Introduction to Information Systems

ISM - 121
Lecture 4

Chapter 2

Organizations

By

Dr. Nawsher Khan

Associate Professor
nawsher@kku.edu.sa

King Khalid University

Abh, Saudi Arabia

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Organization Definition
 Organization: Group of people that is structure and
managed to meet a mission or set of goals.

 Value Chain: A series of activates that an organization

performs to transform inputs into outputs in such a way
that the value of input is increased.
Organizational Structure
 Organizational subunits and their relationship with the
overall organization

 Categories of organizational structure:

 Traditional
 Matrix
 Project
 Virtual
Organizational Culture
 Shared understandings, values, and assumptions in
an organization

 Influences information systems

Organizational Change
Reengineering
Reengineering
Continuous Improvement

 Constantly seeking ways to improve business processes

 Benefits:
 Increased customer loyalty
 Reduction in customer dissatisfaction
 Reduced opportunity for competitive inroads
Continuous Improvement vs. Reengineering
User Satisfaction and Technology Acceptance
Technology Acceptance Model (TAM) - specifies factors
that can lead to higher usage of technology
Outsourcing, Offshoring & Downsizing

 Outsourcing: contracting with outside

professionals.

 Offshoring: An outsourcing arrangement where

the organization providing the service is located in
a country different than the firm obtaining the
service.

 Downsizing: cutting the number of employees.

Competitive Advantage
 Significant, long-term benefit to a company over its
competition and can result in:
 High quality product
 Lower costs
 Better customer service

 Ability to establish and maintain a competitive

advantage is vital to the company’s success
Competitive Advantage (cont.)

 Five forces motivate firms to seek competitive

advantage
 Rivalry among existing competition
 Industries with stronger rivalries tend to have more firms seeking competitive
advantage
 Threat of new entrants
 Threat appears when:
 Entry and exit costs to an industry are low

 Technology needed to start and maintain a business is commonly available

Competitive Advantage (cont.)

 Five forces motivate firms to seek competitive

advantage
 Threat of substitutions
 The more consumers can obtain similar products and services that
satisfy their needs, the more likely firms are to try to establish
competitive advantage
 Bargaining power of customers and suppliers:
 When customers have a lot of bargaining power, companies increase
their competitive advantage to retain their customers.
Strategic Planning for Competitive Advantage

 Cost leadership: deliver the lowest possible costs

 Differentiation: Deliver different products and services,
cars companies deliver many model of the same car
 Niche strategy: Deliver for small niche market, Porsche
 Change the structure of the industry
 Create new products or services
 Improve existing products or services
 Use information systems for strategic planning
Financial evaluation of IS projects
 Cash flow: takes into account all the increases and decreases in cash flow
associated with the project.

 Time value of money: takes into account the fact that money in the
present is worth more than the same amount in the future.

 Payback Period: (break even point) the number of years required to

recover the initial cost of an investment.

 Net present value: the sum of the present value of the net cash flow for
each year period.

 Internal rate of return: the rate that makes the net present value of all
cash flow generated by a project equal to zero.
Summary
 Value-added processes increase the relative worth of
combined inputs on their way to becoming final outputs

 Business process reengineering involves the radical redesign

of business processes, organizational structures, and
information systems

 Information systems personnel typically work in an

information systems department that employs a chief
information officer, systems analysts, and computer
programmers
 End

Any Question ?

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