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Information Systems, Organization, and
Strategy
Business needs to fine-tune
its strategy to keep profitable
eBay
• Internet auction
or the best marketplace
• Hosting 532,000 online storefront
• 83 million active users
• 2007 revenue: 77 billions– Fee & commission from sale transactions– Direct ads– End-to-end service: PayPal
• eBay’s growth strategy– Expansion in geography & scope
• Innovation to enhance the variety and product of its site
• PayPal– Service enable the exchange of money between
individual– Standard payment method for online transactions
• Shopping.com– Online shopping comparison
• Skype– Free internet phone– Low cost voice calls– Provide communication among buyers and sellers
• StubHub: ticket-selling website• Craiglist: classified ads • ProStores:
– Technology used to help users setup online store
– Business model change• Selling items at a fix price
– “Buy it Now”– Work with buy.com
» DVD, electronic books, …
– Objections from pop and mom dealer
• Internet auction
or the best marketplace
3.1 Organization & Information systems
3.2 How information systems impact organizations & business firm
3.3 Using systems to achieve competitive advantage
3.4 Management Issues: using systems for competitive advantage
3.1 Organization and
Information systems
組織建立資訊系統to serve the interest of firms
will transform the operations of firms資訊系統影響作業方式高鐵 -- 雙色優惠票價
• What is organization?– Stable, formal structure – Take resources from the environment and process
them to produce output
Technical Definition
• What is an organization?– Collection of rights,
privileges, obligations, and responsibilities
• Delicately balanced over a period of time
• Through conflict and conflict resolution Behavioral definition
– Who own and control information– Who has the right to access and update
information– Who make decisions about whom, when, how
Factors affect the success of information systems
• Features of organizations– Routines and business processes– Organizational politics
• Struggle for resources, competition, and conflict within every organization
– Organizational culture• Bedrock, unassailable, unquestioned assumptions
that define their goals and products
• Features of organizations– Organizational Environments
• Organizations depend on the social and physical environment
– 創新的環境 創新的公司 • Organizations influence their environment
– 創新的公司 創新的環境
• Features of organizations– Organizational structure
Org. Type Examples
Entrepreneurial Start-up
Machine Bureaucracy Midsize Mfg
Divisional Bureaucracy General Motor
Professional Bureaucracy Law firms
Adhocracy Consulting
• Other organizational features– Goal
• Coercive (ex: prison)• Utilitarian (ex: firm)• Normative (ex: university)
3.2 How Information Systems Impact organizations and Business Firms
• Economic impacts– Transaction cost theory
• Using the market is expensive– Obtaining information on products– Locating and communicate with suppliers– Monitoring contract compliance– Buying insurance
Information systems lower the cost• Chrysler Corporation
– Outsource 70% of its parts
– Agency cost theory• A firm is a “nexus of contracts” among self-
interested individuals• A principal (owner) employs “agents” to perform
work on his or her behalf
Information systems make it easier for managers to oversee
• Organizational and behavioral impacts– IT flattens organizations
• Increase the management span of control– Broaden the distribution of information– Higher education level of workforce
– Postindustrial organizations• Authority increasingly relies on
– Knowledge and competence– NOT merely on formal positions
• Understanding organizational resistance to change– Information systems
• Bound up in organizational politics• Influence access to a key resource – Information
– New information systems• Requires changes in personal, individual routines• Potentially change structure, culture, …
3.3 Using Information systems to achieve competitive advantage
• Competitive advantage– Always “do better” than others
• Access to special resources• Use resources more efficiently
– Superior knowledge– Superior information assets
• Porter’s competitive forces model– 五力分析
Traditional competitors
• Traditional competitors– All firms share market space with other
competitors• Brands• Switching cost
• New market entrants– Entry barriers
• Low: internet auctions• High: steel mill
– Advantages of new companies• New equipment, young workers (less expensive,
