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Table of Contents
ABSTRACT……………………………………………………………………...…. 3
1. Introduction………………………………………………………………...………. 4
1.1 7-Eleven case……………………………………………………………………. 4
1.2 Zara case………………………………………………..…………….…………. 5
1.3 Swissair case………………………………………………………….…………. 5
1.4 Beta case………………………………………………………………………… 6
2. Information systems gain competitive advantage……...………………………… 7
2.1 Porter and competitive advantage ….…………….………………………......... 7
2.2 Internal and external factors influence competitive advantages ………………... 9
2.3 Sustain competitive advantage ……..…………………………….…………….. 9
2.4 Competitive advantage diminish ………………………………………………... 9
3. Success or failure factors of information systems………………………………... 10
3.1 Trust……………………………………………………………………………... 10
3.2 Strong motivation……………………………………………………………….. 10
3.3 Consensus on IS mission………………………………………………………… 10
3.4 Business process reengineering…………………………………………………. 10
3.5 Advanced legacy IS infrastructure……………………………………………… 10
3.6 Cross-organizational team………………………………………………………. 10
3.7 Enough preparation and 10
coordination…………………………………………….
3.8 Excellent project management and maintenance.....…………………………….. 11
4. Success metrics……………………………………………………………………... 12
5. Conclusion……………………………….....………………………………….....… 13
6. References………………………………………….....…………………………….. 14

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ABSTRACT
This report studied two success information systems cases, 7-Elven and Zara also two
failure information systems cases, Swissair and Beta. By using Porter’s value chain
and Porter’s five force model (Porter and Millar 1985) approaches, I examined the use
of information systems for gaining competitive advantages. In addition, I analyzed the
sustainability of the competitive advantages.
Since successful information systems can enhance organization’s competitive
advantages, I summarized success factors for information systems and lessons learned
from the two failure information systems cases.
To evaluate the success of information systems, I adopted some notions of
information systems as success metrics.
After finishing this report, I am in agreement with that in today’s computerized
society every organization need a sophisticated “information system” to compete in
the business world (Munir et al 2011).

1. Introduction
The purpose of this report is to discuss how strategic information systems can bring
competitive advantage to organizations. The information revolution affects all of our
economic activities today; it dramatically reduces the cost of obtaining, processing
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and transmitting information. At the same time, the information revolution changes
the way we do business (Porter and Millar 1985). I believe information systems can
give companies competitive advantage, nevertheless, Griffiths (1995) concludes
major IT projects offer the potential for huge returns, yet very few seem to come to
successful conclusions. Hayes (1996) also states that many information systems are
trapped in a downward spiral by consuming more valuable time and resources to
resolve the problem occurred by the information system itself instead to work on
actual service. I will go through case study to find what we can do to ensure the
information systems giving competitive advantages to an organization and minimize
the failure of information systems.
1.1. 7-Eleven case
Adopt from Website of Athens University of Economics and Business,
Information Systems Management - 7-Eleven Case Study (2011) states 7-
Eleven, Inc. is the world’s largest operator, franchisor and licensor of the
convenience stores with more than 24,000 units worldwide. In the early 1990s
7-Eleven Japan created a $200 million information system for its stores. The
purpose of the system was to (1) discover who the customers are and what
they want and (2) create a sophisticated product tracking system. The
information system is also used to monitor the inventories. It allows 7-Eleven
to keep a minimum inventory and enable their suppliers to deliver the products
just-in-time. Other uses of the information system are to (1) electrically
transmit orders to distribution centers and manufacturers (via satellite), (2)
determine which products to keep in each store, (3) determine how much shelf
space to allocate to each product, and (4) track employee performance.
In addition, the company focus heavily on quality control, even the company’s
president goes into stores to check the quality sometimes. The quality control
data is collected and analyzed continuously by a computerized decision
support system at headquarters.
As a result of its information system, 7-Eleven know exactly what the market
needs. This enhances 7-Eleven’s bargain power and enables them to get better
prices and high quality products. Thus 7-Eleven can make 40 percent profit on
sales; this is extremely unusual high level of profit.

