Chapter three introduces concepts of competitive advantage that businesses face and how information systems play an important role in achieving that. Porter's model, the most widely used in understanding competitive advantage, is discussed with emphasis on the five forces that shape the fate of the firm: traditional competitors, new market entrants, substitute products and services, customers, and suppliers. The chapter concludes by discussing how product or service quality can differentiate a firm and produce a competitive advantage. Quality can be judged by both producers and consumers, the former using such standards as benchmarking as a means of measurement.

Information systems can be utilized to achieve competitive advantage. In recent times, funds have been allocated to IT in order to increase efficiency. Information systems aid companies in competing with other competitors by maintaining low costs, differentiating products or services, focusing on market niche, strengthening ties with customers and suppliers, and increasing market entry high competition. These competitions are on a global scale and are not just within the industry. There are also strategies in competing in the global business such as the DOMESTIC EXPORTER strategy and the MULTINATIONAL strategy. These strategies integrate product quality and design in order to differentiate from other products. This allow firms to create profit by attracting customers. Technology is not enough to be competitive and organizations need to be redesigned by a process called BUSINESS PROCESS RE-ENGINEERING.

Using Information Systems to achieve competitive advantage can be described by Porter’s competitive forces model. This model “provides a general view of the firm, its competitors, and the firm’s environment.” In this model five competitive forces decide about the firm’s future. Traditional Competitors are companies which produce similar products and services within the market. Firms compete to attract consumers and make sure that they have the strategy and resources to keep their customers satisfied. New Market Entrants are companies that are entering the business industry. However, every firm have a different way of entering the market. The way a computer firm enters a market is different from how a pizza business introduces itself into a market. They can have high or low barriers of entry depending on how high are the capital costs. In just about every industry there will be Substitute Products that can be bought. Firms make sure that they can make quality products with minimum cost of resources. A company also has to put great emphasis on their relationship with suppliers and customers because this is what their business revolves around. A firm makes sure that they have different choices of suppliers so as to regulate and receive raw materials on time in order to meet customers needs. This is also a strategy which is used to attract and keep customers. Businesses attains it's competitive advantage with the great help of informations systems. The competitive forces, which assist in competitive advantage, include traditional competitors, new market entrant, subsitute products, customers, and suppliers. Also, the methods that businesses utilize in order to fight against these competitive forces are vital and important. The internet also influences competitive advantage greatly. With this help and the help of informations systems, businesses compete on a global scale, with different business models. Furthermore, a business can compete on quality, design and business process.

Having information systems in today's society helps businesses stay more connected with the world, and most importantly its customers. Information systems help connect businesses with its customers by relaying information quickly back and forth. This fast transmission, for example, helps suppliers know more rapidly what to supply and the demand for their supply. Knowing the demand for the supply not only creates efficiency in the business, but also make customers happy. This efficiency created by information systems helps suppliers with its overall success by having high revenues.

This model explains how the competitiveness of a firm is affected by new market entrants, substitute products and services, customers, and suppliers. The value chain model helps firms decide what information systems adds are of value to the firm. These decisions are applied to two activities called primary activities and support activities. A value web is another model that is made up of information systems to help a firm become more efficient with business partners. In addition, this chapter explains how a business gains an advantage by using information systems to smoothly run synergies, network-based strategies, and core competences. It mentions how the introduction of the internet helped companies improve quality and compete on a global scale. In this chapter, the reader understands why a firm may use BPR (business process re-engineering) to make processes more efficient.

Porter's competitive forces model helps companies determine what they should do to be more productive by comparing what their competitors are doing. It also brings the companies costs down and makes them more efficient as a business by using Information Systems. Value chain models and value web models are also introduced in this chapter which show where a company can be most efficient. When businesses redesign their practices they are going to be more efficient in their technology department.

Microsoft Access is one software that relates databases to one another, creating relationships, allowing businesses to use applications more efficiently. Also, Microsoft Access is preferred to be used over Microsoft Excel, because it allows to create relations as mentioned above and work with larger amounts of data.