more energetic), flexible business process
– Disadvantages• Less capital, less experienced workforce, little
brand recognition
• Substitute products and services– Fiber-optic telephone
• Carry TV program
– Cable TV lines
• Customers– To be a profitable company:
• Ability to attract and retain customers• Charge high prices
Product differentiation
• Suppliers– The market power of suppliers can have
significant impact on firm profit• Microsoft/Intel vs. PC manufacturers
• Information system strategies for dealing with competitive forces– Low cost leadership– Product differentiation– Focus on market niche– Strengthen customer and supplier intimacy
– Low cost leadershipWal-Mart
• Continuous replenishment systems– Shelves well stocked– Inventory low
Keep price low
• Efficient customer response system– Direct link consumer behavior to
» distribution and production» Supply chain
– Product differentiation• Information system to enable new products
– Apple (iPod, iTune)– Dell (Build to order)
» Manage business customers’ computer services
• Mass customization分眾生產– Offer individually tailored product or service– Using the same production resources as mass
production
– Focus on market niche• Serve a narrow, specific market
– Buying patterns, tastes, preference– Advertising and marketing campaigns to smaller target
markets
• CRM• Hilton hotels
– 8 brands– OnQ system
» Predict customers’ future business with Hilton» Identify customers who are clearly not profitable
– Strengthen customer and supplier intimacy• Chrysler corporation
– Facilitate direct access from supplier to production schedule
– Allow suppliers more lead time
Strong linkages to customers and suppliers increase switching cost
• The Internet’s impact on competitive advantage
• Nearly destroyed some industries– Encyclopedia, newspapers
• Severely threatened more– Travel, brokerage
• Create new markets– Online used textbook (goods) sales
» Amazon charges
15% selling fees + $1.35 closing fee per item
– The business value chain model• Highlight specific activities in the business• Where competitive strategies can be applied
Extending the value chain:
the value web
Internet for cross industries’ value chains
• Synergies, core competencies, and network-based strategies– Synergy
• The output of some units can be used as inputs to other units
– 正正得 ( 正【平方】 ) positive * positive = positive2
– 負負得 ( 負【平方】 ) negative * negative = negative ()2
• Use information systems– Tie together the operations of disparate business units
– Enhance core competence• Activity for which a firm is the world-class leader
– Best package delivery service
– Best thin-film manufacturer
• Use information system– Encourage the sharing of knowledge
– Enhance competence
• Ex: Procter & Gamble– 300 different brands
– InnovationNet
» Share ideas & expertise among all brands
– Network-Based strategies• Traditional economics
Law of diminishing return 邊際效益遞減– The more any given resources is apply to production– The lower the marginal gain in output– Eventually reaches Zero
• Network economics– The marginal cost of adding another participant are
about zero– The marginal gain is much larger
Ex: Traffic of websites, eBay.com
• Virtual company strategy– Use network to link people, assets, and idea– Enabling it to ally with other companies
• To create and distribute products and services• Without being limited by organizational boundary
Ex: GUESS, Ann Taylor, Levis, Reebok
Hong Kong-based Li & Fung 香港利豐集團
– Business ecosystem: keystone and niche firms
• Loosely coupled but interdependent networks– Suppliers– Distributors– Outsourcing firms– Transportation service firms– Technology manufacturer
Ex: Microsoft & thousands of developers
eBay & over 400,000 small business sellers
3.4 using systems for competitive advantage: Management issues
• Sustaining competitive advantage– Do not necessarily last long enough to
ensure long-term profitability• American airline: SABRE• Citibank: ATM
– Tools for survival
• Performing a strategic systems analysis– What is the structure of the industry in which
the firm is located?– What are the business, firm, and industry
value chains for this particular firm?
• Managing strategic transitions– Adoption of strategic systems requires
changes• Movement between levels of sociotechnical
systems
Interactive session
(Minicase)
– Management• Can technology save solders’ life in Iraq• P.121
– Organization• Can Detroit make the cars customers
want?• P. 128