Management Information

Systems

INFORMATION SYSTEMS,
ORGANIZATIONS
,
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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•
Information technology
influence one another and organizations
–
Complex relationship influenced by
organization’
s•
Structure
•
Business
• processe
s•
Politics
Culture
• Environment,
•and
Management decision
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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THE TWO-WAY
RELATIONSHIP
BETWEEN
ORGANIZATIONS
AND INFORMATION
TECHNOLOG
Y
This complex two-way
relationship is mediated by
many factors,
not the
which areleast
the of
decisions
made—or not made—by
managers.
Other factors
mediating the relationship
include the organizational
culture, structure, politics,
business processes,
and
environment
.
FIGURE 3-
1
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CHAPTER 3: INFORMATION SYSTEMS,
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•
WhatTechnical
is an organization?
• Stable,
definition:
formal social structure
environment that them
and processes takestoresources from
produce output
•s
A as
formal legal
well as entity
a social with internal rules and procedur
structur
es,
– Behavioral
e definition:
• A collection of rights privileges obligations
and
responsibilities that is delicately balanced over a period
of time through conflict and conflict resolutio
n
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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THE TECHNICAL
C C MICROECONOMIC DEFINITION Of THE ORGANIZATION

FIGURE 3- In the microeconomic definition of organizations,

2 capital
the and labor (the
environment) primary production
are transformed factors
by the firm provided
through by
the production process into products and service
s(outputs to the environment). The products and services are consumed by the environment,
which supplies
additional capital
p and labor as inputs
p in the feedback loop p
.
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CHAPTER 3: INFORMATION SYSTEMS,
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THE BEHAVIORAL
O VIEW OF ORGANIZATIONS

FIGURE 3- The behavioral view of organizations emphasizes group relationships, values,

3 and structures.
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
Y

• Features of organizations
Use of hierarchical structure
• Accountability,
y authority
y in system of objective
decision makin
•g
obedience
• to principle of efficiency
Routines and business
• Organizational processes
politics, culture,
environments
and structure
s
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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• Routines and business processes

• Routines ( operating procedures)
•Precise rules, procedures, and practices
developed to cope with virtually all
expected situations
• Business processes: Collections of routines
• Business firm: Collection of business
processes
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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ROUTINES,
BUSINESS
PROCESSES,,
FIRM
AND
SAll organizations are composed
of individual routines and
bh i ll i f hi h
make up a business process.
A
collection of business
processes make up the
business firm.
New information
system applications require
that individual routines and
business processes change to
achieve high levels of
organizational performance
performanc
e .
FIGURE 3-
4
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CHAPTER 3: INFORMATION SYSTEMS,
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• Organizational politics
• different viewpoints lead to
political struggle, competition,
and conflic
•t
hampers
Political organizational
confrontation chang
greatly
e
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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• Organizational culture:

define goal and product

•
What
• Howproducts theitorganization
and where should produce
should be produced
•
For whom the products should be produced
• May be powerful unifying force as well as
self-control on change
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CHAPTER 3: INFORMATION SYSTEMS,
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• Organizational environments:
• Organizations and environments have a mutual
relationship
• Organizations are open to, and dependent on, the social
and physical environment
• Organizations can influence their environments
• Environments generally change faster than organizations

• Information systems can be an instrument of

environmental scanning, act as a lens
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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ENVIRONMENTS
O AND
ORGANIZATIONS HAVE A RECIPROCAL RELATIONSHIP

