Session 4: Organization Management and Information systems

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Session 4 Organization Management and
Information systems
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Management

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A Company System
INPUT of raw materials/ information
OUTPUT of finished products/ service
Manufacturing/ operation PROCESS
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What is an organization?

• Technical definition a stable, formal social
  structure that takes resources from the
  environment and process them to produce output.
• Behavioral definition a collection of rights,
  privileges, obligations, and responsibilities
  that are delicately balanced over time through
  conflict and conflict resolution.

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ORGANIZATIONS AND INFORMATION SYSTEMS
The Two-Way Relationship Between Organizations
and Information Technology
MEDIATING FACTORS Environment
Culture Structure
Standard Procedures(??) Politics
Management Decisions
Chance
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ORGANIZATIONS AND INFORMATION SYSTEMS

• Organization
• Stable, formal structure
• Takes resources from environment and processes
  them to produce outputs

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ORGANIZATIONS AND INFORMATION SYSTEMS

• Behavioral definition of Organization
• Collection of rights, privileges, obligations,
  responsibilities
• Delicately balanced
• Conflict resolution

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ORGANIZATIONS AND INFORMATION SYSTEMS

• Common Features of Organizations
• Organizations are bureaucracies that have certain
  structural features
• Clear division of labor
• Hierarchy
• Explicit rules and procedures(?????)
• Impartial judgments
• Technical qualifications
• Maximum organizational efficiency
• Standard Operating Procedures
• Precise rules, procedures, and practices
• Enable organizations to cope with all expected
  situations

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ORGANIZATIONS AND INFORMATION SYSTEMS

• Common Features of Organizations
• Organizational Politics
• Divergent viewpoints leads to political struggle,
  competition, and conflict
• Hamper organizational change
• Organizational Culture a set of fundamental
  assumptions about
• What products the organization should produce
• How and where it should produce them
• For whom they should be produced

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ORGANIZATIONS INFORMATION SYSTEMS

• Unique Features of Organizations
• Structures/Organizational types
• Goals
• Constituencies(??)
• Leadership Styles, Tasks
• Surrounding Environment

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ORGANIZATIONS INFORMATION SYSTEMS

• Organizational Structures
• Entrepreneurial Start up business
• Machine bureaucracy Midsize manufacturing firm
• Divisionalized bureaucracy Fortune 500
• Professional bureaucracy Law firms, hospitals,
  school systems
• Adhocracy(???? ) Consulting firm

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THE CHANGING ROLE OF INFORMATION SYSTEMS IN
ORGANIZATIONS

• Information Technology Infrastructure and
  Information Technology Services
• Information systems department
• Formal organizational unit
• Responsible for information systems in the
  organization

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THE CHANGING ROLE OF INFORMATION SYSTEMS IN
ORGANIZATIONS

• Information Technology Services

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The Systems Analyst as a facilitator
IT Vendors
Steering committee
User 1
Applications programmers
User 2
System Analyst
User N
Network administrator
Mgt/system owner
Database administrator
Interface design expert
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How Information Systems Affect Organizations

• Economic theories(????)
• Information technology is a factor of production,
  like capital and labor

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Transaction cost theory(??????) Firms can
conduct marketplace transactions internally more
cheaply to grow larger
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Agency theory(????) Firm is nexus of contracts
among self-interested parties requiring
supervision
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Flattening Organizations
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• Behavioral theories(????)
• Information technology could change hierarchy of
  decision making
• Lower cost of information acquisition
• Broadens the distribution of information

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Implement Change
Tasks
Resistant
People
Technology
????MUTUAL ADJUSTMENT
Structure
Source Leavitt, Handbook of Organization (1965)
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MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

• The Role of Managers in Organizations
• Classical model of management
• Traditional description of management
• Focuses on formal functions plan, organize,
  coordinate, decide, control(??????????????)
• Behavioral model of management
• Describes management based on observations of
  managers on the job
• Managerial roles
• Expectation of activities that managers should
  perform in an organization

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• ?????? Managers act as figureheads and leaders.
• ???? Managers receive and disseminate critical
  information, nerve centers.
• ???? Managers initiate activities, allocate
  resources, and negotiate conflicts.

