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Chapter 3 Information Systems, Organizations, Management, and Strategy 3-1

Chapter 3
Information Systems, Organizations, Management, and Strategy

True-False Questions
1. The interaction between information technology and organizations is simple and is not
influenced by other mediating factors.

Answer: False Difficulty: Easy Reference: p. 72

2. E-mail and instant messaging have become a dominant form of business communication.

Answer: True Difficulty: Easy Reference: p. 72

3. An organization is less stable than an informal group in terms of longevity and routines.

Answer: False Difficulty: Easy Reference: p. 73

4. Organizations are social structures.

Answer: True Difficulty: Medium Reference: p. 73

5. The technical and behavioral definitions of organizations are contradictory.

Answer: False Difficulty: Medium Reference: p. 74

6. Peter Drucker was the first person to describe the ideal-typical characteristics of an
organization.

Answer: False Difficulty: Easy Reference: p. 74

7. Standard operating procedures are precise rules, procedures, and practices that have been
developed to cope with virtually all expected situations.

Answer: True Difficulty: Easy Reference: p. 75

8. Organizations that survive over time become less efficient.

Answer: False Difficulty: Medium Reference: p. 75

9. Organizational culture restrains political conflict and promotes common understanding,


agreement on procedures, and common practices.

Answer: True Difficulty: Easy Reference: p. 76


3-2 Information Systems, Organizations, Management, and Strategy Chapter 3

10. Organizations generally have more features in common with each other than they have
unique features.

Answer: False Difficulty: Easy Reference: p. 78

11. It is the systems analysts job to translate business problems and requirements into
information requirements and systems.

Answer: True Difficulty: Easy Reference: p. 80

12. The role of the CFO is a senior management position that oversees the use of information
technology in a firm.

Answer: False Difficulty: Medium Reference: p. 80

13. By reducing overall management costs, information technology enables firms to increase
revenues while shrinking the number of middle managers and clerical workers.

Answer: True Difficulty: Medium Reference: p. 82

14. In virtual organizations, work is tied to geographic location.

Answer: False Difficulty: Easy Reference: p. 83

15. Micromarketing can help companies pinpoint tiny target markets for finely customized
products and services.

Answer: True Difficulty: Easy Reference: p. 84

16. Research on project implementation failures demonstrates that the most common reason for
failure of large projects to reach their objectives is organizational and political resistance to
change.

Answer: True Difficulty: Easy Reference: p. 85

17. The classical model of management is still popular today.

Answer: True Difficulty: Easy Reference: p. 86

18. Managers do not behave as the classical model of management has led us to believe.

Answer: True Difficulty: Easy Reference: p. 86

19. Mintzberg has defined the five modern attributes of managerial behavior.

Answer: False Difficulty: Hard Reference: p. 87

20. Information systems provide only limited assistance for management decision making.

Answer: True Difficulty: Easy Reference: p. 88


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-3

21. The rational model of human behavior is built on the idea that people engage in basically
consistent, rational, value-maximizing calculations.

Answer: True Difficulty: Easy Reference: p. 88

22. People tend to choose the first available alternative that moves them toward the ultimate
goal, not necessarily the alternative that is best.

Answer: True Difficulty: Easy Reference: p. 88

23. Understanding the environment in which an organization must function is not relevant when
building a new information system.

Answer: False Difficulty: Easy Reference: p. 89

24. According to bureaucratic models of decision making an organizations most important goal
is the preservation of the organization.

Answer: True Difficulty: Easy Reference: p. 89

25. If an information system is not built with a clear understanding of the organization and a
clear understanding of exactly what is expected of it, it will not be able to deliver genuine
benefits.

Answer: True Difficulty: Easy Reference: p. 89

26. The value chain model classifies all company activities as either primary or support.

Answer: True Difficulty: Medium Reference: p. 91

27. In the value chain model, primary activities are most directly related to the production and
distribution of the firms products and services that create value for the customer.

Answer: True Difficulty: Medium Reference: p. 91

28. Digitally enabled networks can be used not only to purchase supplies but also to closely
coordinate production of many independent firms.

