle the Computerized National Identity Card (CNIC) but with the passage of time, with the help
of Strategic Information system NADRA is able to extend its services towards Weapon registration, e-
Toll Motorway service, Motor Vehicle Registration, Afghan Registration, and having hundreds of
projects. NADRA providing it services to all the banks of Pakistan, Diplomats, Security agencies,
Passport services etc (source: www.nadra.gov.pk).
Amazon was first introduce their services in book selling but now they are selling computers, jewelry,
Garden tools, Grocery, health products and industrial products.
g. Create Alliances
When the firms are expanding it geographically, Information technology helps organization in various
way. Information technology helps organizations to maintain inter relationship to achieve competitive
advantage (Porter & Millar, 1996).
In past, companies operate separately but now a day’s companies operate with alliances through
Strategic information system like in Airline industry (Elmuti, D., & Kathawala, Y. 2001). Now airline
industry has combined services with car rental firms and hotel chains and offers a bundle of services.
Banks alliances with VISA offer their customer to purchase products worldwide and online without any
hassle.
Walmart, World largest retail store having more than eight thousand branches in approximately fifteen
countries. P&G strategic alliances with Walmart to maintain its product inventory. When the record for
inventory reached to the customer, P&G maintain its inventory according to the area and demand. The
track system helps Walmart to reduce the burden of inventory management (Varadarajan, P. R., &
Cunningham, M. H. 1995).
26
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
27
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
transmits three million messages to various systems for scheduling (Collier, D. A., & Evans, J. R. 2011).
e. Credit Payment: Dell information system handles approximately fifteen thousand transactions per day
which includes payments of suppliers and vendor. It maintains the information about every supplier,
contact detail, Location detail, terms and conditions etc. Information system periodically, based on
weekly, monthly or quarterly basis (Collier, D. A., & Evans, J. R. 2011).
28
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
29
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
like Dell inc. Southwest airline is low cost airline in competitive industry. Southwest achieve economy
of scale by optimal usage of its resources and cut other expenses (Barringer, B. R. 2008).
b. Differentiation Strategy
By offering unique product and services to customer, the company can achieve differentiation. Better
products and services in term of Quality, features and values can charge higher prices (Tuominen, P).
Dell differentiates itself through its supply chain management (Barringer, B. R. 2008).
c. Niche Strategy
In the strategy firms select narrow segments. Through this strategy firms are able to avoid direct
competition. For example, “buyandhold.com” offers investment services to women, children and old
persons having investment $10 (Barringer, B. R. 2008).
30
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
31
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
regarding Global financial Markets are available on internet to effectively diversify our risk. In this regard,
Expert system with technical analysis having Artificial Intelligence helps organizations to facilitate in decision
making.
f. Human Resource Management
When the process is reengineered, what’s happen with human resource? How they interact with each other and
with reengineered process. Stillwagon and Burns (1993) introduce the concept of Human Performance
Engineering. HPE is basically improves the human factor in the business process reengineering.
g. Virtual Corporation and Information Technology
According to the dictionary, Virtual Corporation is a business that exists on internet and totally relying on
telecommunication and internet for operations. Virtual organizations are click and mortar stores instead of brick
and mortar stores. Amazon was the pioneers in the virtual organization have introduced the concept of business
without any physical retail store (Mellahi, K., & Johnson, M. 2000). Virtual corporations are scattered in
different areas and meet only through email, internet and videoconferencing. Low degree of virtuality has been
in the organizations having interaction with other organizations and employees work in traditional environments
while a pure virtual organizations employee operate remotely and interact remotely. Ideal state of virtuality is
rare but hybrid form of virtuality, organization processes are dependent on both traditional and virtual
environment. Shifting towards virtual organizations affects both management and management relationship with
other organizations. Relationship includes other firms, employees, customers and community. Virtual
organization has temporary relationships. Transactions might be coupled (establish relationship) and decoupled
(relationship termination) (Mowshowitz, A. 2002).
Conclusion
Managers now days tackle with lots of information in making business related decision. Strategic Information
System (SIS) helps managers to channelize the information in a systematic way to make strategic decisions.
Moreover, through the system, organizations can catch the long lasting benefits of competitive advantages.
Moreover, for the survival in competitive environment, organization must focus on the implementation of
strategic information system because it will be the key for organizational survival in future.
References
Alavi, M., & Tiwana, A. (2003). Knowledge management: The information technology dimension. M. Easterby,
y M. Lyles, Handbook of Organizational Learning and Knowledge Management, 104-121.
Banerjee, S., & Golhar, D. Y. (1994). Electronic data interchange: characteristics of users and
nonusers. Information & Management, 26(2), 65-74.
Barcan, A. (1955). Records Management and the" Paperwork Age". The Business History Review, 218-226.
Barringer, B. R. (2008). Entrepreneurship: Successfully launching new ventures. Pearson Education India.
Barua, A., Konana, P., Whinston, A. B., & Yin, F. (2001). Driving e-business excellence. MIT Sloan
Management Review, 43(1), 36-45.
