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3
INFORMATIONINFORMATION
SYSTEMS,SYSTEMS,
ORGANIZATIONS,ORGANIZATIONS,
MANAGEMENT,MANAGEMENT,
3.2 © 2003 by Prentice Hall
• What do managers need to know aboutWhat do managers need to know about
organizations in order to build and useorganizations in order to build and use
information systems successfully?information systems successfully?
• What impact do information systems haveWhat impact do information systems have
on organizations?on organizations?
• ow do information systems support theow do information systems support the
activities of managers in organizations?activities of managers in organizations?
!"#$%&'($)

• ow can businesses use informationow can businesses use information
systems for competitive advantage?systems for competitive advantage?
• Why is it so difficult to build successfulWhy is it so difficult to build successful
information systems* including systemsinformation systems* including systems
that promote competitive advantage?that promote competitive advantage?
!"#$%&'($)

1.1. )ustainability of competitive advantage)ustainability of competitive advantage
2. ,itting technology to the organization -or2. ,itting technology to the organization -or
viceversa/viceversa/
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,igure 31
Essentials of Manageent Inforation S!stesEssentials of Manageent Inforation S!stes Chapter 3 Inforation S!stes , Organi"ations, Manageent, an# Strateg!Chapter 3 Inforation S!stes , Organi"ations, Manageent, an# Strateg!
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!rganization:!rganization:
• &akes resources from environment and&akes resources from environment and
processes them to produce outputsprocesses them to produce outputs
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&echnical 0icroeconomic 8efinition of the !rganization
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,igure 32
"ehavioral definition of !rganization:"ehavioral definition of !rganization:
• %ollection of rights* privileges* obligations*%ollection of rights* privileges* obligations*
responsibilitiesresponsibilities
• %onflict resolution%onflict resolution
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3. © 2003 by Prentice Hall
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,igure 33
3.1A © 2003 by Prentice Hall
• !rganizations are bureaucracies that have!rganizations are bureaucracies that have
certain structural featurescertain structural features
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%ommon ,eatures of !rganizations
)tructural %haracteristics of !rganizations:)tructural %haracteristics of !rganizations:
• %lear division of labor %lear division of labor
• ierarchyierarchy
• 'mpartial Cudgments'mpartial Cudgments
)tructural %haracteristics of !rganizations)tructural %haracteristics of !rganizations
-cont./:-cont./:
)tandard !perating ;rocedures:)tandard !perating ;rocedures:
• ;recise rules* procedures* and practices;recise rules* procedures* and practices
• $nable organizations to cope with all$nable organizations to cope with all
eBpected situationseBpected situations
3.1+ © 2003 by Prentice Hall
!rganizational ;olitics:!rganizational ;olitics:
struggle* competition* and conflictstruggle* competition* and conflict
• amper organizational changeamper organizational change
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!rganizational %ulture: a set of!rganizational %ulture: a set of
fundamental assumptions about:fundamental assumptions about:
• What products the organization shouldWhat products the organization should
produceproduce
• ow and where it should produce themow and where it should produce them
• ,or whom they should be produced,or whom they should be produced
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ll organizations have different:ll organizations have different: • )tructuresE!rganizational types)tructuresE!rganizational types
• oalsoals
• %onstituencies%onstituencies
• )urrounding $nvironment)urrounding $nvironment
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@niDue ,eatures of !rganizations
3.1= © 2003 by Prentice Hall
Essentials of Manageent Inforation S!stesEssentials of Manageent Inforation S!stes Chapter 3 Inforation S!stes , organi"ations, Manageent, an# Strateg!Chapter 3 Inforation S!stes , organi"ations, Manageent, an# Strateg!
• $ntrepreneurial:$ntrepreneurial: )tart up business)tart up business
• 0achine bureaucracy:0achine bureaucracy: 0idsize manufacturing firm0idsize manufacturing firm
• 8ivisionalized bureaucracy:8ivisionalized bureaucracy: ,ortune 5AA,ortune 5AA
• ;rofessional bureaucracy:;rofessional bureaucracy: 4aw firms* hospitals*4aw firms* hospitals* school systemsschool systems
• dhocracy:dhocracy: %onsulting firm%onsulting firm
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!rganizational )tructures
3.1> © 2003 by Prentice Hall
,igure 3+

