Chapter 3 Information Systems, Organizations, and Strategy

Low-Cost Leadership

Low-Cost Leadership

Use information systems to achieve the lowest operational costs and the lowest prices.

organization

a stable, formal social structure that takes resources from the environment and processes them to produce outputs. This technical definition focuses on three elements of an organization

behavioral definition of an organization

a collection of rights, privileges, obligations, and responsibilities delicately balanced over a period of time through conflict and conflict resolution

routines

sometimes called standard operating procedures—are precise rules, procedures, and practices that have been developed to cope with virtually all expected situations

Business processes

are collections of such routines

business firm

is a collection of business processes

Organizational Politics

People in organizations occupy different positions with different specialties, concerns, and perspectives. As a result, they naturally have divergent viewpoints about how resources, rewards, and punishments should be distributed.

Organizational Culture

set of assumptions about what products the organization should produce, how it should produce them, where, and for whom.

disruptive technologies

are substitute products that perform as well as or better (often much better) than anything currently produced.

Entrepreneurial structure

Young, small firm in a fast-changing environment. It has a simple structure and is managed by an entrepreneur serving as its single chief executive officer.

Machine bureaucracy

Large bureaucracy existing in a slowly changing environment, producing standard products. It is dominated by a centralized management team and centralized decision making.

Divisionalized bureaucracy

Combination of multiple machine bureaucracies, each producing a different product or service, all topped by one central headquarters.

Professional bureaucracy

Knowledge-based organization where goods and services depend on the expertise and knowledge of professionals. Dominated by department heads with weak centralized authority.

Adhocracy

Task force organization that must respond to rapidly changing environments. Consists of large groups of specialists organized into short-lived multidisciplinary teams and has weak central management.

transaction cost theory

firms and individuals seek to economize on transaction costs, much as they do on production costs

agency theory

the firm is viewed as a "nexus of contracts" among self-interested individuals rather than as a unified, profit-maximizing entity

ECONOMIC IMPACTS

IT changes both the relative costs of capital and the costs of information.

Postindustrial Organizations

the shape of organizations flattens because professional workers tend to be self-managing, and decision making should become more decentralized as knowledge and information become more widespread throughout the firm

Michael Porter's competitive forces model

This model provides a general view of the firm, its competitors, and the firm's environment.

Traditional Competitors

All firms share market space with other competitors who are continuously devising new, more efficient ways to produce by introducing new products and services, and attempting to attract customers by developing their brands and imposing switching costs on their customers.

New Market Entrants

In a free economy with mobile labor and financial resources, new companies are always entering the marketplace. In some industries, there are very low barriers to entry, whereas in other industries, entry is very difficult.

efficient customer response system

directly links consumer behavior to distribution and production and supply chains

Product Differentiation

Use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services.

mass customization

ability to offer individually tailored products or services using the same production resources as mass production

Focus on Market Niche

Use information systems to enable a specific market focus, and serve this narrow target market better than competitors.

switching costs

the cost of switching from one product to a competing product

Customer and supplier intimacy

Use information systems to develop strong ties and loyalty with customers and suppliers

value chain model

highlights specific activities in the business where competitive strategies can best be applied

Primary activities

most directly related to the production and distribution of the firm's products and services, which create value for the customer

Support activities

make the delivery of the primary activities possible

Benchmarking

involves comparing the efficiency and effectiveness of your business processes against strict standards and then measuring performance against those standards

Industry best practices

usually identified by consulting companies, research organizations, government agencies, and industry associations as the most successful solutions or problem-solving methods for consistently and effectively achieving a business objective

value web

a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively

Synergies

when the output of some units can be used as inputs to other units, or two organizations pool markets and expertise, these relationships lower costs and generate profits

core competency

an activity for which a firm is a world-class leader

Network-Based Strategies

use of network economics, a virtual company model, and business ecosystems

network economics

Business models based on a network may help firms strategically by taking advantage it

virtual company

also known as a virtual organization, uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations

Business ecosystem

sets—collections of industries that provide related services and products