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MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

• Managers and Decision Making
• Process of Decision Making
• Strategic Decision Making Determines long-term
  objectives, resources, and policies
• Management Control Monitors effective or
  efficient usage of resources and performance of
  operational units
• Operational control Determines how to perform
  specific tasks set by strategic and
  middle-management decision makers
• Knowledge-level decision making Evaluates new
  ideas for products, services, ways to communicate
  new knowledge, ways to distribute information

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MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

• Decisions are classified as
• Unstructured Non routine, decision maker
  provides judgment, evaluation, and insights into
  problem definition, no agreed-upon procedure for
  decision making
• Structured Repetitive, routine, handled using a
  definite procedure

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MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS
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Business Model, Business Processes, and
Information systems
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CASE Dell COMPUTER CORPORATION

• Analyze the PC industry and its market segments

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PC Industry

• Product life cycles in the PC industry have
  shrunk from about 22 months in 1988 to six months
  in 1997, and the price/performance of key
  components has continued to double every 18
  months or less. As a result, excess inventory
  depreciates rapidly (an estimated 10 per month .
  )
• driven by rapid technological improvements
• getting new, quality products to market on time
  is critical to maintaining competitiveness in an
  industry where customers are willing to pay a
  premium for the latest technologies and reward
  quality by repeated purchases.

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PC Industry

• companies that minimize inventory and bring new
  products to market faster can reduce costs,
  increase market share and maintain higher
  margins.
• the standardized, modular nature of the PC.
• the structure of distribution.

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Dells Direct Distribution Channel

• Selling direct removes two links in the supply
  chain where inventory could build up and also
  enables Dell to know its final customers, provide
  better service to them, and promote repeat or
  expanded sales to them.
• Build-to-order production allows Dell to
  introduce new technologies as soon as customers
  want them and makes it possible to adjust
  production to demand very quickly. It also means
  that Dell does not purchase components and
  assemble PCs until it has received payment from
  the customer, giving the company a negative cash
  conversion cycle in which it receives payment
  from customers before it must pay suppliers.

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Dells Global Sales Characteristics
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Dell Build-to-Order Production

• The build-to-order production system is the focal
  point of Dells business operations, the common
  contact point for sales, procurement, logistics,
  manufacturing and delivery.
• This requires very close coordination between
  Dells sales and manufacturing arms and between
  Dell and its suppliers. It achieves this by
  refining its business processes, developing close
  relationships with a limited number of suppliers,
  and by using IT to facilitate communication
  within and outside the company.

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Dell ??

• Direct sales eliminates inventory in the channel,
  provides Dell with information on and access to
  the final customer, and allows Dell to offer
  other services to the customer.
• Build-to-order allows Dell to offer the latest
  technologies which carry a higher margin, allows
  it to customize its products to user
  specifications, and means that Dell doesnt lay
  out cash for parts until it receives payment for
  the PC.
• Together, direct sales and build-to order help
  create a strong relationship between Dell and its
  customers, as both require direct interaction and
  allow Dell to gather information on its
  customers needs.

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Dells Use of Information And Technology----Refine
ment of the Dell Model
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Extension of the Dell Model
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Dell Sales Revenue (Millions )
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Dell Worldwide Market Share in (based on unit
shipments)
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Dell U.S. Market Share in (based on unit
shipments)
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Dell's Share Price
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Dell Net Income
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Dell Online History
Late 1980s 1994 1995 1996 1997
1998 1999 2000
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What advantages had Dell Online in comparison to
its competitor?

• Transaction segment
• Market access 250000 visits per week to dell.com
  website. (?The website sale is incremental or
  merely cannibalization of existing customers)
• Cost saving
• A website sale rep was able to carry 1.5 time
  monthly quota as a traditional sale rep
• Service efficiency

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What advantages had Dell Online in comparison to
its competitor?

• Relationship Segment
• Premier Pages will build switching costs and
  build customer loyalty ?!
• Market access
• Provide them with an opportunity to offer
  customers a differentiated service/product.

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What role does information system play in the
business model?

• Differentiate product/service
• Reduce the cost, improve the business process.
• Increase the revenue
• Increase the customer switch cost
• Lock in customers and in suppliers
• Change industry business model
• unpick the internally built products and outside
  distributors, dealers, resellers, and retailers
• Mass customization

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Traditional Business Model
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