• @ltimate goal@ltimate goal
• ature of leadershipature of leadership
• &asks and technology&asks and technology
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!ther 8ifferences mong !rganizations
3.2A © 2003 by Prentice Hall
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'nformation systems department:'nformation systems department:
• ,ormal organizational unit,ormal organizational unit
• 6esponsible for information systems in6esponsible for information systems in
the organizationthe organization

,igure 35
'nformation &echnology )ervices
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'ncludes specialists:'ncludes specialists:
• )ystems analysts:)ystems analysts: &ranslate business&ranslate business problems into solutions* act as liaisonsproblems into solutions* act as liaisons between the information systemsbetween the information systems department and rest of the organizationdepartment and rest of the organization
'nformation &echnology 'nfrastructure and 'nformation &echnology )ervices

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)pecialists -cont./:)pecialists -cont./:
• 'nformation system managers:'nformation system managers: 4eaders of4eaders of various specialistsvarious specialists
• %hief information officer -%'!/:%hief information officer -%'!/: )enior manager)enior manager in charge of information systems function in the firmin charge of information systems function in the firm
• $nd users:$nd users: 8epartment representatives outside the8epartment representatives outside the information system department for whominformation system department for whom
applications are developedapplications are developed
'nformation &echnology 'nfrastructure and 'nformation &echnology )ervices

$conomic theories$conomic theories
• 'nformation technology is a factor of'nformation technology is a factor of production* like capital and labor production* like capital and labor
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ow 'nformation )ystems ffect !rganizations

&ransaction cost theory:&ransaction cost theory: ,irms can,irms can
conduct marketplace transactionsconduct marketplace transactions
internally more cheaply to grow larger internally more cheaply to grow larger
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&ransaction %ost &heory
,igure 3<

• gency theory:gency theory: ,irm is neBus of,irm is neBus of contracts among selfinterested partiescontracts among selfinterested parties reDuiring supervisionreDuiring supervision
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gency %ost &heory
,igure 3=

"ehavioral theories:"ehavioral theories:
• 4ower cost of information acDuisition4ower cost of information acDuisition
• "roadens the distribution of information"roadens the distribution of information
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(irtual organization:(irtual organization:
• &ask force networked organizations&ask force networked organizations
• @ses networks to link people* assets* and ideas to@ses networks to link people* assets* and ideas to create and distribute products and services withoutcreate and distribute products and services without being limited to physical locationsbeing limited to physical locations
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,igure 3>

%lassical model of management:%lassical model of management: • &raditional description of management&raditional description of management
• ,ocuses on formal functions: plan*,ocuses on formal functions: plan* organize* coordinate* decide* controlorganize* coordinate* decide* control
"ehavioral model of management:"ehavioral model of management: • 8escribes management based on8escribes management based on
observations of managers on the Cobobservations of managers on the Cob
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&he 6ole of 0anagers in !rganizations

0anagerial roles0anagerial roles
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3.3+ © 2003 by Prentice Hall
%ategories%ategories
• 'nformational:'nformational: 0anagers receive and0anagers receive and disseminate critical information* nerve centersdisseminate critical information* nerve centers
• 8ecisional:8ecisional: 0anagers initiate activities*0anagers initiate activities* allocate resources* and negotiate conflictsallocate resources* and negotiate conflicts
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;rocess of 8ecision 0aking;rocess of 8ecision 0aking
• )trategic 8ecision 0aking:)trategic 8ecision 0aking: 8etermines8etermines
longterm obCectives* resources* andlongterm obCectives* resources* and policiespolicies
• 0anagement %ontrol:0anagement %ontrol: 0onitors effective0onitors effective or efficient usage of resources andor efficient usage of resources and performance of operational unitsperformance of operational units
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0anagers and 8ecision 0aking
3.3< © 2003 by Prentice Hall
• !perational control:!perational control: 8etermines how to8etermines how to
perform specific tasks set by strategic andperform specific tasks set by strategic and middlemanagement decision makersmiddlemanagement decision makers
• Gnowledgelevel decision making:Gnowledgelevel decision making: $valuates new ideas for products*$valuates new ideas for products* services* ways to communicate newservices* ways to communicate new knowledge* ways to distributeknowledge* ways to distribute informationinformation
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3.3= © 2003 by Prentice Hall
8ecisions are classified as:8ecisions are classified as:
• @nstructured:@nstructured: on routine* decisionon routine* decision maker provides Cudgment* evaluation* andmaker provides Cudgment* evaluation* and insights into problem definition* no agreedinsights into problem definition* no agreed upon procedure for decision makingupon procedure for decision making
• )tructured:)tructured: 6epetitive* routine* handled6epetitive* routine* handled using a definite procedureusing a definite procedure
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3.3> © 2003 by Prentice Hall
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!rganizational 4evel &9;$ !,&9;$ !, 8$%')'!8$%')'! !;$6&'!4 G!W4$8$ 0$0$& )&6&$'%
)&6@%&@6$8 %%!@&) 6$%$'("4$
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8ifferent Ginds of 'nformation )ystems