Answer: True Difficulty: Medium Reference: p. 91

29. Many of information technology-based products and services were developed originally by
financial institutions.

Answer: True Difficulty: Easy Reference: p. 93

30. One way an organization can increase profitability and market penetration is to mine existing
data.

Answer: True Difficulty: Easy Reference: p. 94


3-4 Information Systems, Organizations, Management, and Strategy Chapter 3

31. The just-in-time supply method allows stockless inventory.

Answer: False Difficulty: Hard Reference: p. 96

32. Supply chain management and efficient customer response systems allow digital firms to
engage in business strategies not available to traditional firms.

Answer: True Difficulty: Easy Reference: p. 96

33. The idea driving synergies is that when the output of some units can be used as inputs to
other units, the relationship can lower cost and generate profits.

Answer: True Difficulty: Easy Reference: p. 97

34. The competitive forces model was created for todays digital firm.

Answer: False Difficulty: Hard Reference: p. 99

35. In the age of the Internet, Porters traditional competitive forces model is still at work, but
competitive rivalry has become much more intense.

Answer: True Difficulty: Easy Reference: p. 99

36. Customers are one of the competitive forces that affect an organizations ability to compete.

Answer: True Difficulty: Easy Reference: p. 99

37. Business ecosystems typically have one or a few keystone firms that dominate the ecosystem
and create the platforms used by other niche firms.

Answer: True Difficulty: Medium Reference: p. 100

38. The law of diminishing returns always applies to digital, as well as traditional companies.

Answer: False Difficulty: Medium Reference: p. 101

39. The more people that use Microsoft Office software and related products, the greater its
value.

Answer: False Difficulty: Medium Reference: p. 102

40. The competitive advantages strategic systems confer usually last long enough to ensure long-
term profitability.

Answer: False Difficulty: Easy Reference: p. 103


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-5

Multiple-Choice Questions
41. The interaction between information technology and organizations is very complex and
is influenced by a great many mediating factors, including the organization structure,
business processes, politics, culture, management decisions and:

a. the surrounding environment.


b. the economic basis of the company.
c. the availability of trained employees.
d. the cash flow within the company.

Answer: a Difficulty: Easy Reference: p. 72

42. A stable, formal social structure that takes resources from the environment and processes
them to produce outputs is called a(n):

a. micro system.
b. organization.
c. bureaucracy.
d. value chain.

Answer: b Difficulty: Easy Reference: p. 73

43. _____________________ are common features of all organizations.

a. Culture, routines, and politics


b. Power, technology, and business processes
c. Formal structure, politics, and goals
d. Formal structure, function, and environments

Answer: a Difficulty: Hard Reference: p. 74

44. The behavioral view of organizations emphasizes group relationships and


____________.

a. values
b. abstract rules and procedures
c. structures
d. Both a and c

Answer: d Difficulty: Medium Reference: p. 74


3-6 Information Systems, Organizations, Management, and Strategy Chapter 3

45. In 1911, this German sociologist called organizations bureaucracies:

a. Max Webber
b. Franz Kafka
c. Anne Frank
d. Paul Gerhardt

Answer: a Difficulty: Medium Reference: p. 74

46. Virtually all information systems that bring about significant changes in goals,
procedures, productivity, and personnel are:

a. doomed to failure.
b. going to elicit serious political opposition.
c. going to require a CIO.
d. unnecessary.

Answer: b Difficulty: Easy Reference: pp. 75-76

47. Routines for producing goods and services are sometimes called:

a. bureaucratic structures.
b. standard operating procedures.
c. routine tasks.
d. formal structures.

Answer: b Difficulty: Medium Reference: p. 75

48. Collections of routines for producing goods and services are referred to as:

a. business processes.
b. work with routine tasks.
c. standard reporting procedures.
d. mediating factors.

Answer: a Difficulty: Medium Reference: p. 75

49. The greatest difficulty of bringing about organizational change especially the
development of new information systems is:

a. computerizing manual systems.


b. recruiting qualified employees.
c. political resistance.
d. perceiving environmental change.

Answer: c Difficulty: Medium Reference: p. 76


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-7

50. Fundamental assumptions about what products the organization should produce, how it
should produce them, where, and for whom is known as:

a. motivational factors.
b. organizational culture.
c. business processes.
d. standard operating procedures.

