Chapter 3 Information Systems, Organizations, and Strategy

1) The interaction between information systems and organizations is influenced

A) primarily by the decision making of middle and senior managers.
B) by the development of new information technologies.
C) by many factors, including structure, politics, culture, and environment.
D) by two main microeconomic forces: capital and labor.
E) by management decisions.
Answer: B

2) An organization is a
A) stable, formal social structure that takes resources from the environment and processes them
to produce outputs.
B) formal, legal entity with internal rules and procedures that must abide by laws.
C) a collection of people and other social elements.
D) B and C
E) A, B, and C
Answer: E

3) An organization is seen as a means by which primary production factors are transformed into
outputs consumed by the environment according to the ________ definition of organizations.
A) microeconomic
B) macroeconomic
C) sociotechnical
D) behavioral
E) psychological
Answer: A

4) How does the technical view of organizations fall short of understanding the full impacts of
information systems in a firm?
A) It sees information systems as a way to rearrange the inputs and outputs of the organization.
B) It sees capital and labor as primary production factors.
C) It sees an organization as a collection of rights, privileges, obligations, and responsibilities.
D) It sees the organization as a social structure similar to a machine.
E) It sees the inputs and outputs, labor and capital, as being infinitely malleable.
Answer: E

5) Which of the following is not a major feature of organizations that impacts the use of
information systems?
A) business processes
B) environments
C) goals
D) agency costs
E) leadership styles
Answer: D

6) Business processes are collections of

A) informal practices and behaviors.
B) formalized and documented practices.
C) business rules.
D) rights and privileges.
E) routines.
Answer: E
Page Ref: 116

7) All of the following are considered disruptive technologies except

A) instant messaging.
B) e-mail.
C) Internet telephony.
D) PCs.
E) smartphones.
Answer: A

8) Under Mintzberg's classification of organizational structure, the knowledge-based

organization where goods and services depend on the expertise and knowledge of professionals
falls under the category of
A) entrepreneurial structures.
B) divisionalized bureaucracies.
C) professional bureaucracies.
D) adhocracies.
E) machine bureaucracies.
Answer: C

9) Mintzberg classifies a large bureaucracy existing in a slowly changing environment that

produces standard products and is dominated by centralized management as a ________
bureaucracy.
A) machine
B) professional
C) divisionalized
D) multidivisional
E) ad hoc
Answer: A
Page Ref: 120

10) An example of a divisionalized bureaucracy is a

A) startup firm.
B) university.
C) Fortune 500 firm.
D) midsize manufacturer.
E) consulting firm.
Answer: C

11) Along with capital, ________ is the primary production input that the organization uses to
create products and services.
A) structure
B) culture
C) politics
D) natural resources
E) labor
Answer: E

12) The divergent viewpoints about how resources, rewards, and punishments should be
distributed, and the struggles resulting from these differences are known as
A) culture.
B) politics.
C) structure.
D) viewpoints.
E) variance.
Answer: B

13) ________ technologies radically change the business landscape and environment.
A) Explosive
B) Inventive
C) Disruptive
D) Subversive
E) Divisive
Answer: C

14) Some organizations lack bedrock, unassailable assumptions that define their goals and
products.
Answer: FALSE

15) A professional bureaucracy is a knowledge-based organization where goods and services

depend on the expertise and knowledge of professionals.
Answer: TRUE

16) Routines are also called standard operating procedures.

Answer: TRUE

18) When a firm buys on the marketplace what it cannot make itself, the costs incurred are
referred to as
A) switching costs.
B) network costs.
C) procurement.
D) agency costs.
E) transaction costs.
Answer: E

19) All of the following statements are true about information technology's impact on business
firms except
A) it helps firms expand in size.
B) it helps firms lower the cost of market participation.
C) it helps reduce internal management costs.
D) it helps reduce transaction costs.
E) it helps reduce agency costs.
Answer: A
Page Ref: 121-122
Difficulty: Moderate
AACSB: Information technology
CASE: Content
LO: 3.2: What is the impact of information systems on organizations?

