Statistics - Bayes' Therom

If we have a soap company with two plants, let’s say Ohio and Virginia. Ohio makes 60% of the soap; Virginia makes 40% of it. All the soap is mixed together at a third facility for shipping. If we had a bad bar of soap the chance that it would be bad and from Ohio is 60%. But that assumes both plants have the same rate of defective soaps. This changes when we learn that 5% oh the soap made in Ohio is defective, and 10% of the soap made in Virginia is food. Should this change our 60% and 40% ratio? Yes it should. Bayes' theorem says:



P(E1 | B) = P(E1) P(B | E1) / P(E1) P(B | E1) + P(E2) P(B | E2)



Where En equals the n possible numbers of an event. B is the event that will affect P (En). The fraction can go to include all events. How does this affect our soap? Well the formula as typed here holds.



P (Ohio | D) = P (Ohio) P (D | Ohio) / P (D)



And


P (Virginia | D) = P (Virginia) P (D | Virginia) / P (D)



P (D) = P (Ohio) P (D | Ohio) + P(Virginia) P(D | Virginia)



From our case: P (D | Ohio) = 0.05 and P (D | Virginia) = 0.10

As well as P (Ohio) = 0.60 and P (Virginia) = 0.40



P (Ohio | D) = P (0.60) P (0.05) / P (D)



P (Virginia | D) = P (0.40) P (0.10) / P (D)



P (D) = P (0.60) P (0.05) + P (0.40) P (0.10)



Let’s solve for P (D)

.6 * .05 = 0.03

.4 * .1 = 0.04



So

P (D) = 0.03 + 0.04 = 0.07



Finish it off:




P (Ohio | D) = P (0.03) / P (0.07)



P (Virginia | D) = P (0.04) / P (0.07)



P (Ohio | D) = .4286

P (Virginia | D) = .5714




These revised estimates are called posterior probabilities.


The book suggest a table format to make things easier to follow

Event	Prior Prob.	Conditional Prob	Joint Prob.	Revised Prob
Ohio	.6	.05	.6 * .05 = >03	.03/.07 = .4286
Virginia	.4	.1	.4 * .1 = .04	.4/.7 = .52174
Totals			.07	1.0

Mis5

Ethical and Social Issues in the Digital Firm

5.1 Understanding Ethical and Social Issues

Most ethical problems are not masterminded by the information Technology Department but very often the systems can be used by unethical people. Ethics refer to the free choices of right and wrong used by a free moral agent. Because information systems can collect so much personal information, this has become an issue where ethics have become involved. When using an information system it is essential to ask what the ethical and socially responsible course of action is.

A Model for Thinking About Ethical, Social, and political Issues

Ethical, Social, and political issues Are closely linked. People (ethics) know how to act become society has put expectations on them. These expectations are often bodied by lawn. Into the mix we add information technology. We now have an environmental that society and politics do not know how to handle much less had experience with.

Five Moral Dimensions of the Information Age

· Information rights And obligations - what rights does an organization on an individual have about information collected about them, what rights does an individual or an organization about data it collects on others?

· Property rights and obligations - how are intellectual property rights enforced?

· Accountability and control - who is held accountable if information is used in a way to harm someone?

· System Quality - What standards do we set to protest individual rights and societies softly?

· Quality of life - what values and institutions should we protect or Support?

Key Technology Trends That Raise Ethical Issues

Computing power doubles roughly every 18 months causing many firms to rely heavily on the data from these machines. Social standards are neither in place to handle this, nor legal standards either. Costs of storage have dropped, allowing for firms to collect large amounts of information on people. Like wise, advances in data analysis techniques allow for mining of that same data. If one were to take all the various pieces of digital data about a person from actions they do, a picture could develop about who this individual is and what they are like. Using Nonobvious Relationship Awareness (NORA) tools, information from many different sources can be combined that could help fight crime but raises privacy issues. The advances in computer and networks mean that information can be quickly and easily collected and shared.

5.2 Ethics in an Information society

Ethics deals with the choices one make when fared with several plans of Action.

Basic Concepts: responsibility, Accountability, and Liability

· Responsibility - you Accept the Cost for the Actions you take

· Accountability - the tools are in place to determine who took a certain action, often deals with laws

· Liability - feature of politics that permits recovery of damages when harm is done

· Due Process- feature of laws, laws are understood and there is a way to appeal to higher authorities

These all deal with the ethical process. Remember that systems are not good on bad but how they are put to use that matters. Responsibility falls on those who use them.