This section states information about how a firms pursuing a global strategy benefit from economies of scale and resource cost reduction. There are various examples of how a product that has a U.S. label could have probably been designed in California and stitched together Hong Kong using materials from China or India. The possible purpose of this process is to reduce wage cost. This section also describes how the global internet, along with other IT systems, has put manufacturing firms in almost instant contact with their supplier.


  • Until the 1990s, companies like: General Electric, General Motors, Toyota, and IBM; dominated the global competition.
  • Today, the global internet and internal information systems, put manufacturing firms in nearly instant contact with their suppliers.
  • With the Internet it is possible to move very large computer files with hundreds of graphics and designs across the globe in seconds.
  • Because of the Internet and IT systems, it is possible for medium-sized, " micro-multinational ", firms to also enter the global competition.
  • Information technology and the Internet provide efficiency and almost instant communication to


The concept of competition on a global scale is mentioned with regard to the recent global business strategies that companies practice including; multinational (heavy centralization of co. activities in home country), transnational(no national headquarters, many regional; global perspective), and domestic exporting(activities centralized in home country of origin); franchiser(everything is produced in the home country). When an organization is centralized it is established in the home country; decentralized being the opposite of this.

This section in the chapter focuses on companies competing on business processes. These days, technology in itself is not sufficient to make an organization competitive and quality-oriented. In order to take advantage of information technology, businesses may have to undergo a radical rethinking and redesigning of its business processes known as Business Process Re-engineering. Some basic questions a business must ask in order to re-engineer successfully are: Why do we do what we do? and Why do we do it the way we do? In order to speed up the process of handling documents, businesses should implement Workflow Management—streamlining business procedures to efficiently move documents. The steps to be followed to achieve effective re-engineering are most importantly, to identify what business processes need improvement. Resources such as time and cost should not be spent on business processes that have little impact on overall business profits.
Section five in chapter three talks about Competing on business processes. This means that businesses have to continually change and take advantage of technology. These changes can be very minor but in some organizations the whole business processes require change. Businesses have to understand the business model so they can make changes in the right places. If a business fails to understand the business model and spends time and money changing a processes that has little impact on overall performance, they become vulnerable to competitors who may have discovered the right business model. Managers need to determine what business processes are the most important when applying new information technology.

3.3 What is Quality? pg 100
Quality is defined differently from the consumer and producer perspective. It is becoming more about satisfying the customers' needs and moving away from what producers believe is good quality. Customers want to buy things that are worth the money. Total quality management is becoming a common concept in companies. TQM makes quality the responsibility of all people and functions within an organization. TQM would only be effective if everyone takes an active role of improving quality. Companies with good quality are able to charge higher prices than other companies because people are willing to pay more for goods that have high standards. From the customer's point of view, the quality of the physical product matters. From the producer's point of view, specifications matter. To make sure that customers are satisfied with the products they buy, companies have adopted the concept of total quality management (TQM). TQM basically means that everyone involved in creating the product puts in all their effort to make sure the product is at its best state. It involves first realizing who the stakeholders are. To make sure that a product is as perfect as it can get, many companies have introduced a measurement of quality called six sigma. Six sigma means that there are only 3.4 defects out of every million products the company creates. This is hard to achieve but this goal improves quality and lowers costs of production. Another way to improve quality is by having shorter cycle times. If there are fewer steps in creating the product, there is a less of a chance that a mistake will occur.