Answer: b Difficulty: Medium Reference: p. 76

51. Mintzberg classifies ______________________basic kinds of organizational structures.

a. five
b. six
c. seven
d. eight

Answer: a Difficulty: Easy Reference: p. 76

52. According to Mintzberg, a ______________________ is an example of a professional


bureaucracy structure.

a. midsize manufacturing firm


b. law firm or school system
c. consulting firm
d. small start-up business

Answer: b Difficulty: Easy Reference: p. 77

53. According to Mintzberg, a ______________________ is an example of a divisionalized


bureaucracy structure.

a. midsize manufacturing firm


b. law firm or school system
c. small start-up business
d. very large established company

Answer: d Difficulty: Easy Reference: p. 77

54. Only ______________________ percent of the Fortune 500 companies of 1919 still
exist today.

a. 10
b. 20
c. 30
d. 40

Answer: a Difficulty: Hard Reference: p. 77


3-8 Information Systems, Organizations, Management, and Strategy Chapter 3

55. These information specialists constitute the principal liaisons between the information
systems groups and the rest of the organization:

a. systems analysts.
b. programmers.
c. end users.
d. Web-page developers.

Answer: a Difficulty: Easy Reference: p. 80

56. The role of ______________________ is a senior management position that oversees the
use of information technology in the firm.

a. CTO
b. CFO
c. CIO
d. CEO

Answer: c Difficulty: Easy Reference: p. 80

57. Information systems managers are:

a. highly-trained technical specialists who write computer software instructions.


b. specialists who translate business problems and requirements into information
requirements and systems.
c. leaders of the various specialists in the information system department.
d. in change of the information systems function in the organization.

Answer: c Difficulty: Easy Reference: p. 80

58. ______________________ are representatives of departments outside of the information


systems group for whom applications are developed.

a. End users
b. Programmers
c. Analysts
d. IS managers

Answer: a Difficulty: Easy Reference: p. 80

59. Although ____________________ theories try to explain how large numbers of firms act
in the marketplace, __________________________ theories are more useful in
describing the mechanics of actual firms.

a. behavioral; transaction
b. economic; behavioral
c. economic; agency
d. agency; behavioral

Answer: b Difficulty: Hard Reference: p. 81


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-9

60. __________________________organizations use networks to link people, assets, and


ideas. Work is no longer tied to geographic location.

a. Hierarchical
b. Vertical
c. Virtual
d. Manufacturing

Answer: c Difficulty: Easy Reference: p. 83

61. __________________________is the ability to offer individually tailored products or


services using the same production resources as bulk production.

a. Mass customization
b. Size customization
c. Magnitude customization
d. Dimension customization

Answer: a Difficulty: Easy Reference: p. 84

62. Managers as planners, organizers, coordinators, decision makers, and controllers


describe the principles of the:

a. classical model of management.


b. interpersonal model of management.
c. transactional model of management.
d. virtual organization.

Answer: a Difficulty: Medium Reference: p. 86

63. For the manager, no technological support systems exist for the managerial roles of:

a. liaison or negotiator.
b. spokesperson or resource allocator.
c. entrepreneur or nerve center.
d. figurehead or disturbance handler.

Answer: d Difficulty: Hard Reference: p. 87

64. According to the Mintzberg model of management, managerial roles are:

a. where managers initiate activities, handle disturbances, allocate resources, and


negotiate conflict.
b. where managers act as figureheads and leaders for the organization.
c. where managers act as a liaison, disseminating and allocating resources.
d. the expectations of the activities that managers should perform in an organization.

Answer: d Difficulty: Easy Reference: p. 87


3-10 Information Systems, Organizations, Management, and Strategy Chapter 3

65. According to the Mintzberg model of management, interpersonal roles are:

a. where managers initiate activities, handle disturbances, allocate resources, and


negotiate conflict.
b. where managers act as figureheads and leaders for the organization.
c. where managers act as a liaison, disseminating and allocating resources.
d. the expectations of the activities that managers should perform in an organization.

Answer: b Difficulty: Easy Reference: p. 87

66. According to the __________________________model of human behavior, an


individual identifies goals, ranks all possible alternatives actions by their contributions to
those goals, and chooses the alternative that contributes most to those goals.

a. hierarchical
b. rational model
c. choice model
d. decisional model

Answer: b Difficulty: Easy Reference: p. 88

67. At the business level the most common analytical tool for identifying opportunities for
strategic systems is:

a. DSS.
b. the value web.
c. ESS.
d. value chain analysis.