Ethical Analysis

· Identify and clearly describe the facts- use who, what when, where, how and why, finding the facts Can help lead to the Situation resolution

· Define the Conflict or dilemma And identify the higher-order values involved, each side often feels that their higher-order needs are the ones to be pursued and often will conflict with the others needs

· Identify the stakeholders - find out who will be affected and what they want

· Identify the options that you Can treasonably take- often the options do not Meet all need, and sometimes you need to balance one groups needs with respect to another's needs

· Identify the potential Consequences of your options - what will happen if I make this choice

Candidate Ethical Principles

· Do the others what you want you would want them to do you.

· If an action is not right for everyone to take it is not right for anyone (if everyone did this Could society Survive)

· If an action cannot be taken repeatedly it is not right to take at all (Slippery Slope Rule)

· Take the action that achieves the higher or greater value

· Take the action that produces the least harm, or the least potential cost (Risk Aversion )

· Assume that virtually all tangible and intangible objects are owned by Someone else (No Free Lunch)

Any action that cannot pass all these rules need to be looked at with caution.

Professional Codes of Conduct

Most Professional organizations have Code of conducts that must be agreed to for membership. These are a form of self regulation.

Some Real-World Ethical Dilemmas

Information Systems allow for reduce spending on employees But what about their welfare? A company has a right to monitor interest use but employees feel the right of privacy is violated. In many cases compromise needs to be done,

5.3 The Moral Dimensions of Information systems

Information Rights: Privacy and Freedom in the Internet Age

Privacy is the claim of an individual to be left alone and free from surveillance. Information technology and systems make this invasion Cheap, profitable, and effective. Most countries in the free world have privacy protection as part of their laws. These are based on a document called the Fair Information Practices. The FIP are a set of principles governing the collection and use of information of an individual. Basically, if an individual has a transaction with some agency the agency may not give out details it has collected on the individual without their permission. The FTC has agreed with this and extended it to children in 1998 with the COPPA act which will not let any web site to collect information on children under the age of 13 without parent's permission. In 1999 the Gramm-Leach-Bliley act made financial institutions tell their customers their privacy policies and to allow them to opt out of any information sharing. HIPPA sets up rules for privacy of medial records.

The European Directive on Data Protection

Europe has more Stringent riles on data Collection. They work under the policy of In formed Consent. This says that a person can agree to concert only if they have been given all the facts needed to make a rational decision. European companies can not share information with another firm outside of Europe unless that country or the firm they are dealing with has established rules on data collection.

Internet Challenges to Privacy

Since the internet is a network of computers to get information from one computer to another, any one of those computers could store information that passes through it. Tools are available to monitor what people have done on the Internet. Companies can monitor how there workers use the internet as well. Web sites can collect information that a user provider and add to it other information and attach it to Cookies. Cookies are small text files stored on a computer that can be retrieved when a person visits that site. They can be used for site personalization but they can also be used with site history as data collection and sold. Web bugs can be put on sites and especially email to track if a message was viewed. Spyware can be downloaded to people's machines that will report home where you have been, and send unsolicited ads to you. Google scans the free email accounts they provide and offers ads that relate to the content and this has some privacy advocates upset. The United States allows web sites to collect information. Some sites use opt-out sections about personal information but some people would rather have opt-in sections. While the online industry wants self regulation very few sites actually privacy policies and consumers seem to not know how to protect themselves.

Technical Solutions

The platform For Privacy Protection (P3P) allows for communications between a privacy policy on a web site, and a browser to see if it matches a user's preferences, but it is a voluntary action by the websites.

Ethical Issues

When is it ok to invade someone's privacy? When and how do we tell them it is being done?

Social Issues

Should we allow people to think they have privacy while collecting information on them.

Political Issues

Should we allow our government to Spy on us in order to protect us?

Property Rights: Intellectual Property

Intellectual Property is the intangible property created by a firm or an individual.

Trade Secrets

Any intellectual work product can be classified as a trade secret. This can include software with unique elements. To use a trade secret as a protection for a work, the company must take clear steps to protect it.

Copyright

Copyright allows for any created work to be protected for the life of the copyright. In the 1960's software was added into this category. While how the software manifests itself is protected how it works is not. This also creates problems with how software may look as there are only so many ways to do things like a drop down menu.

