minzberg 2
TRANSCRIPT
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Reading notes for chapter 3 in the textbook.
Read Section 3.1 leisurely. It is on the organizations and the informationsystems. You are probably familiar with the organization theory .Pay
attention to the technical and behavioral definitions of organizations as
well as bureaucracy, structural characteristics of organizations, standard
operating procedures and organizational culture.
Section 3.2 is on the changing role of information systems in the
organization and is interesting to read how information systems leads to
automation, decreases transaction costs and lays foundations for virtual
organizations. Note the definitions of end users and CIO.
Section 3.3 is on decision-making, perhaps another familiar topic for
you. Pay attention to strategic decision making, structured and
unstructured decisions, rational model of decision making .It would be
interesting to read individual models of decision-making and
organizational models of decision-making.
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Reading notes for chapter 3 in the textbook - Continued
Section 3.4 is on the strategic use of information technology to gaincompetitive advantage. Strategic use of information technology may be
at the business-level, firm level or industry level. Pay attention to how
information technology is used at each level, especially strategies
employed at each level. Strategic transition and its management is
crucial for successfully steering the organization into new technology.
Pay attention to the fact the information technology is widely
used in every type of organization to be competitive, to keep pace with
competition, to meet the legal requirements, and to improve the
production. Hence, strategic use of information technology results insignificant competitive advantages. This section deserves careful
attention.
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Chapter 3: Information Systems,Organizations, Management and
Strategy
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organizations Information
Technology
Mediating Factors
Environment
Culture
Structure
Standard proceduresBusiness process
Politics
Management Decisions
Chance
Organizations And Information Technology
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StructureHierarchy
division of labor
Rules,procedures
Business processesProcess
Rights/obligations
Privileges/responsibilities
ValuesNorms
People
Environmental
resources
Environmental
outputs
FORMAL ORGANIZATION
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Organization (technical definition)
A Stable, formal, social structure that takes resources from
the environment and processes them to produce outputs.
Organization (behavioral definition)
A collection of rights, privileges, obligations, and
responsibilities that are delicately balanced over a period oftime through conflict and conflict resolution.
Bureaucracy
Formal Organization with a clear-cut division of labor, abstract
rules and procedures, and impartial decision making that uses
technical qualifications and professionalism as a basis for
Promoting employees.
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STRUCTURAL CHARACTERISTICS OF ALL
ORGANIZATIONS
Clear division of labor
Hierarchy
Explicit rules and proceduresImpartial judgments
Technical qualifications for
positions
Maximum organizationalefficiency
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ORGANIZATIONAL STRUCTURES
Orga izatio -
al Ty e
escri tio E am le
Entrepreneurialstructure
oung, small irm in a ast-changingenvironment. It has a simple structure and ismanaged by an entrepreneur serving as its singlechie executive o icer.
mall start-business
Machinebureaucracy
Large bureaucracy existing in a slo ly changingenvironment, producing standard products. It isdominated by a centralized management teamand centralized decision making.
Midsizemanu acturiirm
Divisionalizedbureaucracy
ombination o multiple machine bureaucracies,each producing a di erent product or service, alltoped by one central headquarters.
Fortune 500irms such a
general mot
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ORGANIZATIONAL STRUCTURES
Organization-al Type
escription Example
Professionalbureaucracy
Knowledge-based organization wheregoods and services depend on theexpertise and knowledge of professionals.
ominated by department heads withweak centralized authority.
aw firms,school systehospitals
Adhocracy Task force organization that must re torapidly changing environments. Consistsof large groups of specialists organizedinto short-lived multidisciplinary teamsand has weak central management.
Consulting fisuch as thecorporation.
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Summary of salient features of
organizationsCommon Features
Formal Structure
Standard operatingprocedures(SOPs)
Politics
Culture
Unique features Organizational type
Environments Goals
Power
Constituencies
Function
Leadership
Tasks
Technology
Business processes
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Information Systems department
The Formal organizational unit that is responsible for the information
systems function in the organization.
ProgrammersHighly trained technical specialists who write computer software
instructions.
Systems analysts
Specialists who translate business problems and requirements into
information requirements and systems,acting as liaison between theinformation systems department and the rest of the organization.
Information systems managers
Leaders of the various specialists in the information systems department.
Chief information officer(CIO)Senior manager in charge of the information systems function in the firm.
nd users
epresentatives of departments outside the information systems group for
hom applications are developed.
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THE ORGANIZATION
Senior management
Major end users(divisions)
Information Systems department
IT Infrastructure
HardwareSoftware
ata storage
Networks
Information Systems Specialists
CIOManagers
Systems analysts
Systems designers
Programmers
Network specialists
atabase administrator
Clerical
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Microeconomic model of thee firmM
odel of the firm that views information technology as a factor ofproduction that can be freely substituted for capital and labor.
