Unit 1

Impact of Information
Systems on Organisation and
Business Firms
 • Identify and describe important features of
organizations that managers need to know about
in order to build and use information systems
successfully

• Evaluate the impact of information systems on

organizations

• Assess how information systems support the

activities of managers in organizations

3.2 © 2006 by Prentice Hall

• Analyze how information systems support
various business strategies for competitive
advantage

• Porter’s competitive forces model

Assess the challenges posed by strategic

information systems and management solutions
 What Is an Organization?

Organization:
• Stable, formal social structure

• Takes resources from the environment and

processes them to produce outputs
The Technical Microeconomic Definition of the
Organization
Behavioral Definition of Organization:
Organizational behavior is directly concerned with the
understanding, prediction, and control of human behavior in
organizations
• Collection of rights, privileges, obligations, and
responsibilities

• Delicately balanced over a period of time through

conflict

• Conflict resolution
Shared Features of all
Organizations:
• Clear division of labor
• Hierarchy
• Explicit rules and
procedures
• Impartial judgments
• Technical qualifications
for positions
• Maximum
organizational
efficiency
Organizational Politics

Divergent viewpoints lead to political struggle,

competition, and conflict.
Hamper organizational change
Organizational Culture
What products the organization should produce
How and where it should be produced
For whom the products should be produced
Organizations and Environments:

• Organizations and
environments have a
reciprocal
relationship.
• Organizations are open to, and
dependent on, the social and
physical environment.
• Organizations can influence
their environments.
Increasing Flexibility of Organizations:

• Information systems give both large and small

organizations additional flexibility to overcome the
limitations posed by their size.

• Small organizations use information systems to

acquire some of the muscle and reach of larger
organizations.
Increasing Flexibility of Organizations: (Continued)

• Large organizations use information technology to

achieve some of the agility and responsiveness of
small organizations.

• Customization and personalization: IT makes it

possible to tailor products and services to
individuals.
Understanding Organizational Resistance to Change:

• Information systems become bound up in

organizational politics because they influence access
to a key resource.

• Information systems potentially change an

organization’s structure, culture, politics, and work.

• Most common reason for failure of large projects is due

to organizational and political resistance to change.
 Organizational Resistance and the Mutually Adjusting
Relationship between Technology and the Organization
 The Internet and Organizations
• The Internet increases the accessibility, storage,
distribution of information and knowledge for business
firms.

• The Internet lowers the transaction and agency costs

of firms.

• Businesses are rapidly rebuilding their key business

processes based on Internet technology. Example:
online order entry, customer service, and fulfillment of
orders.
 Implications for the Design and Understanding of
Information Systems

Factors to consider while planning a new system:

• Organizational environment

• Organizational structure, hierarchy, specialization,

routines, and business processes

• The organization’s culture and politics

 Implications for the Design and Understanding of
Information Systems (Continued)
• The type of organization and its style of
leadership
• Groups affected by the system and the attitudes of
workers who will be using the system

• The kinds of tasks, decisions, and business processes

that the information system is designed to assist
 Characteristics to be kept in mind while Designing
Systems:

• Flexibility and multiple options for handling data and

evaluating information
• Capability to support a variety of management styles,
skills, and knowledge
• Capability to keep track of many alternatives and
consequences
• Sensitivity to the organization’s bureaucratic and
political requirements
 Porter’s Five Forces Model
In the larger environment, there are five main forces or
threats:
• New market entrants

• Substitute products and services

• Suppliers

• Customers

• Other firms competing directly

Porter’s Competitive Forces Model
IT and the Internet can greatly change the strength of
these competitive forces:

• Encourage new entrants. Example: NetFlix

vs. Blockbuster

• Increase customer bargaining power.

Example: Expedia.com and others
IT and the Internet can greatly change the strength of
these competitive forces: (Continued)

• Decrease in supplier power. Example: eCampus.com

increases the efficiency of used textbook market,
reducing publisher profits

• Substitute products. Example: online music lowers

value of record stores
Business Ecosystems:

IT plays a powerful role in creating new forms of

business ecosystems.

• Business ecosystems are interdependent networks of

suppliers, distributors, outsourcing firms,
transportation service firms, and technology
manufacturers.
Examples:

• Microsoft: 1 billion PCs worldwide and hundreds of

thousands of businesses rely on Microsoft’s platform.

• EBay: Millions of people and thousands of business

firms use this platform.

• Wal-Mart: Enterprise systems used by suppliers to

increase their efficiency
 Management Opportunities:

• Firms face a continuing stream of IT-based

opportunities to achieve strategic advantages

3.24 © 2006 by Prentice Hall

Management Challenges:

• Some firms face big hurdles in implementing

contemporary systems.

• Once an advantage is achieved, there are difficulties in

sustaining the advantage.

• Organizations often cannot change fast enough to

accommodate new technologies.
Question: An organization and its environment primarily exchange:

1. information, resources, and supplies

2. resources, imports, and information
3. information, resources, and power/influence
4. None of the above