Information systems in organizations - Unitedworld School of Business

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  • 1. Information Systems,Organizations,Management, andStrategy
  • 2. OBJECTIVES• Identify and describe important features oforganizations that managers need to know aboutin order to build and use information systemssuccessfully• Evaluate the impact of information systems onorganizations• Assess how information systems support theactivities of managers in organizations
  • 3. • Analyze how information systems supportvarious business strategies for competitiveadvantage• Assess the challenges posed by strategicinformation systems and management solutionsOBJECTIVES(Continued)
  • 4. ORGANIZATIONS AND INFORMATIONSYSTEMSThe Two-Way Relationship between Organizationsand Information Technology
  • 5. ORGANIZATIONS AND INFORMATIONSYSTEMSWhat Is an Organization?Organization:• Stable, formal social structure• Takes resources from the environment and processes themto produce outputs
  • 6. The Technical Microeconomic Definition of theOrganization
  • 7. • Collection of rights, privileges, obligations, andresponsibilities• Delicately balanced over a period of time throughconflict• Conflict resolutionBehavioral Definition of Organization:
  • 8. The Behavioral View of Organizations
  • 9. • All organizations have some similar “structural”features.Common Features of Organizations
  • 10. • Clear division of labor• Hierarchy• Explicit rules and procedures• Impartial judgmentsShared Features of all Organizations:
  • 11. • Technical qualifications for positions• Maximum organizational efficiencyShared Features of all Organizations: (Continued)
  • 12. • Routines are patterns of individual behavior.• Business processes are a collection of routines.• Business firms are a collection of businessprocesses.• Business processes enable organizations to copewith all recurring expected situations.Routines and Business Processes
  • 13. Routines, Business Processes, and Firms
  • 14. • Divergent viewpoints lead to political struggle,competition, and conflict.• Hamper organizational changeOrganizational Politics
  • 15. • What products the organization should produce• How and where it should be produced• For whom the products should be producedOrganizational Culture
  • 16. • Structures• Goals• Constituencies• Leadership styles• Tasks• Surrounding environmentsUnique Features of Organizations
  • 17. • Entrepreneurial structure: Small start-up business• Machine bureaucracy: Midsize manufacturing firm• Divisionalized bureaucracy: Fortune 500 firms• Professional bureaucracy: Law firms, schoolsystems, hospitals• Adhocracy: Consulting firmsOrganizational Structures
  • 18. • Organizations and environments have areciprocal relationship.• Organizations are open to, and dependent on, thesocial and physical environment.• Organizations can influence their environments.Organizations and Environments:
  • 19. Environments and Organizations Have aReciprocal Relationship
  • 20. • Ultimate goals• Different groups and constituencies• Nature of leadership• Tasks and technologyOther Differences Among Organizations:
  • 21. Organizing the IT Function• Hardware• Software• Data storage• NetworksThe information systems department isresponsible for maintaining:
  • 22. Information Technology Services
  • 23. Includes Specialists:• Programmers: Highly trained, writers of thesoftware instructions for computers• Systems analysts: Translate business problemsinto solutions, act as liaisons between theinformation systems department and rest of theorganization• Information system managers: Leaders of variousspecialists
  • 24. • Chief Information Officer (CIO): Senior manager incharge of information systems function in the firm• End users: Department representatives outsidethe information system department for whomapplications are developedIncludes Specialists: (Continued)
  • 25. • IT changes both the relative costs of capital andthe costs of information.• Information systems technology is a factor ofproduction, like capital and labor.Economic Impacts:
  • 26. • Transaction cost theory: Firms seek toeconomize on the cost of participating in markets(transaction costs).• IT lowers market transaction costs for firm,making it worthwhile for firms to transact withother firms rather than grow the number ofemployees.Economic Impacts: (Continued)
  • 27. The Transaction Cost Theory of the Impact ofInformation Technology on the Organization
  • 28. • Agency theory: Firm is nexus of contracts amongself-interested parties requiring supervision.• Firms experience agency costs (the cost ofmanaging and supervising).• IT can reduce agency costs, making it possiblefor firms to grow without adding to the costs ofsupervising, and without adding employees.HOW INFORMATION SYSTEMS IMPACTORGANIZATIONS AND BUSINESS FIRMS
  • 29. The Agency Cost Theory of the Impact ofInformation Technology on the OrganizationHOW INFORMATION SYSTEMS IMPACTORGANIZATIONS AND BUSINESS FIRMS
  • 30. Organizational and Behavioral ImpactsIT Flattens Organizations:• Facilitates flattening of hierarchies• Broadens the distribution of timely information• Increases the speed of decision making
  • 31. • Empowers lower-level employees to makedecisions without supervision and increasemanagement efficiency• Management span of control (the number ofemployees supervised by each manager) willalso growIT Flattens Organizations: (Continued)
  • 32. Flattening Organizations
  • 33. Postindustrial Organizations and Virtual FirmsPostindustrial Organizations:• Authority increasingly relies on knowledge andcompetence.• Information technology encourages taskforce-networked organizations.
