Instructor's Manual, Chapter 3 Management Information Systems, Second Canadian Edition 3-1
Chapter 3
Information Systems, Organizations,
Management, and Strategy
Teaching Objectives
Students should be able to answer the following questions:
1. What do managers need to know about organizations in order to build and use information systems successfully?
2. What impact do information systems have on organizations?
3. How do information systems support the activities of managers in organizations?
4. How can businesses use information systems for competitive advantage?
5. Why is it so difficult to develop successful information systems, including systems that promote competitive advantage?
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.
Agency theory, 79 / Managerial roles, 82Behavioural models, 82 / Network economics, 97
Bureaucracy, 73 / Operational control, 83
Bureaucratic model of decision making, 86 / Organization (behavioural definition), 72
Chief information officer (CIO), 77 / Organization (technical definition), 71
Choice, 84 / Organizational culture, 74
Classical model of management, 81 / Organizational models of decision making, 86
Cognitive style, 86 / Political models of decision making, 86
Competitive forces model, 96 / Primary activities, 88
Core competency, 95 / Product differentiation, 90
Decisional roles, 82 / Programmers, 76
Design, 84 / Rational model, 85
Efficient customer response system, 93 / Standard operating procedures (SOPs), 73
End users, 77 / Strategic decision making, 83
Focused differentiation, 91 / Strategic information system, 87
“Garbage can” model, 86 / Strategic intent, 100
Implementation, 85 / Strategic transitions, 99
Information partnership, 95 / Structured decisions, 84
Information systems department, 76 / Support activities, 88
Information systems managers, 76 / Switching costs, 93
Informational roles, 82 / Systematic decision makers, 86
Intelligence, 84 / Systems analysts, 76
Interpersonal roles, 82 / Transaction cost theory, 78
Intuitive decision makers, 86 / Unstructured decisions, 84
Knowledge-level decision making, 83 / Value chain model, 88
Management control, 83 / Value web, 89
Virtual organization, 80
Teaching Suggestions
The opening vignette, “Flextronics' Strategic Supply Chain,” tells the story of how the company's supply chain management system helped the company become a multibillion-dollar global company by enabling it to maximize efficiency and profits by standardizing and coordinating work. This vignette shows how the company is using its information systems to realize a strategic advantage.
This vignette illustrates how every function can contribute to a company’s profitability and also how important it is to think of the company and its business as an enterprise. You should stress that the article also demonstrates how information openness and sharing are a positive rather than a way that might reveal company secrets. Also, students should note that the company wants to expand by moving into closely related functions, such as design work for the products it produces. Finally, relate the diagram at the beginning of the chapter to the Flextronics article. This is an excellent way for students to see the roles of management, technology, and organization.
To facilitate class discussion, ask your students to discuss the following questions as they relate to the opening vignette.
1. How does Flextronics use its supply chain information? What information does it use?
2. What are the advantages to using standardized campuses and enterprise resource planning software?
3. What are the advantages of the global information system?
4. What is Flextronics's new strategy? How can its supply chain management system help it achieve its strategy?
5. Do you consider Flextronics's information systems to be strategic information systems?
The first section, “Organizations and Information Systems,” introduces students to both the technical and behavioural definitions of an organization, suggests that information technology and organizations have a complex two-way relationship, discusses common features to all organizations, and identifies the unique features of organizations. It is critical for the rest of the course that students understand what an organization is. Moreover, students need to recognize from this section that the relationship between information systems and organizations is very complex.
As an example, you can take a well-known organization in your area, such as a bank, and discuss the organization from both a technical and behavioural standpoint. By using an example, you can illustrate to students that the technical and behavioural definitions are indeed complementary. Ask students for examples of situations where the mediating factors have influenced both the organization and the information technology it uses.
The “Window on Organizations: E-commerce -- South Korean, and Middle Eastern Style” illustrates how environments, culture, and organizational characteristics influence the success of e-commerce.
Section Two, “The Changing Role of Information Systems in Organizations,” discusses information technology infrastructure and information technology services, how information systems affect organizations, and the Internet and organizations. Students should realize that organizations make important decisions about the technical and organizational configurations of systems, as well as who will design, develop, and maintain the organization's IT infrastructure. When describing how information systems affect organizations, you should spend a few minutes discussing the economic and behavioural theories. Have students apply these theories to a familiar company, such as Bombardier or the Bank of Canada.
This text focuses on the management aspects of information systems, and Section Three, “Managers, Decision Making, and Information Systems,” introduces students to managerial roles, the process of decision making, stages of decision making, and models of decision making. Students will easily understand the classical description of management and may even think of management that way. However, students need to understand what managers actually do, including how they make decisions, and what their roles are.
Section Four, “Information Systems and Business Strategy,” is one of the most critical sections in the text because it actually defines strategy when it defines strategic information systems. Understanding business strategy and how information systems can aid employees in making far-reaching and deep-rooted decisions is critical to the long range success of any corporation. As the text says, and as students need to focus on, “At the business level of strategy, the key question is, ‘How can we compete effectively in this particular market?’” Within this discussion, the text defines “value chain” and its critical role in the success of a company, including its relationship to how companies think about and relate to their customers.
