1. CHAPTER THREE INFORMATION SYSTEMS, ORGANIZATION AND STRATEGY

2. Introduction Characteristics of an Organization Economic impact of an organization

3. Organization (Definition) An organization is a sable formal social structure that takes resources from the environment and processes them to produce outputs We study these characteristics in organizational behavior

4. Organization (Features) Processes, procedures, and policies Organizational politics Organizational culture Structure Matrix / hierarchical A firm operates within an environment and it’s constraints

5. Organization (Change) Organizations (and individuals) have different values toward change There are technical and organizational dimensions of change Technical changes easy Organizational changes change be challenging

6. IT and it’s Economic Impact IT can lower transaction costs Transaction cost theory Agency theory views a firm as a “nexus of contracts” among self- interested individuals It can lower agency costs IT flattens organizations

7. Competitive Forces Models These model apply not only to IT but business in general Michael Porter’s Five Forces Model Value chain analysis Generic strategies

8. Porter’s Five Forces Model (Illustration)

9. Porter’s Five Forces Model (1) Buyer power Reduce buyer power through loyalty programs Frequent flyer Gaming rewards Increase switching costs Supplier power The inverse of buyer power Enhance through B to B exchanges Reverse auctions – Clients competitively bid down cost of goods or services

10. Five Forces Model (2) Substitution threat High when there are many buyer choices Amazon vs. Barnes and Noble Lower when switching costs are high Threat of new entrants High when it’s easy to enter a market UPS / FedEx have a low threat Competition rivalry Groceries and other commoditized items

11. Porter’s Three Business Strategies

12. Cost leadership Lower costs through information technology Hyundai Broad differentiation Audi Focused strategy in narrow markets Porsche

13. Value Chain Analysis Value chain views an organization as a group of processes Each process adds value to a product or service Wal-Mart's supply chain adds value to the organization by reducing cost IT systems support this activity Divide activities into support activities and primary activities

14. Value Chain (Primary Activities) Activities vary based on what the organization produces Supply chain optimization Warehousing / delivery Manufacturing Materials requirements planning Process control Marketing CRM systems Customer service CRM systems

15. Value Chain (Support Activities) Activities related to the business itself Managing human resources Infrastructure Technology development (It’s a primary activity for Google, Twitter, Facebook)