3.1 Information Systems, Organizations, Management, and Strategy Chapter 3 Essentials of Management Information Systems, 6e Chapter 3 Information Systems, Organizations, Management, and Strategy © 2005 by Prentice Hall

3.2 Management Challenges 1.Sustainability of competitive advantage (short term advantage vs. long term advantage) 2.Fitting technology to the organization (or vice versa).

3.3 Organizations and Information Systems The two-way relationship between organizations and information technology Figure 3-1

3.4 Technical Definition 1.Stable, formal social structure that takes resources from the environment and processes them to produce outputs Behavioral Definition 1.A collection of rights, privileges, obligations, and responsibilities that are delicately balanced over a period of time through conflict and conflict resolution Organizations and Information Systems What Is an Organization?

3.5 Organizations and Information Systems The technical microeconomic definition of the organization Figure 3-2

3.6 Organizations and Information Systems The behavioral view of organizations Figure 3-3

3.7 Structural Characteristics of All Organizations 1.Clear division of labor 2.Hierarchy 3.Explicit rules and procedures 4.Impartial judgments 5.Technical qualifications for positions 6.Maximum organizational efficiency Organizations and Information Systems Common Features of Organizations

3.8 Additional Features of Organizations 1.Standard Operating Procedures (SOPs): Precise procedures to cope with all expected situations 2.Organizational Politics: Struggle to resolve divergent viewpoints within the organization 3.Organizational Culture: Fundamental assumptions about what products the organization should produce Organizations and Information Systems Common Features of Organizations

3.9 Organizational Types 1.Entrepreneurial: Start up business 2.Machine bureaucracy: Midsize manufacturing firm 3.Divisionalized bureaucracy: Fortune 500 firms 4.Professional bureaucracy: Law firms, hospitals, school systems 5.Adhocracy: Consulting firm Organizations and Information Systems Unique Features of Organizations

3.10 Organizations and Information Systems Environments and organizations have a reciprocal relationship Figure 3-4

3.11 Organizations and Information Systems Organizational type Environments Goals Power Constituencies Function Leadership Tasks Technology Business processes Unique Features of Organizations All organizations have different:

3.12 E-Commerce French and German Style What organizational factors explain why France and Germany have had such different experiences adopting e-commerce? Organizations and Information Systems Window on Organizations

3.13 Information Services Department Past: Consisted primarily of programmers, building own software and managing own computing facilities Today: A growing proportion of specialists, with department acting as powerful change agent in the organization The Changing Role of Information Systems in Organizations Information Technology Infrastructure and Information Technology Services

3.14 The Changing Role of Information Systems in Organizations Information technology services Figure 3-5

3.15 Economic Theories 1.Information system technology is a factor of production, freely substituted for capital and labor 2.Transaction cost theory: Information technology can help lower the cost of market participation The Changing Role of Information Systems in Organizations How Information Systems Affect Organizations

3.16 The Changing Role of Information Systems in Organizations The transaction cost theory of the impact of information technology on the organization Figure 3-6

3.17 Economic Theories – The Agency Theory 1.Agents (employees) need supervision 2.As firm grows, agency and coordination costs rise 3.Information technology reduces agency costs because it becomes easier for managers to oversee more employees The Changing Role of Information Systems in Organizations How Information Systems Affect Organizations

3.18 The Changing Role of Information Systems in Organizations The agency cost theory of the impact of information technology on the organization Figure 3-7

3.19 Behavioral Theories 1.IT could change hierarchy of decision making by lowering costs of information acquisition and distribution 2.Organization shape could “flatten” as decision making becomes more decentralized 3.Growth of “virtual organizations” 4.Information systems seen as outcome of political competition between subgroups The Changing Role of Information Systems in Organizations How Information Systems Affect Organizations

3.20 The Changing Role of Information Systems in Organizations Organizational resistance and the mutually adjusting relationship between technology and the organization Figure 3-8

The Internet is capable of dramatically reducing transaction and agency costs 2.Businesses are rapidly rebuilding some key business processes based on Internet technology 3.Internet technology becoming a key component of IT infrastructure The Changing Role of Information Systems in Organizations The Internet and Organizations

3.22 Classical Model: Five Functions of Managers 1.Planning 2.Organizing 3.Coordinating 4.Deciding 5.Controlling Managers, Decision Making, and Information Systems The Role of Managers in Organizations

3.23 Behavioral Models: Five Attributes of Managers 1.Perform much work at non-stop pace 2.Fragmented activities 3.Prefer speculation, hearsay, current and ad-hoc information 4.Prefer oral communication 5.Maintain diverse web of contacts as informal information system. Managers, Decision Making, and Information Systems The Role of Managers in Organizations

3.24 Managerial Role Categories 1.Interpersonal: Figurehead, leader, liaison 2.Informational: Nerve center, disseminator, spokesperson 3.Decisional: Entrepreneur, disturbance handler, resource allocator, negotiator Managers, Decision Making, and Information Systems The Role of Managers in Organizations

3.25 Decision Making Classified by Organizational Level 1.Strategic: determines long-term objectives, resources, policies 2.Management control: monitors effective usage of resources, performance 3.Operational control: determines how to perform tasks and ways to distribute information Managers, Decision Making, and Information Systems Managers and Decision Making

3.26 Decisions are classified as: 1.Unstructured: Nonroutine, decision maker provides judgment, evaluation, and insights into problem definition, no agreed-upon procedure for decision making 2.Structured: Repetitive, routine, handled using a definite procedure Managers, Decision Making, and Information Systems Managers and Decision Making

