3.1 © 2002 by Prentice Hall c h a p t e r 3 3 INFORMATION SYSTEMS, ORGANIZATIONS, MANAGEMENT, AND STRATEGY

3.2 © 2002 by Prentice Hall LEARNING OBJECTIVES IDENTIFY SALIENT CHARACTERISTICS OF ORGANIZATIONSIDENTIFY SALIENT CHARACTERISTICS OF ORGANIZATIONS ANALYZE RELATIONSHIP BETWEEN INFO SYSTEM & ORGANIZATIONSANALYZE RELATIONSHIP BETWEEN INFO SYSTEM & ORGANIZATIONS* © 2002 by Prentice Hall

3.3 LEARNING OBJECTIVES CONTRAST THEORIES OF ORGANIZATIONSCONTRAST THEORIES OF ORGANIZATIONS DESCRIBE DECISION PROCESSESDESCRIBE DECISION PROCESSES EVALUATE ROLE OF INFORMATION SYSTEMS IN SUPPORTING BUSINESS STRATEGYEVALUATE ROLE OF INFORMATION SYSTEMS IN SUPPORTING BUSINESS STRATEGY* © 2002 by Prentice Hall

3.4 MANAGEMENT CHALLENGES ORGANIZATIONS & INFORMATION SYSTEMSORGANIZATIONS & INFORMATION SYSTEMS CHANGING ROLES OF SYSTEMS IN ORGANIZATIONSCHANGING ROLES OF SYSTEMS IN ORGANIZATIONS MANAGERS, DECISION MAKING & INFORMATION SYSTEMSMANAGERS, DECISION MAKING & INFORMATION SYSTEMS INFORMATION SYSTEMS & BUSINESS STRATEGYINFORMATION SYSTEMS & BUSINESS STRATEGY*

3.5 © 2002 by Prentice Hall MANAGEMENT CHALLENGES 1. SUSTAINABILITY OF COMPETITIVE ADVANTAGE 2. FITTING TECHNOLOGY & ORGANIZATION *

3.6 © 2002 by Prentice Hall MEDIATING FACTORS: Environment Culture Structure Standard Procedures Politics Management Decisions Chance ORGANIZATIONS & INFORMATION TECHNOLOGY ORGANIZATIONS INFORMATION TECHNOLOGY

3.7 © 2002 by Prentice Hall VP CEO ORGANIZATION TECHNICAL DEFINITION: STABLE, FORMAL STRUCTURE TAKES RESOURCES FROM ENVIRONMENT AND PROCESSES THEM TO PRODUCE OUTPUTSTAKES RESOURCES FROM ENVIRONMENT AND PROCESSES THEM TO PRODUCE OUTPUTS*

3.8 © 2002 by Prentice Hall TECHNICAL MICROECONOMIC DEFINITION OF ORGANIZATION OUTPUTS TO ENVIRONMENTORGANIZATION PRODUCTION PROCESS INPUTS FROM ENVIRONMENT

3.9 © 2002 by Prentice Hall ORGANIZATION BEHAVIORAL DEFINITION: COLLECTION OF: RIGHTS, PRIVILEGES, OBLIGATIONS, RESPONSIBILITIESRIGHTS, PRIVILEGES, OBLIGATIONS, RESPONSIBILITIES DELICATELY BALANCEDDELICATELY BALANCED CONFLICT RESOLUTIONCONFLICT RESOLUTION*

3.10 © 2002 by Prentice Hall ENVIRONMENTAL RESOURCES ENVIRONMENTAL OUTPUTS FORMAL ORGANIZATION STRUCTURE: Hierarchy Division of labor Rules, Procedures PROCESS: Rights/Obligations Privileges/Responsibilities Values Norms People

3.11 © 2002 by Prentice Hall STRUCTURAL CHARACTERISTICS OF ALL ORGANIZATIONS CLEAR DIVISION OF LABORCLEAR DIVISION OF LABOR HIERARCHYHIERARCHY EXPLICIT RULES & PROCEDURESEXPLICIT RULES & PROCEDURES IMPARTIAL JUDGMENTSIMPARTIAL JUDGMENTS TECHNICAL QUALIFICATIONSTECHNICAL QUALIFICATIONS MAXIMUM ORGANIZATIONAL EFFICIENCYMAXIMUM ORGANIZATIONAL EFFICIENCY*