Answer: d Difficulty: Medium Reference: p. 91

68. A ______________________ is a collection of independent firms that use information


technology to coordinate their value chains to produce a product or service for a market
collectively.
a. portal
b. business link
c. value web
d. primary activity

Answer: c Difficulty: Medium Reference: p. 91


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-11

69. When a firm provides a specialized product or service for a narrow target market better
than competitors, they are using a:
a. product differentiation strategy.
b. focused differentiation strategy.
c. value web strategy.
d. customization strategy.

Answer: b Difficulty: Medium Reference: p. 93

70. The cost of acquiring a new customer has been estimated to be _____________ times
that of retaining an existing customer.

a. three
b. six
c. five
d. seven

Answer: c Difficulty: Easy Reference: p. 94

71. Which of the following is most likely to raise switching costs:

a. just-in-time supply method.


b. stockless inventory method
c. traditional delivery method
d. vendor-supported supply method

Answer: b Difficulty: Medium Reference: p. 96

72. When the output of some units can be used as inputs to other units, or if two
organizations pool markets and expertise that result in lower costs and generate profits it
is often referred to as creating:

a. digital strategies.
b. switching costs.
c. synergies.
d. low-cost producer strategies.

Answer: c Difficulty: Easy Reference: p. 97

73. Which of the following is not an example of firm-level strategy:

a. an information system integrating the operations of a company and its subsidiaries


b. an information system for knowledge-sharing
c. an information system for cross-marketing among a firm and its subsidiaries
d. an information system enabling a firm and its suppliers to share order status data

Answer: d Difficulty: Medium Reference: p. 97


3-12 Information Systems, Organizations, Management, and Strategy Chapter 3

74. An information system can enhance core competencies by:

a. providing better reporting facilities.


b. creating educational opportunities for management.
c. allowing operational employees to interact with management.
d. encouraging the sharing of knowledge across business units.

Answer: d Difficulty: Medium Reference: p. 98

75. The ______________________ model is used to describe the interaction of external


influences, specifically threats and opportunities that affect an organizations strategy
and ability to compete.

a. network economics
b. competitive forces
c. strategic transitions
d. environmental conditions

Answer: b Difficulty: Medium Reference: p. 99

76. ___________ is determined by the nature of the players in an industry and their relative
bargaining power.

a. Industry structure
b. Industry opportunities
c. Industry threats
d. Industry power

Answer: a Difficulty: Easy Reference: p. 99

77. Which of the following is not one of the competitive forces:

a. suppliers.
b. other competitors.
c. external environment
d. customers.

Answer: c Difficulty: Medium Reference: p. 99

78. This traditional model assumes a relatively static industry environment, relatively clear-
cut industry boundaries, and a relatively stable set of suppliers, substitutes, and
customers, with a focus on industry players in a market environment:

a. Porters competitive forces model.


b. Porters value chain model.
c. Porters model of diminishing returns.
d. Porters generic strategy model.

Answer: a Difficulty: Easy Reference: p. 100


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-13

79. Another term for loosely coupled but interdependent networks of suppliers, distributors,
outsourcing firms, transportation service firms, and technology manufacturers is:

a. Keystone firm.
b. Niche firm.
c. business portal.
d. business ecosystem.

Answer: d Difficulty: Easy Reference: p. 100

80. The more any given resource is applied to production, the lower the marginal gain in
output, until a point is reached where the additional inputs produce no additional output
is referred to as:

a. the point of no return.


b. the law of diminishing returns.
c. supply and demand.
d. inelasticity.

Answer: b Difficulty: Easy Reference: p. 101

Fill In the Blanks


81. A(n) organization, by technical definition, is a stable, formal, social structure taking
resources from the environment and processing them to produce outputs.

Difficulty: Easy Reference: p. 73

82. A(n) bureaucracy is a formal organization with a clear-cut division of labor, abstract rules
and procedures, and impartial decision making that uses technical qualifications and
professionalism as a basis for promoting employees.

Difficulty: Easy Reference: p. 74

83. Max Weber was the first to describe the ideal-typical characteristics of organizations in
1911.

Difficulty: Easy Reference: p. 74

84. An organization arranges specialists in a hierarchy of authority in which everyone is


accountable to someone and authority is limited to specific actions.