1. What is it called when you compare the efficiency and effectiveness of your business processes against strict standards:
A) Deep packet inspection
B) Benchmarking
C) Enterprise-wide knowledge management system
D) Sole Trading
E) None of the above

2. Which one of the following is NOT part of Porter's competitive forces model?
A) Product Differentiation
B) Traditional Competitors
C) Customers
D) Suppliers
E) None of the above

3. What does CAD stand for?
A) Computer-actual dictation
B) Computer-aided design
C) Computer-acknowledged data
D) Computer-aided details
E) None of the above

4. Which of the following is an activity for which a firm is a world-class leader?
A) Network economics
B) Core competency
C) Disruptive technologies
D) Leader economics
E) None of the above

5. Which company owns the patent for the page rank algorithm?
A) Microsoft
B) Ask
C) Google
E) Yahoo

6. An efficient customer response system does what?
A) Creates a database of sales
B) Informs businesses customer's complaints
C) Directly links customer behavior to distribution and supply chains
D) A and B
E) All of the above

7. What are the four ways of organizing businesses internationally?
A) Domestic exporter, multinational, franchiser, and transnational
B) Domestic Traveler, Multinational exchange, and Franchiser
C)Transnational exporter, Franchiser, Domestic exporter, and Multinational data
D) None of the above
E) All of the above

8. What are the four types of systems configurations for Global Business Organizations?
A) Network Systems only
B) Centralized, duplicated, decentralize, and network systems
C) Decentralized, and Duplicated only
D) Centralized only
E) None of the above

9. What is the most efficient way to ease production processes?
A) Not using production processes
B) Benchmarking
C) Efficiency
D) Reducing Cycle Time
E) B and C

10. Rethinking and redesigning of business processes to take advantage of information systems is called?
A) Workflow management
B) Business Process reengineering (BPR)
C) Computer-aided design (CAD)

11. The process of streamlining business procedures allows documents to be moved easily and efficiently?
A) Transnational
B) Cycle time
C) Online-inputs
D) Workflow Management
E)None of the Above

12. What type of technologies have an negative impact on industries and businesses?
A) Disruptive technologies
B) Malicious Viruses
C) Networks
D) Malware

13. Specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact?
A) Support activities
B) Best practices
C) Value chain model
D) Primary activities
E) First Activities

14. System that directly links consumer behavior back to distribution, production, and supply chains is called?
A) Best practices
B) Transnational
C) Disruptive technologies
D) Efficient customer response system

15. Which of the following is apart of the 5 competitive forces in Porter's Competitive Forces Model?
a. new market entrants
b. customers
c. suppliers
d. traditional competitors
e. all of the above (p. 82)

16. The ability to offer individually customized products or services using the same production resources as mass production is
a. mass customization
b. synergies
c. core competency
d.domestic exporter
e. disruptive technology

17. Walmart always ensures customers that they have a full stock of their goods available on the shelves. This is an example of
a. product differentiation
b. customer response system
c. mass customization
d. bench marking
e. customer preferences

18. Systems in which development and operation occur totally at the domestic home base are called
a. network systems
b. decentralized systems
c. centralized systems
d. duplicated systems
e. operation systems

19. Which is a form of benchmarking?
a. Using external industry standards
b. Utilizing standards that have been set by other companies.
c. Deploying internally developed high standards.
e. All of the above (pg 101)

20. Bob Jones has an internet site that sells shoes. He manually takes orders, obtains credit card approval, determines what shoe company is closest to the customer, and finally forwards the order to that company. How can Bob improve his system?
a. Partner with more shoe companies
b. Sell his shoes only on the east coast
c. Reduce his cycle time (pg 101)
d. Employ benchmarking strategies
e. All of the above

21. When customers are defining the quality of a product they are looking at which of the following?
  • a. physical product
  • b. service
  • c. psychological aspects
  • d. specification or absence of variation
  • e. a, b, and c (pg 100)

22. The use of the information system to enable a concentrated strategy on a single market specialty is called?
  • a. low-cost leader
  • b. focus on market niche (pg 88)
  • c. ghost business
  • d. application process
  • e. market specialty information system

23. What competitive force impacts the internet by reducing barriers to entry, such as the need for a sales force, access to channels, and physical assets.
a. Customer bargaining power
b. Substitute products and service
c. Supplier bargaining power
d. Threat of new entrants (pg 91)
e. Distributor bargaining power

24. How many of Porter's competitive forces are there in the environment?
a) 3
b) 5
c) 4
d) 2

25. Which is an example of synergy
a) A bank goes having plants in other countries
b) A bank merging with another bank to be more productive
c) A bank firing employees to cut back on expenses
d) A bank being more environmentally friendly