• 'ntelligence:'ntelligence: %ollect information* identify%ollect information* identify problemproblem
• 8esign:8esign: %onceive alternative solution to a%onceive alternative solution to a problemproblem
• %hoice:%hoice: )elect among the alternative solutions)elect among the alternative solutions
• 'mplementation:'mplementation: ;ut decision into effect and;ut decision into effect and provide report on the progress of solutionprovide report on the progress of solution
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)tages of 8ecision 0aking
3.+A © 2003 by Prentice Hall
,i ure 31A
8ecision0aking ;rocess
• 6ational:6ational: ;eople* organizations* and;eople* organizations* and nations engage in consistent* valuenations engage in consistent* value maBimizing calculations or adaptationsmaBimizing calculations or adaptations within certain constraintswithin certain constraints
• %ognitive style:%ognitive style: @nderlying personality@nderlying personality dispositions toward the treatment ofdispositions toward the treatment of information* selection of alternatives* andinformation* selection of alternatives* and evaluation of conseDuencesevaluation of conseDuences
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0odels of 8ecision 0aking
• )ystematic decision makers:)ystematic decision makers:
%ognitive style*%ognitive style* describes people whodescribes people who approach a problem by structuring it inapproach a problem by structuring it in terms of some formal methodterms of some formal method
• 'ntuitive:'ntuitive: %ognitive style* describes%ognitive style* describes people approaching a problem withpeople approaching a problem with multiple methods in an unstructuredmultiple methods in an unstructured manner manner
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• !rganizational models of decision!rganizational models of decision
making:making: %onsider structural and political%onsider structural and political
characteristics of an organizationcharacteristics of an organization
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3.++ © 2003 by Prentice Hall
,actors to consider while planning a,actors to consider while planning a
new system:new system:
• !rganizational environment!rganizational environment
• !rganizational structure* hierarchy*!rganizational structure* hierarchy* specialization* standard operatingspecialization* standard operating proceduresprocedures
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'mplications for the 8esign and @nderstanding of 'nformation )ystems

3.+5 © 2003 by Prentice Hall
• %ulture and politics of the organization%ulture and politics of the organization
• &ype of organization and its style of&ype of organization and its style of
leadershipleadership
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3.+< © 2003 by Prentice Hall
• roups affected by the system and theroups affected by the system and the
attitudes of workers who will be using theattitudes of workers who will be using the
systemsystem
• Ginds of tasks* decisions* and businessGinds of tasks* decisions* and business
processes* information system isprocesses* information system is
designed to assistdesigned to assist
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3.+= © 2003 by Prentice Hall
%haracteristics to be kept in mind%haracteristics to be kept in mind
while designing systems:while designing systems:
• ,leBibility and multiple options for,leBibility and multiple options for
handling data and evaluating informationhandling data and evaluating information
• %apability to support a variety of styles*%apability to support a variety of styles*
skills* and knowledgeskills* and knowledge
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3.+> © 2003 by Prentice Hall
• %apability to keep track of many%apability to keep track of many
alternatives and conseDuencesalternatives and conseDuences
• )ensitivity to the organizationHs)ensitivity to the organizationHs
bureaucratic and political reDuirementsbureaucratic and political reDuirements
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3.+ © 2003 by Prentice Hall
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• %omputer system at any level of an%omputer system at any level of an
organizationorganization
services* or environmental relationshipsservices* or environmental relationships
• elps organization gain a competitiveelps organization gain a competitive
advantageadvantage
What is )trategic 'nformation )ystem

8igital firms8igital firms
• 0anage the supply chain by building0anage the supply chain by building
efficient customer Isense and responseJefficient customer Isense and responseJ
systemssystems
• ;articipate in Ivalue websJ to deliver new;articipate in Ivalue websJ to deliver new
products and servicesproducts and services
"usiness 4evel )trategy and the (alue %hain 0odel