3.12 © 2002 by Prentice Hall COMMON FEATURES OF ORGANIZATIONS FORMAL STRUCTUREFORMAL STRUCTURE STANDARD OPERATING PROCEDURESSTANDARD OPERATING PROCEDURES POLITICSPOLITICS CULTURECULTURE*

3.13 © 2002 by Prentice Hall UNIQUE FEATURES OF ORGANIZATIONS ORGANIZATIONAL TYPESORGANIZATIONAL TYPES ENVIRONMENTS, GOALS, POWERENVIRONMENTS, GOALS, POWER CONSTITUENCIES, FUNCTIONCONSTITUENCIES, FUNCTION LEADERSHIP, TASKSLEADERSHIP, TASKS TECHNOLOGYTECHNOLOGY BUSINESS PROCESSESBUSINESS PROCESSES*

3.14 © 2002 by Prentice Hall ORGANIZATIONAL STRUCTURES ENTREPRENEURIAL: Startup businessENTREPRENEURIAL: Startup business MACHINE BUREAUCRACY: Mid-sized manufacturing firmMACHINE BUREAUCRACY: Mid-sized manufacturing firm DIVISIONALIZED BUREAUCRACY: Fortune 500DIVISIONALIZED BUREAUCRACY: Fortune 500 PROFESSIONAL BUREAUCRACY: Law firms, hospitalsPROFESSIONAL BUREAUCRACY: Law firms, hospitals ADHOCRACY: Consulting firmADHOCRACY: Consulting firm*

3.15 © 2002 by Prentice Hall ORGANIZATION & ITS ENVIRONMENT THE FIRM INFORMATION SYSTEMS THE ENVIRONMENT: RESOURCES & CONSTRAINTS GOVERNMENTS COMPETITORS FINANCIAL INSTITUTIONS CULTURE KNOWLEDGE TECHNOLOGY

3.16 © 2002 by Prentice Hall INFORMATION SYSTEMS DEPARTMENT PROGRAMMERS: Write softwarePROGRAMMERS: Write software SYSTEMS ANALYSTS: Translate business problems into solutionsSYSTEMS ANALYSTS: Translate business problems into solutions IS MANAGERS: Department leadersIS MANAGERS: Department leaders END USERS: Department reps for whom applications are developedEND USERS: Department reps for whom applications are developed*

3.17 © 2002 by Prentice Hall THE ORGANIZATION SENIOR MANAGEMENT MAJOR END-USERS (DIVISIONS) INFORMATION SYSTEMS DEPARTMENT IT Infrastructure: Hardware Software Data Networks Information System Specialists: CIO Managers System Analysts System Developers Programmers Network Specialists Database AdministratorClerical

3.18 © 2002 by Prentice Hall HOW INFO SYSTEMS AFFECT ORGANIZATIONS MICROECONOMIC MODEL: Info technology is a factor of production, like capital & laborMICROECONOMIC MODEL: Info technology is a factor of production, like capital & labor TRANSACTION COST THEORY: Firms attempt to minimize transaction costs internally & externallyTRANSACTION COST THEORY: Firms attempt to minimize transaction costs internally & externally*

3.19 © 2002 by Prentice Hall AGENCY THEORY: Firm is nexus of contracts among self-interested parties requiring supervisionAGENCY THEORY: Firm is nexus of contracts among self-interested parties requiring supervision BEHAVIORAL THEORIES: Info systems could change hierarchy of decision making; reduce need for middle management & clerical support; distribute informationBEHAVIORAL THEORIES: Info systems could change hierarchy of decision making; reduce need for middle management & clerical support; distribute information* HOW INFO SYSTEMS AFFECT ORGANIZATIONS