Berger, A. N., & DeYoung, R. (2001). The effects of geographic expansion on bank efficiency. Journal of
Financial Services Research, 19(2), 163-184.
Bloch, M., Pigneur, Y., & Segev, A. (1996). On the road of electronic commerce – a business value framework,
gaining competitive advantage and some research issues. Retrieved from
www.stern.nvu.edu/mbloch/docs/roadtoec/ec.htm
Bruss, L.R., Roos, H.T., 1993. Operations, readiness and culture: Don’t reengineer without considering them.
Inform 7 (4), 57–64.
Butler, P., & Peppard, J. (1998). Consumer purchasing on the Internet:: Processes and prospects. European
Management Journal, 16(5), 600-610.
Chang, C. H., & Lin, J. T. (1990). Integrated decision support and expert systems in a computer integrated
manufacturing environment. Computers & Industrial Engineering, 19(1), 140-144.
Chang, R.Y., 1994. Improve processes, reengineer them, or both? Training and Development 48 (3), 54–58.
Clemons, E. K., Reddi, S. P., & Row, M. C. (1993). The impact of information technology on the organization of
32
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
economic activity: The" move to the middle" hypothesis. Journal of Management Information Systems,
9-35.
Collier, D. A., & Evans, J. R. (2011). OM3. South-Western Pub.
Cusumano, M. A. (1992). Japanese technology management: innovations, transferability and the limitations of"
lean" production (No. 92). MIT Japan Program, Massachusetts Institute of Technology.
Davenport, T. H., & Prusak, L. (2000). Working knowledge: How organizations manage what they know.
Harvard Business Press.
Davis, D. L., & Davis, D. F. (1990). The effect of training techniques and personal characteristics on training
end users of information systems. Journal of Management Information Systems, 93-110.
Drucker, P. F. (1995). The information executives truly need. Harvard Business Review, 73, 54-54.
Elmuti, D. The perceived impact of outsourcing on organizational performance. American Journal of
Business, 18(2), 33-42.
Elmuti, D., & Kathawala, Y. (2001). An overview of strategic alliances. Management decision, 39(3), 205-218.
Enders, A., & Jelassi, T. (2000). The converging business models of Internet and bricks-and-mortar
retailers. European Management Journal, 18(5), 542-550.
Er, M. C. (1988). Decision support systems: a summary, problems, and future trends. Decision Support
Systems, 4(3), 355-363.
Evans, D., Nichols, A., & Reddy, B. (2002). The Rise and Fall of Leaders in Personal Computer
Software. Microsoft, Antitrust and the New Economy: Selected Essays, 265-285.
Fruhling, A.l., & Digman, La.(2000). The impact of electronic commerce on business-level strategies. Journal of
Electronic Commerce Research, 1(1), Retrieved from
http://www.csulb.edu/web/journals/jecr/issues/20001/paper2.htm
Ghosh, S. (1998). Making business sense of the Internet. Harvard Business Review,76(2),126–135.
Gunasekaran, A., Marri, H. B., McGaughey, R. E., & Nebhwani, M. D. (2002). E-commerce and its impact on
operations management. International Journal of Production Economics, 75(1), 185-197.
Gupta, H. (2009). Management Information System. Hitesh Gupta.
Hamel, G., & Prahalad, C. K. (1989). To revitalize corporate performance, we need a whole new model of
strategy. Harvard business review, 63-76.
Hammer, M. (1997). Beyond Reengineering: How the Process-Centered Organization Will Change Our Work
and Our Lives. HarperBusiness.
Hammer, M., Champy, J., 1993. Reengineering the Corporation: A Manifesto for Business Revolution. Harper
Business, New York.
Hansen, J. V., & Hill, N. C. (1989). Control and audit of electronic data interchange. MIS Quarterly, 403-413.
Heidtmann, V. (2008). Organisation von Supply Chain Management: Theoretische Konzeption und empirische
Untersuchung in der deutschen Automobilindustrie. Gabler Verlag.
Hemmatfar, M., Salehi, M., & Bayat, M. (2010). Competitive advantages and strategic information
systems. International Journal of Business and Management, 5(7), P158.
Henderson, B. D. (1989). The origin of strategy. Harvard business review, 67(6), 139-143.
Holcombe, R. G. (2009). Product differentiation and economic progress. Quarterly Journal of Austrian
Economics, 12(1), 17-35.
Horngren, C. T. (1967). Cost accounting: a managerial emphasis. Pearson Education India.
Jain, T. R., Trehan, M., & Trehan, R. (2009). Business environment. FK Publications.
Jayawardhena, C., & Foley, P. (2000). Changes in the banking sector–the case of Internet banking in the
UK. Internet Research, 10(1), 19-31.
Jiang, B., & Prater, E. (2002). Distribution and logistics development in China: The revolution has
begun. International Journal of Physical Distribution & Logistics Management, 32(9), 783-798.