FIGURE 3- Environments shape

p what organizations
g can do,, g
5 but organizations
decide can influence altogether.
to change environments their environments and
Information technology
organizations plays a criticalchange
perceive environmental role in and
helping
in helping organizations act on their environmen
t.
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Disruptive
– technologies
Technology
businesses,that brings about sweeping change t
industries,
o markets personal computers,
– Examples:
word processing
software, and Internet
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CHAPTER 3: INFORMATION SYSTEMS,
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•
5 basic kinds of organizational structur
– industrial:
e •
Small start‐up business
–
Machine bureaucracy:
• Midsize manufacturing firm
– Divisionalized
bureaucracy:
• Fortune 500 firms
–
Professional
• Law firms, bureaucracy:
school systems,
hospitals
– Adhocracy:
task force organization
• Consulting firms
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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• Economic
impacts
– IT changes relative costs of capital and the costs of
information
–
Information
production, systems technology
like capital and laboris a factor of
–
ITchanges
affects the cost and
economics of quality of information and
information
• Information technology helps firms contract
inbecause
size it can reduce transaction costs (the cost of
participating in markets
) –
Outsourcing
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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THE TRANSACTION COST THEORY OF THE IMPACT O

INFORMATIONTECHNOLOGY ON THE ORGANIZATIO
N

FIGURE 3- Firms traditionally grew in size to reduce market transaction costs. p y

6 IT potentially
transaction reduces
costs. This the firms
means market
firms can outsource work using the market,
reduceand
count their
stillemployee head
grow revenues,
relying more on outsourcing firms and external contractors.
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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THE AGENCY
GC THEORY OF THE IMPACT
CO OF INFORMATIO
O
N TECHNOLOGY ON THE ORGANIZATIO
N

FIGURE 3- As firms grow in size and complexity,

7 traditionally they experience rising agency costs.
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FLATTENING
ORGANIZATION
S
Information systems can
reduce the number of levels in
an organization by providing
managers with information to
supervise larger numbers of
workers and by giving lower
-level employees more
decision-making authority
.
FIGURE 3-
8
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Organizational resistance
Information systems
t to change
become bound
b up in
i
organizational
b politics because they influence
access to a key resource – information
–
Information systems
organization’s potentially
structure culturechange
politics a
n wor
and
– kMost common reason for failure large projects
is due to organizational and political resistance to
chang
e
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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ORGANIZATIONAL
RESISTANCE AND THE
MUTUALLY ADJUSTING
RELATIONSHIP BETWEEN
TECHNOLOGY AND THE
ORGANIZATIO
N
Implementing information
systems has consequences for
task arrangements, structures,
and peopl
people.
According
e to implement
model, to this change,
all components must be
four
changed simultaneously
.
FIGURE 3-
9
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
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•
The Internet
– The andincreases
Internet organizations
the accessibility, storage,
and distribution of information and knowledge
for organization
– sThe Internet
can greatly
agency costlower transaction and
s • Example:
Large firm delivers
to employees internal manuals
via a corporate Web sit
site,
millions
saving of dollars in distribution cost
e
s
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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• Central organizational factors

to consider when
–
Environment
–
Structure
• Hierarchy, specialization, routines,
– business processes
Culture
– and politics
Type
– Mainofinterest
organization and
groups style ofbyleadership
affected system;
attitudes
end usersof
– Tasks decisions
and
willbusiness
assist processes the system
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Why do some firms become leaders in their industry
?
– Provides general view of firm, its competitors,
and
environment
i
–
Five1 competitive forces shape fate of firm
Traditional competitors
.2 New market entrants
.3 Substitute products and service
.4 sCustomer
. s
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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COMPETITIVE FORCES MODEL

FIGURE 3-1 In Porter’s competitive

p forces model,, gp g
0 the strategic
only positionwith
by competition of the firm and itsdirect
its traditional strategies are determined
competitors notfour other forces in the industry’s
but also by
environment: new market entrants, substitute products, customers,
and suppliers.
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•
Traditional
– competitors
Allare
firms share market
continuously space
devising with
new competitors
products, who
services,
efficiencies,, switching costs
•
New Some
market entrants
industries have high barriers to entry, e.g.
computer chip business
– New companies have new equipment, younger
workers, but little brand recognition
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•
Substitute
– products and service
s Substitutes
become toocustomers
high, e.g. might
iTunesuse if your prices
substitutes for CDs
•
Customers
–
Can customers
price easily switch
alone in transparent to competitor’s
marketplace?

