Isys104 Tutorial -Week4 Essay Example

Isys104 Tutorial Isys104 Tutorial -Week4 Essay Isys104 Tutorial -Week4 Essay ISYS104 Tutorial – week 4 Review Questions 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? Define an organization and compare the technical definition of organizations with the behavioral definition. Students can make use of Figures 3–2 and Figure 3–3 in answering this question. The technical definition for an organization defines an organization as a stable, formal social structure that takes resources from the environment and processes them to produce outputs. This definition of an organization focuses on three elements: capital, labor, and production and products for consumption. The technical definition also implies that organizations are more stable than an informal group, are formal legal entities, and are social structures. The behavioral definition states that an organization is a collection of rights, privileges, obligations, and responsibilities that are delicately balanced over a period of time through conflict and conflict resolution. This definition highlights the people within the organization, their ways of working, and their relationships. The technical definition shows us how a firm combines capital, labor, and information technology. The behavioral definition examines how information technology impacts the inner workings of the organization. Identify and describe the features of organizations that help explain differences in organizations’ use of information systems. Common features for organizations include formal structure, standard operating procedures, politics, and culture. Organizations can differ in their organizational type, environment, goals, power, constituencies, function, leadership, tasks, technology, and business processes. Describe the major economic theories that help explain how information systems affect organizations. The two economic theories discussed in the book are transaction cost theory and agency theory. The transaction cost theory is based on the notion that a firm incurs transaction costs when it buys goods in the marketplace rather than making products for itself. Traditionally, firms sought to reduce transaction costs by getting bigger, hiring more employees, vertical and horizontal integration, and small-company takeovers. Information technology helps firms lower the cost of market participation (transaction costs) and helps firms shrink in size while producing the same or greater amount of output. The agency theory views the firm as a nexus of contracts among interested individuals. The owner employs agents (employees) to perform work on his or her behalf and delegates some decision-making authority to the agents. Agents need constant supervision and management, which introduces management costs. As firms grow, management costs rise. Information technology reduces agency costs by providing information more easily so that managers can supervise a larger number of people with fewer resources. Describe the major behavioral theories that help explain how information systems affect organizations. Behavioral theories, from sociology, psychology, and political science, are useful for describing the behavior of individual firms. Behavioral researchers theorize that information technology could change the decision-making hierarchy by lowering 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. It even enables some organizations to act as virtual organizations because they are no longer limited by geographic locations. One behavioral approach views information systems as the outcome of political competition between organizational subgroups. IT becomes very involved with this competition because it controls who has access to what information, and information systems can control who does what, when, where, and how. Explain why there is considerable organizational resistance to the introduction of information systems. There is considerable organizational resistance to new information systems because they change many important organizational dimensions, such as culture, structure, politics, and work. Leavitt puts forth a model that says that changes in technology are absorbed, deflected, and defeated by organizational task arrangements, structures, and people. In this model the only way to bring about change is to change the technology, tasks, structure, and people simultaneously. In a second model, the authors speak of the need to unfreeze organizations before introducing an innovation, quickly implementing the new system, and then refreezing or institutionalizing the change. Describe the impact of the Internet and disruptive technologies on organizations. The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations; nearly any information can be available anywhere at any time. The Internet increases the scope, depth, and range of information and knowledge storage. It lowers the cost and raises the quality of information and knowledge distribution. That is, it lowers transaction costs and information acquisition costs. By using the Internet, organizations may reduce several levels of management, enabling closer and quicker communication between upper levels of management and the lower levels. The Internet also lowers agency costs. Disruptive technologies caused by technological changes can have different effects on different companies depending on how they handle the changes. Some companies create the disruptions and succeed very well. Other companies learn about the disruption and successfully adopt it. Other companies are obliterated by the changes because they are very efficient at doing what no longer needs to be done. Some disruptions mostly benefit the firm. Other disruptions mostly benefit consumers. 