Patents

A patent is a monopoly on an idea for 20 years to protect how a novel idea is used. Software can have and be patented, but it is hard to do.

Challenges to Intellectual Property Rights

The rapid increase of networks has made it difficult to protect intellectual property. Networks allow for the storage and rapid copying of property over wide area. The internet was designed for information to flow freely. Major industry groups have used the Courts to protect their member's content against sharing across the internet. Web site are often made from content from many places. This often lends confusion to the property. The digital Millennium Copyright Act (DCMA) tries to make it illegal to create a work-around for technology used to protect property.

Ethical Issues

Can someone copy for their own use a property protected by law? Will their be continued value in it if everyone does?

Social Issues

The current laws are breaking down in the information age. If routine theft is allowed to continue new information technologies may be slow in coming.

Political Issues

New laws are made regularly all around the world to protect property rights. There are many however who believe that these can never be enforced And that all software should be free.

Accountability, Liability, and Control

Computer Related Liability Problems

Who is liable for economic harm when information systems do not work correctly? In general software producers are hard to hold liable because they fall under works like books that are published. Since software is different than books and users here an expectation of how they should work, these laws may change. Who should be held responsible for offensive Content? The site owner? The person hosting the site? The ISP that acts as a pipe to bring it to a customer? How about Content posted by users of a site?

Ethical Issues

Who is responsible when hardware fails? What Conditions? What liabilities? Should user assume some blame?

Social Issues

Should a firm be responsible to backup of content if its hosting site has equipment failure or should the host be responsible? Can Society permit Networks and bulletin boards to post harmful information?

Political Issues

Here is where providers and users must take their questions of responsibility. Who should be held responsible when information systems have faulty information in than?

System Quality: Data Quality and system Errors

What is an acceptable technological feasible level of system quality? A gray area is when errors could be fixed at great cost and that would make it so costly no one would buy it. Can a software product ever be fully free of bugs? Users need to understand that Software has bugs and no one can estimate what damage they will do and when. Even though software bugs get press, data input quality is the more possible source of problems.

Ethical Issues

At what point can you ethically release software for use by others?

Social Issues

Do we want people to believe a system is infallible? On the other hand do we want people not to use a system at all and be scared of it?

Political Issues

Should governments force software and system quality or let the industry police itself?

Quality of Life: Equity, Access and Boundaries

Computers can Cause problem in deer society a well. They can cause social problems.

Balancing Power: Center versus Periphery

It was felt that with the advent of the mainframe computer that the central office of a firm would keep its hold on the centralization of power. When PCs came into play, it was felt that the power was more evenly distributed. In reality most decisions that do not affect the company were moves to the field units, but serious decision making still takes place at the main centralized location.

Rapidity of Change: Reduced Response Time to Competition

The information technology field has made for more efficient marketing and production in the global marketplace. One has to keep up or be out of business. We are becoming a 'just in time' society.

Maintaining Boundaries: Family, Work, and Leisure

Computers have become so small that work can be done almost anyplace. Is this a good thing or a bad thing? Families provide support mechanisms that blurred lines may not hold in place.

Dependence and Vulnerability

With so many people and firms dependent upon technology a system crash could abuse problems.

Computer Crime and Abuse

Computer Crime is the Commission of an illegal act through the use of a computer or against a computer system. This includes accessing a Computer without Authorization as well as with intent to do harm. Computer Abuse involves doing acts that might not be illegal but may be unethical. This includes Spam. Spamming is so inexpensive for what it returns it has become a clogging problem for businesses.

Employment: Trickle -Down Technology and Reengineering Job Loss

Our Current technology allows for a few to do the work of many. But do we have fewer but more technical jobs? What will happen to the blue collar jobs?

Equity and Access: Increasing Racial and Social Class Cleavages

The digital divide is a real thing. The more income you have the more likely you will have a computer. The some is true for the schools in your neighborhood.

Health Risks: RSI, CVS, and Technostress

Repetitive stress disease in the form of Carpal Tunnel Syndrome is caused by repetitive striking of keep on the keyboard. Another common problem of computers is computer vision syndrome. Technostress is a problem with how people relate to people after they have used computers. Computers have been so much of a part of our lives these problems will not go away and probably increase.

5.4 Management Opportunities, Challenges, And Solutions

Opportunities

Doing the right thing with information systems in the long am will always lead to a stronger firm though stakeholders may not always be happy.

