ITM100 CHAPTER 3 QUIZ

Impact of Information Technology on Organizations

• Information technology reduces management costs, enabling firms to increase revenues and reduce the number of middle managers and clerical workers.
• IT expands the power of small organizations, allowing them to perform coordinated activities with minimal staff.
• The broadening management span of control allows high-level managers to manage more workers over greater distances.
• Postindustrial theories support the idea that IT should flatten hierarchies, as authority increasingly relies on knowledge and competence.
• Information technology may encourage task force–networked organizations, where professionals come together for specific tasks and then join other task forces.
• Organizational resistance to change is common when introducing new information systems due to changes in structure, culture, and business processes.
• Resistance factors include the nature of the IT innovation, organization structure, culture, and tasks affected by the innovation.
• Organizational resistance often leads to failure of large IT projects, making working with people and organizations as important as technical knowledge for managers.
• Supermarkets like Walmart use sales data and continuous replenishment systems to keep costs low and meet customer demands.
• Manufacturers of laptop PCs have multiple competing suppliers of key components, such as keyboards and hard drives.
• Firms can use information systems to counteract competitive forces through low-cost leadership, product differentiation, focus on market niche, and strengthening customer and supplier intimacy.
• Walmart's continuous replenishment system is an example of using information systems to achieve low operational costs and prices.

Using Information Systems for Competitive Advantage

• Bank of America acquired Countrywide Financial, expanding its mortgage lending business and gaining access to new customers for its financial products.
• Information systems can help companies consolidate operations, reduce costs, and increase cross-marketing of products after a merger or acquisition.
• Information systems can enhance core competencies by facilitating knowledge sharing across business units and leveraging existing competencies in related markets.
• Procter & Gamble uses systems to enhance its core competencies in brand management and consumer product innovation by enabling global knowledge sharing.
• Network economics refers to market situations where the economic value produced depends on the number of people using a product.
• Network effects, such as those seen in social networks and on-demand companies, have been highly successful on the Internet.
• In network economics, the value of a product or service increases as more people use it, unlike in traditional economics where diminishing returns apply.
• Internet sites can be used by firms to build communities of users, fostering customer loyalty and unique ties to customers.
• eBay is an example of a business that has built an online community using the Internet, leveraging network economics to increase value for users.
• Network economics also provides strategic benefits to commercial software vendors, as the value of their software increases with a larger user base.
• The virtual company model uses networks to link people, assets, and ideas, enabling companies to ally with others to create and distribute products and services without traditional organizational boundaries.
• The virtual company model is useful for companies seeking to acquire products or services from external vendors or to move quickly to exploit new market opportunities.