Unit II

Contents

Organizational Structure and Design Dependence on Technology Integrating Technology with Business Environment IT and Corporate Strategy Sustaining a Competitive Edge

An organization is a rational coordination of activities of a group of people for the purpose of achieving some goal. There is a joint effort There are basically 2 types of organizations:

Formal what everything that appears on chart. Well-defined reporting relationships among managers and workers Social Organizations that arise spontaneously from the interaction of a group. Have no rational coordinated structure and generally lack explicit goals. Informal It is pattern of relations and coordination among members of the formal organization that is not specified o a formal chart. It represents social interaction and a realistic portrayal of the workplace.

Modern Organizations

The factors that influence the structure and design of modern organizations. They are:

Uncertainty: managers try to eliminate or reduce uncertainty such as Technical uncertainties: about whether a new product can be manufactured or whether it will work. Market uncertainties: as how a product will be received, potential demand, response from competitors, etc. Internal management uncertainty: key personnel may leave or may not perform assigned duties. Specialization: are specialized skills or conditions required for some task? Coordination: when there is specialization, management needs to coordinate diverse specialties. E.g. marketing and production.

Interdependence how different departments or subunits within the department depend on each other. Thompson (1967) has described three types of mutual dependence

Pooled interdependence 2 organizations are part of larger organization. Not directly dependent. Sequential interdependence when the output of one unit is the input to another. E.g. painting of product units . Reciprocal interdependence output of each unit becomes input for the other.

In designing an organization or modifying the design, various interdependencies must be coordinated.

Flexibility

The ability to adapt when confronted with new circumstances. Helps in quickly defending against threats and take advantage of new opportunities. Provides the organization with the ability to adapt to change and respond quickly to market forces and uncertainty in its environment. Speeds up the order processing. Enabled faster searching of books from a library catalogue Enabled communication with anyone at remote location.

Through IT, colleagues working on a project do not have to be in same physical location. Can communicate with colleagues while travelling. With internet can conduct business at any time, day or night. These all are the impact of organizational flexibility.

Creating new types of organization

Technology makes it possible to create new forms of organizations through the use of different design variables. A variable is something that takes on different values. For organizations variables can be span of control i.e. how many subordinates a manager can have. IT is defined to include computers, communications, video conferencing, artificial intelligence, virtual reality, fax, cellular & wireless phones and pagers.

Two types of variables

Conventional design variables IT design variables

Structural

Virtual components e.g. raw material Electronic linking mail, video conferencing, fax Technological leveling elimination of layers, greater span of control (approval of messages from layer below to level above) Production automation Electronic workflows contribute to monitoring and coordination of work

Work process

Two types of variables

Communications Electronic communications

Technological Matrixing e.g. make a temporary task force from marketing, sales, production using mail and groupware to prepare for a trade show Inter-organizational Relations Electronic consumer/supplier relationships Use of EDI

Class of variable Structural

Conventional design Definition of organizational subunits Determining purpose, output of subunits Reporting mechanisms

IT design variables Virtual components Linking mechanisms

Linking mechanisms
Control mechanisms Staffing

Electronic mechanisms
Technological leveling

Class of variable Work process

Conventional design Tasks Workflows Dependencies Output of process Buffers

IT design variables Production Automation

Virtual components Electronic communications Technological Matrixing

Communications

Formal channels Informal communication

Inter-organizational relation

Make vs. buy decision

Electronic customer/supplier relationship Electronic customer/supplier relationship

Electronic linking

Exchange of materials

Communication mechanisms

Integrating Technology With Business Environment

The most significant challenge of the management would be to consider that how technology affects their decisions and Viceversa.

Information Technology

Search for new technology (find out what technology offers)

Seek opportunities

Manage development of new technology

Technological constraints

Manage existing technology Impact Decision making Planning Execution

Impact

First, the manager has to search for new technology to help create new technology. Opportunities + technology = new development projects. Development projects have technological constraints. Technological constraints & opportunities influence decision making. The decisions will have an impact on technology and its development within the firm.

Managing IT

A framework of Managing IT

Vision for the organization & IT

IT and Organization structure

Strategy

Corporate strategic plan

Integration of IT and DM

Alliances and Partnership

IT initiatives

IT infrastructure

Ongoing IT Operations

Vision of the organization and IT

Vision for the organization & IT Leaders should develop a vision for the business and IT in achieving that vision. Vision should describe the mission and the identity of the product and services it produces. It should identify the markets in which the firm will compete and its strategy for competition Plans for mergers, partnerships, alliances, and acquisitions are also part of vision. IT plays an important role in shaping the structure of the organization and in supporting its value chain activities.

Technology for structuring the Organization

A firms structure is highly interrelated with its strategy, so these 2 aspects of the organization must be considered together. E.g.

a firm decides to compete on the basis of extremely efficient operations, to become the low cost, low overhead producer in the industry. For this, firm might use production automation to reduce costs and improve quality. It can EDI

The ideas can be generated by reviewing what competitors are doing, staying abreast of the technology, looking for analogies in other industries for strategic advantage.