Jones, G. R., & Butler, J. E. (1988). Costs, revenue, and business-level strategy. Academy of Management
Review, 202-213.
Klemperer, P. (1995). Competition when consumers have switching costs: An overview with applications to
industrial organization, macroeconomics, and international trade. The Review of Economic
Studies, 62(4), 515-539.
Kotler, P., & Armstrong, G. (2001). Principles of Marketing, Prentice-Hall. Inc., Upper Saddle River, New
Jersey.
Kraemer, K. L., & Dedrick, J. (2001). Dell Computer: using e-commerce to support the virtual company.
LEWIS, I. A., & Talalayevsky, A. (1997). LOGISTICS AND INFORMATION TECHNOLOGY: A
COORDINATION PERSPECTIVE. Journal of Business Logistics
Loch, C. (1998). Operations management and reengineering. European Management Journal, 16(3), 306-317.
Lowenthal, J.N., 1994. Reengineering the Organization; A Step-By- Step Approach to Corporate Revitalization.
ASQC Quality Press, Milwaukee, USA.
33
Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.6, No.9, 2016
Marks, R. G., Conlon, M., & Ruberg, S. J. (2001). Paradigm shifts in clinical trials enabled by information
technology. Statistics in medicine, 20(17‐18), 2683-2696.
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e. commerce? The case of Amazon.
com. Management Decision, 38(7), 445-452
Mintzberg, H. (1987). The strategy concept 1: five p's for strategy. U. of California.
Mishra, R. K. Role of Information Technology in supply chain management.
Mowshowitz, A. (2002). Virtual organization: Toward a theory of societal transformation stimulated by
information technology. Greenwood Publishing Group.
Olalla, M. F. (2000). Information technology in business process reengineering. International Advances in
Economic Research, 6(3), 581-589.
Olalla, M. F. (2000). Information technology in business process reengineering. International Advances in
Economic Research, 6(3), 581-589.
Oz. E (2008). Managing information system. Thomson.
Parker, C.C., McKinney, J (1993) Information technology and small discounters. Discount Merchandiser 33 (5),
124-127.
Petrozzo, D.P., Stepper, J.C., 1994. Successful Reengineering. Van Nostrand Reinhold, New York.
Pitt, L. F., Watson, R. T., & Kavan, C. B. (1995). Service quality: a measure of information systems
effectiveness. MIS quarterly, 173-187.
Porter, M E, (1985).Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New
York.
Porter, M. E. (1980). Industry structure and competitive strategy: Keys to profitability. Financial Analysts
Journal, 30-41
Porter, M. E. (1998). Competitive advantage: Creating and sustaining superior performance. Free press
Porter, M.E. (2001). Strategy and the internet. Harvard Business Review, 79(3),63–78
Porter, M.E., & Millar, Ve. (1996). How information gives you competitive advantage. In Managing Information
for the Competitive Edge (AUSTER E and CHOO CW, Eds), 71–92, Neal-Schuman Publishers Inc.,
New York.
Powell, T (1994) Information Technology helps reengineering research. Marketing News 28 (5), 11, 14.
Rafiq, M., & Ahmed, P. K. (1998). A customer-oriented framework for empowering service employees. Journal
of Services Marketing, 12(5), 379-396.
Rayport, J. F. (1999). The truth about Internet business models. Strategy and Business, 5-7.
Shukla, R. K., Garg, D., & Agarwal, A. Understanding of Supply chain: A literature Review.
Smith,E.R. (2000). E-Loyalty: How to Keep Customers Coming Back to your Website. Harper Business, New
York.
Stillwagon, W., Brus, R., (1993) Improving manufacturing competitiveness through the application of human
performance reengineering. International journal of Technology Management, 8 (3-5), 411-421.
Talwar, R., (1993). Business re-engineering—A strategy-driven approach. Long Range Planning 26 (6), 22–40.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.
ter Hofstede, A. H., van der Aalst, W. M., Adams, M., & Russell, N. (Eds.). (2009). Modern Business Process
Automation: YAWL and its support environment. Springer.
Tuominen, P. Managing brand equity. LTA, 1(99), 65-100.
Turban, E., King D., Viehland, D. and Lee, J. (2006). Electronic commerce A Managerial Perspective. Pearson
Prentice Hall, New Jersey.
Varadarajan, P. R., & Cunningham, M. H. (1995). Strategic alliances: a synthesis of conceptual
foundations. Journal of the Academy of Marketing Science, 23(4), 282-296.
Ward, J. L., & Peppard, J. (2002). Strategic planning for information systems (Vol. 28). Wiley.
Ward, P. T., Bickford, D. J., & Leong, G. K. (1996). Configurations of manufacturing strategy, business strategy,
environment and structure. Journal of management, 22(4), 597-626
Woodruff, R. B. (1997). Customer value: the next source for competitive advantage. Journal of the academy of
marketing science, 25(2), 139-153.
Zhang, H. (2010). Research Hewlett Packard through its Value Chain.International Journal of Business and
Management, 5(8), P179.
34