Difficulty: Medium Reference: p. 74


3-14 Information Systems, Organizations, Management, and Strategy Chapter 3

85. Routines are the precise rules, methods, and practices developed by organizations to cope
with virtually all expected situations.

Difficulty: Easy Reference: p. 75

86. The organizational culture is the set of fundamental assumptions about what products the
organization should produce, how and where it should produce them, and for whom they
should be produced.

Difficulty: Medium Reference: p. 76

87. The examination by management of the external changes that might require an organizational
response is called environmental scanning.

Difficulty: Hard Reference: p. 77

88. A(n) programmer is a highly trained technical specialist who writes computer software
instructions.

Difficulty: Easy Reference: p. 80

89. A(n) systems analyst is a specialist who translates business problems and requirements into
information requirements and systems, acting as a liaison between the information systems
department and the rest of the organization.

Difficulty: Easy Reference: p. 80

90. A(n) chief information officer is the senior manager in charge of the information systems
function in the firm.

Difficulty: Easy Reference: p. 80

91. A(n) end user is a representative of the department outside the information systems group for
whom applications are developed.

Difficulty: Easy Reference: p. 80

92. The transaction cost theory states that firms grow larger because they can conduct
marketplace transactions internally more cheaply than they can with external firms in the
marketplace.

Difficulty: Medium Reference: p. 81

93. Traditionally, firms have tried to reduce transactions costs through vertical integration, by
getting bigger, hiring more employees, and buying their own suppliers and distributors.

Difficulty: Hard Reference: p. 81


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-15

94. The agency theory views the firm as a nexus of contracts among self-interested individuals
who must be supervised and managed.

Difficulty: Medium Reference: p. 81

95. A(n) virtual organization uses networks to link people, assets, and ideas to create and
distribute products and services without being limited to traditional organizational
boundaries or physical locations.

Difficulty: Easy Reference: p. 83

96. Mass customization is the ability to offer individually tailored products and services using
the same production resources as mass production.

Difficulty: Easy Reference: p. 84

97. Information systems inevitably become bound up with organizational politics because they
influence access to information.

Difficulty: Easy Reference: p. 84

98. A(n) behavioral model is a description of management based on behavioral scientists


observation of what managers actually do in their jobs.

Difficulty: Easy Reference: p. 87

99. A(n) managerial role is the expectation of the activities that a manager will perform in an
organization.

Difficulty: Medium Reference: p. 87

100. A manager presenting employees with awards for high performance would be performing
a(n) interpersonal role. .

Difficulty: Medium Reference: p. 87

101. The rational model of human behavior is built on the idea that people engage in basically
consistent, rational, value-maximizing calculations.

Difficulty: Easy Reference: p. 88

102. Organizational models of decision making take into account the structure and political
characteristics of an organization.

Difficulty: Medium Reference: p. 89

103. In the bureaucratic model of decision making an organizations most important goal is the
preservation of the organization.

Difficulty: Hard Reference: p. 89


3-16 Information Systems, Organizations, Management, and Strategy Chapter 3

104. In political models of decision making, what an organization does is a result of bargains
struck among key leaders and interest groups.

Difficulty: Medium Reference: p. 89

105. The value chain model highlights the primary or support activities that add a margin of value
to a firms products or services where information systems can best be applied to achieve a
competitive advantage.

Difficulty: Medium Reference: p. 91

106. A(n) primary activity is one that is directly related to the production and distribution of a
firms products or services.

Difficulty: Easy Reference: p. 91

107. A(n) support activity is a part of the organizations infrastructure, human resources,
technology, and procurement that makes the delivery of the firms products or services
possible.

Difficulty: Medium Reference: p. 91

108. The value web is the customer-driven network of independent firms that use information
technology to coordinate their value chains to collectively produce a product or service for a
market.

Difficulty: Hard Reference: p. 91

109. Product differentiation is a competitive strategy for creating brand loyalty by developing
new and unique products and services that are not easily duplicated by competitors.

Difficulty: Easy Reference: p. 93

110. Focused differentiation is a competitive strategy for developing new market niches for
specialized products or services where a business can compete in the target area better than
its competitors.

Difficulty: Easy Reference: p. 93

111. Switching costs are the expenses incurred by a customer or company in lost time and
resources when changing from one supplier or system to a competing supplier or system.