•
Suppliers
–
Market
pricespower
as fast of
as suppliers
suppliers when firm cannot raise
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Four
withgeneric strategies
competitive forcesfor dealin
g using I by
enabled ,
T–
Low‐cost
– leadership
Product
– differentiation
Focus
– on market niche
Strengthen
intimacy customer and supplier
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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•
Low‐cost
– leadership
Produce products
competitors whileand services
enhancing at a lower
quality price
and level ofthan
service
– Examples:
Wal‐Mart
• Product differentiation
– Enable new products or services,
greatly change
customer convenience and experience
– Examples: Google, Nike,
Apple
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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•
Focus
– on market niche
Use information
strategy systems
on a single to enable
market a focused
niche; specialize
– Example:
Hilton Hotels
•
Strengthen
– customer and supplier intimac
y Use information
loyalty systemsand
with customers to develop
suppliers;strong ties and
increase
switching costs
– Example: Netflix,
Amazon
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
Using Y
Information Systems to Achieve
Competitive Advantage

•
The– Internet’s impact
Transformation
Transformation, on competitive advantag
destruction
destruction,
e threat to some
industries
• E g travel agency printed encyclopedia
encyclopedia
newspaperforces still at work,
– Competitive ,
but rivalry more
intense
– Universal standards allow new rivals,
entrants
market to
–
New opportunities
customer bases for building brands and loyal
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
Y

•
Business
– value chain mode
l Views firm or
products asservices
series of activities that add value to
–
Highlights activities where competitive strategies can
best be applied
• Primary activities vs.
– Atsupport activities
each stage,
determine how information
improve operational systems
efficiency can customer
and improve
and supplier intimacy

© Pearson Education 2012

 Management Information
Systems
CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
Y

THE VALUE CHAIN

MODE
LThis figure provides examples
of systems for both primary
and support activities of a firm
and of its value partners that
can add a margin of value to a
firm’s products or services
.
FIGURE 3-1
1
 Management Information
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CHAPTER 3: INFORMATION SYSTEMS,
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• Value web:
–
Collection of independent
highly synchronized firms using
IT to coordinate
value chains to produce product or
service collectively
– More customer driven,
less linear than traditional value chain
operation
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CHAPTER 3: INFORMATION SYSTEMS,
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THE VALUE WE
B
The value web is a networked
system that can synchronize
the value chains of business
partners within an industry to
respond rapidly to changes in
supply and demand
.
FIGURE 3-1
2
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Core
– competencies
Activity
leader for which firm is world‐class
– Relies on knowledge, experience,
and
sharing this across business units
– Example:
Procter & Gamble’s
and directory intranet
of subject matter experts
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CHAPTER 3: INFORMATION SYSTEMS,
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•
Network‐based
– strategies
Take advantage
network of firm’s
with each other abilities to
–
Include
• use of:
•Network economics
Virtual
• company model
Business ecosystem
s
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•
Network economics:
– Marginal cost of adding new participant almost zero,
with
much greater marginal gai
–n
Value of community grows with siz
e
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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• Business ecosystems
–
Industry sets of firms providing related services and
products
•
Microsoft
• platform used by thousands of fir
ms
Wal‐Mart’s
– Keystone order entry and inventory manageme
firms:
nt
Dominate
platform ecosystem
used by otherand create
firms (ex. Google)
– Niche firms:
Rely
firmon platform developed by keystone
–
Individual firms can niche
become profitable consider howinITlarger
players will help them
ecosystems
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CHAPTER 3: INFORMATION SYSTEMS,
ORGANIZATIONS, AND STRATEG
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Management
• Issues
Sustaining
– competitive advantag
e Because
systems,competitors
competitive can retaliate
advantage andalways
is not copy sustainable;
strate
gicsystems may become tools for surviva
l
•
Aligning
– IT with Business Objective
s Only one‐quarter of firms achieve alignment of IT with t
busines
he
–s
What IT can do? How it works
• ?
–
Managing strategic transitions
Adopting strategic systems
goals, relationships requiresand
with customers changes in busin
suppliers,
business
essand processe
s