Chapter 3

INFORMATION
SYSTEMS,
ORGANIZATIONS,
MANAGEMENT,
AND STRATEGY

3.1 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

OBJECTIVES

• What do managers need to know about

organizations in order to build and use
information systems successfully?

• What impact do information systems have

on organizations?

• How do information systems support the

activities of managers in organizations?

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

OBJECTIVES

• How can businesses use information

systems for competitive advantage?

• Why is it so difficult to build successful

information systems, including systems
that promote competitive advantage?

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGEMENT CHALLENGES

1. Sustainability of competitive advantage

2. Fitting technology to the organization (or

vice-versa)

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

The Two-Way Relationship Between Organizations and Information Technology

MEDIATING FACTORS:
Environment
Culture
Structure
ORGANIZATIONS Standard Procedures INFORMATION
Politics TECHNOLOGY
Management
Decisions Chance

Figure 3-1
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Organization:

• Stable, formal structure

• Takes resources from environment and

processes them to produce outputs

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Technical Microeconomic Definition of the Organization

Figure 3-2
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Behavioral definition of Organization:

• Collection of rights, privileges, obligations,

responsibilities

• Delicately balanced

• Conflict resolution

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

COMMON FEATURES OF ORGANIZATIONS

The Behavioral View of Organizations

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

• Organizations are bureaucracies that have

certain structural features

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

Structural Characteristics of Organizations:

• Clear division of labor

• Hierarchy

• Explicit rules and procedures

• Impartial judgments

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

Structural Characteristics of Organizations

(cont.):

• Technical qualifications

• Maximum organizational efficiency

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

Standard Operating Procedures:

• Precise rules, procedures, and practices

• Enable organizations to cope with all

expected situations

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

Organizational Politics:

• Divergent viewpoints leads to political

struggle, competition, and conflict

• Hamper organizational change

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

Organizational Culture: a set of

fundamental assumptions about:
• What products the organization should
produce

• How and where it should produce them

• For whom they should be produced

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS & INFORMATION SYSTEMS

Unique Features of Organizations

All organizations have different:

• Structures/Organizational types

• Goals

• Constituencies

• Leadership Styles, Tasks

• Surrounding Environment

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 Essentials of Management Information Systems
Chapter 3 Information Systems , organizations, Management, and Strategy

ORGANIZATIONS & INFORMATION SYSTEMS

Organizational Structures

• Entrepreneurial: Start up business

• Machine bureaucracy: Midsize manufacturing firm

• Divisionalized bureaucracy: Fortune 500

• Professional bureaucracy: Law firms, hospitals,

school systems

• Adhocracy: Consulting firm

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS & INFORMATION SYSTEMS

Organization and Its Environment

Figure 3-4
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

ORGANIZATIONS AND INFORMATION SYSTEMS

Other Differences Among Organizations

• Ultimate goal

• Different groups and constituencies

• Nature of leadership

• Tasks and technology

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information Technology Infrastructure and Information Technology Services

Information systems department:

• Formal organizational unit

• Responsible for information systems in

the organization

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information Technology Services

Figure 3-5
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information Technology Infrastructure and Information Technology Services

Includes specialists:

• Programmers: Highly trained, write

software

• Systems analysts: Translate business

problems into solutions, act as liaisons
between the information systems
department and rest of the organization

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information Technology Infrastructure and Information Technology Services

Specialists (cont.):
• Information system managers: Leaders of
various specialists

• Chief information officer (CIO): Senior

manager in charge of information systems
function in the firm

• End users: Department representatives outside

the information system department for whom
applications are developed

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Economic theories

• Information technology is a factor of

production, like capital and labor

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Transaction cost theory: Firms can

conduct marketplace transactions
internally more cheaply to grow larger

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Transaction Cost Theory

Figure 3-6
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

• Agency theory: Firm is nexus of

contracts among self-interested parties
requiring supervision

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Agency Cost Theory

Figure 3-7
3.28 © 2003 by Prentice Hall
 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Behavioral theories:

• Information technology could change hierarchy of

decision making

• Lower cost of information acquisition

• Broadens the distribution of information

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Virtual organization:

• Task force networked organizations

• Uses networks to link people, assets, and ideas

to create and distribute products and services
without being limited to physical locations

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Implementing Change and Organizational Resistance

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

The Role of Managers in Organizations

Classical model of management:

• Traditional description of management

• Focuses on formal functions: plan,

organize, coordinate, decide, control

Behavioral model of management:

• Describes management based on
observations of managers on the job

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

The Role of Managers in Organizations

Managerial roles

• Expectation of activities that managers

should perform in an organization

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

The Role of Managers in Organizations

Categories
• Interpersonal: Managers act as figureheads
and leaders

• Informational: Managers receive and

disseminate critical information, nerve centers

• Decisional: Managers initiate activities,

allocate resources, and negotiate conflicts

3.34 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Managers and Decision Making

Process of Decision Making

• Strategic Decision Making:

Determines long-term objectives,
resources, and policies

• Management Control: Monitors

effective or efficient usage of resources
and performance of operational units

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Managers and Decision Making

• Operational control: Determines how to

perform specific tasks set by strategic and
middle-management decision makers

• Knowledge-level decision making:

Evaluates new ideas for products,
services, ways to communicate new
knowledge, ways to distribute
information

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Managers and Decision Making

Decisions are classified as:

• Unstructured: Non routine, decision

maker provides judgment, evaluation, and
insights into problem definition, no agreed-
upon procedure for decision making

