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ACSC105

Information Systems,Organizations and Strategy

Week/Lecture 4Eleni Michailidou

Resources: Dr. Panos Constantinides & Prentice Hall Slides

20/10/09 ACSC105 - Business Inform. Systems 2

Outline

• Case Study Discussion (eBay)• Case Study Discussion (SouthStream)• The relationship between IS and

organizations– Organizations and Information systems– Common features of organizations

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Discussion

• Case study: Can eBay continuegrowing?– What is eBay’s business model and e-

commerce strategy?– What are some of the problems that eBay

is currently facing?– How is eBay trying to solve these

problems? How good are those solutions?


Discussion

• Case Study: How SouthstreamSeafoods Lands the Big Customers– What kinds of systems for sales and

marketing are described here?– How do these systems support the sales

function?– What organizational levels are supported

by these systems?

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• Identify and describe important features of organizations thatmanagers need to know about in order to build and useinformation systems successfully.

• Evaluate the impact of information systems on organizations.

• Demonstrate how Porter’s competitive forces model and thevalue chain model help businesses use information systems forcompetitive advantage.

• Demonstrate how information systems help businesses usesynergies, core competencies, and network-based strategies toachieve competitive advantage.

• Assess the challenges posed by strategic information systemsand management solutions.

Learning Objectives


• Information technology and organizationsinfluence one another• Complex relationship influenced by organization’s

structure, business processes, politics, culture,environment, and management decisions

Organizations and Information Systems

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This complex two-wayrelationship is mediated bymany factors, not the least ofwhich are the decisionsmade—or not made—bymanagers. Other factorsmediating the relationshipinclude the organizationalculture, structure, politics,business processes, andenvironment.

The Two-Way Relationship Between Organizations andThe Two-Way Relationship Between Organizations andInformation TechnologyInformation Technology


• What is an organization?• Technical/Microeconomic definition:

• Stable, formal social structure that takes resourcesfrom environment and processes to produce outputs.

• A formal legal entity with internal rules andprocedures, as well as a social structure

• Behavioral definition:• A collection of rights, privileges, obligations, and

responsibilities that is delicately balanced over aperiod of time through conflict and conflict resolution

Organizations

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In the microeconomic definition of organizations, capital andlabor (the primary production factors provided by theenvironment) are transformed by the firm through theproduction process into products and services (outputs to theenvironment). The products and services are consumed bythe environment, which supplies additional capital and laboras inputs in the feedback loop.

The Technical Microeconomic Definition of theThe Technical Microeconomic Definition of theOrganizationOrganization


The behavioral view oforganizationsemphasizes grouprelationships, values,and structures.

The Behavioral View of OrganizationsThe Behavioral View of Organizations

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• All modern organizations share somecharacteristics, such as:• Organizational Environments• Organizational Structure• Routines, Business Processes & Goals• Culture & Leadership styles• Accountability & authority of decision-making• Organizational politics

Organizations Features


• Organizations and environments have a reciprocalrelationship

• Organizations are open to, and dependent on, the socialand physical environment

• Organizations can influence their environments

• Environments generally change faster than organizations

• Information systems can be instrument of environmentalscanning, act as a lens

Organizational Environments

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Environments and OrganizationsEnvironments and OrganizationsHave a Reciprocal RelationshipHave a Reciprocal Relationship

Environments shape whatorganizations can do, butorganizations caninfluence theirenvironmentsand decide to changeenvironments altogether.Information technologyplays a critical role inhelpingorganizations perceiveenvironmental change andin helping organizationsact on their environment.

Organizational Environments


• Five basic kinds of structure• Entrepreneurial: Small start-up business

• Machine bureaucracy: Midsize manufacturing firm• Divisionalized bureaucracy: Fortune 500 firms

• Professional bureaucracy: Law firms, school systems,hospitals

• Adhocracy: Consulting firms

Organizational Structure

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• Routines (standard operating procedures)• Precise rules, procedures, and practices

developed to cope with virtually all expectedsituations

• Business processes: Collections of routines• Business firm: Collection of business processes

Routines and Processes


All organizations arecomposed of individualroutines and behaviors, acollection of which makeup a business process. Acollection of businessprocesses make up thebusiness firm. Newinformation systemapplications require thatindividual routines andbusiness processeschange to achieve highlevels of organizationalperformance.

