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Copyright © 2015 Pearson Canada Inc. 3-1
Managing Information SystemsSeventh Canadian Edition
Laudon, Laudon and Brabston
CHAPTER 3
Information Systems, Organizations, and Strategy
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• Relationship influenced by organization’s:
– Structure
– Business processes
– Politics
– Culture
– Environment
– Management decisions
Information Technology and Organizations Influence Each Other
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• Technical definition:
• Stable, formal social structure that takes resources from environment and processes them to produce outputs
What is an Organization?
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• Routines and business processes
• Organizational politics
• Organizational culture
• Organizational environments
• Organizational structure
• Other organizational features
Features of Organizations
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• Routines (standard operating procedures)
- Precise rules, procedures, and practices developed to cope with virtually all expected situations
• Business processes: Collections of routines
• Business firm: Collection of business processes
Routines and Business Processes
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• Divergent viewpoints lead to political struggle, competition, and conflict
• Political resistance greatly hampers organizational change
Organizational Politics
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• Encompasses set of assumptions that define goal and product
• What products the organization should produce
• How and where it should be produced
• For whom the products should be produced
• May be powerful unifying force as well as restraint on change
Organizational Culture
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• Technology that brings about sweeping change to businesses, industries, markets
• Examples: personal computers, word processing software, the Internet, the PageRank algorithm
• Fast followers – firms with the size and resources to capitalize on that technology
Disruptive Technologies: Riding the Wave
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How Information Systems Impact Organizations
• Economic impacts
• Organizational and behavioral impacts
- IT flattens organizations
- Understanding organizational resistance to change
• The Internet and organizations
• Implications for the design and understanding of information systems
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• IT affects the cost and quality of information and can reduce transaction costs
Economic Impacts
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• Firms experience agency costs (the cost of managing and supervising) which rise as firm grows
• IT can reduce agency costs, making it possible for firms to grow
Agency Theory
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IT flattens organizations
- Decision making pushed to lower levels
- Fewer managers needed (IT enables faster decision
making and increases span of control)
Organizational & Behavioural Impacts
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• Information systems become bound up in organizational politics because they influence access to a key resource – information
• Information systems potentially change an organization’s structure, culture, politics, and work
• Most common reason for failure of large projects is due to organizational and political resistance to change
Understanding Organizational Resistance to Change
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• The Internet increases the accessibility, storage, and
distribution of information and knowledge for
organizations
• The Internet can greatly lower transaction and agency
costs
The Internet and Organizations
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• Information systems must be developed with an
understanding of the organization in which they will be
used
• These must be considered: The organization’s culture,
structure, environment, the groups who will use the IS,
and the kinds of tasks, processes and decisions the
information system is meant to assist
Implications for the Design and Understanding of Information Systems
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Five Competitive Forces
• Traditional competitors
• New market entrants
• Substitute products and services
• Customers
• Suppliers
Porter’s Competitive Forces Model
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Traditional competitors
• All firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs
New market entrants
• Some industries have high barriers to entry; new companies may lack brand recognition
Using Information Systems to Achieve Competitive Advantage
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Substitute products and services
• Substitutes customers might use if your prices become too high
Customers and suppliers
• Can customers easily switch to competitor’s products?
• Market power of suppliers when firm cannot raise prices as fast as suppliers
Using Information Systems to Achieve Competitive Advantage
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• Product differentiation
• Focus on market niche
• Strengthen customer and supplier intimacy
• Low cost operations
Information System Strategies for Dealing with Competitive Forces
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Product differentiation
• Enable new products or services, greatly change customer convenience and experience
Information System Strategies for Dealing with Competitive Forces
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Focus on market niche
• Use information systems to enable a focused strategy on a single market niche; specialize
Strengthen customer and supplier intimacy
• Use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs
Information System Strategies for Dealing with Competitive Forces
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• Firm is viewed as a series of activities that add value to products or services
• Highlights activities where competitive strategies can best be applied
• Primary activities vs. support activities
• At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy
Business Value Chain Model
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• A firm’s value chain is linked to the value chains of its suppliers, distributers, and customers
The Value Web
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• Synergies
• When output of some units used as inputs to others, or organizations pool markets and expertise
• Enhancing Core Competencies
• Activity for which firm is world-class leader
• Relies on knowledge, experience, and sharing this across business units
Synergies, Core Competencies, and Network-Based Strategies
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• Network-based Strategies
• Take advantage of firm’s abilities to network with each other
• Include use of:
• Network economics
• Virtual company model
• Business ecosystems
Synergies, Core Competencies, and Network-Based Strategies
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• Industry sets of firms providing related services and products• Microsoft platform used by thousands of firms for their own
products• Walmart’s order entry and inventory management system
• Individual firms can consider how IT will enable them to become profitable niche players in larger ecosystems
Business Ecosystems
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Sustaining Competitive Advantage
• Because competitors can retaliate and copy strategic systems, competitive advantage is not always sustainable; systems may become tools for survival
Aligning IT with Business Objectives
• Performing a Strategic Systems Analysis
Managing Strategic Transitions
• Adopting strategic systems requires changes in business goals, relationships with customers and suppliers, and business processes