3.1 To 3.3 - Presentation For UPES-Final

DSIT 7001-
IT Applications in Supply Chain Management
Module – 1
Organizations, Management, and the
Network
Presented By: Rohit Sindhwani
@ UPSC –MBA LSCM ,
Sem Jul-Dec-2019
Module 1: Organizations, Management, and the Network
3.1 Organizations and Information Systems
3.2 How Information Systems Impact Organizations and

Business Firms
3.3 Using Information Systems to Achieve Competitive

Advantage
3.1 To 3.3
Learning Objectives
• 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
• Demonstrate how Porter’s competitive forces model helps companies develop

competitive strategies using information systems.
• Explain how the value chain and value web models help businesses identify
opportunities for strategic information system applications.
• Assess how information systems support the activities of managers in organizations
• Demonstrate how information systems help businesses use synergies, core

competencies, and network-based strategies to achieve competitive advantage.
• Assess the challenges posed by strategic information systems and management

solutions.
3.1
Organizations and Information Systems

Contents
A- Organizations , an introduction
B- Features of organizations
C- Organizational culture and environment
D- Kinds of organizational structure
E- Organizations and IT systems

What is an organization?
– Technical definition:
• Stable, formal social structure that takes resources from environment and
processes them to produce outputs
• A formal legal entity with internal rules and procedures, as well as a social
structure
• Organizations are also SOCIAL STRUCTURES, because they are a collection
of SOCIAL ELEMENTS.
• Takes RESOURCES from the ENVIRONMENT and PROCESSES them to
produce OUTPUTS
– Behavioral definition:
• A collection of rights, privileges, obligations, and responsibilities that is
delicately balanced over a period of time through conflict and conflict
resolution
A- Technical Microeconomic Definition of The Organization
In the microeconomic definition of organizations, 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.
The Behavioral View Of Organizations
The behavioral view of organizations emphasizes group relationships, values, and structures.
These features of the organization make it different

from other social units. In modern organizations,
which are large and complex in nature, these
features are very important from the point of view of
the management.
1. Composition of Interrelated Individuals:
Organization is a composition or aggregation of interrelated individuals. The
organizations are not merely a number of individuals collected at random but
they are composed of individuals who are interrelated. The identifiable
interrelated group of individuals determines the boundary of the organization. It
shows the organization as a separate entity from the other elements in its
environment.
2. Deliberate and Conscious Creation and Recreation:
Organization is a social unit which is deliberately constructed or reconstructed.
It is a system of consciously coordinated activities of two or more persons. This
feature differentiates the organization from the other social units. Unlike other
social units, members enter in the organization through a contract and can be
shunted out also if their performance is not satisfactory. Thus, the relationship
is purely of a contractual nature. Recreation of groups can be made by the
organisation through promotions, demotions or transfers of people in the
organisation
3. Achievement of Common Objectives:
An organization is a conscious and purposive creation. It is a means towards the
achievement of common enterprise objectives. The objectives of various
segments lead to the achievement of major business objectives. The
organizational structure should build around common and clear cut
objectives. This will help in the proper accomplishment of objectives.
4. Division of Work:
Organization includes breaking up the entire work into different segments.
Different segments of work are then assigned to different persons for their
efficient accomplishment. This brings in division of labour. It is not that one
person cannot carry out many functions but specialization in different
activities is necessary to improve one’s efficiency. Organization helps in
dividing the work into related activities so that they are assigned to different
individuals.
5. Coordination:
Coordination of various activities is as essential as their division. It helps in
integrating and harmonizing various activities. Coordination also avoids
duplications and delays. In-fact, various functions in an organization
depend upon one another and the performance of one influences the
other. Unless all of them are properly coordinated, the performance of
all segments is adversely affected.
6. Co-operative Relationship:
An organization creates co-operative relationship among various members
of the group. An organization cannot be constituted by one person. It
requires at least two or more persons; organization is a system which
helps in creating meaningful relationships among people. The
relationship should be both vertical and horizontal among members of
various departments. The structure should be designed that it motivates
people to perform their part of work together.
7. Well Defined Authority Responsibility Relationship
An organization consists of various positions arranged in a hierarchy with well defined
authority and responsibility. There is always a central authority from which a chain of
authority relationship stretches throughout the organization. The hierarchy of positions
defines the lines of communication and pattern of relationships.
8. Group Behavior:
An organization is a composition of people. The success of an organization depends upon
the behavior of the people and the group. Individual groups and structures are the
basis of group behavior. Relationships on a person to person level and subordinate to
subordinate as well as with the superior are established in a group. Formal and
informal organisations help in developing proper behavior of a group.
Group behavior has given birth to team work which has been accepted as the most
effective form of organization. Team spirit, team performance, team rewards and team
motivation have achieved new dimensions in big organizations in the beginning of this
century. Groups in an organization have more effective behavior. They can achieve
something more together than what they can achieve individually.
9. Performance
The whole organization is greater than the sum of its parts. The
organization’s main aim is to achieve the goals and objectives through
effective performance which is possible with human resource
development. Organizational development programs maximize work
motivations and creativity. Job enlargement, job enrichment and job
satisfaction also come under organizational performance. Specialization
in particular helps in the effective performance of the job.
10. Explicit rules and procedures
11. Impartial judgments
12SOP- Standard Operating Procedures
Organization Hierarchy
Use of hierarchical structure