Ask your students to apply the value chain model to your university to see where technology is applied. Note the emphasis on tying together the customers, manufacturers, and suppliers. Retailers such as Hudson’s Bay Company also apply value chain and supply chain management. Hudson’s Bay Company’s systems allow it to track in-store sales down to the department and item level, thus one can see why Hudson’s Bay Company is such a strong competitor. Note that ERP systems, such as SAP, are usually part of the core of such supply chain management. You should spend time with your students on these issues because corporate success can depend on understanding what is discussed here.
Firm-level and industry-level strategies are analyzed in this section, and a key analytical tool, the competitive forces model, is also introduced here. The competitive forces model and the basic strategies of product differentiation, focused differentiation, developing tight linkages, and cost leadership are easy to understand.
Ask your students who work to describe the strategies pursued by their organizations. Also, ask your students to describe the strategy pursued by your university. Students must understand these concepts and learn how to apply these ideas, if they wish to be successful within a successful company.
Strategic transition means we have to change how the organization works, behaves, and is organized. Students may bristle at this idea. Downsizing may be a concomitant of these transitions. Insurance firms were notorious for using information systems to manage insurance policies in the same way they did before information systems were introduced, and using computers may have resulted in the loss of jobs.
“Window On” Boxes
Window on Organizations: E-Commerce – South Korean and Middle Eastern Style
What organizational factors describe why South Korea and the Arab Middle East have had such different experiences in adopting e-commerce?
The answer to this question can be found in the differences that exist between the economic and cultural environments of the two countries. The South Koreans have easy, affordable access to the Internet, and are quite comfortable using the Internet. The South Korean government is working to advance the use of technology. Although the South Koreans primarily use the Internet for communication and information, the government is taking steps to develop a highly secure digital signature system. This should encourage individuals to shop online more. Additionally, the government is encouraging the use of electronic money and credit cards.
The Middle East's use of e-commerce sharply contrasts with that of the South Koreans. Few e-commerce sites exist, and those that do only have about 1000 visitors a day. The cost and availability of technology, high tariffs, and few credit cards are all reasons why e-commerce is not as successful in the Middle East.
How would a company's management, organization, and technology have to change to either purchase or sell goods in South Korea or in the Middle East?
Students should recognize the influence of government on business. Most of the problems are larger than any one company can solve. Its management would first have to realize the problems and opportunities, decide how they would proceed, and develop the organization and technology to proceed. It would certainly need to hire or train a staff that has the technological skills needed to operate in South Korea or the Middle East. The organization would need to understand the legal environments in both countries, so that the company could decide how to operate, what it can purchase, what it can import, what it can sell, and what it can export.
The company could not change the legal environment, but it needs to determine how it can protect itself and its assets in both countries. In the Middle East, the company should find customers who use credit cards or who are willing to be taught how to use them. The management, organization, and technology must be well coordinated to respond to the current situation so it can operate successfully.
In the Middle East, organizational factors include the lack of computers at many companies and the concomitant lack of computer skills by many employees. The organizations will need to train their employees and the employees of their suppliers and customers. Such companies also need employees who can develop the needed software, or modify it, for use in South Korea and the Middle East.
Window on Management: Dueling Travel Sites
Describe the problems traditional and online travel agents face, and then describe the Cendant and Expedia strategies?
Travel agents generally earn a fee when they book a reservation. The providers are looking for ways to reduce costs, and an obvious way to reduce costs is to eliminate the reservation fees and commissions. Since more and more people are becoming comfortable with booking reservations online and are saving time and money, the traditional travel agent is likely to face many difficulties in the future. Although there are many of us who make online reservations, there are also individuals who enjoy the personal touch that the traditional travel agent provides. For instance, the traditional travel agent can provide you with ideas about places to go, can assemble the trip for you, and can make all of the arrangements and sometimes rearrangements for you.
Cendant's strategy is to use the Galileo system and existing network of travel agents to help airlines better market their tickets and to sell special packaged trips. The Galileo system also assembles special packages that are then broadcast to travel agents. When a reservation is booked, Cendant will receive a transaction fee. In contrast, Barry Diller envisions Expedia as an online emporium where travelers can design their own travel packages or select from an option of travel packages. Essentially, the Expedia site provides one-stop shopping.
Which of the two companies do you think is most likely to succeed? Why?
At this point in time, Expedia has a good shot at success. Cendant will probably have a more difficult time. The case mentions that the Galileo system uses out-of-date and expensive technology and will still charge a reservation fee.
Additional Comments: If you have the time, ask your students if any of them have used an online travel agency or a traditional travel agency. Ask the students to compare and contrast the services provided by each. Also, ask your students to visit Expedia's Web site and prepare an evaluation of it.
For Discussion Questions
1. It has been said that there is no such thing as a sustainable strategic 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. For example, 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 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.