• Structured: Repetitive, routine, handled

using a definite procedure

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Different Kinds of Information Systems

TYPE OF
Organizational Level
DECISION OPERATIONAL KNOWLEDGE MANAGEMENT STRATEGIC

STRUCTURED ACCOUNTS
RECEIVABLE
ELECTRONIC PRODUCTION
SCHEDULING COST OVERRUNS
TPS
OAS MIS
SEMI- BUDGET
STRUCTURED PREPARATION

PROJECT
SCHEDULING DSS
FACILITY
LOCATION
KWS ESS
UNSTRUCTURED PRODUCT DESIGN NEW PRODUCTS
NEW MARKETS

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Stages of Decision Making

• Intelligence: Collect information, identify

problem

• 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

3.39 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Decision-Making Process

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Models of Decision Making

• Rational: People, organizations, and

nations engage in consistent, value-
maximizing calculations or adaptations
within certain constraints

• Cognitive style: Underlying personality

dispositions toward the treatment of
information, selection of alternatives, and
evaluation of consequences

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Models of Decision Making

• Systematic decision makers:

Cognitive style, describes people who
approach a problem by structuring it in
terms of some formal method

• Intuitive: Cognitive style, describes

people approaching a problem with
multiple methods in an unstructured
manner

3.42 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Models of Decision Making

• Organizational models of decision

making: Consider structural and political
characteristics of an organization

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Implications for the Design and Understanding of Information Systems

Factors to consider while planning a

new system:

• Organizational environment

• Organizational structure, hierarchy,

specialization, standard operating
procedures

3.44 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Implications for the Design and Understanding of Information Systems

• Culture and politics of the organization

• Type of organization and its style of

leadership

3.45 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Implications for the Design and Understanding of Information Systems

• Groups affected by the system and the

attitudes of workers who will be using the
system

• Kinds of tasks, decisions, and business

processes, information system is
designed to assist

3.46 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Implications for the Design and Understanding of Information Systems

Characteristics to be kept in mind

while designing systems:

• Flexibility and multiple options for

handling data and evaluating information

• Capability to support a variety of styles,

skills, and knowledge

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

Implications for the Design and Understanding of Information Systems

• Capability to keep track of many

alternatives and consequences

• Sensitivity to the organization’s

bureaucratic and political requirements

3.48 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

What is Strategic Information System

• Computer system at any level of an

organization

• Changes goals, operations, products,

services, or environmental relationships

• Helps organization gain a competitive

advantage

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Digital firms

• Manage the supply chain by building

efficient customer “sense and response”
systems

• Participate in “value webs” to deliver new

products and services

3.50 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Value Chain Model:

• Highlights the primary or support

activities adding a margin of value to
products or services

• Helps achieve a competitive advantage

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Primary Activities:
• Directly related to the production and
distribution of a firm’s products or services

Support Activities:
• Make the delivery of primary activities
possible
• Consist of the organization’s infrastructure,
human resources, technology, and
procurement

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Firm Value Chain

Figure 3-11

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Value Web:

• Customer-driven network of independent

firms

• Uses information technology to coordinate

value chains for collectively producing a
product or service

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

The Value Web

Figure 3-12
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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Product Differentiation:

• Competitive strategy

• Creates brand loyalty by developing new

and unique products and services

• Products and services not easily

duplicated by competitors

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Business Level Strategy and the Value Chain Model

Focused Differentiation:

• Competitive strategy

• Enables development of new market

niches for specialized products or services

• Helps businesses compete better than

competitors in the target areas

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Supply Chain Management and Efficient Customer Response System

Efficient Customer Response System:

• Directly links consumer behavior back to

distribution, production, and supply
chains

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Supply Chain Management and Efficient Customer Response System

Switching costs:

• Expense incurred by a customer or

company in terms of time and expenditure
of resources when changing from one
supplier or system to another

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Stockless Inventory Compared to Traditional and Just-in-time Supply Methods

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Enhancing Core Competencies

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Firm-Level Strategy and Information Technology

Core Competency:

• Activity at which a firm excels as a world-

class leader

• Information system encouraging the

sharing of knowledge across business
units enhances competency

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Industry-Level Strategy and Information Systems

Information partnership:

• Cooperative alliance formed between two

or more corporations for sharing
information to gain strategic advantage

• Help firms gain access to new customers,

creating new opportunities for cross-
selling and targeting products

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Industry-Level Strategy and Information Systems

The competitive forces model:

• Describes the interaction of external

influences, specifically threats and
opportunities, affecting an organization’s
strategy and ability to compete

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Porter’s Competitive Forces Model

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

New Competitive Forces Model

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 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Industry-Level Strategy and Information Systems

Network Economics:

• Model of strategic systems at the industry

level

• Based on the concept of a network

• Adding another participant entails zero

marginal costs but can create much larger
marginal gain

3.67 © 2003 by Prentice Hall

 Essentials of Management Information Systems
Chapter 3 Information Systems , Organizations, Management, and Strategy

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Using Systems for Competitive Advantage: Management Issues

Managing strategic transitions:

• Movement from one level of

sociotechnical system to another

• Required when adopting strategic

systems demanding changes in the social
and technical elements of an organization

3.68 © 2003 by Prentice Hall

 Chapter 3

INFORMATION
SYSTEMS,
ORGANIZATIONS,
MANAGEMENT,
AND STRATEGY

3.69 © 2003 by Prentice Hall