Information systems and organizations work together to function successfully. The interaction between the two is influenced by mediating factors such as the surrounding environment, culture, organization’s structure, business processes, politics, and management’s decisions.
The technical definition of an organization is a stable, formal social structure that takes resources from the environment and processes them to produce outputs. The behavioral definition of an organization is that it is a collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution. These two definitions actually complement each other.
All organizations have characteristics that affect the types of information systems they use. The characteristics include routines and business processes, organizational politics, organizational culture, surrounding environments, structure, goals, constituencies, and leadership styles. In addition, information systems have also had economic and organizational and behavioral impacts on organizations.
In today’s business world some firms do better than others. These firms are said to have a competitive advantage over others. Michael Porter’s competitive forces model is used to understand this advantage. This model provides an overview of the firm, its competitors, and its environment. According to this model, five competition forces shape the outcome of the firm: traditional competitors are constantly devising new and more efficient way to produce new products; new companies are always entering the market; there are substitute products and services that consumers may use if there is a change in what they had been using; the ability to attract and retain customers; and the variety of supplies a firm has.
When a firm is faced with all of these competitive forces they can use information systems to respond some of them. The four strategies used for dealing with the competitive forces include low-cost leadership, product differentiation, focus on market niche, and strengthening customer and supplier intimacy. Because of the wide-use of the Internet competitive rivalry has become much more intense. It has almost destroyed some industries and severely threatened others; but it has also created new markets and provided new opportunities for building brands with large and loyal customer bases.
The value chain model is used to highlight specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. It views firms as a chain of basic activities that add a margin of value to a firm’s products or services. The activities are classified as primary activities or support activities. Primary activities are directly related to the production and distribution of the firm’s products and services. Support activities make the delivery of the primary activities possible and consist of organization infrastructure, technology, and procurement.
Strategic information systems not only can change the organization, but its products, services, and operating procedures as well. This change often drives the organization into new behavioral patterns. Successfully using information systems to achieve a competitive advantage requires coordination of technology, organizations, and management.