Exam 1 Chp 3 INFO

  1. Information technology and organizations influence one another
    Complex relationship influenced by organization's- structure, business processes, politics, culture, environment, and management decisions
  2. 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
  3. 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
  4. 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
  5. Organizational politics
    • Divergent viewpoints lead to political struggle, competition, and conflict
    • Political resistance greatly hampers organizational change
  6. 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
  7. 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
  8. 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
  9. 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
  10. 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 for a firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees
  11. The transaction cost theory of the impact of information technology on the organization
    Firms traditionally grew in size in order to reduce transaction costs. IT potentially reduces the costs for a given size, shifting the transaction cost curve inward, opening up the possibility of revenue growth without increasing size, or even revenue growth accompanied by shrinking size.
  12. 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
  13. The agency theory of the impact of information technology on the organization
    As firms grow in size and complexity, traditionally they experience rising agency costs. IT shifts the agency cost curve down and to the right, allowing firms to increase size while lowering agency costs.
  14. 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 post industrial societies, authority increasingly relies on knowledge and competence rather than formal positions
  15. 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
  16. 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
  17. 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 web site, saving millions of dollas in distribution costs
  18. Central organizational factors to consider when plannign 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
  19. 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
  20. Traditional competitors
    all firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs
  21. 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
  22. substitute products and services
    substitutes customers might use if your prices become too high, e.g. itunes substitutes for CDs
  23. customers
    can customers easily switch to competitor's products? can they force businesses to compete on price alone in transparent marketplace?
  24. Suppliers
    market power of suppliers when firm cannot raise prices as fast as suppliers
  25. 4 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
  26. Low0cost leadership
    • produce products and services at a lower price than competitors while enhancing quality and level of service
    • examples: wal-mart
  27. product differentiation
    • enable new products or services, greatly change customer convenience and experience
    • examples: google, nike, apple
  28. focus on market niche
    • use information systems to enable a focused strategy on a single market niche; specialize
    • example: hilton hotels
  29. Strengthen customer and supplier intimacy
    • use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs
    • example: netflix, amazon
  30. the internet's impact on competitive advantage
    • trasformation, 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
  31. 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
  32. Network-based strategies
    • take advantage of firm's abilities to network with each other
    • include use of: network economics, virtual company model, business ecosystems
  33. Traditional economics: law of diminishing returns
    the more any given resource is applied to production the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional outputs
  34. 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
  35. Virtual company strategy
    • virtual company uses networks to ally with other companies to create and distribute products without being limited by traditional organizational boundaries or physical locations
    • e.g., Li & Fung manages production, shipment of garments for major fashion companies, outsourcing all work to over 7,500 suppliers
  36. Sustaining competitive advantage
    Because competitors can retaliate and copy strategic systems, competitive advantage is not always sustainable; systems may become tools for survival
  37. Performing strategic system analysis
    • What is structure of industry?
    • What are value chains for this firm?
  38. Managing strategic transitions
    adopting strategic systems requires changes in business goals, relationships with customers and suppliers, and business processes
Card Set
Exam 1 Chp 3 INFO
INFO exam