Chapter 3
Essentials of Management Information Systems, 6e
Chapter 3 Information Systems, Organizations, Management, and Strategy
Information Systems, Organizations,
Management, and Strategy
3.1
© 2005 by Prentice Hall
Management Challenges
1. Sustainability of competitive advantage
(short term advantage vs. long term
advantage)
2. Fitting technology to the organization
(or vice versa).
3.2
Organizations and Information Systems
The two-way relationship between organizations and information technology
Figure 3-1
3.3
Organizations and Information Systems
What Is an Organization?
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
3.4
Organizations and Information Systems
The technical microeconomic definition of the organization
Figure 3-2
3.5
Organizations and Information Systems
The behavioral view of organizations
Figure 3-3
3.6
Organizations and Information Systems
Common Features of Organizations
Structural Characteristics of All Organizations
1.
2.
3.
4.
5.
6.
3.7
Clear division of labor
Hierarchy
Explicit rules and procedures
Impartial judgments
Technical qualifications for positions
Maximum organizational efficiency
Organizations and Information Systems
Common Features of Organizations
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
3.8
Organizations and Information Systems
Unique Features of Organizations
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
3.9
Organizations and Information Systems
Environments and organizations have a reciprocal relationship
Figure 3-4
3.10
Organizations and Information Systems
Unique Features of Organizations
All organizations have different:
Organizational type
Environments
Goals
Power
Constituencies
3.11
Function
Leadership
Tasks
Technology
Business processes
Organizations and Information Systems
Window on Organizations
E-Commerce French and German Style
What organizational factors explain why France
and Germany have had such different
experiences adopting e-commerce?
3.12
The Changing Role of Information Systems in Organizations
Information Technology Infrastructure and Information Technology Services
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
3.13
The Changing Role of Information Systems in Organizations
Information technology services
Figure 3-5
3.14
The Changing Role of Information Systems in Organizations
How Information Systems Affect Organizations
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
3.15
The Changing Role of Information Systems in Organizations
The transaction cost theory of the impact of
information technology on the organization
Figure 3-6
3.16
The Changing Role of Information Systems in Organizations
How Information Systems Affect Organizations
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
3.17
The Changing Role of Information Systems in Organizations
The agency cost theory of the impact of
information technology on the organization
Figure 3-7
3.18
The Changing Role of Information Systems in Organizations
How Information Systems Affect Organizations
Behavioral Theories
1.
2.
3.
4.
3.19
IT could change hierarchy of decision making by
lowering costs of information acquisition and
distribution
Organization shape could “flatten” as decision
making becomes more decentralized
Growth of “virtual organizations”
Information systems seen as outcome of political
competition between subgroups
The Changing Role of Information Systems in Organizations
Organizational resistance and the mutually adjusting relationship
between technology and the organization
Figure 3-8
3.20
The Changing Role of Information Systems in Organizations
The Internet and Organizations
1.
2.
3.
3.21
The Internet is capable of dramatically reducing
transaction and agency costs
Businesses are rapidly rebuilding some key business
processes based on Internet technology
Internet technology becoming a key component of
IT infrastructure
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
Classical Model:
1.
2.
3.
4.
5.
3.22
Five Functions of Managers
Planning
Organizing
Coordinating
Deciding
Controlling
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
Behavioral Models:
1.
2.
3.
4.
5.
3.23
Five Attributes of Managers
Perform much work at non-stop pace
Fragmented activities
Prefer speculation, hearsay, current and ad-hoc
information
Prefer oral communication
Maintain diverse web of contacts as informal
information system.
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
Managerial Role Categories
1. Interpersonal: Figurehead, leader, liaison
2. Informational: Nerve center, disseminator,
spokesperson
3. Decisional: Entrepreneur, disturbance handler,
resource allocator, negotiator
3.24
Managers, Decision Making, and Information Systems
Managers and Decision Making
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
3.25
Managers, Decision Making, and Information Systems
Managers and Decision Making
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
3.26
Managers, Decision Making, and Information Systems
Information systems and levels of decision making
Figure 3-9
3.27
Managers, Decision Making, and Information Systems
Managers and Decision Making
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
3.28
Managers, Decision Making, and Information Systems
The decision-making process
Figure 3-10
3.29
Managers, Decision Making, and Information Systems
Managers and Decision Making
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
3.30
Managers, Decision Making, and Information Systems
Managers and Decision Making
Models of Decision Making
1. Cognitive style: Describes underlying
personality dispositions toward decision making
2. Systematic decision makers
3. Intuitive decision makers
3.31
Managers, Decision Making, and Information Systems
Managers and Decision Making
Models of Decision Making
1. Organizational models
2. Bureaucratic models
3. Political models
4. “Garbage can” model
3.32
Managers, Decision Making, and Information Systems
Implications for the Design and Understanding of Information Systems
Organizational Factors in Planning
New Systems
1.
2.
3.
4.
5.
6.
3.33
Organization’s environment
Structure of organization
Organization’s culture and politics
Type of organization and leadership style
Principle interest groups and attitudes of workers
Kinds of tasks, decisions, processes system will assist
Managers, Decision Making, and Information Systems
Implications for the Design and Understanding of Information Systems
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
3.34
Information Systems and Business Strategy
What Is a Strategic Information System?
1. Computer system at any level of an organization
2. Changes goals, operations, products, services, or
environmental relationships
3. Helps organization gain a competitive advantage
3.35
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
Business Competitive Strategies
1. Become the low-cost producer
2. Differentiate product or service
3. Change scope of competition by enlarging
or narrowing market
3.36
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.37
Information Systems and Business Strategy
The firm value chain and the industry value chain
Figure 3-11
3.38
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.39
Information Systems and Business Strategy
The value web
Figure 3-12
3.40
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.41
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.42
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.43
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
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
3.44
Information Systems and Business Strategy
Stockless inventory compared to traditional and just-in-time supply methods
Figure 3-13
3.45
Information Systems and Business Strategy
Business-level strategy
Figure 3-14
3.46
Information Systems and Business Strategy
Firm-Level Strategy and Information Technology
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
3.47
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
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
3.48
Information Systems and Business Strategy
Porter’s competitive forces model
Figure 3-15
3.49
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
Impact of Internet on Competitive Forces
1.
2.
3.
4.
5.
6.
3.50
Reduces barriers to entry
Enables new substitute products and services
Shifts bargaining power to customer
Raises firm’s bargaining power over suppliers
Suppliers benefit from reduced barriers to entry and
from elimination of intermediaries
Widens geographic market, increases number of
competitors, reduces differentiation among competitors
Information Systems and Business Strategy
The new competitive forces model
Figure 3-16
3.51
Information Systems and Business Strategy
Using Systems for Competitive Advantage: Management Issues
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
3.52
Chapter 3 Case Study
How Much Can New Information Systems Help GM?
1. 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?
3.53
Chapter 3 Case Study
How Much Can New Information Systems Help GM?
3.
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?
3.54