3.20 © 2002 by Prentice Hall IMPLEMENTING CHANGE Source: Leavitt, Handbook of Organization (1965)TASKPEOPLETECHNOLOGY STRUCTURE RESISTANCE MUTUAL ADJUST MENT

3.21 © 2002 by Prentice Hall INTERNET & ORGANIZATIONS communication communication Electronic handbooks published & revisedElectronic handbooks published & revised Interactive training classesInteractive training classes Employees review, update personal dataEmployees review, update personal data*

3.22 © 2002 by Prentice Hall ROLE OF MANAGERS CLASSICAL: Describe functions- plan, organize, coordinate, decide, controlCLASSICAL: Describe functions- plan, organize, coordinate, decide, control BEHAVIORAL: Based on observations of managers on the jobBEHAVIORAL: Based on observations of managers on the job*

3.23 © 2002 by Prentice Hall INFO SYSTEMS, LEVELS, DECISIONS TPS OAS MIS KWS DSS ESS ORGANIZATIONAL LEVEL TYPE OF DECISIONOPERATIONALKNOWLEDGEMANAGEMENTSTRATEGIC STRUCTURED ACCOUNTS RECEIVABLE ELECTRONIC PRODUCTION SCHEDULING COST OVERRUNS SEMI-BUDGET STRUCTUREDPREPARATION PROJECT SCHEDULING FACILITY LOCATION UNSTRUCTUREDPRODUCT DESIGN NEW PRODUCTS NEW MARKETS

3.24 © 2002 by Prentice Hall STAGES OF DECISION MAKING INTELLIGENCE: Collect information; identify problemINTELLIGENCE: Collect information; identify problem DESIGN: Conceive alternatives; select criteriaDESIGN: Conceive alternatives; select criteria CHOICE: Use criteria to evaluate alternatives; selectCHOICE: Use criteria to evaluate alternatives; select IMPLEMENTATION: Put decision into effect; allocate resources; controlIMPLEMENTATION: Put decision into effect; allocate resources; control* SOURCE: Simon, The New Science of Management Decision (1960)

3.25 © 2002 by Prentice Hall RATIONAL: Comprehensive rationality; evaluate all alternativesRATIONAL: Comprehensive rationality; evaluate all alternatives SYSTEMATIC: Structured, formal methodSYSTEMATIC: Structured, formal method INTUITIVE: Trial & error, unstructured, multiple approachINTUITIVE: Trial & error, unstructured, multiple approach* INDIVIDUAL MODELS OF DECISION MAKING

3.26 © 2002 by Prentice Hall BUREAUCRATIC: Follow standard operating procedures (SOP)BUREAUCRATIC: Follow standard operating procedures (SOP) POLITICAL: Key groups compete and bargainPOLITICAL: Key groups compete and bargain “GARBAGE CAN”: Organizations not rational; solutions accidental“GARBAGE CAN”: Organizations not rational; solutions accidental* ORGANIZATIONAL MODELS OF DECISION MAKING

3.27 © 2002 by Prentice Hall BUSINESS LEVEL STRATEGY LOCK IN CUSTOMERS & SUPPLIERS SUPPLY CHAIN MANAGEMENT: Stockless inventories, continuous replenishment, just-in-time deliverySUPPLY CHAIN MANAGEMENT: Stockless inventories, continuous replenishment, just-in-time delivery INTRA FIRM STRATEGY: Product differentiation, focused differentiation, low-cost producerINTRA FIRM STRATEGY: Product differentiation, focused differentiation, low-cost producer EFFICIENT CUSTOMER RESPONSE: Point-of-sale systems, dataminingEFFICIENT CUSTOMER RESPONSE: Point-of-sale systems, datamining*

3.28 © 2002 by Prentice Hall COMPETITIVE FORCES MODEL SUBSTITUTE PRODUCTS & SERVICES NEW MARKET ENTRANTS SUPPLIERSCUSTOMERS THE FIRM TRADITIONAL INDUSTRY COMPETITORS THE INDUSTRY