• ighlights the primary or supportighlights the primary or support
activities adding a margin of value toactivities adding a margin of value to
products or servicesproducts or services
• elps achieve a competitive advantageelps achieve a competitive advantage

;rimary ctivities:;rimary ctivities: • 8irectly related to the production and8irectly related to the production and
distribution of a firmHs products or servicesdistribution of a firmHs products or services
)upport ctivities:)upport ctivities: • 0ake the delivery of primary activities possible0ake the delivery of primary activities possible
• %onsist of the organizationHs infrastructure*%onsist of the organizationHs infrastructure* human resources* technology* and procurementhuman resources* technology* and procurement

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,irm (alue %hain
,igure 311
(alue Web:(alue Web:
• %ustomerdriven network of independent%ustomerdriven network of independent
firmsfirms
value chains for collectively producing avalue chains for collectively producing a
product or serviceproduct or service

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&he (alue Web
,igure 312
;roduct 8ifferentiation:;roduct 8ifferentiation:
• %ompetitive strategy%ompetitive strategy
• %reates brand loyalty by developing new%reates brand loyalty by developing new and uniDue products and servicesand uniDue products and services
• ;roducts and services not easily duplicated;roducts and services not easily duplicated by competitorsby competitors

,ocused 8ifferentiation:,ocused 8ifferentiation:
• %ompetitive strategy%ompetitive strategy
• $nables development of new market niches$nables development of new market niches for specialized products or servicesfor specialized products or services
• elps businesses compete better thanelps businesses compete better than competitors in the target areascompetitors in the target areas

$fficient %ustomer 6esponse )ystem:$fficient %ustomer 6esponse )ystem:
• 8irectly links consumer behavior back to8irectly links consumer behavior back to
distribution* production* and supplydistribution* production* and supply
chainschains
)upply %hain 0anagement and $fficient %ustomer 6esponse )ystem

)witching costs:)witching costs:
• $Bpense incurred by a customer or$Bpense incurred by a customer or
company in terms of time and eBpenditurecompany in terms of time and eBpenditure
of resources when changing from oneof resources when changing from one
supplier or system to another supplier or system to another
)upply %hain 0anagement and $fficient %ustomer 6esponse )ystem

3.<A © 2003 by Prentice Hall
,igure 313
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3.<1 © 2003 by Prentice Hall
,igure 31+
$nhancing %ore %ompetencies
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%ore %ompetency:%ore %ompetency:
• ctivity at which a firm eBcels as a worldctivity at which a firm eBcels as a world
class leader class leader
sharing of knowledge across businesssharing of knowledge across business
units enhances competencyunits enhances competency
,irm4evel )trategy and 'nformation &echnology

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'nformation partnership:'nformation partnership:
• %ooperative alliance formed between two%ooperative alliance formed between two or more corporations for sharingor more corporations for sharing information to gain strategic advantageinformation to gain strategic advantage
• elp firms gain access to new customers*elp firms gain access to new customers* creating new opportunities for crosscreating new opportunities for cross selling and targeting productsselling and targeting products
'ndustry4evel )trategy and 'nformation )ystems

&he competitive forces model:&he competitive forces model:
• 8escribes the interaction of eBternal8escribes the interaction of eBternal
influences* specifically threats andinfluences* specifically threats and
opportunities* affecting an organizationHsopportunities* affecting an organizationHs
strategy and ability to competestrategy and ability to compete

3.<5 © 2003 by Prentice Hall
,igure 315
;orterHs %ompetitive ,orces 0odel
3.<< © 2003 by Prentice Hall
,igure 31<
ew %ompetitive ,orces 0odel
etwork $conomics:etwork $conomics:
• 0odel of strategic systems at the industry level0odel of strategic systems at the industry level
• "ased on the concept of a network"ased on the concept of a network
• dding another participant entails zerodding another participant entails zero marginal costs but can create much largermarginal costs but can create much larger marginal gainmarginal gain

• 0ovement from one level of0ovement from one level of
sociotechnical system to another sociotechnical system to another
• 6eDuired when adopting strategic systems6eDuired when adopting strategic systems
demanding changes in the social anddemanding changes in the social and
technical elements of an organizationtechnical elements of an organization
@sing )ystems for %ompetitive dvantage: 0anagement 'ssues

3
INFORMATIONINFORMATION
SYSTEMS,SYSTEMS,
ORGANIZATIONS,ORGANIZATIONS,
MANAGEMENT,MANAGEMENT,