Management Challenges

Understanding the Moral Risks of New Technology

Rapid technological changes lead to rapid choices that need to be made. Management needs to understand and figure out solutions to these problems before they happen.

Establishing Corporate Ethics Policies that Include Information Systems Issues

All Information Technology departments need to have an ethics policy and commentate this to other managers as well as workers in the firm.

Solution Guidelines

The code of ethics should include:

· Information rights And obligations - develop a policy on e-mail, Internet privacy etc.

· Property rights and obligations - such things as Software ownership and Contract relationship should be Covered

· System Quality - code should describe levels of data quality And error toleration

· Quality of life - system should be to improve life, human dignity as well as deal with medical problem that may develop

· Accountability and control - who is the single person responsible for information systems? what People report to him and what policy and procedures au they in charge of? Who does the audits of the system should be covered as well.

MIS4

The Digital Firm: Electronic Business and Electronic Commerce

4.1 Electronic Business, Electronic Commerce, and the Emerging Digital Firm

Internet Technology and the Digital Firm

In the past it was basically done with proprietary systems. In our modern Age of the internet this does not make sense. Compares need to be able to communicate with each other. Handing transactions electronically reduces transaction cost. Internet technology provides for this at lower costs. By using the technology managers can deal with many employees in multiple parts of the world.

New Business Models and Value Propositions

The interest has made it to send information in large quantities basically at little cost. For example, in stead of a customer having to go to many stores to get information, comparison shopping Can be done online. Because of the Changes new business models must be developed. A business model is the way a company does business.

The changing Economics Of Information

The internet has brought about an information asymmetry, one side of An transaction has more information than they need) giving them An advantage. It has also allowed firms to not have to worry about the tidiness, the quality of the information, or the reach which is how many people am be dealt with. Technology has changed that.

Internet Business Models

The internet allows for extra value to be added to products and services. This works with not only business to consumer but with business to business model as well. Businesses can focus on advertising to community web sites that have the groups they want to torus on easily. Social networking sites allow for people to network together. Portals provide Content people need along with ads focused to what they are looking at giving a benefit to the firm advertising. Content can be syndicated giving the firm making the content wider known as well as giving the site content people want. Application service providers make applications available over the internet. There are a few business models available:

· Pure play- Ones that exist only on internet

· Brick and mortar - ones that exist only physically

· Click and mortar - both online and physically

4.2 Electronic Commerce

Contractual channels will be the way most business is done but e-commence is quickly growing.

Categories of Electronic Commerce

· Business to Consumer (B2 C)

· Business to Business (B2B)

· Consumer to Consumer (C2C) - E-Bay for an example.

An emerging model is m-commence which is selling through mobile units like phones.

Customer-Centered Retailing

On line retailing provides many companies to provide service after the sale At a lower Cost.

Direct Sales Over the Web

A virtual Store front does not have large expenditures like rent that a physical location does. Since traditional channels and there markups are bypassed so Consumers pay less. This is called disintermediation.

Interactive Marketing And Personalization

The internet allows for easy collection of Customer information. Clickstream tracking allow for collection of information of where a customer has been on a web site web personalization allows for sites to be made to order for a customer offering them information And products thy would have interest in. Collaborative filtering lets a firm Compare information about the current customer to similar ones and offer other products that they could be interested in. Blogs have offered a way for consumers to vent but also for a firm to let its customers know about what is goings on. Tracking a customer on a web site can show where problems are. Online feed back is much cheaper than normal ways.

Customer Self-Service

Rather than take up a person's time a customer Can find information they need online at a fraction of the cost.

Business-to-Business Electronic Commerce: New Efficiencies and Relationships

80% of B2B is based on Electronic Data Interchange (EDI). This allows for a paperless and therefore less costly transaction process. Though it is still possible to use private Edi Services many firms have set up there own through the Internet. In doing prominent, the whole process of getting goods from ordering to payment can be done On-line. Because it is on the internet you are not limited to suppliers as you would be with EDI. Like EDI private industrial networks have been set up for B2B. They are also called private exchanges. There are also Net Marketplaces also known as e- hubs and provide a place where buyers and sellers can meet. They are often sorted by the types of goods they deal with. Direct goods would be those that are used in the production process. Indirect are those that not used in the production like office supplies. Often a net marketplace will deal with long term Contracts. Many focus on vertical markets. Exchanges are independently owned third- party marketplaces. The problem with many of them is that suppliers would not participate because the people who purchase would drive pieces down by bidding for a lower price and they would make less money.

