Management Information Systems Chapter 3 PDF

Management Information Systems MANAGING THE DIGITAL FIRM, 12TH EDITION Chapter 3 INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY VIDEO CASES Case 1: National Basketball Association: Competing on Global Delivery With Akamai OS Streaming Case 2: Customer Relationship Management for...

Management Information Systems MANAGING THE DIGITAL FIRM, 12TH EDITION Chapter 3 INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY VIDEO CASES Case 1: National Basketball Association: Competing on Global Delivery With Akamai OS Streaming Case 2: Customer Relationship Management for San Francisco's City Government  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Information technology and organizations influence one another – Complex relationship influenced by organization’s Structure Business processes Politics Culture Environment, and Management decisions 5 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems THE TWO-WAY RELATIONSHIP BETWEEN ORGANIZATIONS AND INFORMATION TECHNOLOGY This complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment. FIGURE 3-1 6 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems What is an organization? – Technical definition: Stable, formal social structure that takes resources from environment and processes them 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 7 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems THE TECHNICAL MICROECONOMIC DEFINITION OF THE ORGANIZATION FIGURE 3-2 In the microeconomic definition of organizations, capital and labor (the primary production factors provided by the environment) are transformed by the firm through the production process into products and services (outputs to the environment). The products and services are consumed by the environment, which supplies additional capital and labor as inputs in the feedback loop. 8 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems THE BEHAVIORAL VIEW OF ORGANIZATIONS FIGURE 3-3 The behavioral view of organizations emphasizes group relationships, values, and structures. 9 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Features of organizations Use of hierarchical structure Accountability, authority in system of impartial decision making Adherence to principle of efficiency Routines and business processes Organizational politics, culture, environments and structures 10 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Routines and business processes Routines (standard operating procedures) Precise rules, procedures, and practices developed to cope with virtually all expected situations Business processes: Collections of routines Business firm: Collection of business processes 11 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems ROUTINES, BUSINESS PROCESSES, AND FIRMS All organizations are composed of individual routines and behaviors, a collection of which make up a business process. A collection of business processes make up the business firm. New information system applications require that individual routines and business processes change to achieve high levels of organizational performance. FIGURE 3-4 12 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Organizational politics Divergent viewpoints lead to political struggle, competition, and conflict Political resistance greatly hampers organizational change 13 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Organizational culture: Encompasses set of assumptions that define goal and product What products the organization should produce How and where it should be produced For whom the products should be produced May be powerful unifying force as well as restraint on change 14 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Organizational environments: Organizations and environments have a reciprocal relationship Organizations are open to, and dependent on, the social and physical environment Organizations can influence their environments Environments generally change faster than organizations Information systems can be an instrument of environmental scanning, act as a lens 15 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems ENVIRONMENTS AND ORGANIZATIONS HAVE A RECIPROCAL RELATIONSHIP FIGURE 3-5 Environments shape what organizations can do, but organizations can influence their environments and decide to change environments altogether. Information technology plays a critical role in helping organizations perceive environmental change and in helping organizations act on their environment. 16 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Disruptive technologies – Technology that brings about sweeping change to businesses, industries, markets – Examples: personal computers, word processing software, the Internet, the PageRank algorithm – First movers and fast followers First movers – inventors of disruptive technologies Fast followers – firms with the size and resources to capitalize on that technology 17 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Organizations and Information Systems Other organizational features –Goals –Constituencies –Leadership styles –Tasks –Surrounding environments 19 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY How Information Systems Impact Organizations and Business Firms Economic impacts – 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) – Outsourcing 20 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY How Information Systems Impact Organizations and Business Firms Organizational and behavioral impacts – IT flattens organizations Decision making pushed to lower levels Fewer managers needed (IT 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 25 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY How Information Systems Impact Organizations and Business Firms FLATTENING ORGANIZATIONS Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower- level employees more decision-making authority. FIGURE 3-8 26 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY How Information Systems Impact Organizations and Business Firms 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 – Most common reason for failure of large projects is due to organizational and political resistance to change 27 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY How Information Systems Impact Organizations and Business Firms Central organizational factors to consider when 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 30 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage 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 1. Traditional competitors 2. New market entrants 3. Substitute products and services 4. Customers 5. Suppliers 31 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage PORTER’S COMPETITIVE FORCES MODEL FIGURE 3-10 In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four other forces in the industry’s environment: new market entrants, substitute products, customers, and suppliers. 32 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Traditional competitors – All firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs New market entrants – Some industries have high barriers to entry, e.g. computer chip business – New companies have new equipment, younger workers, but little brand recognition 33 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Substitute products and services – Substitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs 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 34 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Four generic strategies for dealing with competitive forces, enabled by using IT – Low-cost leadership – Product differentiation – Focus on market niche – Strengthen customer and supplier intimacy 35 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Low-cost leadership – Produce products and services at a lower price than competitors while enhancing quality and level of service – Examples: Wal-Mart Product differentiation – Enable new products or services, greatly change customer convenience and experience – Examples: Google, Nike, Apple 36 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Focus on market niche – Use information systems to enable a focused strategy on a single market niche; specialize – Example: Hilton Hotels Strengthen customer and supplier intimacy – Use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs – Example: Netflix, Amazon 37 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage The Internet’s impact on competitive advantage – Transformation, destruction, threat to some industries E.g. travel agency, printed encyclopedia, newspaper – 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 38 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage Business value chain model – Views 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 39 © Prentice Hall 2011  Management Information Systems CHAPTER 3: INFORMATION SYSTEMS, ORGANIZATIONS, AND STRATEGY Using Information Systems to Achieve Competitive Advantage THE VALUE CHAIN MODEL This figure provides examples of systems for both primary and support activities of a firm and of its value partners that can add a margin of value to a firm’s products or services. FIGURE 3-11 40 © Prentice Hall 2011