Mis chapter 3

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Management Information
Systems -- Chap. 3
By: Filmon HabtemichaelBy: Filmon Habtemichael

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Information Systems, Organizations,Information Systems, Organizations,
Management, and StrategyManagement, and Strategy
3.1 Organizations & Information System3.1 Organizations & Information System
3.2 The Changing Role of Information3.2 The Changing Role of Information
Systems in OrganizationsSystems in Organizations
3.3 Managers, Decision Making, and3.3 Managers, Decision Making, and
Information SystemsInformation Systems
3.4 Information Systems and Business3.4 Information Systems and Business
StrategyStrategy
Chap. 3

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 Technical Definition:
Stable, Formal, Social Structure
 Takes Resources From
Environment
 Processes Them
 To Produce Outputs
ORGANIZATION

 Capital and labor (the primary production factors provided by the
environment) are transformed by the firm through the production
process into products and services (outputs to the environment).
 The products and services are consumed by the environment, which
supplies additional capital and labor as inputs in the feedback loop.
 This definition of organizations is powerful and simple, but it is not
very descriptive or even predictive of real-world organizations
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 Technical Microeconomic Definition:

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Fig 3-2: The Technical view of Organizations .

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 Behavioral Definition :
 A collection of rights, privileges, obligations, and
responsibilities that is delicately balanced over a
period of time through conflict and conflict
resolution
Collection Of
 Rights, Privileges, Obligations,
Responsibilities
 Delicately Balanced
 Conflict Resolution

How do these definitions of organizations relate to
information system technology?
 A technical view of organizations encourages us to focus on the way inputs are
combined into outputs when technology changes are introduced into the company.
Technological change requires changes in who owns and controls information, who has
the right to access and update that information, and who makes decisions about whom,
when, and how.
 But the more realistic behavioral definition of an organization suggests that building
new information systems or rebuilding old ones involves much more than a technical
rearrangement of machines or workers—that some information systems change the
organizational balance of rights, privileges, obligations, responsibilities, and feelings
that has been established over a long period of time.
 The technical and behavioral definitions of organizations are not contradictory.
Indeed, they complement each other: The technical definition tells us how thousands of
firms in competitive markets combine capital, labor, and information technology,
whereas the behavioral model takes us inside the individual firm to see how that
technology affects the organization’s inner workings.
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Fig 3-1: The Two-way relationship b/w Organizations and I.S.
MEDIATING FACTORS:MEDIATING FACTORS:
EnvironmentEnvironment
CultureCulture
StructureStructure
Standard ProceduresStandard Procedures
Business ProcessesBusiness Processes
PoliticsPolitics
ManagementManagement
Decisions ChanceDecisions Chance
ORGANIZATIONSORGANIZATIONS INFORMATIONINFORMATION
TECHNOLOGYTECHNOLOGY

Organizational 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
 Alliances to political process, Advertise to influence customers
 Environments generally change faster than organizations
 Information systems can be an instrument of
environmental scanning, act as a lens
 The inertia in the SOP, the political conflicts, and the threat to closely held
cultural values inhibit change
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Organization & Its Environment
Figure 3-4

Organizational politics
 Divergent viewpoints lead on resource, reward
and punishment
 Results in struggle, competition, & conflict
 Political resistance greatly hampers
organizational change
 Significant changes in goals, procedures,
productivity, and personnel are politically
charged and will elicit serious political
opposition.
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Organizational culture
 Encompasses set of assumptions that define goal
and product
 What products the organization should produce
 How and where it should be produced
 For whom the products should be produced
 May be powerful unifying force as well as
restraint on change
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Structural Characteristics of All
Organizations
 Clear Division Of Labor
 Hierarchy
 Explicit Rules & Procedures
 Impartial Judgments
 Technical Qualifications
 Maximum Organizational Efficiency

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Common Features of Organizations
 Formal Structure
 Standard Operating Procedures
 Politics
 Culture

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Unique Features of Organizations
 Organizational Types
 Environments, Goals, Power
 Constituencies, Function
 Leadership, Tasks
 Technology
 Business Processes(Particular ways in which work is
organized, coordinated, and focused to produce a valuable products and services

Adhocracy – a
selectively
decentralized
form of
organization that
emphasizes the
support staff and
mutual adjustment
among people
Simple Structure – a
centralized form of
organization that
emphasizes the upper
echelon and direct
supervision
Machine Bureaucracy –
a moderately
decentralized form of
organization that
emphasizes the
technical staff and
standardization of
work processes
Divisional Form – a
moderately decentralized
form of organization
that emphasizes the
middle level and
standardization of outputs
Professional
Bureaucracy –
a decentralized
form of
organization that
emphasizes the
operating level
and standardization
of skills
Structural
Configurations
of
Organizations
Kyle P

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Mintzberg’s five types of organizational structure

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Table 3-3: Summary of Salient Features of Organizations.

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Fig 3-5: Information Technology Services.
3.2 The Changing Role of Info Systems In Organizations3.2 The Changing Role of Info Systems In Organizations

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How Information Systems affect Organizations
The Impact of Information Systems onThe Impact of Information Systems on
OrganizationOrganization
 Reduces
 Operating costs
 Reduces
 Organizational size
– middle managers
– clerical workers

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 Changes
 Organizational Structure
– decentralize
– less reliance on SOPs
 Increase
 Information and knowledge workers
 Self- guided workers
– information access: automated,
timeliness, and accuracy
 Shortens
 Decision Making Process
How Information Systems affect Organizations

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How Organizations Affect Information
Systems ?
 Decisions about
The Role of information systems
 Decisions about
The Computer Package :
- Who delivers information technology services ?
 Decisions about
Why information systems are built ?

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Fig 3-8: Organizational Resistance and the mutually adjusting
relationship between technology and the organization.