• Routines and business processes
• Organizational politics, culture,
environments and structures
• Organizational Structure
• Accountability, authority in system
of impartial decision making
• Adherence to principle of
efficiency
Common Features of Organizations

Standard Operating Procedures:
• Organizations that survive over time
become very efficient, producing a limited
number of products and services by
following STANDARD ROUTINES.
• These standard routines become codified
into reasonably precise rules, procedures,
and practices called SOP
Routines ( SOP) and Business Processes
• Routines (SOP) are patterns of individual

behavior.
• Business processes are a collection of routines.
• Business firms are a collection of business

processes.
• Business processes enable organizations to cope

with all recurring expected situations.
Routines, Business Processes,
And Firms
All organizations are composed of

individual routines and behaviors,
a collection of which make up a
business process. A collection of
business processes make up the
business firm. New information
system applications require that
individual routines and business
processes change to achieve high
levels of organizational
performance.
• Routines and business processes
• Routines (standard operating procedures)
• Precise rules, procedures, and practices
developed to cope with virtually all
expected situations
• Business processes: Collections of routines
• Business firm: Collection of business
processes
Organizational politics
• Divergent viewpoints lead to political struggle,

competition, and conflict
• Political resistance greatly hampers organizational

change

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
• Organizations and environments have a reciprocal

relationship
• Organizations are open to, and dependent on, the
social and physical environment
• Organizations can influence their environments
• Environments generally change faster than
organizations
• Information systems can be an instrument of
environmental scanning, act as a lens

Environment And Organizations RELATIONSHIP
A Reciprocal
Relationship
Environments shape what organizations can do, but organizations can influence their environments and
decide to change environments altogether. Information technology plays a critical role in helping
organizations perceive environmental change and in helping organizations act on their environment.
D- kinds of organizational structure
5 basic kinds of organizational structure

– Entrepreneurial:
• Small start-up business
– Machine bureaucracy:
• Midsize manufacturing firm
– Divisionalized bureaucracy:
• Fortune 500 firms
– Professional bureaucracy:
• Law firms, school systems, hospitals
– Adhocracy:
• Consulting firms
5 basic kinds of organizational structure


The information systems department is responsible for maintaining:
• Hardware
• Software
• Data storage
• Networks

Information Technology Services

Includes Specialists:
• Programmers: Highly trained, writers of the

software instructions for computers
• Systems analysts: Translate business problems

into solutions, act as liaisons between the
information systems department and rest of the
organization
• Information system managers: Leaders of various

specialists
Includes Specialists: (Continued)
• Chief Information Officer (CIO): Senior manager in

charge of information systems function in the firm
• End users: Department representatives outside

the information system department for whom
applications are developed

Q&A
3.2
How Information Systems Impact
Organizations and Business Firms

3.2
How Information Systems Impact Organizations and
Business Firms
Contents
Major impacts an Information System on the organization are
A- Economic impacts
B- Organizational and behavioral impacts
C- The internet and organizations
D- Implications for the design and understanding of IS
E- Mutual Impact
3.2
Business Firms
A- Economic impacts
– IT changes relative costs of capital and the costs of
information
– Information systems technology is a factor of
production, like capital and labor
– IT affects the cost and quality of information and
changes economics of information
• Information technology helps firms contract in size
because it can reduce transaction costs (the cost of
participating in markets)
– Outsourcing cost reduction due to faster collaboration
3.2
Business Firms
A- Economic impacts
Transaction cost theory
– Firms seek to economize on transaction costs (the costs of

participating in markets)
• Vertical integration, hiring more employees, buying
suppliers and distributors
– IT lowers market transaction costs for a firm, making it