Difficulty: Medium Reference: p. 96

112. A(n) core competency is an activity at which a firm excels as a world-class leader.

Difficulty: Medium Reference: p. 97


Chapter 3 Information Systems, Organizations, Management, and Strategy 3-17

113. A(n) information partnership is a cooperative alliance formed between two or more
corporations for the purpose of sharing information to gain strategic advantage.

Difficulty: Medium Reference: p. 98

114. Porters competitive forces model illustrates that a firm faces a number of external threats
and opportunities.

Difficulty: Medium Reference: p. 99

115. The Internet can lower transaction and agency costs.


Difficulty: Medium Reference: p. 99

116. American Airlines awarding a mile in its frequent flier program for every dollar a customer
spends on MCI long-distance telephone calls is an example of a(n) information partnership.

Difficulty: Medium Reference: p. 99

117. A(n) business ecosystem is a term used to describe loosely coupled but interdependent
networks of suppliers, distributors, outsourcing firms, transportation service firms, and
technology manufacturers.

Difficulty: Medium Reference: p. 100

118. According to the law of diminishing returns the more any given resource is applied to
production, the lower the marginal gain in output, until a point is reached where the
additional inputs produce no additional outputs.

Difficulty: Medium Reference: p. 101

119. The Internet can make competitive advantage disappear very quickly because virtually all
companies can use this technology.

Difficulty: Medium Reference: p. 103

120. Sociotechnical changes that affect both social and technical elements of an organization, can
be considered strategic transitions a movement between levels of sociotechnical systems.

Difficulty: Medium Reference: p. 104


3-18 Information Systems, Organizations, Management, and Strategy Chapter 3

Essay Questions
121. Distinguish between the behavioral definition of an organization and the technical definition.

The technical definition of an organization is that it 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 delicately balanced over time through conflict and conflict
resolution.

122. List at
. least four of the six structural characteristics of all organizations. Which two of these
do you think are most important to the digital firm as opposed to the traditional firm? As
always, support your answer.

The six characteristics are: a clear division of labor, hierarchy, explicit rules and procedures,
impartial judgments, technical qualifications for positions, and maximum organizational
efficiency. Hierarchy and efficiency are probably the most affected by the digital firm.

123. From an economic standpoint, information system technology can be viewed as a factor
production that can be freely substituted for capital and labor." What is the meaning of this
sentence, and how does it change the traditional managerial perspective?

There are, of course, several possible answers. One of them could be:

Traditionally, labor has been a rising cost. Information technology, by providing better data,
reporting, and speed of dissemination of information, makes it possible for individual middle
managers to have a wider span of control. This means that fewer middle managers and fewer
clerical workers are needed, which reduces costs. This in turn results in a flatter, more open,
organization. Information technology also provides more precise and accurate information
for running the organization, with the potential of reducing unnecessary work and increasing
efficiency.
Chapter 3 Information Systems, Organizations, Management, and Strategy 3-19

124. Distinguish between the transaction cost theory of the impact of information technology on
the organization and the agency cost theory of the impact of information technology on the
organization. Are these theories contradictory or complementary? Support your answer.

The transaction costs theory says the firms traditionally grew in size in order to reduce
transaction costs. Information technology potentially reduces the cost for growing size,
shifting the transaction costs that occur inward, opening up the possibility of revenue growth
without increasing size, where even revenue growth is accompanied by shrinking size. The
agency cost theory says that as firms grow in size and complexity, traditionally they
experience rising agency costs. Information technology shifts the agency costs curve down to
the right, allowing firms to increase size while lowering agency costs.

One answer might be that the two theories are complementary in that each is concerned with
the relationship between company size and cost, and each one makes the point that the use of
information technology allows the company (through its managers) to do more with less
expenditure. However, the success of the transaction cost theory is measured in the need for
fewer employees, while the agency cost theory measures success in that the company can
increase its size at the same time it lowers costs.