20) According to agency theory, the firm is viewed as a(n)

A) unified, profit-maximizing entity.
B) task force organization that must respond to rapidly changing environments.
C) entrepreneurial endeavor.
D) "nexus of contracts" among self-interested individuals.
E) entrepreneurial structure.
Answer: D

21) According to research on organizational resistance, the four components that must be
changed in an organization in order to successfully implement a new information system are
A) environment, organization, structure, and tasks.
B) technology, people, culture, and structure.
C) organization, culture, management, and environment.
D) tasks, technology, people, and structure.
E) costs, tasks, structure, and management.
Answer: D

22) Information systems technology can be viewed as a factor of production that can be
substituted for traditional capital and labor from the point of view of economics.
Answer: TRUE

24) As discussed in the chapter opening case, which of the four generic strategies did T.J. Maxx
employ to combat the competition offered by Target, Kohls, Walmart, Macy's and pure online
stores likeRue LaLa and Gilt Groupe?
A) market niche focus
B) customer and supplier intimacy
C) network-based strategy
D) product synergies
E) efficient customer response
Answer: A

25) Which model is used to describe the interaction of external forces that affect an
organization's strategy and ability to compete?
A) network economics model
B) competitive forces model
C) competitive advantage model
D) demand control model
E) agency costs model
Answer: B
26) Which of the following industries has a low barrier to entry?
A) automotive
B) computer chip
C) national retailer
D) airline
E) restaurant
Answer: E

27) All of the following are competitive forces except

A) suppliers.
B) new market entrants.
C) external environment.
D) customers.
E) substitute products.
Answer: C

28) A manufacturer of deep-sea oil rigs may be least concerned about this marketplace force.
A) product differentiation
B) traditional competitors
C) low number of suppliers
D) new market entrants
E) low number of customers
Answer: D

29) A substitute product of most concern for a cable TV distributor is

A) satellite TV.
B) broadcast TV.
C) satellite radio.
D) the Internet.
E) terrestrial radio.
Answer: A

30) Walmart's attempts to increase its online presence is an example of a firm using information
systems to
A) strengthen ties to its customers.
B) simplify the industry value chain.
C) develop synergies.
D) focus on market niche.
E) achieve low-cost leadership.
Answer: E

31) A firm can exercise greater control over its suppliers by having
A) more suppliers.
B) fewer suppliers.
C) global suppliers.
D) local suppliers.
E) regional suppliers.
Answer: A
32) Amazon's use of the Internet as a platform to sell books more efficiently than traditional
bookstores illustrates a use of information services for
A) low-cost leadership.
B) marketing effectiveness.
C) focusing on market niche.
D) strengthening supplier intimacy.
E) developing synergies.
Answer: A

33) The four major competitive strategies are

A) low-cost leadership, substitute products and services, customers; and suppliers.
B) low-cost leadership, product differentiation, focus on market niche, and customer and supplier
intimacy.
C) new market entrants, substitute products and services, customers, and suppliers.
D) low-cost leadership, new market entrants, product differentiation, and focus on market niche.
E) customers, suppliers, new market entrants, and substitute products.
Answer: B

34) Walmart's continuous replenishment system allows it to

A) provide mass customization.
B) differentiate products.
C) strengthen customer intimacy.
D) achieve economy of scale.
E) achieve low-cost leadership.
Answer: E

35) Firms use a ________ strategy to provide a specialized product or service for a narrow target
market better than competitors.
A) product differentiation
B) market niche
C) mass customization
D) process efficiency
E) low-cost leadership
Answer: B

36) The ability to offer individually tailored products or services using the same production
resources as bulk production is known as
A) customized response.
B) size customization.
C) magnitude customization.
D) dimension customization.
E) mass customization.
Answer: E

37) In environmental scanning, a firm may use information systems to

A) utilize sensors that track products through the value chain.
B) analyze external Internet traffic to its Web sites.
C) identify external events that may affect it.
D) understand its carbon footprint and energy impacts on the environment.
E) develop a unified organizational culture.
Answer: C

38) Nike's forays into information technology represent an effort to

A) maintain low-cost leadership.
B) focus on market niche.
C) strengthen customer and supplier intimacy.
D) perform intensive customer data analysis.
E) achieve product differentiation.
Answer: E

39) Which of the following best illustrates the use of information systems to focus on market
niche?
A) A car manufacturer's Web site that lets you customize the features on the car you are
purchasing.
B) A restaurant chain analyzing local sales figures to determine which menu items to serve.
C) A bookseller selling an e-book reader that reads only the bookseller's books.
D) A department store creating specialized products for preferred customers.
E) A clothes manufacturer expanding its offerings to new styles.
Answer: D