Integrating Technology and Decision Making

It is the most significant responsibility of management to integrate technology with all business decisions. Integrating means that the manager is aware of how new technology can create opportunities. A decision o enter a new line of business has a direct effect on existing information processing system. E.g. Frequent flyer program.

A Corporate Plan for Strategy

It comes from the firms vision for its future activities.

The plan includes the vision; Road map for bringing about the vision. IT should be integral part of firms strategic plan.

Alliances and Partnerships

E.g. Intel and Microsoft One organization enhances the operations of the offerings of another. It can be appealing to work with the other organization It is done by electronic linking and communication

New IT Initiatives

With the advancement in technology, new ideas should be stimulated as how IT will improve some aspects of the organization. Corporate strategic plan should identify broad areas in which technology can contribute to the firm. IT plan adds further details and identifies specific applications of the technology for development.

The IT Infrastructure

The combination of firms various common technologies constitutes information structure. The network with which the computers are connected. Development of interactive application which is available to all employees. Developing the Intranet.

Ongoing Management of IT

Vision and strategy are long-term in nature; a firm still faces day to day task of managing IT. This consists 2 tasks:

Developing new applications Operating the existing stock of application.

IT and Corporate Strategy

Information Technologys Ability To Change Strategy

IT can

Enable new strategies Provide new ways to reach customers Expand the markets in which the firm participates

Metrics for Evaluating Strategies

Market share Number of markets in which a firm participates Number of new markets Sales growth Size of the average sale Sales per employee

Thinking Strategically

Strategy is an approach to achieving a series of objectives Corporate strategy describes how a firm will achieve the vision of its senior management Corporate strategy and IT strategy are intertwined The new economy has created threats and opportunities for corporate strategy

Corporate Strategy: Porters Value Chain

The value chain divides a firms activities into two types Primary: activities associated with the mission of the firm such as inbound logistics, operations, outbound logistics, marketing and sales, and service Support: activities represented by the firms infrastructure such as human resources management, technology development, and procurement The Internet and electronic commerce have impacted the traditional value chain E.G., Amazon.com has no physical stores and hence a smaller infrastructure which is easier to manage Comparing value chains can highlight the differences among business models based on the internet and web

Porters Five Forces Model

Forces that shape a firms competition

Competitive rivalry The threat of new entrants The bargaining power of suppliers The bargaining power of buyers The threat of substitutes Lowering entry barriers for new firms Creating substitutes for traditional businesses (e.G., Stock trading and music) Creating new markets that change the way buyers and supplies interact

The Internet has affected the five forces by

Some generic strategies by Porter

Low cost producer Differentiation Market niche strategy Some specific strategies Customer driven Reducing cycle time Global competition Right sizing Quality

The Strategic Grid

r Level of dependence on existing IS/IT systems:

High = systems essential to companys survival Low = systems improve performance of work but are not essential
r Strategic impact of current and planned IS/IT

developments:
High = IS/IT is a critical success factor (CSF) to business Low = IS/IT is useful but has low business potential

Strategic Grid Quadrants

Support: (e.g., Cement company)
requiring average or below average investment occasional senior management attention

Factory: (e.g., Steelworks)

crucial to current operations and management

Turnaround: (e.g., retailer on-line and real-time

systems) crucial to current operations and management sensitive to productivity and effectiveness
Strategic: (e.g., Credit card company)
determining the business survival and growth foreseeing future opportunities

Support

organizations may spend a lot of money on IT, but they are not totally dependent on IT systems for operational success day to day, minute to minute. Neither do they gain strategic advantage from innovative application developments.

Factory

organizations are completely dependent on the smooth running of their IT systems. For instance, a manufacturing unit might grind to a halt if the IT systems were to fail. However, with this type of organization, innovative applications developments, although important, are not crucial to the organizations ability to be competitive, except when its performance starts to lag behind competitors, and a move to the strategic quadrant occurs.

Turnaround

organizations are those in which innovative applications developments are crucial to the firms strategic success, but the day-to-day running of IT systems is not so critical.

Strategic

organizations such as banks and insurance companies are those in which innovative applications development brings significant competitive advantage and day-to-day processes are highly dependent on the smooth running of IT systems. In these types of organization, there is a very tight link between business strategy and IT strategy, and the head of IT normally sits on the board of directors.

Capitalizing on IT

Look for ways to incorporate technology in a product or service Seek ways to use technology to connect with other firms Seek ways to use technology to make dramatic changes in the way you structure the organization Integrate technology with planning - Managers need to understand:

The operation of their business The capabilities of technology

Internet, Intranet & Extranet

Extranet Intranet
Management Employees Production Centres Other departments Vendors/Suppliers Distributors, Bankers Consultants

Internet
Customers Competitors General Public