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1.2. Zara case
Zara is one of the largest international fashion companies. Gallaugher (2010)
states in his book that Zara tripled in size between 1996 and 2000, then their
sales skyrocketed from $2.43 billion in 2001 to $13.6 billion in 2007.
The success of Zara is from highly vertically integrated information systems.
The information systems enable Zara to make sure stores carry the kinds of
things customers want to buy. One of the main job tasks of Zara’s store
manager is to gather customer feedback. Zara’s staff might casually ask: What
if this skirt was in a longer length? Would you like it in a different color? What
if this v-neck blouse were available in a round-neck? Another level of data
gathering starts once the door close. All staff turn into trend-spotting
discussions, they will find the preferences or disappointments in cloth, color or
style offered among the products in stock. All the information will be put into
the handheld personal digital assistants (PDAs). PDAs are also linked to the
store’s point-of-sale (POS) system, showing how garments rank by sales. All
of this valuable data allows the organization to plan styles and issue re-buy
orders based on customer feedback. Zara can precisely understand the market
needs through the information systems.
1.3. Swissair case
Sauer (1994) reports the failure of information systems developed by Swissair.
Swissair wanted a personnel and payroll system, and the system developers
were asked to work with two departments: personnel and finance, however the
two departments had different objectives, which led to conflicting
requirements of the system. After a review of the situation by the company, the
initial budget of 5.3 million Swiss Francs needed to be supplemented with a
further 3.6 million Swiss France, reducing the return on investment by 3% to
zero. Finally the whole project was terminated.

1.4. Beta case

Bartis and Mitev (2008) report the information systems failure from Beta. Beta
is a subsidiary of a large FMCG multinational, in a European country. The
company operates a factory in a remote area with production in three shifts. To
maintain the competitive advantage, Bata need to adopt a more flexible

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 manufacturing schedule. As a result, the work-time and holiday planning was
a problem for both employees and their managers.
In January 2004, Beta decided to use an electronic work time registration
(WTR) system to replace manual recording of work attendance. All
employees’ working hours and attendance need registering in the same WTR
system. But different group of employees have different interests. The
manufacturing works receive wages according to flexible working hours, thus
they have interests in filling-in the data. While manager level employees
receive fixed salary, they have no interests in filling data daily.
The project started in February 2004 and there were no significant results
within eight months. The then project manager resigned, and new project
manager was appointed in November 2004. At the beginning, the new project
manager was told that everything was ready to launch. Half month later the
project manager was told that she needed to sort out few technical problems.
The project manager found that the user interface was not user-friendly and
had a completely different inherent logic compared to other administrative
systems in the company and few users had forgotten their passwords. The
project manager organized training courses for different groups people, then
the system was launched on 2 January 2005 for factory employees. Second
day, all data was lost from the system, due to a server problem. In March and
April, the system was rolled out to sales forces working in remote depots. The
technical problems appeared widely and server was overloaded. Officially, the
project phase ended in June 2005

2. Information systems gain competitive advantage

2.1 Porter and competitive advantage
Marketing is to create and deliver value. Kotler et al. (2010) concludes three
step value creation and delivery process is, choose the value, provide the value
and communicate the value. Kotler & Amstrong (1999) also concludes
consumers will base their judgment of a product value on the prices that
competitors charge for similar products. In view of the fact, Porter and Millar

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 (1985) concludes information systems gain competitive advantage through the
firm’s value chain. Information systems can either reduce the cost of
producing value, or create value exceeding customer’s value perception of
what they received. Porter and Millar (1985) concludes a company’s value
activities into a value chain process, which illustrate in Figure 2.1 below.
Figure 2.1
The Value Chain
Support Firm
activities Infrastructur
e
Human
resource
management
Technology
development
Procurement
Inbound Operations Outbound Marketing Service
logistics logistics and sales