40) All of the following are IT-enabled products and services providing competitive advantage
except
A) Amazon's one-click shopping.
B) Apple's iPod and iTunes.
C) Ping's golf club customization.
D) PayPal's online person-to-person payment system.
E) Walmart's RetailLink system.
Answer: E

the bargaining power of customers by

A) creating new opportunities for building loyal customer bases.
B) making more products available.
C) making information available to everyone.
D) lowering transaction costs.
E) enabling the development of new services.
Answer: C

42) All of the following industries have been disrupted by the Internet except
A) encyclopedias.
B) newspapers.
C) music.
D) air travel.
E) clothing.
Answer: E
43) A competitive force challenging the publishing industry is
A) positioning and rivalry among competitors.
B) low cost of entry.
C) substitute products or services.
D) customers' bargaining power.
E) suppliers' bargaining power.
Answer: C

44) The value chain model

A) categorizes five related advantages for adding value to a firm's products or services.
B) sees the supply chain as the primary activity for adding value.
C) categorizes four basic strategies a firm can use to enhance its value chain.
D) highlights specific activities in the business where competitive strategies can best be applied.
E) enables more effective product differentiation.
Answer: D

45) Which of the following represent the primary activities of a firm?

A) inbound logistics, operations, outbound logistics, sales and marketing, and service
B) inbound logistics, operations, outbound logistics, technology, and service
C) procurement, inbound logistics, operations, technology, and outbound logistics
D) procurement, operations, technology, sales and marketing, and services
E) organization infrastructure, human resources, technology, and procurement
Answer: A

46) Which of the following is one of the support activities in a firm's value chain?
A) inbound logistics
B) operations
C) sales and marketing
D) service
E) technology
Answer: E

47) An activity businesses perform to measure and compare business processes to similar
processes of other companies within their industry is
A) benchmarking.
B) best practices.
C) value chain analysis.
D) strategic systems analysis.
E) secondary activities.
Answer: A

48) What are the most successful solutions or methods for achieving a business objective?
A) value activities
B) best processes
C) core competencies
D) best practices
E) benchmarks
Answer: D
49) How are information systems used at the industry level to achieve strategic advantage?
A) by building industry-wide, IT-supported consortia and symposia
B) by raising the bargaining power of suppliers
C) by encouraging the entry of new competitors
D) by enforcing standards that reduce the differences between competitors
E) by decreasing switching costs
Answer: A

50) A collection of independent firms that use information technology to coordinate their value
chains to produce a product or service for a market collectively is called a(n)
A) industry value chain.
B) business ecosystem.
C) value web.
D) consortia.
E) synergy chain.
Answer: C

51) When two organizations pool markets and expertise that result in lower costs and generate
profits, it is referred to as creating
A) a value web.
B) a value chain.
C) net marketplaces.
D) core competencies.
E) synergies.
Answer: E

52) An example of synergy in business is

A) Amazon's use of the Internet to sell books.
B) Bank of America acquiring Countrywide Financial to reach a large pool of new customers.
C) Blockbuster combining traditional video rental with online video rental.
D) Walmart's order entry and inventory management system to coordinate with suppliers.
E) Nike's use of technology to improve its product offerings.
Answer: B

53) How do information systems enhance core competencies?

A) by providing better reporting facilities
B) by creating educational opportunities for management
C) by allowing operational employees to interact with management
D) by encouraging the sharing of knowledge across business units
E) by fostering synergies among departments
Answer: D

54) 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 output. This is referred
to as
A) the point of no return.
B) the law of diminishing returns.
C) supply and demand.
D) network inelasticity.
E) the invisible hand.
Answer: B

55) Network economics

A) applies the law of diminishing returns to communities of users.
B) applies traditional economics to networked users.
C) sees the cost of adding new members as inconsequential.
D) balances the high cost of adding new members to a community against the lower cost of using
network infrastructure.
E) uses networks to link people, assets, and ideas.
Answer: C

56) A virtual company

A) uses networks to link people, assets, and ideas.
B) uses Internet technology to maintain a virtual storefront.
C) uses Internet technology to maintain a networked community of users.
D) provides entirely Internet-driven services, or virtual products.
E) is limited by traditional organizational boundaries.
Answer: A

