Essentials of Management Information Systems, 6e Chapter 3 Information Systems, Organizations, Management, and Strategy 3.1 © 2005 by Prentice Hall Information

Managing the Digital FirmEssentials of Management Information Systems, 6e Chapter 3 Information Systems, Organizations, Management, and Strategy
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Essentials of Management Information Systems, 6e Chapter 3 Information Systems, Organizations, Management, and Strategy
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Information technology services
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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.
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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.
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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
Information Technology Infrastructure and Information Technology Services
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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.
Information Technology Infrastructure and Information Technology Services
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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.
How Information Systems Affect Organizations
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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.
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information technology on the organization
Figure 3-6
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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
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information technology on the organization
Figure 3-7
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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.
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The Changing Role of Information Systems in 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
The Internet and Organizations
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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.
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Classical Model:
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Behavioral Models:
Fragmented activities
Prefer oral communication
The Role of Managers in Organizations
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Managerial Role Categories
Decisional: Entrepreneur, disturbance handler, resource allocator, negotiator
The Role of Managers in Organizations
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Decision Making
Management control: monitors effective usage of resources, performance
Operational control: determines how to perform tasks and ways to distribute information
Managers and Decision Making
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Decisions are classified as:
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Information systems and levels of decision making
Figure 3-9
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Stages of Decision Making
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
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The decision-making process
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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?
Window on Management
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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 organization’s bureaucratic and political requirements
Implications for the Design and Understanding of Information Systems
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Computer system at any level of an organization
Changes goals, operations, products, services, or environmental relationships
Helps organization gain a competitive advantage
What Is a Strategic Information System?
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Business Competitive Strategies Questions
Business-Level Strategy and the Value Chain Model
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Business Competitive Strategies
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Value Chain Model
Firm seen as series or “chain” of activities that add a margin of value to firm’s products or services
Highlights activities in business where competitive strategies are best applied
Primary or support activities
Firm’s value chain linked to value chains of other partners
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Information Systems and Business Strategy
Primary activities: Activities directly related to the production and distribution of the firm’s 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.
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The firm value chain and the industry value chain
Figure 3-11
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Value Web
Value chain extended by Internet technology that connects all the firm’s 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
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The value web
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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
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Product Differentiation
NetBank: Virtual Banking
Dell: Assemble to Order
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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
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Focused Differentiation
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.
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Efficient Customer Response Systems
Links consumer behavior back to distribution, production, and supply chains
Information systems used to link customer’s value chain to firm’s value chain
Reduce inventory costs; deliver product or service more quickly to customer
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Efficient Customer Response Systems
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%)
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Stockless inventory compared to traditional and just-in-time supply methods
Figure 3-13
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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
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Business-level strategy
Figure 3-14
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At firm level, information technology can:
Promote synergies between business units, pool resources
Tie together operations of disparate business units
Improve core competencies
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Information Systems and Business Strategy
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.
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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
Industry-Level Strategy and Information Technology
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Information Partnerships
Increased customer loyalty
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Competitive Forces Model
Coordinate policies and regulations.
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Impact of Internet on Competitive Forces
Reduces barriers to entry
Shifts bargaining power to customer
Raises firm’s 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
Industry-Level Strategy and Information Technology
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Figure 3-15
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Figure 3-16
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Network Economics
The law of diminishing returns.
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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Essentials of Management Information Systems, 6e Chapter 3 Information Systems, Organizations, Management, and Strategy 3.1 © 2005 by Prentice Hall Information