3.29 © 2002 by Prentice Hall COMPETITIVE FORCES MODEL SUBSTITUTE PRODUCTS & SERVICES NEW MARKET ENTRANTS SUPPLIERSCUSTOMERS INDUSTRY SET INDUSTRY COMPETITORS INDUSTRY 4 INDUSTRY 3 INDUSTRY 2 INDUSTRY 1

3.30 © 2002 by Prentice Hall Five Forces To Determine Industry Profitability New Entrants Industry Competitors Rivalry Among Existing Firms Threat of New Entrants Buyers Bargaining Power of Buyers Suppliers Bargaining Power of Suppliers Threat of Substitute Products or Services Source: Porter, M., Competitive Advantage, NY: The Free Press, 1985 Substitutes

3.31 © 2002 by Prentice Hall Impact on Competitive Forces Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

3.32 © 2002 by Prentice Hall Impact on Competitive Forces Source: Cash, J. I., McFarlan, F. W., McKenney, J. L., Applegate, L. M., Corporate Information Systems Management: Text and Cases, Homewood, IL, 1992.

3.33 © 2002 by Prentice Hall The Value Chain Firm Infrastructure Human Resources Management Technology Development Procurement M A R G I N N I G R A M Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Source: Porter, M., Competitive Advantage, NY: The Free Press, 1985

3.34 © 2002 by Prentice Hall How long before a response?How long before a response? Who can respond?Who can respond? Will copying help?Will copying help? OTHERWISE Be prepared to be a fast/cheap follower

3.35 © 2002 by Prentice Hall The Evolution of Customer Order Entry ONE-WAYONE-WAY COMMUNICATIONCOMMUNICATION TWO-WAYTWO-WAY COMMUNICATIONCOMMUNICATION 1957 Customer orders taken manually. Order entry and billing procedures automated 1960’s: Tel-American IBM 1001 Dataphone and 026 card punch sped the order process and increased accuracy 1970’s: ASAP Utilization of card reader developed by Tek-Pro with mainframe computer support widely implemented 1977: ASAP 2 Addition of Bell 43 terminal to allow customer response to orders; also allowed intra-company/ customer messaging capability 1980: ASAP 3 Enabled customers to use their internal stock numbers to order and build standing orders. Also produced inventory lists, P.O.’s and requisition forms to customer specifications 1983: ASAP 3 Plus Enabled customers to manage inventory through the incorporation of bar code scanning 1983: ASAP 4 Computer-to-computer order entry system that merely required customer approval for processing 1985: ASAP 5 Extended capabilities of ASAP 3 by using IBM PC with tutorial software and menu-driven functions. Also provided capability to edit order off-line, thus saving telephone expenses MULTI-WAYMULTI-WAY COMMUNICATIONCOMMUNICATION 1986: ASAP Express Capabilities expanded to include other vendors by using electronic clearing house to enter orders. Potential for total automation of hospital logistics

3.36 © 2002 by Prentice Hall Porter Industry and Competitive Analysis Framework Prior to Introduction of ASAP Express High Medium High New Entrants Bargaining Power of Suppliers Positioning of Intraindustry Rivals Bargaining Power of Buyers Substitute Products or Services Information Technology Specialists EDS Perot Systems IBM GE Competing Systems as Good or Better than ASAP Direct Linkage With Hospitals Hospital Creation of Buyer Groups Improved Access Supplier Information Consolidated Ordering System Integrated Ordering and Material Management Systems

3.37 © 2002 by Prentice Hall Porter Industry and Competitive Analysis Framework After Introduction of ASAP Express Medium Low MediumHigh New Entrants Bargaining Power of Suppliers Positioning of Intraindustry Rivals Bargaining Power of Buyers Substitute Products or Services ASAP Express Establishes Barrier to Entry for IT Specialist No ASAP Express Intraindustry Rivals Consolidated System Forces Supplier to Interface with ASAP Express Rather than Direct Link with Hospitals Hospital Creation of Buyer Groups Improved Access Supplier Information Consolidated Ordering System Integrated Ordering and Material Management Systems High

3.38 © 2002 by Prentice Hall c h a p t e r 3 3 INFORMATION SYSTEMS, ORGANIZATIONS, MANAGEMENT, AND STRATEGY