Electronic Commerce Payment Systems

Special systems have been created to take payment over the internet. 80% of online payments are done by credit Card. Digital credit card payment systems Allow for secure transaction to be made, and a digital wallet can store important credit information in an online location for quick entry. Micropayment systems are for low cost purchase. These are just some of the many ways of doing payments on line.

4.3 Electronic Business and the Digital Firm

How Intranets Support Electronic Business

An important use of intranets is as a repository of information for a company.

Intranets And Group Collaboration

Intranets can provide a place for central collaboration to take place. This need not be from people in the same office but all over the world.

Intranet Applications for Electronic Business

Finance and Accounting

Transaction Processing systems allow for collecting financial information and management information for finance.

Human Resources

Corporate policies, benefits information and enrollment, training and job postings are things that can be set up on a corporate intranet.

Sales and Marketing

Sales tools can be made available on a corporate intranet as well as marketing information.

Manufacturing and Production

Information about the various stages of production can be shown on an intranet so that workers can know what is expected. Quality control information along with that data can be useful for management.

Business Process Integration

The use of digital technologies to enable multiple organizations to design, develop, move, and manage products collaboratively through their life cycles called collaborative commerce. This used to happen among several departments in a single firm. Now it takes place among several firms.

4.4 Management Opportunities, Challenges, and Solutions

Opportunities

Firms are using this technology to create new products, services, new ways to sell and even new business. They have also helped traditional businesses by keeping costs of products low in the supply chain.

Management Challenges

Finding a Successful Internet Business Model

Only a fraction of the businesses that were created as Internet based models have survived. Low cost is not necessarily true in internet based business either if you think about having to warehouse the products that you are selling. Mixed businesses have to worry that they do not cannibalize there other sales chains.

Organizational Change Challenges

E-business and e-commerce require that a firm change the way that the organization is designed. Often traditional boundaries will get in the way when collaboration needs to be done.

Trust, Security, and Privacy

Trust needs to be available to do transaction either live or on the net, but the internet often seems impersonal and so trust has to be earned. The internet was designed to be an open system so it is constantly under attack when security is so important to doing business. Lastly, we can collect so much information about people who visit a web site by not only following their traffic through a site, but by information that they may give willingly. Is it right to profit from the information that is collected?

Solutions

Determining How Internet Technology Can Provide Value for the Business

Management needs to have a carefully designed business model for how they intend to use the Internet/Intranet in the business. They need to understand how it will work within their organization.

Managing Business Process Changes

Managers need to have in place plans for how to deal with change and the impacted people both internal and external to the firm. Also, plans must be made to see where and how data is exchanged with other organizations including what format it is to be in.

Safeguarding Security and Privacy

While keeping a site open to customers, a firm needs to keep hackers away. A firm must also develop a policy for respecting the privacy of their customers.

MIS3

Information Systems, Organizations, Management, and Strategy

3.1 Organizations and Information Systems

Information Systems and organizations influence one another. This interaction is complex and influenced by many mediating factors. A manager decides what systems to implement every though they not know all of the consequences of what they do.

What Is an Organization

An organization is a stable formal structure taking recourses from the environment and then processes them to produce output. An organization is more stable than an informal group as well as being legal entry that has social structure. This definition does not allow us to predict what will happen in an organization. So we could pay that one is a collection of rights, privileges, obligations, and responsibilities that are in a delicate balance over a period of time through conflict and resolution. The firm is malleable and we would use information systems to do so. Changing these systems can take a long time and be disruptive. Before you can have a technological change, you need to have a change in who owns and controls the information. The technical and behavioral definitions complement each other does not contradict each other.

Common Features of Organizations

Sociologist Max Weber pointed out that all organizations basically have many characteristics alike. He called organizations bureaucracies and defined them as having structural formats. Modern bureaucracies have a clean cut division of labor in a hierarchy format. Rules, called standard operating procedures (SOP), define how things are to be done. They follow the rule of maximum output with limited input.

Routines and Business Process

Routines are precise rules, procedures, and practices developed to cover virtually all situations that come up in normal business, and help the employee to become proficient as he learns them. Business processes are just a collection of these routines. They can be analyzed for a better understanding of the company.

Organizational Politics

Because different people in different positions see things from a different perspective political battles come about. This resistance hinders organizational change. Managers need to learn how to manage the political problems.