2. How does Porter’s competitive forces model help companies develop competitive strategies using information systems? Define Porter’s competitive forces model and explain how it works. This model provides a general view 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: traditional competitors new market entrants substitute products and services customers suppliers Describe what the competitive forces model explains about competitive advantage. Some firms do better than other because they either have access to special resources that others do not, or they are able to use commonly available resource more efficiently. 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. List and describe four competitive strategies enabled by information systems that firms can pursue. Table 3. 2 can be used to help answer this question. The four generic strategies, each of which often is enabled by using information technology and systems include: Low-cost leadership: lowest operational costs and the lowest prices. Product differentiation: enable new products and services, or greatly change the customer convenience in using existing products and services. Focus on market niche: enable a specific market focus and serve this narrow target market better than competitors. Strengthen customer and suppliers: tighten linkages with suppliers and develop intimacy with customers. Describe how information systems can support each of these competitive strategies and give examples. Low-cost leadership: use informa tion systems to improve inventory management, supply management, and create efficient customer response systems. Example: Wal: Google, eBay, Apple, Lands’ End. Focus on market niche: use information systems to produce and analyze data for finely tuned sales and marketing techniques. Analyze customer buying patterns, tastes, and preferences closely in order to efficiently pitch advertising and marketing campaigns to smaller target markets. Example: Hilton Hotels, Harrah’s. Strengthen customer and supplier intimacies: use information systems to facilitate direct access from suppliers to information within the company. Increase switching costs and loyalty to the company. Example: IBM, Amazon. com Explain why aligning IT with business objectives is essential for strategic use of systems. The basic principle of IT strategy for a business is to ensure the technology serves the business and not the other way around. The more successfully a firm can align its IT with its business goals, the more profitable it will be. Business people must take an active role in shaping IT to the enterpri se. They cannot ignore IT issues. They cannot tolerate failure in the IT area as just a nuisance to work around. They must understand what IT can do, how it works, and measure its impact on revenues and profits. 3. How do the value chain and value web models help businesses identify opportunities for strategic information system applications? Define and describe the value chain model. The value chain model highlights specific activities in the business where competitive strategies can best be applied and where information systems will most likely have a strategic impact. The 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 of basic activities that add a margin of value to a firm’s products or services. The activities are categorized as either primary or support activities. Primary activities are most directly related to production and distribution of the firm’s products and services, which create value for the customer. Support activities make the delivery of primary activities possible and consist of organization infrastructure. A firm’s value chain can be linked to the value chains of its suppliers, distributors, and customers. Explain how the value chain model can be used to identify opportunities for information systems. Information systems can be used at each stage of the value chain to improve operational efficiency, lower costs, improve profit margins, and forge a closer relationship with customers and suppliers. Define the value web and show how it is related to the value chain. A value web is a collection of independent firms that use information technology to coordinate their value chains to collectively produce a product or service. It is more customer driven and operates in a less linear fashion than the traditional value chain. The value web is a networked system that can synchronize the business processes of customers, suppliers, and trading partners among different companies in an industry or in related industries. Explain how the value web helps businesses identify opportunities for strategic information systems. Information systems enable value webs that are flexible and adaptive to changes in supply and demand. Relationships can be bundled or unbundled in response to changing market conditions. Firms will accelerate time to market and to customers by optimizing their value web relationships to make quick decisions on who can deliver the required products or services at the right price and location. Information systems make it possible for companies to establish and operate value webs. Describe how the Internet has changed competitive forces and competitive advantage. The Internet has nearly destroyed some industries and severely threatened others. The Internet has also created entirely new markets and formed the basis of thousands of new businesses. The Internet has enabled new products and services, new business models, and new industries to rapidly develop. Because of the Internet, competitive rivalry has become much more intense. Internet technology is based on universal standards that any company can use, making it easy for rivals to compete on price alone and for new competitors to enter the market. Because information is available to everyone, the Internet raises the bargaining power of customers, who can quickly find the lowest-cost provider on the Web. 4. How do information systems help businesses use synergies, core competencies and network-based strategies to achieve competitive advantage? Explain how information systems promote synergies and core competencies. 