Disruptive Technology and Organizational Structure

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Questions and Answers

What happens to agency costs as a firm grows?

They are eliminated

They remain the same

They decrease

They increase (correct)

How does IT affect the number of managers needed in an organization?

It reduces the number of managers (correct)

It has no effect on the number of managers

It eliminates the need for managers

It increases the number of managers

What is the basis of authority in postindustrial societies?

Social status

Knowledge and competence (correct)

Age and experience

Formal positions

What is the result of IT providing managers with information to supervise larger numbers of workers?

Organizational flattening Signup and view all the answers

What is the most common reason for failure of large projects?

Organizational and political resistance to change Signup and view all the answers

What is the result of giving lower-level employees more decision-making authority?

Flattening of the organizational structure Signup and view all the answers

What is the role of information systems in organizational politics?

They increase the influence of information Signup and view all the answers

What is the impact of IT on organizational structure?

It decreases the number of layers Signup and view all the answers

What is the primary characteristic of first movers in the context of disruptive technologies?

They are inventors of disruptive technologies Signup and view all the answers

What is the primary function of information systems technology in an organization?

It is a factor of production, similar to labor and capital Signup and view all the answers

Which type of organizational structure is typically associated with law firms and school systems?

Professional bureaucracy Signup and view all the answers

What is the primary benefit of IT in reducing transaction costs?

It makes it more worthwhile for firms to transact with other firms Signup and view all the answers

What is the primary assumption of agency theory?

Firms are a nexus of contracts among self-interested parties Signup and view all the answers

What is the primary impact of IT on the cost and quality of information?

It reduces the cost and increases the quality of information Signup and view all the answers

What is the primary characteristic of an adhocracy?

It is a type of organizational structure associated with consulting firms Signup and view all the answers

What is the primary benefit of outsourcing in the context of transaction cost theory?

It allows firms to reduce their transaction costs Signup and view all the answers

What is the primary focus of the primary activities in the business value chain model?

Creating value for the customer Signup and view all the answers

What is the purpose of the inbound logistics primary activity?

Receiving and storing materials for distribution to production Signup and view all the answers

Which of the following is an example of a support activity?

Human resources Signup and view all the answers

What is the goal of benchmarking in the business value chain model?

Comparing business processes against strict standards Signup and view all the answers

What is the outcome of using the business value chain model?

Improved customer and supplier intimacy Signup and view all the answers

What is the main goal of identifying industry best practices?

To achieve operational excellence Signup and view all the answers

What is the purpose of the service primary activity?

Maintaining and repairing the firm's goods and services Signup and view all the answers

What is the role of technology in the business value chain model?

Improving products and the production process Signup and view all the answers

What is the result of making improvements in a company's value chain?

Operational excellence Signup and view all the answers

What is the primary characteristic of a value web?

More customer-driven Signup and view all the answers

What is the purpose of asking 'How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?'?

To critically examine how value-adding activities are performed Signup and view all the answers

What is the purpose of analyzing the value chain?

To develop candidate applications Signup and view all the answers

How do companies benefit from software-enhanced cars?

By gaining a competitive advantage Signup and view all the answers

What is the outcome if competitors also make improvements in their value chains?

No change in competitiveness Signup and view all the answers

What is a collection of independent firms using synchronized IT to coordinate value chains called?

Collection of independent firms Signup and view all the answers

What is the purpose of identifying candidate applications of information systems?

To decide which applications to develop first Signup and view all the answers

What is a key aspect of implementing information systems in an organization?

Changing all four components simultaneously Signup and view all the answers

How does the Internet affect organizations?

It greatly lowers transaction and agency costs Signup and view all the answers

What is an example of how the Internet can benefit a large firm?

Delivering internal manuals to employees via a corporate Web site Signup and view all the answers

What is an important factor to consider when planning a new information system?

The type of organization and style of leadership Signup and view all the answers

What is the main idea behind Michael Porter's competitive forces model?

A firm's success is determined by five competitive forces: traditional competitors, new market entrants, substitute products, customers, and suppliers Signup and view all the answers

What are the five competitive forces that shape the fate of a firm, according to Porter's model?

Traditional competitors, new market entrants, substitute products, customers, and suppliers Signup and view all the answers

What is a key aspect of achieving competitive advantage through information systems?

Considering the main interest groups affected by the system Signup and view all the answers

What is a key consideration when designing a new information system?

The tasks, decisions, and business processes the system will assist Signup and view all the answers

Study Notes

Disruptive Technologies

Examples of technologies that bring about sweeping change to businesses, industries, and markets: personal computers, word processing software, the Internet, and the PageRank algorithm
First movers: inventors of disruptive technologies
Fast followers: firms with the size and resources to capitalize on that technology

Organizational Structure

5 basic kinds of organizational structure:
- Entrepreneurial: small start-up business
- Machine bureaucracy: midsize manufacturing firm
- Divisionalized bureaucracy: Fortune 500 firms
- Professional bureaucracy: law firms, school systems, hospitals
- Adhocracy: consulting firms

Economic Impact of IT

IT changes relative costs of capital and the costs of information
Information systems technology is a factor of production, like capital and labor
IT affects the cost and quality of information and changes economics of information
Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets)
Examples: outsourcing

Transaction Cost Theory

Firms seek to economize on transaction costs (the costs of participating in markets)
Vertical integration, hiring more employees, buying suppliers and distributors
IT lowers market transaction costs for firms, making it worthwhile for firms to transact with other firms rather than grow the number of employees

Agency Theory

Firm is a nexus of contracts among self-interested parties requiring supervision
Firms experience agency costs (the cost of managing and supervising) which rise as firm grows
IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees

Postindustrial Organizations

IT flattens organizations: decision making is pushed to lower levels, fewer managers are needed
Organizational resistance to change: information systems become bound up in organizational politics because they influence access to a key resource—information

Internet and Organizations

The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations
The Internet can greatly lower transaction and agency costs
Example: large firm delivers internal manuals to employees via a corporate Web site, saving millions of dollars in distribution costs

Organizational Factors in Planning a New System

Environment
Structure: hierarchy, specialization, routines, business processes
Culture and politics
Type of organization and style of leadership
Main interest groups affected by system; attitudes of end users
Tasks, decisions, and business processes the system will assist

Competitive Advantage

Michael Porter's competitive forces model: provides general view of firm, its competitors, and environment
Five competitive forces shape fate of firm: traditional competitors, new market entrants, substitute products and services, customers, and suppliers

Business Value Chain Model

Primary activities: most directly related to the production and distribution of the firm's products and services, which create value for the customer
Primary activities include: inbound logistics, operations, outbound logistics, sales and marketing, and service
Support activities: make the delivery of the primary activities possible and consist of organization infrastructure, human resources, technology, and procurement
Ask at each stage of the value chain, "How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?"
Use benchmarking and industry best practices to identify areas for improvement

Value Web

A networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand
More customer-driven, less linear operation than traditional value chain

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Description

This quiz covers the impact of disruptive technologies on businesses and industries, as well as the different types of organizational structures. Learn about the first movers and fast followers, and the 5 basic kinds of organizational structures.