IS Answers

1) Which features of organizations do managers need to know about to build and use
information systems successfully? What is the impact of information systems on
organizations?
ANS- Organization refers to a collection of people, who are involved in pursuing defined objectives. It can
be understood as a social system which comprises all formal human relationships. The organization
encompasses division of work among employees and alignment of tasks towards the ultimate goal of the
company.
The features of organizations do managers need to know about to build and use information systems
successfully are:
1. Organizational politics
2. Organization culture
3. Organization environment
4. Organization structures
5. Routines and business processes

1. Organizational politics
Organizational politics are informal, unofficial, and sometimes behind-the-scenes efforts to sell ideas,
influence an organization, increase power, or achieve other targeted objectives. Political resistance is one of
the great difficulties of bringing about organizational change—especially the development of new
information systems. Virtually all large information systems investments by a firm that bring about
significant changes in strategy, business objectives, business processes, and procedures become politically
charged events. Managers that know how to work with the politics of an organization will be more
successful than less-skilled managers in implementing new information systems.

2. Organization culture
Organizational culture is assumptions that define the organizational goals and products create a powerful
restraint on change, especially technological change. Organizational culture is a powerful unifying force that
restrains political conflict and promotes common understanding, agreement on procedures, and common
practices. Organizational culture is a powerful restraint on change, especially technological change. Most
organizations will do almost anything to avoid making changes in basic assumptions. Any technological
change that threatens commonly held cultural assumptions usually meets a great deal of resistance.
However, there are times when the only sensible way for a firm to move forward is to employ a new
technology that directly opposes an existing organizational culture. When this occurs, the technology is
often stalled while the culture slowly adjusts.
3. Organization environment
Reciprocal relationships exist between an organization and environments; information systems in helping
organizations. Perceive changes in their environments and also in helping organizations act. Information
systems are key instruments for environmental scanning, helping managers identify external changes that
might require an organizational response.

4. Organization structures
Organizations all have a structure or shape. The kind of information systems you find in a business firm—
and the nature of problems with these systems—often reflects the type of organizational structure. In small
entrepreneurial firms there will often find poorly designed systems developed in a rush that often outgrow
their usefulness quickly. In huge multidivisional firms operating in hundreds of locations there will often not
be a single integrating information system, but instead each locale or each division has its set of
information systems.

5. Routines and business processes

Routines are standard operating procedures are precise rules, procedures, and practices that have been
developed to cope with virtually all expected situations. As employees learn these routines, they become
highly productive and efficient, and the firm is able to reduce its costs over time as efficiency increases.
Business processes, which we introduced in are collections of such routines. A business firm in turn is a
collection of business processes. Information systems have become integral, online, interactive tools deeply
involved in the minute-to-minute operations and decision making of large organizations. Over the last
decade, information systems have fundamentally altered the economics of organizations and greatly
increased the possibilities for organizing work. Theories and concepts from economics and sociology help
us understand the changes brought about by IT.
1. Economic Impacts
2. Organizational and Behavioural Impacts

1. Economic Impacts
From an economic perspective, information system, technology can be observed as a factor of production
that can be substituted for capital and labour without barriers. As information system technology
mechanizes the production process, less capital and labour are necessary to produce a specified production
or output. There are 2 economic theories which are transaction cost theory and agency theory. The
transaction cost theory is based on the notion that a firm instead making products for itself, it incurs
transaction costs when it buys goods in the marketplace. Traditionally, firms look to lower transaction costs
by getting bigger, small-company takeovers, hiring more employees, vertical and horizontal integration,
Information technology helps firms reduce the cost of transaction costs and greater. Amount of output and
helps firms shrink in size while producing the same. The agency theory views the firm as relation of
contracts among interested individuals. The owner employs agents (employees) to do work on his or her
behalf and delegates some decision-making authority to the agents. Agents need steady supervision and
management, which introduces management costs. As management costs rise, firms grow. Information
technology reduces agency costs by providing information more easily therefore managers can supervise a
larger number of people with fewer resources.
2. Organizational and Behavioural Impacts
Behavioural theories are useful for describing the behaviour of individual firms. Behavioural researchers
consider that information technology could change the decision-making by reducing the costs of
information acquisition and distribution. IT could eliminate middle managers and their clerical support by
sending information from operating units directly to senior management and by enabling information to be
sent directly to lower-level operating units. Also enables some organizations to act as virtual organizations
because they are no longer limited by geographic locations. One behavioural approach views information
system as the outcome of political competition between organizational subgroups. IT becomes involved
with this competition because it controls who has access to information, and information systems can
control who does what, when, where, and how.

