Chapter 3: Information Systems, Organisations, and Strategy

Question 1

What is an organisation? (technical definition)

Answer 1

• formal social structure that processes resources from the environment to produce outputs
• a formal legal entity with internal rules and procedures, as well as a social structure
• relate to IS: how inputs are combined to create outputs

Question 2

What is an organisation? (behavioural definition)

Answer 2

• a collection of rights, privilege, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution
• relate to IS: information systems could change the organizational balance of rights, obligations and responsibilities

Question 3

What are features of an organisation?

Answer 3

• Routines (standard operating procedures)
• Business processes (collection of routines)
• Business firm (collection of business procedures)
• Organizational politics
• Organizational culture
• Organizational environments
• Organizational structure

Question 4

What are organizational politics?

Answer 4

• divergent viewpoints lead to political struggle, competition, and conflict
• political resistance greatly hampers organisational change

Question 5

What is organisational culture?

Answer 5

• encompasses set of assumptions that define goal and product : thus purpose

Question 6

What are organizational environments?

Answer 6

• organizations and environments have a reciprocal relationship
• environments change faster than the organisation
• an organisation chooses their environment

Question 7

What are disruptive technologies?

Answer 7

• Technology that brings about sweeping change to businesses, industries and markets
• first movers: inventors of disruptive technologies
• fast follower: firms with the size and resources to capitalise on that technology

Question 8

What are 5 basic operational structures?

Answer 8

• Entrepreneurial structure (young, small firm)
• Machine bureaucracy (midsize manufacturing firm)
• Divisionalised bureaucracy ( Fortune 500 firms)
• Professional bureaucracy (law firms, school systems, hospitals)
• Adhocracy (consulting firms)

Question 9

Economic impact of IS on organisations

Answer 9

• changes costs of capital and costs of information
• IS technology is a factor of production, like capital and labor
• it helps firms contract in size because it can reduce transaction cost (outsourcing)

Question 10

What is the transaction cost theory?

Answer 10

• firms seek to economise on cost of participating in market (transaction costs)
• IT lowers market transaction costs for firm (making it worthwhile for firms to transact with other firms rather than grow in number of employees)

Question 11

What is the agency theory?

Answer 11

• firm is nexus of contracts among self-interested parties requiring supervision
• firms experience agency cost ( the cost of managing and supervising) which rise as firm grows
• IT can reduce agency costs

Question 12

Organizational and behavioural impacts of IT

Answer 12

• IT flattens organisations (decision making is pushed to lower levels)
• Postindustrial organisations (organisations flatten because reliance on competence rather than formal positions, more decentrelization)

Question 13

Organisational resistance to change

Answer 13

• IS potentially change an organization’s structure, politics, and work
• most common reason for failure of large projects is due to organisational and political resistance to change

Question 14

The internet and organizations

Answer 14

• the internet increases accessibility, storage and distribution of info and knowledge for organizations
• can greatly lower transaction and agency costs

Question 15

Organisational factors when planning a new system

Answer 15

• environment
• structure
• culture and politics
• type of organisation and leadership
• main interest group
• tasks, decisions, and business processes

Question 16

What is Porter’s competitive forces model?

Answer 16

provides general view of firm, its competitors, and environment

Question 17

Which five forces shape the fate of the firm in Porter’s competitive forces model?

Answer 17

• Traditional competitors (all firms share market space with competitors)
• New market entrants (some industries have high barriers to entry, f.e. computer chip business, have newer technology, younger workers, but little brand recognition)
• Substitute products and services (customers might use substitutes if your prices become too high) (physical replaced by digital)
• Customers (can customers switch easily to competitors products)
• Suppliers (market power of suppliers when firm cannot raise prices as fast as suppliers)

Question 18

How to deal with competitive forces (porter’s model)

Answer 18

• low-cost leadership (produce products/services at a lower price than competitors while enhancing quality)
• product differentiation (enables new products or services)
• focus on market niche
• strengthen customer and supplier intimacy (use IS to develop strong ties and loyalty with customers and suppliers)

Question 19

What is the internet’s impact on competitive advantage?

Answer 19

• transformation or threat to some industries
• competitive forces still at work, but rivalry more intense
• universal standards allow new rivals, entrant to market
• new opportunities for building brands and loyal customer bases

Question 20

What is the business value chain model?

Answer 20

• views firm as a series of activities that add value to products or service
• highlights activities where competitive strategies can best be applied: primary activities vs support activities

Question 21

Extending the value chain: the value web

Answer 21

• networked system that can synchronise the value chains of business partners within an industry to respond rapidly to changes in supply and demand
• firm’s value chain is linked to value chains of suppliers, distributors, customers

Question 22

Synergies

Answer 22

when output of some units used as input to others or organizations pool markets and expertise
example: purchase of YouTube by Google

Question 23

Core competencies

Answer 23

• activity for which firm is world-class leader
• relies on knowledge, experience and sharing this across business units
  example: P&G intranet and directory of subject matter experts

Question 24

Network-based strategies

Answer 24

• take advantage of firm’s abilities to network with one another
• include use of: network economics, virtual company model, business ecosystems

Question 25

Network economics

Answer 25

- marginal cost of adding new participants almost zero, with much greater marginal gain - value of community grows w size - internet can be used to grow - value of software grows as installed customer base grows - compared to traditional economics and law of diminishing returns

Question 26

Virtual company model

Answer 26

- uses networks to ally with other companies to create and distribute products without being limited by traditional organisational boundaries or physical locations

Question 27

Business ecosystems and platforms

Answer 27

- industry sets of firms providing related services and products - platforms: Microsoft, Facebook - keystone firms: dominate ecosystem and create platform used by other firms - niche firms: rely on platform developed by keystone firm

Question 28

Sustaining competitive advantage

Answer 28

- competitors can retaliate and copy strategic systems - systems may become tools for survival

Question 29

Aligning IT w business objectives

Answer 29

- structure of industry - performing strategic system analysis

Question 30

managing strategic transitions

Answer 30

- adopting strategic systems requies change in business goals, relationships with customers and suppliers, and business processes