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