worthwhile for firms to transact with other firms rather
than grow the number of employees
3.2
Business Firms
A- The transaction cost theory Impact
As firms grow in size and complexity, traditionally they experience rising agency costs.
3.2
Business Firms
A- Agency theory
– Firm is nexus of contracts among self-interested parties
requiring supervision
– Firms experience agency costs (the cost of managing and

supervising) which rise as firm grows
– IT can reduce agency costs, making it possible for firms to

grow without adding to the costs of supervising, and
without adding employees
3.2
Business Firms
A- THE AGENCY THEORY OF THE IMPACT
Firms traditionally grew in size to reduce market transaction costs. IT potentially reduces
the firms market transaction costs. This means firms can outsource work using the market,
reduce their employee head count and still grow revenues, relying more on outsourcing
firms and external contractors.
3.2
Business Firms
– IT flattens organizations
• Decision making pushed to lower levels
• Fewer managers needed (IT enables faster
decision making and increases span of control)
– Postindustrial organizations
• Organizations flatten because in postindustrial
societies, authority increasingly relies on
knowledge and competence rather than formal
positions
3.2
Business Firms
FLATTENING
ORGANIZATIONS
Information systems
can reduce the
number of levels in
an organization by
providing managers
with information to
supervise larger
numbers of workers
and by giving lower-
level employees
more decision-
making authority.
3.2
Business Firms
Organizational resistance to change
– Information systems become bound up in organizational politics

because they influence access to a key resource – information
– 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
3.2
Business
T Firms
C- The Internet and organizations
– Internet increases the accessibility, storage, and
distribution of information and knowledge for
organizations
– The Internet can greatly lower transaction and agency

costs
• Example: Large firm delivers internal manuals to
employees via a corporate Web site, saving millions of
dollars in distribution costs
3.2
Business Firms
D- Implications for the design and understanding of information systems
– To deliver genuine benefits, information systems must be built with a
clear understanding of the organization in which they will be used. In
our experience, the central organizational factors to consider when
planning a new system are the following:
• The environment in which the organization must function
• The structure of the organization: hierarchy, specialization, routines,
and business processes
• The organization’s culture and politics
• The type of organization and its style of leadership
• The principal interest 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
3.2
Business Firms
D- Organizational factors to consider when planning a new system
– Environment
– Structure
• Hierarchy, specialization, routines, business processes
– Culture and politics
– Type of organization and style of leadership
– Main interest groups affected by system; attitudes of
end users
– Tasks, decisions, and business processes the system
will assist
3.2
Business Firms
E – Mutual Impact
• Information technology and organizations
influence one another
– Complex relationship influenced by organization’s
• Structure
• Business processes
• Politics
• Culture
• Environment, and
• Management decisions
3.2
Business Firms
E- THE TWO-WAY RELATIONSHIP
BETWEEN
ORGANIZATIONS
AND
INFORMATION
TECHNOLOGY
This complex two-way relationship is mediated by many factors, not the least of which are the
decisions made—or not made—by managers. Other factors mediating the relationship
include the organizational culture, structure, politics, business processes, and environment.
E- THE TWO-WAY RELATIONSHIP

BETWEEN ORGANIZATIONS AND INFORMATION TECHNOLOGY
Information systems and organizations INFLUENCE one another.

On the one hand, information systems must be ALIGNED with the organization to
PROVIDE INFORMATION that important groups within the organization need.
On the other hand, the organization must BE AWARE of and open itself to the
INFLUENCES of information systems in order to benefit from NEW
TECHNOLOGIES.
The INTERACTION between information technology and organizations is VERY

COMPLEX and is influenced by a great many MEDIATING FACTORS,
including the ORGANIZATION'S STRUCTURE, STANDARD OPERATING
PROCEDURES, POLITICS, CULTURE, SURROUNDING ENVIRONMENT.
Managers must be aware that information systems can MARKEDLY ALTER life in
the organization.
They cannot successfully design new systems or understand existing systems

WITHOUT UNDERSTANDING organizations.
Q&A
3.3
Using Information Systems to Achieve
Competitive Advantage
3.3
Using Information Systems to Achieve Competitive Advantage
Contents
A- Competitive forces and Competitive advantage
B- Types of Competitive Advantages
C- Information Systems for Competitive Advantage

3.3
– Five competitive forces shape fate of firm

1. Traditional competitors
2. New market entrants
3. Substitute products and services
4. Customers
5. Suppliers
• Michael Porter’s competitive forces model

– Provides general view of firm, its competitors, and
environment
3.3

Michael Porter’s competitive forces model
This figure
provides examples
of systems for
both primary and
support activities
of a firm and of its
value partners
that can add a
margin of value to
a firm’s products
or services.
3.3
A- Competitive forces and Competitive

