eBay's Strategy Evolution: Acquisitions, Adaptation, and IT's Role

1. 3 Chapter Information Systems, Organizations, Management, and Strategy

2. EBay Fine-Tunes Its Strategy • Problem: Losing market share to other online retailers, ultra-competitive and constantly changing marketplace. Solutions: Acquire other businesses and adjust its business model to maintain online dominance. • Purchase of PayPal, deal with Buy.com allowed eBay to grow and diversify its business. • Demonstrates IT’s role in the development of eBay’s organization as it expands and makes acquisitions • Illustrates the challenges of maintaining a competitive advantage in a fast-moving, constantly-changing marketplace.

3. Figure 3-1 ORGANIZATIONS AND INFORMATION SYSTEMS The Two-Way Relationship between Organizations and Information Technology

4. As a manager you would be the one deciding that which will be built, what they will do, and how they will be implemented. WHAT IS AN ORGANIZATION? “It is a stable, formal social structure that take resources from the environment and processes them to produce outputs.” ORGANIZATIONS AND INFORMATION SYSTEMS

5. This definition focuses on three elements of organization. Capital and labor are primary production factors provided by the environment. The firm transforms these inputs into products and services in a production function The products and services are consumed by the environment in return for supply inputs.

6. Figure 3-2 ORGANIZATIONS AND INFORMATION SYSTEMS The Technical Microeconomic Definition of the Organization

7. ORGANIZATIONS AND INFORMATION SYSTEMS Behavioral Definition of Organization: • Collection of rights, privileges, obligations, and responsibilities • Delicately balanced over a period of time through conflict and conflict resolution

8. Figure 3-3 ORGANIZATIONS AND INFORMATION SYSTEMS The Behavioral View of Organizations

9. The Technical and Behavioral definitions of organizations are not contradictory, on the other hand they complement each other. Earlier tell us how thousand of firms in competitive markets combine capital, labor and IT , whereas the latter takes us inside the individual firm to see how the technology effect the firm How these definitions relate to Information System?

10. All organizations have some similar “structural” features.

11. ORGANIZATIONS AND INFORMATION SYSTEMS Features of Organizations • Routines and Business Processes • Routines for producing goods and services (Standard Operating Procedures) are developed by firm to become time efficient and productive. • Business processes are the collections of these routines

12. ORGANIZATIONS AND INFORMATION SYSTEMS Routines and Business Processes • Business firms are a collection of business processes. • Business processes enable organizations to cope with all recurring expected situations.

13. Figure 3-4 ORGANIZATIONS AND INFORMATION SYSTEMS Routines, Business Processes, and Firms

14. ORGANIZATIONS AND INFORMATION SYSTEMS Organizational Politics • Divergent viewpoints lead to political struggle, competition, and conflict. • Hamper organizational change- especially information systems

15. Virtually all large information systems investments by a firm that brings about the significant changes n strategy, business processes, business objectives, and business processes become politically charged events. Internal politics defeats the best-laid plans for an IS.

16. ORGANIZATIONS AND INFORMATION SYSTEMS Organizational Culture • The assumptions about: • What products the organization should produce • How and where it should be produced • For whom the products should be produced

17. If we all share the same basic cultural assumptions, agreements on the matters will be easy.

18. Management Information Systems Chapter 3 Information Systems, Organizations, Management, and Strategy ORGANIZATIONS AND INFORMATION SYSTEMS Unique Features of Organizations • Structures • Goals • Constituencies • Leadership styles • Tasks • Surrounding environments

19. ORGANIZATIONS AND INFORMATION SYSTEMS Organizational Structures • Entrepreneurial structure: Small start-up business • Machine bureaucracy: Midsize manufacturing firm • Divisionalized bureaucracy: Fortune 500 firms • Professional bureaucracy: Law firms, school systems, hospitals • Adhocracy: Consulting firms

20. ORGANIZATIONS AND INFORMATION SYSTEMS Organizations and 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.

21. Figure 3-5 ORGANIZATIONS AND INFORMATION SYSTEMS Environments and Organizations Have a Reciprocal Relationship

23. ORGANIZATIONS AND INFORMATION SYSTEMS Other Differences Among Organizations: • Ultimate goals • Different groups and constituencies • Nature of leadership • Tasks and technology

24. ORGANIZATIONS AND INFORMATION SYSTEMS Organizing the IT Function The information systems department is responsible for maintaining: • Hardware • Software • Data storage • Networks

25. Figure 3-6 ORGANIZATIONS AND INFORMATION SYSTEMS Information Technology Services

26. ORGANIZATIONS AND INFORMATION SYSTEMS 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

27. ORGANIZATIONS AND INFORMATION SYSTEMS • 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

28. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Economic Impacts: • IT changes both the relative costs of capital and the costs of information. • Information systems technology is a factor of production, like capital and labor.

29. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Economic Impacts: (Continued) • Transaction cost theory:Firms seek to economize on the cost of participating in markets (transaction costs). • Using markets is expensive • Costs of locating, communicating, with distant suppliers, buying insurance, obtaining info on products is expensive

30. IT lowers market transaction costs for firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees.

31. The Transaction Cost Theory of the Impact of Information Technology on the Organization

32. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS • Agency theory:Firm is nexus of contracts among self-interested parties requiring supervision. • Firms experience agency costs (the cost of managing and supervising). • IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees.

33. Figure 3-8 Management Information Systems Chapter 3 Information Systems, Organizations, Management, and Strategy HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS The Agency Cost Theory of the Impact of Information Technology on the Organization

34. There is no magic wand companies can wave that will solve all their problems just because they installed the latest information system. People using technology efficiently and effectively, however, can transform organizations. Technology can enhance communications up and down the organization and from one department to another on the same managerial level. Organizational and Behavioral Impacts

35. Technology makes virtual organizations more feasible, cheaper, and easier to set up and tear down than before. If you had a small group of people from each functional area of the company collaborating on a new production method, you can bring them together, hammer out the new methodology, and then return them to their regularly assigned units.

36. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Organizational and Behavioral Impacts IT Flattens Organizations: • Facilitates flattening of hierarchies • Broadens the distribution of timely information • Increases the speed of decision making

37. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS IT Flattens Organizations • Empowers lower-level employees to make decisions without supervision and increase management efficiency • Management span of control (the number of employees supervised by each manager) will also grow

38. Figure 3-9 HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Flattening Organizations

39. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Postindustrial Organizations and Virtual Firms Postindustrial Organizations: • Authority increasingly relies on knowledge and • competence rather than formal positions, • therefore it supports the notion that IT flattens • hierarchies • Information technology encourages task • force-networked organizations.

40. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Virtual Firms: • Use networks to link people, assets, and ideas • Can ally with suppliers, customers to create • and distribute new products and services • Not limited to traditional organizational boundaries • or physical locations

41. Accenture is the example- no operational headquarter, many of its 186,000 employees move from location to location to work on project for different clients in 49 countries

42. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Understanding Organizational Resistance to Change: • Information systems become bound up in organizational politics because they influence access to a key resource. • 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.

43. Figure 3-10 HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS Organizational Resistance and the Mutually Adjusting Relationship between Technology and the Organization Source: Reprinted by permission of James G. March.

44. HOW INFORMATION SYSTEMS IMPACT ORGANIZATIONS AND BUSINESS FIRMS The Internet and Organizations • The Internet increases the accessibility, storage, distribution of information and knowledge for business firms. • The Internet lowers the transaction and agency costs of firms. • Businesses are rapidly rebuilding their key business processes based on Internet technology. Example: online order entry, customer service, and fulfillment of orders.

45. PORTER’S COMPETITIVE FORCES MODEL

46. PORTER’S COMPETITIVE FORCES MODEL contends that much of the success or failure of a business depends on its ability to respond to its external environment. Traditional competitors: always nipping at your heals with new products and services trying to steal your customers. New market entrants: not constrained by traditional ways of producing goods and services, they can easily jump into your markets and lure customers away with cheaper or better products and services.

47. Substitute products and services: customers may be willing to try substitute products and services if they decide your price is too high or the quality of your products and services is too low. Customers: they are now armed with new information resources that make it easier for them to jump to your competitors, new market entrants, or substitute products. Suppliers: the number of suppliers used may determine how easy or difficult your business will have in controlling your supply chain. Too few suppliers and you lose a lot of control.

48. Four generic strategies for dealing with competitive forces, enabled by using IT • Low-cost leadership (e.g., Wall-Mart) • Product differentiation (non-commodity) • Focus on market niche • Strengthen customer and supplier intimacy-results in high switching costs and brand loyalty. Using Information Systems to Achieve Competitive Advantage

49. INFORMATION SYSTEMS AND BUSINESS STRATEGY Business-Level Strategy: The Value Chain Model • The most common generic business level strategies are: • Become the low-cost producer • Differentiate your product from competitors’ products • Change the scope of competition by enlarging the market or narrowing it to a specialized niche

50. INFORMATION SYSTEMS AND BUSINESS STRATEGY • Value Chain Model: • Highlights the primary or support activities that add business value • A good tool for understanding strategy at the business firm level • Primary Activities: • Directly related to the production and distribution of a firm’s products or services