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Information Systems, Organizations, Management, and Strategy

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Classified by Organizational Level ... Decisions are classified as: ... Example: Covisint for auto industry. Information Systems and Business Strategy ... – PowerPoint PPT presentation

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Title: Information Systems, Organizations, Management, and Strategy


1
Information Systems, Organizations,Management,
and Strategy
Chapter 3
2
The Changing Role of Information Systems in
Organizations
Information technology services
Figure 3-5
3
  • Programmers Highly trained technical specialists
    who write software instructions for computers.
  • System analysts The principal liaisons between
    the information system groups and the rest of the
    organization.
  • IS managers Leaders of IS specialists and
    external specialists to vendors, manufacturers,
    consultants, and other managers of the
    organization.

4
  • CIO Senior manager in charge of the IS functions
    in the firm.
  • End users Representatives of departments outside
    the IS group for whom applications are developed.

5
The Changing Role of Information Systems in
Organizations
Information Technology Infrastructure and
Information Technology Services
  • Information Services Department
  • Past Consisted primarily of programmers,
    building own software and managing own computing
    facilities
  • Today A growing proportion of specialists, with
    department acting as powerful change agent in the
    organization

6
The Changing Role of Information Systems in
Organizations
Information Technology Infrastructure and
Information Technology Services
  • Information Services Department
  • The IS department suggests new business
    strategies and new information-based products and
    services, and coordinates both the development of
    the technology and the planned changes in the
    organization.

7
The Changing Role of Information Systems in
Organizations
How Information Systems Affect Organizations
  • Economic Theories
  • Information system technology is a factor of
    production, freely substituted for capital and
    labor
  • Decreasing cost of IT substitutes the rising cost
    of labor.
  • Result in a decline in the number of middle
    managers and clerical workers.

8
The Changing Role of Information Systems in
Organizations
How Information Systems Affect Organizations
  • Economic Theories
  • Transaction cost theory Information technology
    can help lower the cost of market participation.
  • Traditionally, firms have tried to reduce
    transaction costs by getting bigger, hiring more
    employees, or buying suppliers and distributors,
    as GM used to do.
  • It is now worthwhile for firms to contract with
    external suppliers.
  • Firm size can stay constant or contract even if
    revenue increases.

9
The Changing Role of Information Systems in
Organizations
The transaction cost theory of the impact of
information technology on the organization
Figure 3-6
10
The Changing Role of Information Systems in
Organizations
How Information Systems Affect Organizations
  • Economic Theories The Agency Theory
  • A principal (owner) employees agents
    (employees) to perform work on his or her behalf.
    However, agents need constant supervision and
    management otherwise, they will tend to pursue
    their own interests rather than those of owners.
  • As firm grows, agency and coordination costs rise
  • Information technology reduces agency costs
    because it becomes easier for managers to oversee
    more employees

11
The Changing Role of Information Systems in
Organizations
The agency cost theory of the impact of
information technology on the organization
Figure 3-7
12
The Changing Role of Information Systems in
Organizations
How Information Systems Affect Organizations
  • Behavioral Theories
  • IT could change hierarchy of decision making by
    lowering costs of information acquisition and
    distribution.
  • Organization shape could flatten as
    professional workers become self-managing and
    decision making becomes more decentralized
  • Growth of virtual organizations, networking of
    people, group, and companies to complete a task.
  • Information systems seen as outcome of political
    competition between subgroups due to their
    influence access to a key resource ---
    information.

13
The Changing Role of Information Systems in
Organizations
The Internet and Organizations
  • The Internet is capable of dramatically reducing
    transaction and agency costs
  • Businesses are rapidly rebuilding some key
    business processes based on Internet technology
  • Internet technology becoming a key component of
    IT infrastructure

14
Managers, Decision Making, and Information Systems
  • Examine what managers do and what information
    they need for decision making and other
    functions.
  • Understand how decisions are made and what kinds
    of decisions can be supported by IS.
  • Determine how IS can benefit managers.