PORTER’S COMPETITIVE advantage
FORCES MODEL
Michael Porter’s competitive forces model
In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined
not only by competition with its traditional direct competitors but also by four other forces in the
industry’s environment: new market entrants, substitute products, customers, and suppliers.
3.3
How Competitive forces shape the strategic position of firm

• Traditional competitors
– All firms share market space with competitors who are
continuously devising new products, services,
efficiencies, switching costs
• New market entrants
– Some industries have high barriers to entry, e.g.
computer chip business
– New companies have new equipment, younger
workers, but little brand recognition
3.3
How Competitive forces shape the strategic position of firm

• Substitute products and services
– Substitutes customers might use if your prices become too
high,
• Customers
– Can customers easily switch to competitor’s products? Can
they force businesses to compete on price alone in transparent
market place?
• Suppliers
– Market power of suppliers when firm cannot raise prices as
fast as suppliers
3.3
Competitive advantage
When a firm earns higher economic profit than the average
in its industry
• Profitability depends on
-Market level economics (the 5-forces)
-Firm’s value creation relative to competitors
• Value creation depends on
-cost position relative to competitors
-benefit position relative to competitors
3.3

3.3

3.3

3.3

3.3

Competitive Advantage Strategies
3.3
Value creation and value chain

• To achieve a competitive advantage a firm’s product must
create more value than its competitors
• Value is created as goods move down the vertical chain
• Therefore the vertical chain is referred to as the value
chain
• To create more value than competitors the firm must
have unique resources and/or capabilities
• Resources are firm-specific assets
• Capabilities are activities that a firm does especially well
compared to other firms
3.3
B - Types of Competitive Advantages

Strategies for dealing with competitive forces – Lower costs , JIO
1) Low-cost leadership – Superior customer service
– Best prices on goods/services , Examples: Dell, Jio – Dell , HP
– Produce products and services at a lower price
than competitors while enhancing quality and level
of service ,Ex.: Wal-Mart
2) Product differentiation
– Best products or services Ex.: Porsche, Nordstrom, – Best-made product - Bose
IBM , – Superior manufacturing
– Enable new products or services, greatly change technology – iPhone
customer convenience and experience, Ex.:
Google, Nike, Apple – Well-known brand name –
All FMCG goods
3) Best-Cost Provider (middle-of-the-road)
– Reasonable quality, competitive prices ,Example: Wal-
Mart
– Focus on market niche – Shorter lead times –
– Strengthen customer and supplier intimacy FMCG
– High value per cost -
– These strategies are enabled by using IT
Patanjali
3.3
B- Types of Competitive Advantages

3.3
Organizational Value Chain

3.3
• Value Chain Analysis and Information System

– VC Analysis: adding value within an organization
– Organizations as big input/output processes
– IS can automate many value chain activities:

• Purchased supplies inbound logistics
• Operations
• Outbound logistics
• Sales and marketing
• Service
3.3
Business value chain model

– Views firm as series of activities that add value to
products or services
– Highlights activities where competitive strategies can
best be applied
• Primary activities vs. support activities
– At each stage, determine how information systems
can improve operational efficiency and improve
customer and supplier intimacy
– Utilize benchmarking, industry best practices
3.3
Value web
– Collection of independent firms using
highly synchronized IT to coordinate
value chains to produce product or
service collectively
– JIT
– More customer driven, less linear
operation than traditional value chain
3.3
THE VALUE WEB

The value web is a
networked system that
can synchronize the
value chains of
business partners
within an industry to
respond rapidly to
changes in supply and
demand.
3.3
• Improving Business Performance

Information systems can improve overall
performance of business units by promoting
– synergies
– core competencies
– Synergies
– Network-based strategies
3.3

Improving Business Performance
- Synergies
•When output of some units used as inputs to others, or
organizations pool markets and expertise
•Example: merger of Bank of NY and JPMorgan Chase
•Purchase of YouTube by Google
-Core competencies
–Activity for which firm is world-class leader
–Relies on knowledge, experience, and sharing this across
business units
–Example: Procter & Gamble’s intranet and directory of subject
matter experts
3.3

• Network-based strategies
– Take advantage of firm’s abilities to
network with each other
– Include use of:
• Network economics
• Virtual company model
• Business ecosystems
3.3

• Network economics
• Traditional economics: Law of diminishing returns
– The more any given resource is applied to production, the
lower the marginal gain in output, until a point is reached
where the additional inputs produce no additional outputs
• Network economics:
– Marginal cost of adding new participant almost zero, with
much greater marginal gain
– Value of community grows with size
– Value of software grows as installed customer base grows
3.3