125. Discuss the impact of the Internet on the competitive forces model
.
The traditional competitive forces are still at work, but the Internet has made
competitive rivalry much more intense. Internet technology is based on universal
standards that any company can use, making it easy for rivals to compete on price
alone and for new competitors to enter the market. Easy access to information on the
Internet raises the bargaining power of customers, who can quickly find the lowest-
cost provider on the Web, lowering profits. At the same time, the Internet creates
new opportunities for building brands and building very large and loyal customer
bases that are willing to pay a premium for the brand. The traditional Porter model
assumes a relatively static industry environment; relatively clear-cut industry
boundaries; and a relatively stable set of suppliers, substitutes, and customers, with
the focus on industry players in a market environment. Instead of participating in a
single industry, some of todays firms participate in industry sets and business
ecosystems that collections of industries that provide related services and products.
3-20 Information Systems, Organizations, Management, and Strategy Chapter 3

126. Your text lists five attributes of managerial behavior that differ greatly from the classical
description. What are these five attributes, and how do they differ from the classical
description?

The five attributes are:


managers perform a great deal of work at an unrelenting pace,
managerial activities are fragmented,
managers prefer speculation, hearsay, and gossip ad hoc information
because printed information is often too old,
managers prefer oral forms of communication to written forms because oral
media provide greater flexibility, require less effort, and bring a faster
response,
and finally, managers give high priority to maintaining a diverse and
complex web of contacts that acts as an informal information system and
helps them execute their personal agendas and short- and long-term goals.

The classical model of management describes managers as planners, organizers,


coordinators, decision makers, and controllers. The impression left in the mind of the student
is one of reserved dignity, wisdom, and tremendous self-control. (This might be termed
"manager as father figure.") Behavioral models state that the actual behavior of managers
appears to be less systematic, more informal, less reflective, more reactive, less well
organized, and much more frivolous than a classical model of management would indicate
(and this might be termed "manager as elder brother").

127. Managerial roles are expectations of the activities that managers should perform in an
organization. Mintzberg found that these managerial roles fell into three categories. List
and discuss these three categories.

Interpersonal roles managers act as figureheads for the organization


when they represent their companies to the outside world and perform
symbolic duties. Managers act as leaders, attempting to motivate, counsel,
and support subordinates. Managers also act as liaisons between various
organizational levels; within each of these levels, they serve as liaisons
among the members of the management team. Managers provide time and
favors, which they expect to be returned.
Informational roles managers act as the nerve centers of their
organizations, receiving the most concrete, up-to-date information and
redistributing it to those who need to be aware of it. Managers are therefore
information disseminators and spokespersons for their organizations.
Decisional roles managers make decisions. They act as entrepreneurs by
initiating new kinds of activities; they handle disturbances arising in the
organization; they allocate resources to staff members who need them; and
they negotiate conflicts and mediate between conflicting groups in the
organization.
Chapter 3 Information Systems, Organizations, Management, and Strategy 3-21

128. Value chain analysis is useful at the business level to highlight specific activities in the
business where information systems are most likely to have a strategic impact. Discuss this
model, identify the activities, and how the model can be applied to the concept of information
technology.

The value chain model identifies specific, critical leverage points where a firm can use
information technology most effectively to enhance its competitive positions. Exactly where
can it obtain the greatest benefit from strategic information systems what specific activities
can be used to create new products and services, enhance market penetration, lock in
customers and suppliers, and lower operational costs? This model views the firm as a series
or chain of basic activities that add a margin of value to a firms products or services. These
activities can be categorized as either primary activities or support activities.
Primary activities are most directly related to the production and
distribution of the firms products and services that create value for the
customer. Primary activities include inbound logistics, operations, outbound
logistics, sales and marketing, and service.
Support activities make the delivery of the primary activities possible and
consist of organization infrastructure (administration and management),
human resources (employee recruiting, hiring, and training, technology
(improving products and the production process), and procurement
(purchasing input).

129. List at least four of the six central organizational factors to consider when planning a new
information system.

The environment in which the organization must function.


The structure of the organization: hierarchy, specialization, and standard
operating procedures.
The organizations culture and politics.
The type of organization and its style of leadership.
The principal interest groups affected by the system and the attitudes of
workers who will be using the system.
The kinds of tasks, decisions, and business processes that the information
system is designed to assist.

130. At the business level, what are the three most common competitive strategies? What new
capabilities for supporting business level strategy do digital firms provide?

The strategies are:


Become the below-cost producer.
Differentiate your product or service.
Change the scope of competition by either enlarging the market to include
global markets or narrowing the market by focusing on a small niche not
well served by your competitors.

The capabilities provided by digital firms are:


Managing the supply chain.
Building efficient customer sense and response systems.
Participation in value webs to deliver new products and services to market.

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