Routines, Business Processes, and FirmsRoutines, Business Processes, and Firms

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• Encompasses set of assumptions that define goaland 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 asrestraint on change

Organizational Culture


• Divergent viewpoints lead to politicalstruggle, competition, and conflict

• Political resistance greatly hampersorganizational change

Organizational Politics

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• Goals• Constituencies

• Leadership styles

• Tasks• Surrounding environments

Other Organizational Features


• Economic impacts• IT changes relative costs of capital and the costs of

information• Information systems technology is a factor of

production, like capital and labor• IT affects the cost and quality of information and

changes economics of information• Information technology helps firms contract in size

because it can reduce transaction costs (the cost ofparticipating in markets). Outsourcing expands

How Information Systems Impact Organizations andBusiness Firms

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• Transaction cost theory• Firms seek to economize on cost of

participating in market (transaction costs)• IT lowers market transaction costs for firm,

making it worthwhile for firms to transact withother firms rather than grow the number ofemployees

Economic Impacts


The Transaction Cost Theory of the Impact ofThe Transaction Cost Theory of the Impact ofInformation Technology on the OrganizationInformation Technology on the Organization

Firms traditionally grew in sizeto reduce transaction costs.IT potentially reduces thecosts for a given size, shiftingthe transaction cost curveinward, opening up thepossibility of revenue growthwithout increasing size, oreven revenue growthaccompanied by shrinkingsize.

Firm size can stay constanteven if the company increasesits revenues.

Economic Impacts

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• Agency theory:• Firm is nexus of contracts among self-interested parties

requiring supervision• 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 without adding to the costs of supervising, andwithout adding employees

Economic Impacts


The Agency Cost Theory of the Impact ofThe Agency Cost Theory of the Impact ofInformation Technology on the OrganizationInformation Technology on the Organization

As firms grow insize andcomplexity,traditionally theyexperience risingagency costs. ITshifts the agencycost curve downand to the right,enabling firms toincrease size whilelowering agencycosts.

Economic Impacts

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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)• Postindustrial organizations

• Organizations flatten because in postindustrialsocieties, authority increasingly relies on knowledgeand competence rather than formal positions

Organizational and behavioral impacts


Flattening OrganizationsFlattening Organizations

Informationsystems canreduce the numberof levels in anorganization byprovidingmanagers withinformation tosupervise largernumbers ofworkers and bygiving lower-levelemployees moredecision-makingauthority.


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• Organizational resistance to change

• Information systems become bound up inorganizational politics because they influence access toa key resource -- information

• Information systems potentially change anorganization’s structure, culture, politics, and work

• Most common reason for failure of large projects is dueto organizational & political resistance to change



Organizational Resistance and the Mutually AdjustingOrganizational Resistance and the Mutually AdjustingRelationship Between Technology and the OrganizationRelationship Between Technology and the Organization

Implementinginformation systemshas consequencesfor taskarrangements,structures, andpeople. According tothis model, toimplement change,all four componentsmust be changedsimultaneously.


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• The Internet increases the accessibility, storage, anddistribution of information and knowledge for organizations

• The Internet can greatly lower transaction and agencycosts• E.g. Large firm delivers internal manuals to employees

via intranet, saving millions of dollars in distributioncosts

The Internet and organizations


• Central organizational factors to consider whenplanning a new system:• Environment• Structure

• Hierarchy, specialization, routines, business processes• Culture and politics• Type of organization and style of leadership• Main interest groups affected by system; attitudes of

end users• Tasks, decisions, and business processes the system

will assist

Implications for the design and understanding ofinformation systems

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Discussion• Case Study: Information Systems Help KIA Solve its Quality

Problems– Why was it so difficult for Kia to identify sources of defects in the

cars it produced?– What was the business impact of Kia not having an information

system to track defects? What other business processes besidesmanufacturing and production were affected?

– How did Kia’s new defect-reporting system improve the way it ranits business?

– What management, Organization, and technology issues did Kiahave to address when it adopted its new quality control system?

– What new business processes were enabled by Kia’s new qualitycontrol system?

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