Primary Margin
activities
Information systems can permeate the value chain at every point enabling a
company to achieve competitive advantage in three ways.
First, advancement in information systems are changing the industry structure.
The industry structure is constrained by five competitive forces and
determines industry profitability. The five forces are the power of buyers, the
power of suppliers, threat of new entrants, threat of substitute products, and
the rivalry among existing customer as illustrated in below figure 2.2 adopted
from Baltzan et al. (2010).
Figure 2.2
Porter’s Five Forces Model
Threat of Substitute
Products or Services
Buyer Power
Supplier Power Bargaining power of
Rivalry among Existing
Bargaining power of channels
Competitors
suppliers Bargaining power of end
users
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 Threat of New
Entrants
In 7-Eleven’s case, the IS discover who the customers are and what they want.
Because of this 7-Eleven is able to supply exactly customers’ wants and needs
better than their competitors. The IS also create a sophisticated product
tracking system to enable 7-Eleven minimize their inventory, therefore
reducing the cost of their value creation. In Zara case, the PDAs linked to POS
system, enable Zara to act faster than their competitors and provides excessive
value higher above customers’ perception. Both case prove IS can gain
competitive advantage.
Second, information systems are, a more and more important lever that a
company can use to achieve competitive advantage. In 7-Eleven case, IS
enable the firm to electrically transit orders to distribution centers and
manufacturers to improve efficiency and reduce manpower cost. Because of
this, 7-Eleven gains competitive advantage.
Finally, advance in information system can spawn completely new business. In
Zara case, most fashion retailers place orders for a seasonal collection months
before these lines make an appearance in stores. With advance IS, Zara can
feedback customer wants, precisely to their design and production center and
deliver the goods to their retail shop in very short time, hence Zara gains
competitive advantage.

2.2 Internal and external factors influence competitive advantages

From Porter’s value chain approach and five forces model, we can find both
internal and external factors can influence an organization gaining competitive
advantages. Companies use of information systems can enhance their bargain
power to suppliers and buyers, because they know more than their suppliers
and buyers. The bargain power can be categorized into external factors.
However in general, internal factors are more critical. In the four cases
illustrated in this paper, all the information systems depend on data input.
When a new information system was implemented, it definitely requested
some changes to internal staff to collect data and upload to the system.
Because resistance to changes is human norm, if the organization can’t
overcome the resistance, the information system will fail. This is the lesson we
learnt from Beta case. Hence competitive advantages can’t be achieved.
2.3 Sustain competitive advantage
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 Base on analysis in previous paragraph, we can attribute 7-Elven gain
competitive advantage by adopting a cost leadership strategy and Zara by
using differentiation strategy. Porter (2004) argues that the fundamental basis
for above average performance in the long run is sustainable competitive
advantage. In 7-Eleven case, through the information systems, they are able to
seek out and exploit every source of potential cost advantage. Thus they are a
cost leader; a cost leader is able to sustain competitive advantage.
In Zara case, through the information system, they are able to position them
self uniquely to meet customers’ needs. The uniqueness enables Zara to
sustain their competitive advantage.
2.4 Competitive advantage diminish
Scholar Nicholas (2004) argues while information technology has become the
backbone of any business, the importance of IS as a strategic resource capable
of gaining sustainable competitive advantage has diminished. I disagree this
statement. All companies use information systems today, most of companies
may use IS as data storage, data processing and data transfer. At this stage, the
IS will not gain competitive advantage for sure. The companies who can use
IS to analyse data and provide useful information will definitely gain
sustainable competitive advantage, such as 7-Eleven and Zara.