Organizational Culture

The organizational culture is the set of beliefs of what product it should produce, how it should produce it, where and for whom. Usually they are just there and not spoken about and the business processes are a result of the culture. While this is beneficial in order to get things done, it is also a hindrance, like the organizational politics is, to getting change not only started but progressing as well.

Unique Features of Organizations

Different Organizational Types

There are 5 basic types of organizations.

· Entrepreneurial - small, young, fast changing

· Machine - makes standardized products with standardized procedures

· Divisional - multiple machine types combined together

· Professional - knowledge based, expertise and knowledge of professionals sold

· Adhocracy - Task force type of organizations, short teams, weak central management

The information system in a business will reflect its organizational type.

Organizations and environments

Organizations draw resources from the environment around them as well as supply those goods and services back. They can be influenced by the environment as well as influence it as well. Information systems are needed to help this interaction in both directions. Environments change faster than organizations, and that is the reason organizations eventually fail. Another failure reason is lack of resources to make it through a crisis.

Other Differences Among Organizations

Organizations also have different goals. They car have coercive, utilitarian, and even normative goals. They also serve different groups. Some are more are more democratic. The culture of the nation Can even affect things.

Organizing the IT Function

Different organizations form the information systems department differently. This department is made up of many different people.

· Programmers - Software writers

· System Analysts - Communicates between the group and the rest of the organization

· Information system managers - leaders in all the different parts of the information

· Chief Information officer - senior management

· End users - the ones who the department exist for

In the past this department was mostly programmers, now many skills are needed. Earlier companies developed their own software, not they outsource it.

3.2 How Information Systems Impact Organizations and Business Firms

Economic Impact

As information technology Cost decrease, the costs get transferred from tradional capital to labor and production. Because of declining cost of IT investments will be increased. Firms can contract in size because technology reduces transaction costs. Networks help in this as costs are lowered when companies can communicate efficiently. As these costs decrease firm size should decrease as well. Management costs as well as size should decease because less manages are needed as less employees because other businesses are doing the work. Agency costs can be reduced because the information they need cost less to get.

Organizational and Behavioral Impacts

It Flattens organizations

Many firms were developed at a time when technology costs were high and management layers were needed to provide information. Not only does it flatten but puts decision making at lower levels. The lower level people are given better information and generally are better educated.

Postindustrial Organizations and Virtual Firms

Postindustrial theories support flattened organizational charts as well. It says that knowledge increases authority. In some Cases they can even make a virtual organization that has no formal location where all people work.

Increasing Flexibility of Organizations

Information Technology allows for companies to respond to change and be flexible. Mass customization allows for individual tailored products making a larger organization more agile.

Under standing Organizational Resistance to Change

One of the Reasons for resistance to IT is people and routines as well as high levels of training. Some times it deals with political infighting. This same infighting can cause a project to fail even when it is implemented.

In order for a system to be implemented task, structure, technology and people need to change at the same time.

The Internet and Organizations

The internet has influenced how work is accomplished not only internally but externally as well. Businesses need to work with this change.

3.3 The Impact of IT on Management Decision Making

Before Information technology managers tended to work with old data meanings they often had to guess. Modem Technology has allowed for quicker data meaning better decisions.

How IT Affects Management Decision Making

Basically organizations have increased productivity and profitability.

The Role of Managers in Organizations

Older thought led to the beliefs of four activities those managers all participate in. The behavioral Model says that all managers do: planning, Coordinating) decision making And leading. Now the thought is that managers do a lot of work at a continuous pace, the activities are fragmented taking about ten minutes with very few lasting an hour or more, they prefer information verbally especially gossip, and a high priority is the contacts they have. There are the managerial roles they have:

· Interpersonal roles - figurehead to outside, leadership to internal people.

· International Roles get information and get it out to those who need it

· Decisional Roles - initiate things, handle disturbances, allocate resources

Models of Decision Making

There Are several different models when it comer to decision Making:

· Rational Model - people are rational so they will look at all options and choose the best (critics say most will go with the first thing that advances their needs)

· Organizational model - several people in organization contribute to decisions

· Bureaucratic model - the most important thing is to continue and preserve the organization and because of this decisions may not be rational. Changing things means going against SOP.