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. Describe how promoting synergies and core competencies enhances competitive advantages. 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. Explain how businesses benefit by using network economics. 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. Define and describe a virtual company and the benefits of pursuing a virtual company strategy. A virtual company uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another company without being physically tied to that company. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own. . What are the challenges posed by strategic information systems and how should they be addressed? List and describe the management challenges posed by strategic information systems. Information systems are closely intertwined with an organization’s structure, culture, and business processes. New systems disrupt established patterns of work and power relationships, so there is oft en considerable resistance to them when they are introduced. Implementing strategic systems often requires extensive organizational change and a transition from one sociotechnical level to another. Such changes are called strategic transitions and are often difficult and painful to achieve. Moreover, not all strategic systems are profitable. They are expensive and difficult to build because they entail massive sociotechnical changes within the organization. Many strategic information systems are easily copied by other firms so that strategic advantage is not always sustainable. The complex relationship between information systems, organizational performance, and decision making must be carefully managed. Explain how to perform a strategic systems analysis. Managers should ask the following questions to help them identify the types of systems that may provide them with a strategic advantage. 1. What is the structure of the industry in which the firm is located? Analyze the competitive forces at work in the industry; determine the basis of competition; determine the direction and nature of change within the industry; and analyze how the industry is currently using information technology. 2. What are the business, firm, and industry value chains for this particular firm? Decide how the company creates value for its customers; determine how the firm uses best practices to manage its business processes; analyze how the firm leverages its core competencies; verify how the industry supply chain and customer base are changing; establish the benefit of strategic partnerships and value webs; clarify where information systems will provide the greatest value in the firm’s value chain. 3. Have we aligned IT with our business strategy and goals? Articulate the firm’s business strategy and goals; decide if IT is improving the right business processes and activities in accordance with the firm’s strategy; agree on the right metrics to measure progress toward the goals. Discussion Questions 1. It has been said that there is no such thing as a sustainable competitive advantage. Do you agree? Why or why not? Students will argue both sides, and there is no definite answer to the question. There is little that a company can do that cannot be duplicated over time. Citibank and its ATM machines and American Airlines and its reservation systems are good examples. Think about companies that had strategic advantages in the 1920s or 1940s that no longer exist. In contrast, some companies, such as Wal-Mart, maintain a strategic advantage for a long time. Wal-Mart maintains its lead by striving to advance even further. Gary Hamel, whom some call the leading strategy expert in business today, says there is no such thing as sustainable strategic advantage. Hamel is founder and chairman of Strategos and a research fellow at Harvard Business School. He believes that, in the past, most companies were built to do one thing exceedingly well for an exceedingly long period of time. In today’s marketplace, companies built for scale, replication, diligence, and exactitude must learn to change, adapt, and experiment at the speed that you see in the new economy. New economy companies must master some virtues of the old economy. These companies are learning that scale, operational excellence, and global infrastructure are important. They can constitute hard-to-duplicate competitive advantages that allow them to capture the rents on their innovation. Many have been trained to think that there is no such a thing as sustainable competitive advantage. They have been trained to think about innovation in products and technology, not innovation in business models. They assume that being radical is risky and being incremental is safe. We have to rewire people with new thinking skills. 2. It has been said that the advantage that leading-edge retailers such as Dell and Wal-Mart have over their competition isn’t technology; it’s their management. Do you agree? Why or why not? Student answers will vary but here are some points their answers should include: How well has each company, Dell and Wal-Mart, used information systems to reduce transaction costs and agency costs? How well has each company used information systems to take advantage of Porter’s Competitive Forces model: o Keeping new market entrants out o Either preventing substitute products and services that may compete with their own, or introducing substitute products and services that pull customers away from their competitors o Holding onto customers by c ompeting on prices alone when there is very little product differentiation o Exercising more control over suppliers How well has each company’s management used information systems to enhance o Low-cost leadership – Wal-Mart is the king at this; Dell sometimes uses this strategy o Product differentiation – Dell uses this strategy against Apple and HP (the two leading computer sellers) o Focusing on market niche – neither company uses this much o Strengthening customer and supplier intimacy – Wal-Mart wrote the book on this one; Dell uses this strategy extensively. Business Problem-Solving Case: YouTube, the Internet, and the Future of Movies 1. What competitive forces have challenged the movie industry? What problems have these forces created? What changes have these problems caused the movie and television studios to make? New market entrants and substitute products are the two main competitive forces challenging the movie industry. The traditional outlets for viewing movies – theatres, cable television, and movie rental businesses – are all challenged by new ways for customers to obtain products. The traditional outlets were very easy to control and ensured that the movie producers received compensation for their products. The distribution system was created, not necessarily for the customer’s convenience, but to provide an orderly process for all the players to make money. With the advent of downloadable movies, the system is changing to more of a viewer-centric process. The main problem is that movie studios and producers, outlets for selling the movies, and the myriad of people involved in the old system, have no way of controlling downloads from all the different Web sites that make them available. With no controls in place, the industry cannot ensure its receiving just payments and rewards for the work they produce. Several distributors have tried to squelch the download outlets but its virtually impossible to monitor all the Web sites and all their content. As NBC Universal’s general counsel, Rick Cotton admitted, â€Å"There is only so much we can do. † Some of the major studios entered into negotiations with YouTube and established licensing agreements. Other solutions follow the music industry trends of taking advantage of movie downloads and view them as another source of revenue. YouTube is helping build a revenue-sharing model with content creators and developing a filtering and digital fingerprinting technology that will help it control the unauthorized use of copyright protected material. 2. Describe the impact of disruptive technology on the companies discussed in this case? YouTube is to the motion picture industry what Napster was to the music industry. That is, it’s a conduit to new processes that are more customer-driven than the old ones. YouTube has become the most popular video-sharing Web site because it gives users what they want when they want it. People wanted an outlet for the creative video diaries and amateur films that they created using inexpensive digital video equipment. Disruptive technologies continually displace old technologies that, while they are still good products, no longer serve a customer base. That explains what is causing the changes in how customers want to receive motion pictures. Basically, once the cat is out of the bag, it’s very difficult to get it back in. 3. How have the movie studios responded to YouTube? What is the goal of the response? What can the movie studios learn from music industry’s dealings with online digital music and copyright infringement? If you want to lay blame for all that’s happening in the movie industry you could almost point your finger at hardware and software video-related manufacturers who provided cheap, easy-to-use tools for the average person. Originally the movie industry tried to fight the thousands of illegal uses of their copyrighted material- much as the music industry tried to fight their battle years ago. It was and is a losing battle- both in protecting their copyrighted content and in the public relations fight for loyal customers. Many producers have chosen to not fight their customers but are trying to find ways to meet the needs and demands of both sides- the producers and the customers. It’s a wise decision. 4. Should motion picture companies continue to use YouTube to promote their new films? Why or why not? The answers obviously will vary. It’s important to understand that YouTube continues to be the most popular video sharing Web site. With Google’s clout behind it, it will continue to be a force to reckon with. The movie industry should continue to work with YouTube to find ways to use the site, if for nothing else than promotional reasons. By putting their own short videos and film clips on the site, before others do, movie studios can thwart some of the illegal use of their films. The average person would rather see a well-produced video than a second- or third-rate clip. By taking proactive measures rather than being reactive, the industry can control (to a greater extent) what appears on YouTube’s site. 5. Go to YouTube. com and search for videos from your favorite movie or television show. What do you find on the site? Do you see any advertisements attached to the video? Do you feel this way of advertising is effective? Why or why not? Answers will vary to most of this question but it should provoke some good classroom discussions or discussions in a chat forum. Key elements students should understand is that all artists, producers, and distributors deserve some compensation for their talent, time, investments, and labor. Illegally using copyrighted material is an act of theft. Both users and video- and audio-sharing Web sites are equally and legally responsible for properly using someone else’s property. Advertising is becoming a major source of revenue for many Web sites and YouTube is no different. That’s especially true since Google, a company very dependent on advertising dollars, purchased YouTube. It’s probably true that YouTube ads help get customers excited about seeing the actual movie. Note: Demonstrating the use of Michael Porter’s competitive forces model would be a good exercise in this discussion.