3. Success or failure factors of information systems

Rockart (1979) defines CSFs as those few key areas of activity in which favorable
results are absolutely necessary for a particular company to reach its goals. Lu et al.
(2005) attributes few critical success factors of information systems, I will use the
factors to illustrate the success or failure of IS.
3.1 Trust
In Beta case, all data was lost from the system, hence most user don’t trust the
IS and they will choose not use the system. Without trust, IS can’t success.
3.2 Strong motivation
In 7-Eleven case, the company’s president occasionally goes into the store to
check the quality and collect the data. This is strong motivation leads the IS
success.
3.3 Consensus on IS mission
In Swissair case, the objectives of IS are different between personnel and
finance department, which led conflicting requirements of the system and
cause the IS failure.
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3.4 Business process reengineering
In Zara case, most fashion retailers place orders for a seasonal collection
months before these lines make an appearance in stores. Zara reengineering
their business process by design and produce the items according to
customers’ feedback immediately.
3.5 Advanced legacy IS infrastructure
In Zara case, store managers collect the data and upload to PDAs and PDAs
are also linked to their POS system. This advanced legacy IS infrastructure
leads the IS success.
3.6 Cross-organizational team
In Zara case, the data was collected by frontline sales and store managers and
then transfer to their design team in headquarters. This cross-organizational
team ensure the IS success.
3.7 Enough preparation and coordination
In 7-Eleven case, they create $200 million information system for its stores.
This enough preparation leads the IS success.

3.8 Excellent project management and maintenance

In Beta case, when the user group increased, they found the server was
overload. This is a bad project management and maintenance, because of this,
the IS failure.
Various other factors than illustrated above can influence the success or failure using
IS and internet, such as size, geographical location and development level. For
example, many information systems in developing countries can be categorized as
failure either totally or partially (Heeks 2002). The reason may be lack of literature in
general.

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4. Success metrics
The fundamental success metrics will be a financial report of return on investment.
Some information systems may not be able to measure quantitatively, and then we
may review its notions. Lyytinen and Hirschheim (1987) conclude four major notions
of IS.
First correspondence, when the system design objectives can be met, the IS is
considered success.
Second process, if an IS can be developed within an allocated budget, and/or time
schedule, the IS is considered success.
Third interaction, a success IS must be at expected level of end-user usage.
Forth expectation, a success IS must be able to meet its stakeholders’ requirements,
expectations, or values.

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5. Conclusion
In conclusion, organizations are able to gain competitive advantage through
information systems, and this competitive advantage is sustainable. But most
information systems projects failed according to recent studies (Yeo 2002). Hence we
have to learn from experiences from existing success and failure cases, we then can
pay more attention to the critical success factors during developing information
systems. In general, success information systems can be evaluated by financial results.
I belief it also can be evaluated by nonquantitatively notions.
From the discussion in this paper, I found that internal factors will determine whether
the information systems can enhance an organization’s competitive advantage. I
would say people are the kenel of the information systems. No matter how advanced
hardware and software used by an organization, if the people are not willing to use it,
then the information systems will completely fail, so that competitive advantage can’t
be achieved.

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6. References
Baltzan, P, Phillips, A & Hagg, S 2010, Business Driven technology, 4 edn, McGraw
Hill Companies, Boston, MA.
Bartis, E and Mitev, N 2008, A multiple narrative approach to information systems
failure: a successful system that failured. European Journal of Information Systems,
no. 2, (April 1): 112-124. http://www.proquest.com.ezproxy.scu.edu.au/ (accessed
September 17, 2011).
Carr, N 2004, Does IT Matter? Information technology and the Corrosion of
competitive Advantage, 1 edn, Harvard Business Press.
Gallaugher, J 2010, Information Systems: A manager’s Guide to Harnessing
Technology, 1.2 edn, Flat World Knowledge, Inc.
Griffiths, C 1995, ‘Terminal Failures. Computer system disasters have cost billions
and dinosaur bosses must take the blame’. London: Independent on Sunday, 3rd
December.
Hayes, R 1996, ‘Moving IS beyond conflict’, The Journal of Systems Management,
May 1996.
Heeks, R 2002, Information Systems and Developing Countries: failure, Success, and
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%20developing%20countries.pdf (accessed September 18, 2011).
Information Systems Management – 7-Eleven Case Study, Athens University of
Economics And Business, http://e-learning.dmst.aueb.gr/mis/Cases/7-
Eleven/index.htm (accessed September 17, 2011).

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Kotler, P & Armstrong, G 1999, Principles of Marketing, 8 edn., Prentice-Hall Inc.,
Upper Saddle River, New Jersey.
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