3.27 Managers, Decision Making, and Information Systems Information systems and levels of decision making Figure 3-9

3.28 Stages of Decision Making 1.Intelligence: Collect information, identify problem 2.Design: Conceive alternative solution to a problem 3.Choice: Select among the alternative solutions 4.Implementation: Put decision into effect and provide report on the progress of solution Managers, Decision Making, and Information Systems Managers and Decision Making

3.29 Managers, Decision Making, and Information Systems The decision-making process Figure 3-10

3.30 Models of Decision Making 1.Rational model: people engage in consistent, rational decision making. Individuals rank all alternatives and select the one that most contributes to their goal 2.Critics point out that individuals can’t rank all possible alternatives; tend to select first viable alternative 3.Built-in biases, frame of reference, distort decision making Managers, Decision Making, and Information Systems Managers and Decision Making

3.31 Models of Decision Making 1.Cognitive style: Describes underlying personality dispositions toward decision making 2.Systematic decision makers 3.Intuitive decision makers Managers, Decision Making, and Information Systems Managers and Decision Making

3.32 Models of Decision Making 1.Organizational models 2.Bureaucratic models 3.Political models 4.“Garbage can” model Managers, Decision Making, and Information Systems Managers and Decision Making

3.33 Organizational Factors in Planning New Systems 1.Organization’s environment 2.Structure of organization 3.Organization’s culture and politics 4.Type of organization and leadership style 5.Principle interest groups and attitudes of workers 6.Kinds of tasks, decisions, processes system will assist Managers, Decision Making, and Information Systems Implications for the Design and Understanding of Information Systems

3.34 Optimal Information Systems: 1.Flexible; provide many options for handling and evaluating data 2.Support a variety of styles, skills, knowledge; keep track of many alternatives 3.Sensitive to organization’s bureaucratic and political requirements Managers, Decision Making, and Information Systems Implications for the Design and Understanding of Information Systems

Computer system at any level of an organization 2.Changes goals, operations, products, services, or environmental relationships 3.Helps organization gain a competitive advantage Information Systems and Business Strategy What Is a Strategic Information System?

3.36 Business Competitive Strategies 1.Become the low-cost producer 2.Differentiate product or service 3.Change scope of competition by enlarging or narrowing market Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.37 Value Chain Model 1.Firm seen as series or “chain” of activities that add a margin of value to firm’s products or services 2.Highlights activities in business where competitive strategies are best applied 3.Primary or support activities 4.Firm’s value chain linked to value chains of other partners Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.38 Information Systems and Business Strategy The firm value chain and the industry value chain Figure 3-11

3.39 Value Web 1.Value chain extended by Internet technology that connects all the firm’s suppliers, partners, and customers 2.Collection of independent firms using IT to coordinate value chains to collectively produce a product or service 3.More customer-driven, less linear than value chain 4.Flexible, adaptive to changes in supply and demand Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.40 Information Systems and Business Strategy The value web Figure 3-12

3.41 Product Differentiation 1.Strategy for creating brand loyalty by developing new and unique products and services not easily duplicated by competitors 2.Information systems used to create new information technology-based products and services 3.Examples: ATMs, computerized reservation services Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.42 Focused Differentiation 1.Strategy for developing new market niches for specialized products and services 2.Information systems used to produce data for sales and marketing; analyze customer behavior 3.Examples: One-to-one and customized marketing Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.43 Efficient Customer Response Systems 1.Links consumer behavior back to distribution, production, and supply chains 2.Information systems used to link customer’s value chain to firm’s value chain 3.Reduce inventory costs; deliver product or service more quickly to customer Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.44 Switching Costs 1.Cost of switching to competitive product; higher switching costs discourage customers going to competitors 2.Information systems offer convenience, ease of use, raise switching costs 3.Stockless inventory systems Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model

3.45 Information Systems and Business Strategy Stockless inventory compared to traditional and just-in-time supply methods Figure 3-13

3.46 Information Systems and Business Strategy Business-level strategy Figure 3-14

3.47 At firm level, information technology can: 1.Promote synergies between business units, pool resources 2.Tie together operations of disparate business units 3.Improve core competencies Information Systems and Business Strategy Firm-Level Strategy and Information Technology

3.48 Industry-Level Strategies: 1.Information partnerships 2.Competitive forces model; e.g., developing industry standards 3.Network economics: cost of adding new participant negligible, but adds great marginal gain Information Systems and Business Strategy Industry-Level Strategy and Information Technology

3.49 Information Systems and Business Strategy Porter’s competitive forces model Figure 3-15

3.50 Impact of Internet on Competitive Forces 1.Reduces barriers to entry 2.Enables new substitute products and services 3.Shifts bargaining power to customer 4.Raises firm’s bargaining power over suppliers 5.Suppliers benefit from reduced barriers to entry and from elimination of intermediaries 6.Widens geographic market, increases number of competitors, reduces differentiation among competitors Information Systems and Business Strategy Industry-Level Strategy and Information Technology

3.51 Information Systems and Business Strategy The new competitive forces model Figure 3-16

3.52 Strategic Transitions 1.A movement from one level of sociotechnical system to another 2.Often required when adopting strategic systems that demand changes in the social and technical elements of an organization Information Systems and Business Strategy Using Systems for Competitive Advantage: Management Issues

Analyze GM by using the value chain and competitive forces models. 2.Describe the relationship between GM’s organization and its information technology infrastructure. What management, organization, and technology factors influenced this relationship? Chapter 3 Case Study How Much Can New Information Systems Help GM?

Evaluate the current business strategy of GM in response to its competitive environment. What is the role of information systems in that strategy? How do they provide value for GM? 4.How successful have GM’s strategy and use of information systems been in addressing the company’s problems? What kind of problems can they solve? What are some of the problems that they cannot address? Chapter 3 Case Study How Much Can New Information Systems Help GM?