15
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
  • Classical Model
  • Five Functions of Managers
  • Planning
  • Organizing
  • Coordinating
  • Deciding
  • Controlling

16
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
  • Behavioral Models
  • Five Attributes of Managers
  • Perform much work at non-stop pace
  • Fragmented activities
  • Prefer speculation, hearsay, current and ad-hoc
    information
  • Prefer oral communication
  • Maintain diverse web of contacts as informal
    information system.

17
Managers, Decision Making, and Information Systems
The Role of Managers in Organizations
  • Managerial Role Categories
  • Interpersonal Figurehead, leader, liaison
  • Informational Nerve center, disseminator,
    spokesperson
  • Decisional Entrepreneur, disturbance handler,
    resource allocator, negotiator

18
  • Manager roles supported by IS Table 3-4, page 90.

19
Managers, Decision Making, and Information Systems
Managers and Decision Making
  • Decision Making
  • Classified by Organizational Level
  • Strategic determines long-term objectives,
    resources, policies
  • Management control monitors effective usage of
    resources, performance
  • Operational control determines how to perform
    tasks and ways to distribute information

20
Managers, Decision Making, and Information Systems
Managers and Decision Making
  • Decisions are classified as
  • Unstructured Nonroutine, decision maker provides
    judgment, evaluation, and insights into problem
    definition, no agreed-upon procedure for decision
    making
  • Structured Repetitive, routine, handled using a
    definite procedure

21
Managers, Decision Making, and Information Systems
Information systems and levels of decision making
Figure 3-9
22
Managers, Decision Making, and Information Systems
Managers and Decision Making
  • Stages of Decision Making
  • Intelligence Collect information, identify
    problem
  • Design Conceive alternative solution to a
    problem
  • Choice Select among the alternative solutions
  • Implementation Put decision into effect and
    provide report on the progress of solution

23
Managers, Decision Making, and Information Systems
The decision-making process
Figure 3-10
24
Managers, Decision Making, and Information Systems
Window on Management
  • Why War Games Cant Always
  • Simulate the Battlefield
  • How useful are war games in simulating combat
    scenarios and predicting outcomes?
  • How would the models of decision making described
    here explain how they are designed and performed?

25
Managers, Decision Making, and Information Systems
Implications for the Design and Understanding of
Information Systems
  • Optimal Information Systems
  • Flexible provide many options for handling and
    evaluating data
  • Support a variety of styles, skills, knowledge
    keep track of many alternatives
  • Sensitive to organizations bureaucratic and
    political requirements

26
Information Systems and Business Strategy
What Is a Strategic Information System?
  • Computer system at any level of an organization
  • Changes goals, operations, products, services, or
    environmental relationships
  • Helps organization gain a competitive advantage

27
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Business Competitive Strategies Questions
  • How can we compete effectively in this particular
    market?

28
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Business Competitive Strategies
  • Become the low-cost producer
  • Differentiate product or service
  • Change scope of competition by enlarging or
    narrowing market

29
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Value Chain Model
  • Firm seen as series or chain of activities that
    add a margin of value to firms products or
    services
  • Highlights activities in business where
    competitive strategies are best applied
  • Primary or support activities
  • Firms value chain linked to value chains of
    other partners

30
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Primary activities Activities directly related
    to the production and distribution of the firms
    products and services that create value for the
    customers.
  • Supporting activities Make the delivery of the
    primary activities possible and consist of
    organizational infrastructure, human resources,
    technology, and procurement.

31
Information Systems and Business Strategy
The firm value chain and the industry value chain
Figure 3-11
32
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Value Web
  • Value chain extended by Internet technology that
    connects all the firms suppliers, partners, and
    customers
  • Collection of independent firms using IT to
    coordinate value chains to collectively produce a
    product or service
  • More customer-driven, less linear than value
    chain
  • Flexible, adaptive to changes in supply and
    demand

33
Information Systems and Business Strategy
The value web
Figure 3-12
34
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Product Differentiation
  • Strategy for creating brand loyalty by developing
    new and unique products and services not easily
    duplicated by competitors
  • Information systems used to create new
    information technology-based products and
    services