Transaction cost theoryEconomic theory stating that firms grow larger because they can
conduct market place transactions internally more cheaply than
they can with external firms in the marketplace.Agency theoryEconomic theory that views the firm as a nexus of contracts among
self-interested individuals who must be supervised and managed.
Virtual organizationOrganization using networks to link people,assets and ideas to create
and distribute products and services without being limited to traditional
organizational boundaries or physical location.
How Information Systems Affect the Organizations
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TASK
TECHNOLOGY
STRUCTURE
PEOPLE
Organizational Components and Change
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Classical model of management
Traditional description of management that focused on its
formal functions of planning, organizing, coordinating,
deciding and controlling.
Behavioral models
escriptions of management based on behavioral scientistsobservations of what managers actually do in their jobs.
Managers and Decision-Making
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Managerial roles
Expectations of the activities that managers should perform in an
organization.
Interpersonal roles
Mintzbergs classification for managerial roles where managers act
as figureheads and leaders for the organization.
Informational roles
Mintzbergs classification for managerial roles where managers act as
the nerve centers of their organizations,receiving and disseminating
critical information.
Decision roles
Mintzbergs classification for managerial roles where managers
initiate activities,handle disturbances,allocate resources andnegotiate conflicts.
Managerial Roles in Behavioral Model
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The Process of Decision-MakingStrategic decision making
Determining the long-term objectives, resources and policies of an
organization.
Management control
Monitoring how efficiently or effectively resources are utilized and how
well operational units are performing.
Operational control
Deciding how to carry out specific tasks specified by upper and middle
management and establishing criteria for completion and resource
allocation.
Knowledge-level decision making
Evaluating new ideas for products, services, ways to communicate new
knowledge, and ways to distribute information throughout the
organization.
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Unstructured decisionsNon-routine decisions in which the decision maker must
provide judgement, evaluation, and insights into the problem
definition; there is no agreed-upon procedure for making such
decisions.
Structured decisions
Decisions that are repetitive, routine, and have a definite
procedure for handling them.
Types of Decisions
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Type of
decisionStructured
Semi-
structured
U n-
structured
Organizational level
Operational knowledge management Strategic
TPS
Office
systems
KWS
MIS
DSS
ESS
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Cognitive style
Underlying personality dispositions toward the treatment of
information, selection of alternatives, and evaluation of consequences.
Systematic decision makers
cognitive style that describes people who approach a problem by
structuring it in terms of some formal method.
Intuitive decision makers
Cognitive style that describes people who approach a problem with
multiple methods in an unstructured manner, using trail and error to
find a solution.
Organizational models of decision making
Models of decision making that take into account the structural and
political characteristics of an organization.
Individual Models of Decision-Making
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Bureaucratic models of decision making
M
odels of decision making where decisions are shaped by theorganizations standard operating procedures(SOPs).
Political models of decision making
Models of decision making where decisions result from competition andbargaining among the organizations interest groups and key leaders.
Garbage can model
Model of decision making that states that organizations are not rational
and that decisions are solutions that become attached to problems for
accidental reasons.
Organizational Models of Decision-Making
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What is Business Strategy?
Organization has a limited set of resources (e.g. time,people, money, physical resources) and they must decidehow to use those resources.
Example: You have the following resources: $500,000
A building
10 employees A patent on new invention
Strategy is deciding what the organization is going to do and how itwill use use its resources
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Examples of Strategies
Strategy 1: manufacture equipment with the money
and use the building and the people to manufacture
widgets. Strategy 2: Outsource the production of widgets
and use the people and building to be widget
distributor - or perhaps a widget store.
Strategy 3: Sell the patent to a larger firm, sell the
building, fire the employees and retire!
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Strategy vs. Tactic
Strategy focuses essentially on deciding on whatthe
organization is trying to do, what it is trying to become
within its business environment. Changing strategy isdifficult and often causes problems.
Tactic is the implementation of the strategy. It is the set
of management decisions focussed on how to achieve
the strategic objectives.
Example: once the organization decides that it wants to be a
widget manufacturer, there are many decisions that must be made
about how to profitably manufacture widgets.
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Strategic Decisions
Strategic decisions address questions such as:What products or services will be provide?
Will we focus on providing low cost goods/services?
Will we focus on providing unique goods/services?
Where will we sell our goods/services? To whom?
IT can assist the strategic decision maker (e.g. ESS).More importantly, IT is likely to be critical to theimplementation of the strategy.
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Elements of Strategic Management
Long range planning
Responsive
management Innovation
ision
Mission
Strategic
Managerial
erational
Information
ec nology
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The Role of IT
Create systems that provide strategic advantage
Supports strategic changes, such as
business reengineering
Provides business intelligence
Competitive intelligence
Sustainable competitive advantage
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Competitive Advantage
What makes strategy difficult is that most
business environments are competitive. Need to
try to "second guess" the competition.
