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Management Information Systems: Managing the Digital Firm Sixteenth Edition Global Edition Chapter 3 Information Systems, Organizations, and Strategy...

Management Information Systems: Managing the Digital Firm Sixteenth Edition Global Edition Chapter 3 Information Systems, Organizations, and Strategy Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Learning Objectives 3.1 Which features of organizations do managers need to know about to build and use information systems successfully? 3.2 What is the impact of information systems on organizations? 3.3 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies develop competitive strategies using information systems? 3.4 What are the challenges posed by strategic information systems, and how should they be addressed? 3.5 How will MIS help my career? Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Video Cases Case 1: G E Becomes a Digital Firm: The Emerging Industrial Internet Case 2: National Basketball Association: Competing on Global Delivery with Akamai O S Streaming Copyright © 2020 Pearson Education, Ltd. All Rights Reserved The Relationship Between Organizations and Information Technology Information technology and organizations influence each other – Relationship influenced by organization’s  Structure  Business processes  Politics  Culture  Environment  Management decisions Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.1 The Two-Way Relationship Between Organizations and Information Technology Copyright © 2020 Pearson Education, Ltd. All Rights Reserved What Is an Organization? Technical definition – Formal social structure that processes resources from environment to produce outputs – A formal legal entity with internal rules and procedures, as well as a social structure Behavioral definition – A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.2 The Technical Microeconomic Definition of the Organization Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.3 The Behavioral View of Organizations Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.5 Environments and Organizations Have a Reciprocal Relationship Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Disruptive Technologies Substitute products that perform as well as or better than existing product Technology that brings sweeping change to businesses, industries, markets Examples: personal computers, smartphones, Big Data, artificial intelligence, the Internet First movers and fast followers – First movers—inventors of disruptive technologies – Fast followers—firms with the size and resources to capitalize on that technology Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Economic Impacts I T changes relative costs of capital and the costs of information Information systems technology is a factor of production, like capital and labor I T 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)  Outsourcing Copyright © 2020 Pearson Education, Ltd. All Rights Reserved 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 I T lowers market transaction costs, making it worthwhile for firms to transact with other firms rather than grow the number of employees Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Organizational and Behavioral Impacts I T flattens organizations – Decision making is pushed to lower levels – Fewer managers are needed (I T enables faster decision making and increases span of control) Postindustrial organizations – Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.6 Flattening Organizations Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Understanding Organizational Resistance to Change Information systems become bound up in organizational politics because they influence access to a key resource— information Information systems potentially change an organization’s structure, culture, politics, and work Four factors – Nature of the innovation – Structure of organization – Culture of organization – Tasks affected by innovation Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.7 Organizational Resistance to Information System Innovations Copyright © 2020 Pearson Education, Ltd. All Rights Reserved The 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 website, saving millions of dollars in distribution costs Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Implications for the Design and Understanding of Information Systems 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 Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Porter’s Competitive Forces Model (1 of 3) Why do some firms become leaders in their industry? 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 – Suppliers Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Porter’s Competitive Forces Model (2 of 3) Traditional competitors – All firms share market space with competitors who are continuously devising new products, services, efficiencies, and switching costs New market entrants – Some industries have high barriers to entry, for example, computer chip business – New companies have new equipment, younger workers, but little brand recognition Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Porter’s Competitive Forces Model (3 of 3) Substitute products and services – Substitutes customers might use if your prices become too high, for example, i Tunes substitutes for C D s Customers – Can customers easily switch to competitor's products? Can they force businesses to compete on price alone in transparent marketplace? Suppliers – Market power of suppliers when firm cannot raise prices as fast as suppliers Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.8 Porter’s Competitive Forces Model Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (1 of 3) Four generic strategies for dealing with competitive forces, enabled by using I T: – Low-cost leadership – Product differentiation – Focus on market niche – Strengthen customer and supplier intimacy Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (2 of 3) Low-cost leadership – Produce products and services at a lower price than competitors – Example: Walmart’s efficient customer response system Product differentiation – Enable new products or services, greatly change customer convenience and experience – Example: Google, Nike, Apple – Mass customization Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Information System Strategies for Dealing with Competitive Forces (3 of 3) Focus on market niche – Use information systems to enable a focused strategy on a single market niche; specialize – Example: Hilton Hotels’ O n Q system Strengthen customer and supplier intimacy – Use information systems to develop strong ties and loyalty with customers and suppliers – Increase switching costs – Examples: Chrysler, Amazon, Starbucks Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Interactive Session: Management: Can AI Replace Managers? Class Discussion – How do flat organizations differ from traditional bureaucratic hierarchies? – How has information technology made it possible to eliminate middle manager positions? – What management, organization, and technology issues would you consider if you wanted to move from a traditional bureaucracy to a flatter organization? – Can AI replace managers? Explain your answer. Copyright © 2020 Pearson Education, Ltd. All Rights Reserved The Internet’s Impact on Competitive Advantage Transformation or threat to some industries – Examples: travel agency, printed encyclopedia, media Competitive forces still at work, but rivalry more intense Universal standards allow new rivals, entrants to market New opportunities for building brands and loyal customer bases Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Smart Products and the Internet of Things Internet of Things (I o T) – Growing use of Internet-connected sensors in products Smart products – Fitness equipment, health trackers Expand product differentiation opportunities – Increasing rivalry between competitors Raise switching costs Inhibit new entrants May decrease power of suppliers Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Interactive Session: Technology: Singapore as a Smart Nation Class discussion – Describe the role of smart technology in the civic planning described in this case. How is it adding value? How is it transforming the city? – How will smart cities impact the behavior of their citizens? – Are there any ethical issues raised by such implementation of smart technology, such as their impact on privacy? Explain your answer. Copyright © 2020 Pearson Education, Ltd. All Rights Reserved The Business Value Chain Model Firm as series of activities that add value to products or services Highlights activities where competitive strategies can best be applied – Primary activities vs. support activities At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy Utilize benchmarking, industry best practices Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.9 The Value Chain Model Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Extending the Value Chain: The Value Web Firm’s value chain is linked to value chains of suppliers, distributors, customers Industry value chain Value web – Collection of independent firms using highly synchronized I T to coordinate value chains to produce product or service collectively – More customer driven, less linear operation than traditional value chain Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Figure 3.10 The Value Web Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Synergies When output of some units are used as inputs to others, or organizations pool markets and expertise Example: merger of Bank of N Y and J P Morgan Chase Purchase of YouTube by Google Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Core Competencies Activity for which firm is world-class leader Relies on knowledge, experience, and sharing this across business units Example: Procter & Gamble’s intranet and directory of subject matter experts Copyright © 2020 Pearson Education, Ltd. All Rights Reserved Virtual Company Model Virtual company – Uses networks to ally with other companies – Creates and distributes products without being limited by traditional organizational boundaries or physical locations Example: Li & Fung – Manages production, shipment of garments for major fashion companies – Outsources all work to thousands of suppliers Copyright © 2020 Pearson Education, Ltd. All Rights Reserved How Will MIS Help My Career? The Company: Superior Data Quality Position Description: Entry-level business development representative Job Requirements Interview Questions Author Tips Copyright © 2020 Pearson Education, Ltd. All Rights Reserved