Chapter 3 Review Questions

Topics: Strategic management, Transaction cost, Value chain Pages: 7 (1979 words) Published: May 4, 2012
Chapter 3 Module 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.

The technical definition of an organization is a stable, formal social structure that takes resources from the environment and develops them to outputs. The definition of an organization also focuses on three elements: Capital, labor, and production and products for consumption. The technical definition also infers that organizations are more stable than an informal group, and are formal legal entities, and are social structures. On the other hand behavioral definition of an organization defines it as a collection of rights, privileges, obligations, and responsibilities that are carefully 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 relationship between technical definition and behavioral definition shows us how a firm can combine capital, labor, and information technology which impacts the inner workings of the organization.

* Identify and describe the features of organizations that help explain differences in organizations’ use of information systems.

Features that are common among an organization include the following: * Routines and business processes: Standard operating procedures (SOP) have been developed to allow an organization to become productive and efficient thereby reducing costs over time. * Organizational politics: Differing viewpoints about how resources, rewards, and punishments should be distributed bring about political resistance to organization change. * Organizational culture: Assumptions that define the organizational goals and products create limitation on change, especially technological change. * Organizational environments: A shared relationship exists between an organization and environments; information systems provide organizations a way to identify external changes that might require an organizational response. * Organizational structure: Information systems reflect the type of organizational structure - entrepreneurial, machine, divisional, and professional bureaucracy, or adhocracy.

* Describe the major economic theories that help explain how information systems affect organizations.

There are two economic theories discussed in the book: transaction cost theory and agency theory. Transaction cost theory is based on that a firm incurs transaction costs when it buys goods in the marketplace rather than making products for itself. For example, traditional firms seek out to reduce transaction costs by getting bigger, hiring more employees, vertical and horizontal integration, and small-company takeovers. Information technology can help a firm lower the cost of market participation (transaction costs) and help firms shrink in size while producing the same or greater amount of output. In contrast, an agency theory views the firm as an interconnection of contracts among interested individuals. The owner employs employees to perform work on his or her behalf and delegates some decision making authority to them. Therefore employees need constant supervision and management, which creates management costs. As management costs rise the introduction of information technology reduces 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, ranging from sociology, psychology, and political science, are useful for describing the behavior of individual firms. Behavioral researchers theorize...
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