Competitive advantage: what sets the firm apart
from the rest of its competitors.
Basis for competition: cost, speed, quality,
variety, level of service,...
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Strategic Information Systems
Strategic information systems computer systems at any level of an organization that
change the goals, processes, products, services, or
environmental relationships to help the organization
gain a competitive advantage
Information considered as a resource, much like
capital and labor
IT-critical competitive strategies: Customer lock-in, customer lock-out, new business entry
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STRATEGY LEVELS AND INFORMATION
TECHNOLOGY (IT) - ANOTHER FRAMEWORKSTRATEGIES MODELS IT TECHNIQUES
INDUSTRYcooperation vs. competition Competitive forces electronic transactions
licensing Network economics communications networks
standards Inter-organizational systemsinformation partnership
FIRMSynergy Core competency knowledge systems
Core competencies organizational systems
BUSINESSLow Cost producer Value chain analysis data mining
Differentiation of
products/services
IT-based products / services
Scope of competition
(global vs. niche)
Inter-organizational systems
supply chain management
efficient customer response
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Value Chain AnalysisValue Chain Analysis
Highlights the primary and supportHighlights the primary and supportactivities that add athat add amargin of valuemargin of value to a firms product/service where IS canto a firms product/service where IS canbest be applied to achieve a competitive advantage.best be applied to achieve a competitive advantage.
Primary activities:Primary activities: Activities most directly related to the production andActivities most directly related to the production and
distribution of a firms products/servicesdistribution of a firms products/services Consist of inbound logistics, operations, outboundConsist of inbound logistics, operations, outboundlogistics, sales and marketing, servicelogistics, sales and marketing, service
Support activities:Support activities:
Activities that make the delivery of primary activitiesActivities that make the delivery of primary activitiespossiblepossible Consist of organizations infrastructure, humanConsist of organizations infrastructure, humanresources, technology, procurementresources, technology, procurement
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The Value Chain for a Restaurant
Each box represents a primary process
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IS to Support Product/Service Differentiatio
Product/service differentiation
strategy for creating brand loyalty by
developing new and unique products/services
that are not easily duplicated by competitors
e.g. Citibanks ATM
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IS to Support Niche Focus Focused differentiation
strategy for developing new market niches for specializedproducts/services
Data mining
analysis of large pool of data to find patterns and rules that
can be used to guide decision-making and predict future
behavior
e.g. direct marketing
Applications of Data mining
Identifying individuals or organizations most likely to
respond to a direct mailing.
Predicting which customers are likely to switch to
competitors.
Identifying common characteristics of customers who
purchase the same product.
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IS to Support Low Cost Strategy Supply chain management
integrates supplier, distributors, and customer logisticsrequirements into one cohesive process
to reduce inventory cost or underutilized staff
e.g.Wall-Marts continuous replenishment system
lock in customer and raise switching costs
expense a customer incurs in lost time and expenditureof resources when changing from one supplier to acompeting supplier
e.g. Baxter Healthcares stockless inventory
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Business Level Strategy
e Business irm
en ors ustomers
Su ly ain
anagement
Stockless Inventory
ontinous e lenis ment
Just-in-time elivery
Intra irm Strategy
ro uct ifferentiation
ocuse ifferentiation
Lo -cost ro ucer
fficient ustomer
es onse
oint-of-sale systemsatamining
Business Level Strategy
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Firm-Level Strategies
A firm is a collection of business units
Synergy
outputs of some business units used as inputs to
other units IS to tie operations of business units
Core competencies
activities at which a firm is a world-class leader IS to encourage sharing of knowledge
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Industry-Level Strategies
Competition with other firms
Cooperation through information partnership
e.g. American Airlines and Citibank
Models to help analysis
Competitive forces
Network economics
based on concept of a network where adding another participant
entails no marginal costs but can create much larger marginal
gain
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COMPETITIVE FORCES MODEL
THE FIRMTRADITIONAL
COMPETITION
NEW
MARKET
ENTRANTS
Bargaining
power of
SUPPLIERS
Bargaining
power of
CUSTOMERS
SUBSTITUTE
PRODUCTS
& SERVICES
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Managing Strategic Transitions
A movement from one level of socio-
technical system to another. Often required
when adopting strategic systems thatdemand changes in the social and technical
elements of an organization.
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Questions Managers Should Ask
Forces at work in the industry and strategies
Using information and communication technology The direction and nature of change within the industry
Opportunities to be gained by introducing informationsystems technology
Kinds of systems are applicable to the
Being behind or ahead of the industry in its application ofinformation systems
The current business strategic plan, and the cur-rentstrategy for information services
Sufficient technology and capital to develop a strategicinformation systems initiative
The greatest value to the firm
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Challenges
Integrations
Sustainability of competitiveadvantage