Virtual company uses networks to
ally with other companies to create
and distribute products without
being limited by traditional
organizational boundaries or
physical locations
Amazon India has more than 5 Lac
Suppliers Base.
3.3
• Improving Business Performance

• Virtual company strategy
– Virtual company uses networks to ally with
other companies to create and distribute
products without being limited by traditional
organizational boundaries or physical locations
– E.g. Li & Fung manages production, shipment
of garments for major fashion companies,
outsourcing all work to over 7,500 suppliers
3.3 Using Information Systems to Achieve Competitive Advantage

IT Helps to survive the business
– Sustaining competitive advantage
• Because competitors can retaliate and copy strategic
systems, competitive advantage is not always
sustainable; systems may become tools for survival
– Performing strategic systems analysis
• What is structure of industry?
• What are value chains for this firm?
– Managing strategic transitions
• Adopting strategic systems requires changes in
business goals, relationships with customers and
suppliers, and business processes
Q&A
3.3
Supply Chain V/s Value Chain Comparison

Questions
• 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.
• Demonstrate how Porter’s competitive forces model helps companies develop
competitive strategies using information systems.
• Explain how the value chain and value web models help businesses identify
opportunities for strategic information system applications.
• Assess how information systems support the activities of managers in
organizations.
• Demonstrate how information systems help businesses use synergies, core
competencies, and network-based strategies to achieve competitive advantage.
• Assess the challenges posed by strategic information systems and management
solutions.
• What are 5 basic kinds of organizational structure , give description and
examples
Questions
• Define and differentiate between competitive forces and competitive advantage .

• Define value chain and draw a typical value web for an organization .
• What are the strategies for dealing with competitive forces ? discuss with 2
examples each.
• Compare Supply Chain and Value Chain based on 5 basic features.
• Draw and explain Michael Porter`s competitive forces model .

3.1 To 3.3 - Presentation For UPES-Final

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

3.1 To 3.3 - Presentation For UPES-Final

Uploaded by

Copyright:

Available Formats

DSIT 7001-

IT Applications in Supply Chain Management

3.1 Organizations and Information Systems

3.2 How Information Systems Impact Organizations and

3.3 Using Information Systems to Achieve Competitive

• Evaluate the impact of information systems on organizations

• Demonstrate how Porter’s competitive forces model helps companies develop

• Assess how information systems support the activities of managers in organizations

• Demonstrate how information systems help businesses use synergies, core

• Assess the challenges posed by strategic information systems and management

Organizations and Information Systems

C- Organizational culture and environment

D- Kinds of organizational structure

E- Organizations and IT systems

In the microeconomic definition of organizations, capital and labor (the primary

These features of the organization make it different

Use of hierarchical structure

Common Features of Organizations

• Routines (SOP) are patterns of individual

• Business processes are a collection of routines.

• Business firms are a collection of business

• Business processes enable organizations to cope

Routines, Business Processes,

All organizations are composed of

C- Organizational culture and environment

• Divergent viewpoints lead to political struggle,

• Political resistance greatly hampers organizational

C- Organizational culture and environment

• May be powerful unifying force as well as

C- Organizational culture and environment

• Organizations and environments have a reciprocal

C- Organizational culture and environment

D- kinds of organizational structure

5 basic kinds of organizational structure

5 basic kinds of organizational structure

E- Organizations and IT systems

E- Organizations and IT systems

E- Organizations and IT systems

• Programmers: Highly trained, writers of the

• Systems analysts: Translate business problems

• Information system managers: Leaders of various

E- Organizations and IT systems

Includes Specialists: (Continued)

• Chief Information Officer (CIO): Senior manager in

• End users: Department representatives outside

E- Organizations and IT systems

How Information Systems Impact

Organizations and Business Firms

Transaction cost theory

– Firms seek to economize on transaction costs (the costs of

– IT lowers market transaction costs for a firm, making it

– Firms experience agency costs (the cost of managing and

– IT can reduce agency costs, making it possible for firms to

– Information systems become bound up in organizational politics

– Information systems potentially change an organization’s structure,

– Most common reason for failure of large projects is due to

– The Internet can greatly lower transaction and agency

E- THE TWO-WAY RELATIONSHIP

Information systems and organizations INFLUENCE one another.

The INTERACTION between information technology and organizations is VERY

They cannot successfully design new systems or understand existing systems

Using Information Systems to Achieve

A- Competitive forces and Competitive advantage