26. Porter's strategic model provides....
a) A change in customer connivance in using existing products and services
b) A general view of the core competencies
c) Lower costs for customer
d) A general view of the firm, its competitors, and the firm’s environment

27. Which of the following is difficult to substitute.
a) Core competencies
b) Network based strategies
c) None of the above
d) All of the above

28. How has the internet impacted the threat of new entrants? (Page 91)
A) It has not affected the competitive force at all.
B) Reduces the barriers to entry and provides a technology for business processes that makes other things easier to do.
C) Helps companies work together to form a synergy.
D) Companies can become more widely known if their information is publicly available.
E) Both b and d.

29. An example of a product differentiation company is: (Page 88)
A) Apple
B) Google
C) eBay
D) Lands' End
E) All of the above

30. Which strategy concentrates financial management and control out of central home base while decentralizing productions, sales, and marketing (Page 99) operations in other countries?
a. domestic exporter
b. multinational
c. franchisers
d. transnational
e. global

31. Six Sigma is: (Page 100)
A) a low cost company that is based in Texas
B) one of porter's competitive strategies
C) a measurement of quality
D) an information system used to rethink and redesign business processes
E) none of the above

32. A Computer-aided design system is: (Page 102)
A) a program only architects use to make buildings
B) detailed instructions that control and coordinate the work of computer hardware components in an information system
C) automation of step-by-step methodologies for software and system development to reduce the amounts of repetitive work the developer needs to do.
D) information system that track all the ways in which a company interacts with its customers and analyze these interactions.
E) information system that automates the creation and revision of designs using sophisticated graphics software

33. Which of the following is NOT part of the competitive force?
a. Traditional Competitors
b. Low-Cost Leadership (pg.84)
c. New Market Entrance
d. Substitute Products and Services
e. None of the above

34. Which information system strategy counteracts competitive forces and deals with mass customization?
a. Low-Cost Leadership
b. Product Differentiation (pg. 85)
c. Focus on Market Niche
d. Strengthen Customer and Supplier Intimacy
e.Tighten Production Tolerance

35. Which strategy is characterized by heavy centralization of corporate activities in the home country of origin?
a. Transnational
b. Franchisers
c. Multinational
d. Domestic exporter (pg. 99)
e. None of the above

36. According to studies, what is the best way to reduce quality problems?
a. Benchmarking
b. Use customer demand
c. Reduce cycle time (pg. 101)
d. Improve production precision
e. Tighten production tolerance

37. What kind of barriers to entry is the new market entrants of the Porter's competitive forces model suggest?
a. High (pg. 82-83)

b. Low
c. None
d. Medium
e. None of the above

38. Which of these organization infrastructure are part of the Support Acitivities?
a. Administration and management
b. Human resources
c. Technology
d. Procurement
e. All of the above (pg. 92)

39. Which of the following is part of Porter’s Model?
A. Customers
B. Suppliers
C. New Market Entrants
D. All of the above

40. A domestic exporter is characterized by "" centralization of corporate activities in the home country.
A. Light
B. Heavy
C. No
D. Some

41. Which of the following is Not part of the primary activities in a value chain model?
A. Operations
B. Service
C. Technology
D. Sales and marketing

43. TQM is an acronym for which of the following?
A. Total Quantity Monitoring
B. Total Quality Management
C. Total Quantity Management
D. Total Quality Monitoring

44. How information systems improve Quality?
  1. Reduce cycle time and simplify the production process
  2. benchmark
  3. use customer demands to improve products and services.
  4. improve design quality and precision
  5. improve production precision and tighten production tolerances

45. Which of the following are not weakness that a new market entrant has?
  • a. locked into old plants and equipments
  • b. workers who are less experienced
  • c. depending on outside financing for plants and equipment
  • d. little brand recognition

46. What force is not recognized in Porter's competitive forces model?
a) New market entrants
b) Prices (pg. 82)
c) Customers
d) Substitute products