  • 34. Virtual Firms:• Use networks to link people, assets, and ideas• Can ally with suppliers, customers to createand distribute new products and services• Not limited to traditional organizational boundariesor physical locations
  • 35. • Information systems give both large and smallorganizations additional flexibility to overcome thelimitations posed by their size.• Small organizations use information systems toacquire some of the muscle and reach of largerorganizations.Increasing Flexibility of Organizations:
  • 36. • Large organizations use information technology toachieve some of the agility and responsiveness ofsmall organizations.• Customization and personalization: IT makes itpossible to tailor products and services toindividuals.Increasing Flexibility of Organizations: (Continued)
  • 37. • Information systems become bound up inorganizational politics because they influence accessto a key resource.• Information systems potentially change anorganization’s structure, culture, politics, and work.• Most common reason for failure of large projects is dueto organizational and political resistance to change.Understanding Organizational Resistance to Change:
  • 38. Organizational Resistance and the Mutually Adjusting Relationshipbetween Technology and the Organization
  • 39. • The Internet increases the accessibility, storage,distribution of information and knowledge for businessfirms.• The Internet lowers the transaction and agency costsof firms.• Businesses are rapidly rebuilding their key businessprocesses based on Internet technology. Example:online order entry, customer service, and fulfillment oforders.The Internet and Organizations
  • 40. The Role of Managers in OrganizationsClassical Descriptions of Management:• Traditional description of management• Focuses on formal functions: Plan, organize,coordinate, decide, control
  • 41. THE IMPACT OF IT ON MANAGEMENT DECISIONMAKINGBehavioral Models:• Describes management based on observations of whatmanagers actually do on the jobManagerial Roles:• Expectation of activities that managers should performin an organization
  • 42. • Interpersonal: Managers act as figureheads andleaders.• Informational: Managers receive and disseminatecritical information, nerve centers.• Decisional: Managers initiate activities, allocateresources, and negotiate conflicts.Management Roles:
  • 43. • Rational model: An individual manager identifiesgoals, ranks all possible alternative actions andchooses the alternative that contributes most tothose goals• Organizational model: Considers the structuraland political characteristics of an organization• Bureaucratic model: Whatever organizations do isthe result of routines and existing businessprocesses honed over years of active useModels of Decision Making
  • 44. • Political model: What an organization does is aresult of political bargains struck among keyleaders and interest groupsModels of Decision Making (Continued)
  • 45. • Organizational environment• Organizational structure, hierarchy, specialization,routines, and business processes• The organization’s culture and politicsFactors to consider while planning a new system:Implications for the Design and Understanding ofInformation Systems
  • 46. • The type of organization and its style of leadership• Groups affected by the system and the attitudes ofworkers who will be using the system• The kinds of tasks, decisions, and business processesthat the information system is designed to assistImplications for the Design and Understanding ofInformation Systems (Continued)
  • 47. • Flexibility and multiple options for handling data andevaluating information• Capability to support a variety of management styles,skills, and knowledgeCharacteristics to be kept in mind while DesigningSystems:
  • 48. • Capability to keep track of many alternatives andconsequences• Sensitivity to the organization’s bureaucratic andpolitical requirementsCharacteristics to be kept in mind while DesigningSystems: (Continued)
  • 49. Business strategy decisions of the firms willdetermine the following:• The products and services a firm produces• The industries in which the firm competes• Competitors, suppliers, and customers of the firm• Long-term goals of the firm
  • 50. Business-Level Strategy: The Value Chain ModelThe most common generic business level strategies are:• Become the low-cost producer• Differentiate your product from competitors’ products• Change the scope of competition by enlarging themarket or narrowing it to a specialized niche
  • 51. Value Chain Model:• Highlights the primary or support activities that addbusiness value• A good tool for understanding strategy at the businessfirm levelPrimary Activities:• Directly related to the production and distribution of afirm’s products or services