57) An example of a keystone firm within a business ecosystem is

A) Apple and software application writers in the mobile platform ecosystem.
B) GUESS and the fashion ecosystem.
C) Citibank and the ATM ecosystem.
D) American Airlines and the computerized reservation ecosystem.
E) Nike and the athletic apparel ecosystem.
Answer: A

58) ________ is a competitive strategy for creating brand loyalty by developing new and unique
products and services that are not easily duplicated by competitors.
A) Product differentiation
B) Low-cost leadership
C) Customer efficiency
D) Mass customization
E) Switching cost
Answer: A

59) The expenses incurred by a customer or company in lost time and resources when changing
from one supplier or system to a competing supplier or system are known as
A) retention costs.
B) preservation costs.
C) differentiation costs.
D) switching costs.
E) variation costs.
Answer: D
60) The ________ model highlights the primary or support activities that add a margin of value
to a firm's products or services where information systems can best be applied to achieve a
competitive advantage.
A) competitive forces
B) value chain
C) bargaining power
D) new entrant
E) rivalry
Answer: B

61) The parts of an organization's infrastructure, human resources, technology, and procurement
that make the delivery of the firm's products or services possible are known as ________
activities.
A) primary
B) auxiliary
C) secondary
D) service
E) support
Answer: E

62) A(n) ________ is a collection of independent firms that use information technology to
coordinate their value chains to collectively produce a product or service for a market.
A) value chain
B) support web
C) value web
D) consortium
E) firm network
Answer: C

63) A(n) ________ is an activity at which a firm excels as a world-class leader.

A) expertise area
B) competitive advantage
C) growth driver
D) efficiency
E) core competency
Answer: E

64) A company's competitive advantages ultimately translate into higher stock market valuations
than its competitors.
Answer: TRUE

65) The competitive forces model cannot be used to analyze modern digital firms which face
new competitive forces that are not true of traditional firms.
Answer: FALSE

66) Customers are one of the competitive forces that affect an organization's ability to compete.
Answer: TRUE
67) High product differentiation is a sign of a transparent marketplace.
Answer: FALSE

68) The effect of the Internet has been to decrease the bargaining power of customers.
Answer: FALSE

69) An efficient customer response system directly links consumer behavior to distribution and
production and supply chains.
Answer: TRUE

70) Information systems are used to enable new products and services via product differentiation.
Answer: TRUE

71) Mass customization offers individually tailored products or services using the same resources
as mass production.
Answer: TRUE

72) Switching costs increase when customers are strongly linked to products and platforms.
Answer: TRUE

73) The value chain model classifies all company activities as primary activities.
Answer: FALSE

74) In the value chain model, support activities are most directly related to the production and
distribution of the firm's products and services, which create value for the customer.
Answer: FALSE

75) 'Synergies' occur when the output of some units in a firm can be used as inputs to other units,
lowering cost and generating profits.
Answer: TRUE

76) In a demonstration of network economics, the more people that use eBay's site, the greater
the value of the site.
Answer: TRUE

77) The term business ecosystem describes the loosely coupled but interdependent networks of
suppliers, distributors, outsourcing firms, transportation service firms, and technology
manufacturers.
Answer: TRUE

85) Why does Amazon.com need to worry about competitors in online shopping?
A) E-commerce is affected by the law of diminishing returns.
B) Internet technologies are universal, and therefore usable by all companies.
C) Internet shopping produces cost transparency.
D) The Internet enables the production or sales of substitute products or services.
E) The Internet increases switching costs.
Answer: B
86) You are consulting for a cosmetics distributor who is interested in determining the benefits it
could achieve from implementing new information systems. What will you advise as the first
step?
A) Identify the business ecosystem the distributor is in.
B) Implement a strategic transition to the new system.
C) Perform a strategic systems analysis.
D) Benchmark existing systems.
E) Set up a strategic transition.
Answer: C

87) Sociotechnical changes affecting a firm adopting new information systems requiring
organizational change can be considered
A) organizational adjustments.
B) strategic transitions.
C) systems alterations.
D) business goal transitions.
E) sociotechnical transitions.
Answer: B

88) Research has shown that a majority of firms are able to align their information technology
with their business goals.
Answer: FALSE

89) The use of Internet technologies allows companies to more easily sustain competitive
advantage.
Answer: FALSE