Chapter 2 EVALBUS PDF

The Context of Business Organization Chapter 2  Learning Objectives 1. Which features of organizations do managers need to know about to build and use information systems successfully? 2. What is the impact of information systems on organizations? 3. How do Porter’s...

The Context of Business Organization Chapter 2  Learning Objectives 1. Which features of organizations do managers need to know about to build and use information systems successfully? 2. What is the impact of information systems on organizations? 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? 4. What are the challenges posed by strategic information systems, and how should they be addressed? Group Activity: Organizations: Shipping Wars Class discussion – Why is shipping so important for e-commerce? Explain your answer. – Compare the shipping strategies of LBC, J&T, Entrego, Ninja Van and JRS Express. How are they related to each company’s business model? – What do you think will be the most competitive in the online platforms? Discuss your findings. – Submit your answers via Hard Copy (Short-Sized Bondpaper) tomorrow, September 24, 2024. Thanks!  Video Cases Case 1: GE Becomes a Digital Firm: The Emerging Industrial Internet Case 2: National Basketball Association: Competing on Global Delivery with Akamai OS Streaming Walmart’s New Supercenter Strategy Problem – Opportunities from new technology – Large geographic footprint – Powerful competition – High costs Solutions – Determine business strategy – Design new products and services – Integrate multiple lines of business – Optimize in-store experience – Edge computing  Walmart’s new Supercenter Strategy Supercenter systems expedite ordering and shipping; provides new in-store services, warehousing for third-party sellers, targeted brand online ads Increases revenue and service Illustrates how information systems help business compete Demonstrates IT’s role in helping organizations strengthen their competitive strategies by using new technologies  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  The Two-Way Relationship Between Organizations and Information Technology  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 The Technical Microeconomic Definition of the Organization The Behavioral View of Organizations 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 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 Routines, Business Processes, and Firms  Organizational Politics Divergent viewpoints lead to political struggle, competition, and conflict Political resistance greatly hampers organizational change  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  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 instrument of environmental scanning, act as a lens Environments and Organizations Have a Reciprocal Relationship  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  Organizational Structure Five basic kinds of organizational structure (Mintzberg) – Entrepreneurial – Machine bureaucracy – Divisionalized bureaucracy – Professional bureaucracy – Adhocracy Information system often reflects organizational structure Other Organizational Features Goals – Coercive, utilitarian, normative, and so on Constituencies Leadership styles Types of tasks Different environments  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  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, making it worthwhile for firms to transact with other firms rather than grow the number of employees  Agency Theory Firm is 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  Organizational and Behavioral Impacts IT flattens organizations – Decision making is pushed to lower levels – Fewer managers are 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 Flattening Organizations  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 Organizational Resistance to Information System Innovations  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  Porter’s Competitive Forces Model 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  Porter’s Competitive Forces Model 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  Porter’s Competitive Forces Model Substitute products and services – Substitutes customers might use if your prices become too high, for example, iTunes substitutes for CD 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 Porter’s Competitive Forces Model  Information System Strategies for Dealing with Competitive Forces 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  Information System Strategies for Dealing with Competitive Forces 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 – Mass customization; customer experience management  Customer Experience Management: A New Strategic Weapon Class Discussion – What is customer experience management? How can it contributeto competitive advantage? – How does information technology support customer experience management? Give examples. – How did information technology and customer experience management change operations and decision making at the organizations described in this case?  Information System Strategies for Dealing with Competitive Forces Focus on market niche – Use information systems to enable a focused strategy on a single market niche; specialize – Example: Hilton Hotels’ OnQ system Strengthen customer and supplier intimacy – Use information systems to develop strong ties and loyalty with customers and suppliers – Increase switching costs – Examples: Toyota, Amazon 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  Smart Products and the Internet of Things Internet of Things (IoT) – 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  The Business Value Chain Model Firm as series of activities that add value to products orservices Highlights activities where competitive strategies can bestbe 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 The Value Chain Model  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 IT to coordinate value chains to produce product or service collectively – More customer driven, less linear operation than traditional value chain The Value Web  Synergies When output of some units are used as inputs to others, or organizations pool markets and expertise Example: Merger of Bank of NY and JP Morgan Chase Purchase of YouTube by Google  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  Network-Based Strategies Take advantage of firm’s abilities to network with one another Include use of: – Network economics – Virtual company model – Business ecosystems  Network Economics Marginal cost of adding new participant almost zero, with much greater marginal gain Value of community grows with size Value of software grows as installed customer base grows Compare to traditional economics and law of diminishing returns  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  Business Ecosystems and Platforms Industry sets of firms providing related services and products Platforms – Microsoft, Facebook Keystone firms Niche firms Individual firms can consider how IT will help them become profitable niche players in larger ecosystems An Ecosystem Strategic Model  Challenges Posed by Strategic Information Systems Sustaining competitive advantage – Competitors can retaliate and copy strategic systems – Systems may become tools for survival Aligning IT with business objectives – Performing strategic systems analysis ▪ Structure of industry ▪ Firm value chains