  • 52. Support Activities:• Make the delivery of primary activities possible• Consist of the organization’s infrastructure, humanresources, technology, and procurement
  • 53. The Firm Value Chain and the Industry Value Chain
  • 54. • How can IT be used at each point in the value chain tolower costs, differentiate products, and change thescope of competition?Strategic question:
  • 55. Internet-enabled Web of cooperating firms• Customer-driven network of independent firms• Uses information technology to coordinate valuechains of separate firms for collectively producing aproduct or serviceValue Web:
  • 56. The Value Web
  • 57. Systems that Create Product Differentiation:• Firms can use IT to develop differentiated products.• Create brand loyalty by developing new and uniqueproducts and services• Product and services not easily duplicated bycompetitorsInformation Systems Products and Services
  • 58. • Uses intensive analysis of customer data to supportnew ways of contacting and serving the customer• Enables development of new market niches forspecialized products or servicesSystems that Support Focused Differentiation:
  • 59. • Link your firm’s value chain to the value chains of yoursuppliers and customers• Directly links consumer behavior back to distribution,production, and supply chains• Example: Wal-Mart directly links customer purchasesto suppliers in nearly real time. It is the suppliers’ jobto ensure products are shipped to the store to replacepurchased productsSupply Chain Management and Efficient CustomerResponse Systems:
  • 60. • IT is used at the firm level to discourage customersfrom switching to other suppliers, and “locking” theminto a firm’s channels.• Switching cost is the expense incurred by a customeror company for changing from one supplier or systemto another.Switching Costs and Lock-in Effects
  • 61. Stockless Inventory compared to Traditional and Just-in-time Supply Methods
  • 62. Business-level Strategy
  • 63. Firm-Level Strategy and Information TechnologyCore Competency:• Activity at which a firm excels as a world-class leader• Information systems encourage the sharing ofknowledge across business units and thereforeenhance firm competency
  • 64. Firms operate in a larger environment composed ofother firms, governments, and nationsInformation partnership:• Cooperative alliance formed between two or morecorporations for sharing information to gain strategicadvantage• Help firms gain access to new customers, creating newopportunities for cross-selling and targeting productsIndustry-Level Strategy and Information Systems:Competitive Forces and Network Economics
  • 65. In the larger environment, there are five main forces orthreats:• New market entrants• Substitute products and services• Suppliers• Customers• Other firms competing directlyPorter’s Five Forces Model
  • 66. Porter’s Competitive Forces Model
  • 67. • Encourage new entrants. Example: NetFlix vs.Blockbuster• Increase customer bargaining power.IT and the Internet can greatly change the strength ofthese competitive forces:
  • 68. • Decrease in supplier power. Example: eCampus.comincreases the efficiency of used textbook market,reducing publisher profits• Substitute products. Example: online music lowersvalue of record storesIT and the Internet can greatly change the strength ofthese competitive forces: (Continued)
  • 69. • Business ecosystems are interdependent networks ofsuppliers, distributors, outsourcing firms,transportation service firms, and technologymanufacturers.IT plays a powerful role in creating new forms ofbusiness ecosystems.Business Ecosystems:
  • 70. An Ecosystem Strategic Model
  • 71. • IT products and services exhibit powerful networkeffects and create potential “winner take all” situations.• Network effects occur when adding more resources toa process incurs little or zero cost, but large gains inoutput.• Contrary to the law of diminishing returns typical ofindustrial and agricultural productsNetwork Economics:
  • 72. • Example: Value of the Internet grows exponentiallywith the linear increase in users.• Example: Because certain software can become astandard (like Windows operating systems or WindowsOffice), people can get locked into that standard andthe value of Windows grows as more and more peopleuse it.• Good strategy: Use IT to build products and servicesthat exhibit network effects.Network Economics: (Continued)
  • 73. • Firms face a continuing stream of IT-basedopportunities to achieve strategic advantagesManagement Opportunities:
  • 74. • Some firms face big hurdles in implementingcontemporary systems.• Once an advantage is achieved, there are difficulties insustaining the advantage.• Organizations often cannot change fast enough toaccommodate new technologies.Management Challenges: