Pitanja Chapter 3 PDF

**Learning objectives** - Which features of organizations do managers need to know about to build and use information systems successfully? - What is the impact of information systems on organizations? - How do Porter's competitive forces model, the value chain model, synergies, cor...

**Learning objectives** - Which features of organizations do managers need to know about to build and use information systems successfully? - What is the impact of information systems on organizations? - 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? - What are the challenges posed by strategic information systems, and how should they be addressed? 1\. What is an organization (technical and behavioral definitions)? **Technical definition**: Technical definition of an organization focuses on three main elements. Primary production factors are capital and labor, which are provided by the environment. The organization is responsible for transforming these inputs into outputs, that is, product and services. The product and services are then consumed by environment. Final definition would be that an organization is a stable and formal social structure that takes resources provided by the environment and transforms (processes) them into outputs. **Behavioral definition** says that an organization is a collection of rights, privileges, obligations, and responsibilities which are balanced over certain period of time through conflict and conflict resolution. 2\. How do these definitions of organizations relate to information systems technology? A technical definition of organization puts more focus on how inputs are combined by organization to produce outputs when technological change is introduced to a company. Behavioral definition of an organization puts more emphasis on how certain information systems change balance of rights, privileges, obligations, responsibilities, and feelings in an organization which have been developed through time. Technological change changes ownership of information, right to access and update of information, and who makes decisions. 3\. What features do organizations possess? Organizations are bureaucracies which have clear division of labor and specializations. Specialists are arranged in a hierarchy in which everyone answers to someone and authority is limited to specific actions which are governed by rules of procedures. Organizations try to hire employees on the basis of their qualifications, and not personal relations. Organizations are trying to achieve efficiency by maximizing output while using limited amount of inputs. Other features are business processes, organizational culture, organizational politics, environments, structure, goals, etc. 4\. What are routines and how do they relate to business firm? **Routines, which are also called standard operating procedures**, are precise rules, procedures, and practices which have been developed in order to cope with every expected situation. **Business processes** represent collection of routines, while a **business firm** is a **collection of business processes.** 5\. What is organizational culture? Every organization\'s goals and products are defined by a set of underlying assumptions that are unquestionable and unassailable by its members. These presumptions regarding what, how, where, and for whom the business should generate its goods are all part of its organizational culture. 6\. What is the relationship between organizations and environments? Organizations and environments have mutual relationship. Firstly, organizations are open to and dependent on their environment. Organizations must respond to legal requirements imposed by governments as well as the actions of customers and their competitors. Secondly, organizations can also influence their environments. For example, two firms can form an alliance in order to affect political power. **Information systems** **are instruments which scan environment and help companies cope whit external changes.** 7\. Why are most organizations unable to adapt to a rapidly changing environment? Because of inertia which is built into an organization's standard operating procedures, the political conflicts which arise because of changes in current order, and threats to organization's culture and core values which they hold to tight. 8\. What are **disruptive technologies**? Technologies and business innovations whose appearance results in radical change to the business landscape and environment. Firms that invent them are called "first movers" and they do not benefit if they do not have the resources to exploit the technology or if they fail to see opportunity. 9\. Basic kinds of organizational structures. **10. What is the economic impact of IT on organizations?** From the point of view of economics, IT contributes to change in both the relative costs of capital and the costs of information. IS technology can be seen as a factor of production which is a substitute for capital and labor. IT helps firms to contract in size because it reduces transaction costs. 11\. **Agency theory and how does IT affect agency costs?** According to agency theory, the firm is viewed as a "nexus of contracts" among self-interested individuals rather than as a unified, profit-maximizing entity (Jensen and Meckling, 1976). Owner is called principal and he employs workers, or agents, to perform work for him. Agents need to be constantly overseen or they will pursue their own interest. As firms grow, agency costs tend to rise because there are more employees that need to be supervised and managed. IT can help organizations to reduce these agency costs by providing and analyzing information at less costs and provides managers easier monitoring of employees. 12\. What is organizational and behavioral impact of IT on organizations? Some of the impacts are that IT flattens organizations, IT encourages task force and it becomes involved in organizational politics. Flattening organizations means that IT pushes decision-making rights to lower lever in organization's hierarchy. As an effect, managers receive much more accurate information on time and become much faster at making decisions, which means that organization needs less managers. Encouraging task force means that IT unites professionals to perform certain tasks in short periods of time, after which everyone goes back to their own tasks. Involvement in politics of organizations refers to their influence on who does what to whom, when, where, and how. 13\. What are most important factors of organizational resistance to change? - The nature of IT innovation - The organization's structure - The culture of people in organization - The tasks affected by the innovation 14\. What is impact of Internet on organizations? The Internet provides easier access, storage, and distribution of information and knowledge. It helps lower the transaction and agency costs. 15\. What are the central organizational factors to consider when planning a new system? - The environment in which the organization must function - The structure of the organization: hierarchy, specialization, routines, and business processes - The organization's culture and politics - The type of organization and its style of leadership - The principal interest groups affected by the system and the attitudes of workers who will be using the system - The kinds of tasks, decisions, and business processes that the information system is designed to assist 16\. Explain Porter's five competitive forces model. - Traditional competitors - New market entrants - Substitute products and services - Customers - Suppliers 17\. Information system strategies for dealing with competitive forces. - Low-cost leadership -- use of information systems to achieve the lowest costs of operations and lowest prices. - Product differentiation -- use of information systems to help in production of new products and services or change customer perception regarding existing products. - Focus on market niche -- use information systems to collect, analyze and process data on customer buying patterns, tastes and preferences and help organization focus on certain niche of market. - Strengthening customer and supplier intimacy 18\. What is the impact of Internet on competitive advantages? Because of the Internet, the traditional competitive forces are still at work, but competitive rivalry has become much more intense (Porter, 2001). It is easier to compete on price and it is easier for new competitors to enter market with information being available to everyone.  19\. What is the internet of things? The Internet of Things (IoT) refers to rise in use of sensors in industrial and consumer products. It is an example of how Internet changes industries. 20\. How do smart product affect the market? Smart products refer to products that are part of a set of information-intensive services which are sold by firms. They offer new functionality, more reliability and more intense usage of products while providing detailed information about products which is of use to both producers and consumers. They help differentiate products and services. They increase rivalry among firms because they have to focus on innovating to beat competition. They also rise costs of switching and reduce risks of new competitors entering market. They decrease importance of suppliers of physical products because information systems become more important to companies.