· Political Model - Bargaining and compromise are reasons for decisions, meaning many choices are not the best for the firm

Implications for the Design and Understanding of Information Systems

Information systems need to be built with the following in mind

· Environment of firm

· Structure

· Culture and politics

· The type of the organization

· Interest groups that influence decisions

· The processes that will need to be done

They should be built to:

· be flexible with many options

· Capability of supporting a variety of skills And styles

· Sensitive to the firms bureaucratic and political requirements

3.4 Information Systems and Business Strategy

Business Strategy

· Products and services

· Industry Compete in

· Competitors, Suppliers, and Customers of firm

· Long term goals of firm

Strategies are at three levels

· Business - Single firms

· Firm - Collection of businesses

· Industry - collection of firms

Business-Level Strategy: The Value Chain Model

· Become low cost producer

· Differentiate your product or services

· Enlarge market globally or narrow it to a niche

Leveraging Technology in the value Chain

Value chain model identifies points where technology can give a competitive advantage by seeing what it can add to the steps in the processes up the chain. Primary activities are ones directly related to makings product or service. Support activities make the infrastructure possible so primary activities can be done. A competitive advantage is something that adds value, lowers cost, or both, so that a customer prefers you. Value chains can be part of what you get from a supplier and it sometimes helps to help a supplier in its technology to help you get information quicker. The internet has helped to tie companies to make value chains. Businesses need to create information systems both internally and externally. Chains and value webs are not static and should be changed when advantages can not be maintained.

Information systems Products and Services

Information systems allow firms to create unique products and services that allow them a strategic advantage. This is done through product differentiation. Eventually competitors will have to match the services, get better ones, or drop out of competition.

Systems to focus on Market Niche

Focused differentiation allows for focusing a product or service so that it can be narrow targeted. Information systems can help by showing where sales are strongest and allowing sales people to focus on them. Large groups of data can be analyzed with software tools to find trends early.

Supply Chain Management and efficient Customer Response systems

One way of being efficient in the value chain is to link the supplier value chain to the customer value chain. This allows digital firms to bypass themselves and have the customer be served from the supplier. Example is that Wal-Mart stores communicate each sale to the central computers which then notes when stock is low at a store, sending an order to the supplier to send it to the store, bypassing the need to hold inventory in a warehouse, an item that adds cost but not value. Customer response systems that are efficient raise the switching costs of a customer.

Firm-Level Strategy and Information Technology

A firm is a collection of businesses. Pooling resources or efficiently outputting from one part to the other one can help the bottom line if it is done digitally.

Enhancing Core Competencies

A core competency is one that makes a firm a leader of its industry. Generally they rely on knowledge and any system that allows for sharing of this information across business units makes a core competency more valuable.

Industry-Level Strategy and Information Systems: Competitive Forces and Network Economics

Many firms making the same product form an industry. At this level the question is how much should you compete or cooperate with your fellow industry members. At times, for an example, an industry standard, it might be a good idea to cooperate.

Information Partnerships

In an information partnership, firms can join forces without actually merging, a credit card giving airline miles for example. This creates benefits for both firms and the customers as well.

The Competitive Forces Model

The competitive forces model says that a firm mist deal with external threats and opportunities:

• New entrants into the market
• Substitute products or services
• Bargaining power of customers
• Position of traditional industry competitors

A firm can have a competitive advantage if it can compete in one or more of these. How does information technology do this? Setting standards with competitors, getting lower prices or greater value so that people can not go to a substitute easily, are a couple of examples. The internet has helped put the consumer back in the forefront here, as they can find lower prices, but also branding works towards the firms advantage if they can get the customer loyalty.

Business Ecosystems: Keystones and Niche Firms

The Porter model shown above assumes that an industry is static and a firm stays in one industry. A model not followed in today’s age. Many today work in interrelated sets of industries and make a business ecosystem. This idea is based on the value chain discussed earlier. In an industry ecosystem you would have one or two players who dominate the industry as well as many niche firms that take up the smaller parts of the industry. The same is true of the business, as it has many supporting parts of its chain.

Network Economics

In traditional industries, the more you put into a product does not mean that you will get more out, it reaches a point of diminishing returns. Network economics disagrees with this. It cost no more to add a computer to an existing network and the benefit goes up. This is an example of many industries out there. Adding a player into the ecosystems does not cost much either but can add great value to a firm. An example here is one more user on e-bay does not cost but adds value to the site.

3.5 Management Opportunities, Challenges and Solutions

Opportunities

Management Challenge

Solution Guidelines