2) How does Porter’s competitive forces model help companies develop competitive
strategies using information systems?

ANS- Porter’s competitive forces model provides a general picture of the firm, its competitors, and the
firm's environment. Porter's model is all about the firm's general business environment. In this model, five
competitive forces shape the fate of the firm such as:
Traditional competitors: Surviving firms that share a firm's market area.
New market entrants: Fresh or new companies carry certain advantages, like not being confined into old
equipment and high encouragement, as well as demerits, like very few expertise and tiny brand
recognition. Some industries have fewer obstacles to entry such as cost less for a new company to make an
entrance to the field.
Substitute products and services: These are substitutes that your customers might use if your prices
become too high. For example, Internet telephone service can substitute for traditional telephone service.
The more substitute products and services in your industry, the less you can control pricing and raise your
profit margins.
Customers: The power of customers widens if they can easily adopt a competitor's products and services,
or if they can drive a business and its competitors to fight on price alone in a clear marketplace where there
is tiny product differentiation and all the prices are known instantly.
Suppliers: The greater different suppliers a firm has, the greater command it can exercise over suppliers on
the basis of price, quality, and delivery routines. Some firms produce better than others because they
either have access to special resources that others do not, or they are able to use commonly available
resources more efficiently. In addition, they can use new technology that is chive to the goals of
organization. It could be because of superior knowledge and information assets. Regardless, they excel in
revenue growth, profitability, or productivity growth, ultimately increasing their stock market valuations
compared to their competitors.
3) How do the value chain and value web models help businesses identify opportunities
for strategic information system applications?
ANS- The value chain model highlights specific activities in the business where competitive strategies can
best be applied and where information systems are most likely to have a strategic impact. This model
identifies specific, critical leverage points where a firm can use information technology most effectively to
enhance its competitive position. The value chain model views the firm as a series or chain of basic
activities that add a margin of value to a firm’s products or services. These activities can be categorized as
either primary activities or support activities. Primary activities are directly related to production and
distribution, whereas support activities make the delivery of primary activities possible.
The value chain model forces companies to examine how they perform value-adding processes and how
they might improve those processes by asking the question of how might IS improve customer and
supplier relationships. Benchmarking is another tool that can be used; once standards are established, a
company can test the performance of its processes against those standards to gauge their effectiveness.
By doing this a firm can identify areas of improvement that competitors might not see, or at least identify
the same problems; preventing a market disadvantage.
A value web is a collection of independent firms that use information technology to coordinate their value
chains to produce a product or service for a market collectively by synchronizing the business processes of
customers, suppliers, and trading partners among different companies in an industry or in related
industries.
By working with other firms, industry participants can use information technology to develop industry-
wide standards for exchanging information or business transactions electronically, which force all market
participants to subscribe to similar standards. Looking at the industry value chain encourages you to think
about how to use information systems to link up more efficiently with your suppliers, strategic partners,
and customers. Strategic advantage derives from the ability of a firm to relate their value chain to the
value chains of their partners.
The Internet can make competitive advantage quickly disappear due its wide availability. Systems that
once created an advantage can now be copied and implemented very efficiently; making the advantage
short lived. A company’s internet presence has become a requirement for competitive operation, not a
competitive advantage.
4) How do information systems help businesses use synergies, core competences, and
network-based strategies to achieve competitive advantage?
ANS A large corporation is typically a collection of businesses that are organized as a collection of strategic
business units. Information systems can improve the overall performance of these business units by
promoting synergies and core competencies.
The concept of synergy is that when the output of some units can be used as inputs to other units, or two
organizations can pool markets and expertise, these relationships lower costs and generate profits. In
applying synergy to situations, information systems are used to tie together the operations of disparate
business units so that they can act as a whole. A core competency is an activity for which a firm is a world-
class leader. In general, a core competency relies on knowledge that is gained over many years of
experience and a first-class research organization or simply key people who stay abreast of new external
knowledge. Any information system that encourages the sharing of knowledge across business units
enhances competency.
In a network, the marginal costs of adding another participant are almost zero, whereas the marginal gain
is much larger. The larger the number of participants in a network, the greater the value to all participants
because each user can interact with more people. The availability of Internet and networking technology
has inspired strategies that take advantage of the abilities of the firm to create networks or network with
each other. In a network economy, information systems facilitate business models based on large
networks of users or subscribers that take advantage of network economies. Internet sites can be used by
firms to build communities of users that can result in building customer loyalty and enjoyment and build
unique ties to customers, suppliers, and business partners.