47. What strategy focuses on enhancing quality while producing at a lower price?
a) Product differentiation
b) Customer and supplier intimacy
c) Low-cost leadership (pg. 84)
d) Focus on market niche

48. What is the general idea of a synergy?
a) using IT to become a world-class leader
b) when a firm can use an output of one unit as an input of another (pg. 94)
c) using the law of diminishing returns
d) avoiding disruptive technologies

49. What system strategy heavily centralizes corporate activities in the country of origin?
a) Domestic exporter strategy (pg. 99)
b) Franchising strategy
c) Transnational strategy
d) Multinational strategy

50. What is one way a firm can improve the quality of its product or service?
a) lower prices
b) increase demand
c) improve customer relationships

51. The creation and revision of design is
A. Business process re-engineering (Answer p.103)
B. Computer-aided design system
C. Work flow management
D. Cycle Time

52. Work flow management is
A. the creation and revision of designs
B. Process of streamlining business procedures (Answer p.103)
C. the total time elapsed
D. improves products and services

53. What has disruptive impact on industries and businesses?
A. Virtual company
B. Core competency
C. Disruptive technologies (Answer p.96)
D. Network economics

54. What highlights specific activities in the business where competitive strategies can best be applied?
A. Customer Response system
B. Value Chain model (Answer p.91)
C. Value web model
D. None of the above

55. What's directly related to the production and distribution of a company's products and services?
A. Support activities
B. Secondary activities
C. Primary activities (Answer p.92)
D. Best Practices

56. In the Value Chain Model, what activities are directly related to the production and distribution of the firm's product's and services, which create value for the customer?
a. Support Activities
b. Best Practices
c. Benchmarking
d. Primary activities (pg 92)
e. Inbound Logistic

57. What automates the creation and revision of designs, using computers and sophisticated graphics software?
a. CAD (Computer-Aided Design) system (pg 102)
b. BPR (Business Process Reengineering)
c. TQM (Total Quality Management)
d. Benchmarking
e. None of the Above

58. What is the ability to offer individually tailored products or services using the same production resources as mass production?
a. Market Niche
b. Mass Customization (pg 86)
c. Production Differentiation
d. Efficient Response System
e. Benchmark

59. What makes quality the responsibility of all people and functions within an organization?
a. Total Quality Management (TQM) (pg 100)

b. Cycle Time
c. CRM
d. Transnational
e. Franchisers

60. What is the process of streamlining business procedures so that documents can be moved easily and efficiently?
a. Business Process reengineering (BPR)
b. Computer-Aided design (CAD) system
c. Workflow Management (pg 103)
d. Virtual company
e. Disruptive technologies

61. What uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations?
a. Synergy
b. Core Competencies
c. Network Economics
d. Disruptive Technology
e. Virtual Company (pg 95)

62. What is an activity for which a firm is a world class leader and it relies on knowledge that is gained over many years of experience?
a. network economics
b. Virtual Company
c. Workflow Management
d. Core Competency (pg 94)
e. Disruptive Technologies

63. What makes the delivery of primary activities possible and consist of organization infrastructure, human resources, technology and procurement?
a. Support Activities (pg 92)
b. Primary Activities
c. Benchmarking
d. Best Practices
e. Value Web

64. Which of the following is not a type of configuration system for global busienss organizations?
a. Centralized Systems
b. Coordinated Systems (p. 99)
c. Networked Systems
d. Decentralized Systems
e. Duplicated Systems

65. Business Process Re-engineering involves...
a. the use of technology alone
b. minor adjustments to business processes
c. eliminating repetitive and redundant work
d. radical adjustments to business processes
e. c and d (p. 103)

66. It is a specific measure of quality that represents 3.4 defects per million opportunities:
a. Work flow Management
b. Networked Systems
c. Six Sigma (p. 100-101)
d. Benchmarking
e. Business Process Re-engineering

67. All of the following are Competitive Strategies except:
a. Low-Cost Leadership
b. Product Differentiation
c. Focus on Market Niche
d. Quality Differentiation (p. 88)
e. Customer and Supplier Intimacy