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Internet & Organizations
 The internet increase the
■ Accessibility
■ Storage
■ Distribution of Info & Knowledge
 For organizations
■ Lowering the transaction and agency
costs
◆

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Role Of Managers
 Classical Descriptions of Management
Describe functions-
plan, organize, coordinate, decide,
control
 Behavioral Models
Based on observations of managers
on the job
3.3 Managers, Decision Making, and Information Systems3.3 Managers, Decision Making, and Information Systems

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 Behavioral model of management
activities :
 High-volume, High-speed work
 Variety, Fragmentation, Brevity
 Issue preference current, ad hoc,
specific
 Contacts, complex web of interactions
 Strong preference for verbal media
 Control of the agenda
What Managers Do ?

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Managerial Roles: Mintzberg (1971)
 Interpersonal roles
 Figurehead
 Leader
 Liaison
 Informational roles
 Nerve center
 Disseminator
 spokesperson

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Managerial Roles: Mintzberg (1971)
 Decisional roles
 Entrepreneur
 Disturbance handler
 Resource allocator
 Negotiator

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How information systems can benefit
managers ?
 What managers do ?
 What information managers need for
decision making ?
 How decisions are made ?
 What kinds of decisions can be
supported by formal information
systems ?
◇◇

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Levels of Decision MakingLevels of Decision Making
Operational
control
Operational
control
Knowledge-
level decision
making
Knowledge-
level decision
making
Management
control
Management
control
Strategic
decision
making
Strategic
decision
making

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Decisions are classified as:Decisions are classified as:
 Unstructured:Unstructured:
Non routineNon routine, decision maker provides, decision maker provides
judgment, evaluation, and insightsjudgment, evaluation, and insights intointo
problem definition,problem definition, no agreed-uponno agreed-upon
procedureprocedure for decision makingfor decision making
 Structured:Structured:
Repetitive, routine, handled using a definiteRepetitive, routine, handled using a definite
procedureprocedure

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Fig. 3-9: Different kinds of information systems at the various
organization levels support different types of
decisions.
TPS
OAS MIS
KWS
DSS
ESS
ORGANIZATIONAL LEVEL
TYPE OF
DECISION OPERATIONAL KNOWLEDGE MANAGEMENT STRATEGIC
STRUCTURED ACCOUNTS
RECEIVABLE
ELECTRONIC PRODUCTION
SCHEDULING COST OVERRUNS
SEMI- BUDGET
STRUCTURED PREPARATION
PROJECT
SCHEDULING
FACILITY
LOCATION
UNSTRUCTURED PRODUCT DESIGN NEW PRODUCTS
NEW MARKETS

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Fig 3-10: The decision making process.

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Stages of Decision Making
 Intelligence :
Collect information; identify problem
 Design :
Conceive alternatives; select criteria
 Choice :
Use criteria to evaluate alternatives; select
 Implementation:
Put decision into effect; allocate resources;
control

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Management ChallengesManagement Challenges
Unstructured nature of important decisions
Diversity of managerial roles
Complexity of decision making

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Strategic Information Systems
( S.I.S )
 Computer systems at any level of the
organization that change
The goals, operations, products, services,
or environmental relationships, to
help the organization gain a competitive
advantage .
3.4 Information Systems and Business Strategy3.4 Information Systems and Business Strategy

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Fig. 3-15: Porter’s competitive
forces model

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Competitive forces model
 Model used to describe the interaction
of external influences, specially threats
and opportunities, that affect an
organization’s strategy and ability to
compete.
◆

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Four basic Competitive StrategiesFour basic Competitive Strategies
Product
Differentiation
Product
Differentiation
Focused
Differentiation
Focused
Differentiation
Tight Linkages
to customers
& suppliers
Tight Linkages
to customers
& suppliers
Low-cost
producer
Low-cost
producer
New & Unique
Products and
Services
•ATM by Citibank
•C-M-A by Merrill
Lynch
New Market Niches
for specialized
Products or Services
•Sears Roebuck
•American Express
“Lock” customers &
Suppliers ;
Raises Switching
Costs
• Federal Express
• Baxter International
• Wizard by Avis
• C-R-S by
Wal-Mart
• Yield mgmt by
Airlines

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 Data-mining
Analysis of large pools of data to find patterns andpatterns and
rulesrules that can be used to guide decision making
and to predict future behaviorto predict future behavior.
 Switching Costs
The expense a customer or company incursThe expense a customer or company incurs in lost
time and expenditure of resources when changingwhen changing
fromfrom one suppliersupplier or system to a competing
supplier or system.
Competitive forces model

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Fig. 3-13: Stockless inventory compared to traditional and just-
in-time supply methods.
◆

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Value Chain model
 Model that highlights the primary or support
activities that add a margin of value to a
firm’s products or services where
information systems can best be applied to
achieve a competitive advantage.
 Primary ActivitiesPrimary Activities
Activities most directly related to the production and
distribution of a firm’s products or services .
 Support ActivitiesSupport Activities
Activities that make the delivery of a firm’s primary activities
possible. Consists of the organization’s infrastructure, human
resources, technology, and procurement.

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Figure 3-11

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Business-Level StrategyBusiness-Level Strategy

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StrategicStrategic
InformationInformation
SystemsSystems
StrategicStrategic
InformationInformation
SystemsSystems
Competitive
Forces Model
The Value
Chain Model

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What managers should do ?
 How is the industry currently using
information systems ?
 Can significant strategic opportunities
be gained by introducing new
information system technology ?

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 What is the current business strategic
plan, and how does that plan mesh
with the current strategy for
information services ?
 Does the firm have the technology and
capital required to develop a strategic
information systems initiative ?
What managers should do ?

Mis chapter 3

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