35
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Product Differentiation
  • Citibank ATMs, Debit Cards
  • CitiBank, Wells Fargo On-Line Banking, One
    Statement
  • NetBank Virtual Banking
  • SABRE On-Line Ticketing, Booking, Reservation,
    Tour Package
  • Dell Assemble to Order
  • Lands End Make to Order

36
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Focused Differentiation
  • Strategy for developing new market niches for
    specialized products and services
  • Information systems used to produce data for
    sales and marketing analyze customer behavior

37
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Focused Differentiation
  • Sears Roebuck Target appliance buyers, gardening
    enthusiasts, and mothers-to-be.
  • Stein Roe Investors Personalized ad. and
    services.
  • Canadian Imperial Bank of Commerce (CIBC)
    Personalized services to most profitable
    customers.
  • Transfer of non-profitable customers to on-line
    services.

38
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Efficient Customer Response Systems
  • Links consumer behavior back to distribution,
    production, and supply chains
  • Information systems used to link customers value
    chain to firms value chain
  • Reduce inventory costs deliver product or
    service more quickly to customer

39
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Switching Costs
  • Cost of switching to competitive product higher
    switching costs discourage customers going to
    competitors
  • Information systems offer convenience, ease of
    use, raise switching costs

40
Information Systems and Business Strategy
Business-Level Strategy and the Value Chain Model
  • Efficient Customer Response Systems
  • Wal-Mart Continuous replenishment system,
    efficient customer response.
  • Dell Assemble to order.
  • Baxter International stockless inventory.
  • Sales overhead for operating cost Wal-Mart 16.6
    (Retail average is 20.7, Sears 24.9)

41
Information Systems and Business Strategy
Stockless inventory compared to traditional and
just-in-time supply methods
Figure 3-13
42
Information Systems and Business Strategy
Business-level strategy
Figure 3-14
43
Information Systems and Business Strategy
Firm-Level Strategy and Information Technology
  • At firm level, information technology can
  • Promote synergies between business units, pool
    resources
  • Tie together operations of disparate business
    units
  • Improve core competencies

44
Information Systems and Business Strategy
Firm-Level Strategy and Information Technology
  • Bank merger Chemical and Chase Manhattan, Wells
    Fargo and Norwest, Deutsche and Bankers, Citicorp
    and Travelers Insurance.
  • Provide cross-marketing, pool market and
    expertise, lower retail cost, increase customer
    access to products, tie operations together.
  • American Airline World-One Alliance.

45
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
  • Industry-Level Strategies
  • Information partnerships
  • Competitive forces model e.g., developing
    industry standards, customer awareness, lower
    supplier cost
  • Network economics cost of adding new participant
    negligible, but adds great marginal gain

46
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
  • Information Partnerships
  • AA and Citibank, Northwest and MCI frequent
    flier program
  • Increased customer loyalty
  • New credit card subscribers
  • Cross marketing
  • Baxter International and Staple

47
Information Systems and Business Strategy
Porters competitive forces model
Figure 3-15
48
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
  • Competitive Forces Model
  • Making standards for exchanging information and
    business transactions (make product substitution
    difficult and raise entry cost)
  • Coordinate policies and regulations.
  • Example Covisint for auto industry.

49
Information Systems and Business Strategy
Industry-Level Strategy and Information Technology
  • Impact of Internet on Competitive Forces
  • Reduces barriers to entry
  • Enables new substitute products and services
  • Shifts bargaining power to customer
  • Raises firms bargaining power over suppliers
  • Suppliers benefit from reduced barriers to entry
    and from elimination of intermediaries
  • Widens geographic market, increases number of
    competitors, reduces differentiation among
    competitors

50
Information Systems and Business Strategy
The new competitive forces model
Figure 3-16
51
Information Systems and Business Strategy
Using Systems for Competitive Advantage
Management Issues
  • Network Economics
  • The marginal gain of adding another participant
    is much larger than its marginal cost.
  • Build communities of users
  • Customer loyalty and enjoyment
  • Examples eBay, iVillage, Nepster
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