1231223

CHAPTER 2

INFORMATION SYSTEM FOR COMPETITIVE ADVANTAGE

THE FIRM AND ITS ENVIRONMENT

FIRM is a physical system that is managed through the use of a conceptual system. The physical system of the firm is an open system in that it interfaces with its environment. A firm takes resources from its environment, transforms the resources into products and services, and returns the transformed resources to its environment.

THE GENERAL SYSTEMS MODEL OF THE FIRM

GENERAL SYSTEMS MODEL OF THE FIRM is a diagram that shows the flow of resources from the environment, through the firm and back to the environment. The flow of the physical resources is at the bottom and the flow of the conceptual resources is at the top.

Figure 1. The General Systems Model of the Firm

THE PHYSICAL RESOURCE FLOW. It includes physical resources such as personnel, materials, machines, and money. While in the firm, all the physical resources are used to produce the firm’s products and services to its customers.

THE CONCEPTUAL RESOURCE FLOW. The arrows in the upper part of the diagram show the flows of conceptual resources – data, information, and information in the form of decisions. A two-way flow of data and information that connects the firm to its environment is at the right.

THE FIRM’S CONTROL MECHANISM. The elements that enable the firm to operate as a closed-loop system are shown in the upper portion of the diagram. A CLOSED-LOOP SYSTEM is one that can control itself by means of a control mechanism and feedback loop.

ELEMENTS OF CONTROL MECHANISM

1. The standards of performance that the firm is to meet if it is to accomplish its overall objectives,

2. The management, and

3. An information processor that transform data into information

THE FEEDBACK LOOP. The feedback loop is composed of the conceptual resources.

THE USEFULNESS OF THE MODEL. The general...