68. Which of the following companies best describes a what a franchise is?
a. General Motors
b. Deloitte
c. Citigroup
d. McDonald's
e. Sony

69. Which of the following is NOT one of the forces affecting the firm according to Porter's Model? (p. 82)
A.) Economy
B.) Competitors
C.) Substitute products
D.) Low cost Leadership
E.) Customers

70. A global business strategy characterized by heavy centralization of corporate activities in the home country of origin best describes? (p. 99)
A.) Franchise
B.) Transnational
C.) Domestic Exporter
D.) Multinational
E.) None of the Above

71. An activity or service for which a firm is a worldwide leader is known as what? (p. 94)
A.) Strength
B.) Core competency
C.) Synergy
D.) Virtual company
E.) None of the above

72. Best practices within an industry are usually identified by all of the following except? (p. 93)
A.) Consulting companies
B.) Synergies
C.) Government agencies
D.) Industry associations
E.) Church doctrine

73. The process of streamlining business procedures so that documents can be moved easily and efficiently is known as which of the following? (p. 103)
A.) Business process re-engineering
B.) Total quality management (TQM)
C.) Workflow management
D.) Benchmarking
E.) Product cycle time

74. The domestic exporter strategy is characterized by:
A. Centralization of corporate activities in a foreign country.
B. Relying primarily on production management to optimize resources.
C. Dispersal of power and financial muscle throughout global divisions.
D. Heavy centralization of corporate activities in the home country of origin.

75. A multinational strategy concentrates on:
A. Centralizing production, sales, and marketing operations.
B. Financial management and control out of a central home base.
C. Being a home-based confederation of production and marketing facilities.
D. Not adapting products and services on sale in different countries.

76. Which of the following best describes not having a single national headquarters but instead having many regional or world headquarters:
A. Multinational Strategy
B. Franchisers
C. Transnational Strategy
D. Domestic Exporter Strategy

77. Decentralized systems are:
A. Those in which each foreign unit designs its own unique solutions and systems.
B. Those that develop a single system, usually at the home base.
C. Those that do not allow foreign units to design their own unique solutions and systems.
D. Those that use networked systems that span to multiple countries using powerful telecommunications networks and a shared management culture that crosses cultural barriers.

78. What do firms pursuing a global strategy benefit from?
A. Increase in wage cost.
B. Economies of scale, resource and wage cost reduction.
C. Increase in resource cost.
D. Centralized Systems

79. Networked systems are:
A. Those in which development and operation occur at the home base but operations are handed over to autonomous units in foreign locations.
B. Those in which systems development and operations occur in an integrated and coordinated fashion across all units.
C. Those that have the product created, designed, financed, and initially produced in the home country.
D. Those characterized by heavily centralization of corporate activities in the country of origin.

The Internet and Globalization
Because many firms have been forms of monopolies and other that holded monopoly power through their large assets, the internet has changed that for new industries and businesses. For example, now companies and businesses have the ease to contact their suppliers within minutes through online communications such as private chat rooms, email, web based cellphones, and video conferencing. Businesses that have the ease of these communications face a competitive advantage over other older businesses that use to be monopolies or had monolopy power. Having new generations of new techolgies, the internet is the most used by many consumers today that has transformed Internet communication has created efficiency. Ease of the world wide web is transforming businesses into competitve markets. Because the internet is also used for e-commerce, many companies face low to zero operational costs to sell digital goods, which raises large revenues and decreases expenses.


1) Do you think the internet is transforming today's businesses?
A. Yes
B. No
C. It depends
D. None of the above

2) What are the types of communications performed in the world-wide web?
A. Chats
B. Email
C. Nothing yet
D. Only A and B

3) What events are currently occurring on the web?
1) E-commerce
2) Trading
3) Buying
4) All of the above

4) How can businesses face a competitive advantage?
1) Having the ease to the internet
2) Selling stock
3) Buying of property
4) All of the above