Chapter 9
Organizational Use of Information Systems
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc. 2002. All rights reserved .
Chapter Objectives
• To understand how businesses are organized and
what general functions they need to perform.
• To understand how information systems can be
used to support organizational functions and
activities, regardless of how the organization is
structured.
• To understand potential vulnerabilities arising
from the use of information systems, including
ethical vulnerabilities.
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Organizations and Organizational Structure
• Organizational structure provides stability,
regularity, and predictability.
• Organizational structure is not static.
• Organizational structure deals with
reporting relationships, working
relationships, and communication channels
among departments.
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Traditional View of Organization
• The traditional view of an organization is
that of hierarchy.
– An individual or small group reside at the top.
– The number increases with each successive
group.
– See Figure 9.1
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Business Functions
• One way to divide the organization is based on
business functions.
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–
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Accounting
Finance
Marketing and Sales
Production and Operations Management
Customer Support
Human Resource Management
Information Services
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Business Functions
• Accounting
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Score keeping function.
Records details of company transactions.
Allows organization to keep track of revenue.
Allows organization to keep track of Inventory.
Software to support Accounting Function
• Peachtree and Great Plains (Microsoft)
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Business Functions
• Finance
– Responsible for acquiring and managing the
financial capital (money) for the organization.
– Determines source of capital
• Issue common stock
• Issue bonds
• Re-invest profits
– Typically works close with accounting.
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Business Functions
• Marketing and Sales
– Involves all activities involved with identifying
potential customers and customer preferences.
– Customer Relationship Management
• Data Mining tools are used to track customer
preferences.
– Order processing systems record customer
orders.
– Sales tracking systems monitor sales activities.
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Business Functions
• Production and Operations Management
– Concerned with the acquisition of raw materials
and the conversion of those materials into
finished products.
– Numerous information systems are needed to
keep track of inventories.
– Bar code tags are used to track inventory.
– Radio frequency identification is also used to
track inventory.
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Business Functions
• Customer Support
– Involves answering all customer questions prior
to purchase.
– Involves handling all returns and customer
complaints.
– Customer Relationship Management
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Business Functions
• Human Resource Management
– Responsible for hiring, developing,
administering compensation and training plans,
and terminating employees.
– Systems to submit claims electronically.
– Web-based systems to accept resumes.
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Business Functions
• Information Services
– Responsible for providing the computing and
communications support for the rest of the
organization.
– Acquires computers, networks, and
telecommunications systems.
– Designs and maintains databases.
– Develops or acquires software programs and
applications.
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Business Processes
• Business functions are dependant on the sharing of
data and information.
• The Business cycle
– Starts when marketing delivers a message to a potential
customer.
– Customer places an order.
– Marketing transmits sales information to production.
– Production ships the goods to the customer and
information to accounting.
– Accounting sends the customer a bill.
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Process View of Organization
• An alternative to the functional
organizational structure is the process view
of an organization.
– A process is a clearly defined and structured
series of inputs and outputs.
– Every process has an output.
– A process is a composition of activities for
satisfying a customer need.
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Process View of Organization
• A process view of organizations implies an
emphasis on how work is done.
– Looks at what the organization does.
– A process view of organizations cut across functional
areas.
– A process view differs significantly from the hierarchy
view in terms of authority, and responsibility.
– The process view coordinates the expertise of the
functional areas to meet the common goal of satisfying
the customer.
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I/S to Support Organizational Processes
• Different information systems are required
to support the different functions.
– Lower-levels may use transaction processing
systems.
– Mid-level managers may use decision support
systems.
– Executives may use executive information
systems.
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I/S to Support Organizational Processes
• The term interorganizational system (IOS)
is used to describe a networked system used
by two or more organizations.
– EDI (Electronic Data Interchange)
– XML (Extensible Markup Language)
– ERP (Enterprise Resource Planning) system
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The Virtual Organization
• When members of an organizational team cut
across functional areas using electronic mail and
other similar methods of communication to
achieve the same goal this is known as a virtual
team.
– They exists only in cyber space.
– Members rarely meet face to face.
– Members may be different locations.
• The virtual organization can be viewed as an
extension of the virtual team.
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Cautions on the Use of IT
• Information technology may not be able to sustain
a competitive advantage.
– Regulatory Issues
• SABRE and Apollo
– Bad Timing
• FedEx’s Zapmail
– Waking Sleeping Giant
• Wal-mart
– Cultural Issues
• Short Messaging Service (Popular in Japan)
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Ethical Vulnerabilities
• Ethical vulnerabilities refers to the risks a
company has in collecting, using , and storing
confidential and personal data.
– Competitors may attempt to copy your system.
– Companies buy and sell customer and potential
customer data.
– Companies “profile” customers.
– The right to know versus the right to privacy.
– Efforts to increase efficiency may dehumanize the
workplace.
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Policies on Ethics and Use of IT
• Laws relating to social and ethical issues are
ambiguous and open to interpretation.
• New technologies impact existing laws on
an on-going basis.
• Responsibilities of management.
– Information access
– Information Stewardship (See Table 9.10)
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Analyzing Ethical Dilemmas
Stakeholder analysis
Identify all parties with a stake in
the issue.
Goal-based analysis
Select option that promises
greatest good for greatest number.
Rights-based analysis
Identify data that might violate
rights.
Duty-based analysis
Identify basic ethical duties,
honesty, fairness ect.
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