Chapter 3 Information Systems, Organizations, and Strategy

Management Information System (Nanjing University of Information Science and

Technology)

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 Management Information Systems: Managing the
Digital Firm, 15e(Laudon)
Chapter 3 Information Systems, Organizations, and
Strategy

1) The interaction between information technology and organizations is influenced:

A) solely 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 macroeconomic forces: capital and labor.
E) by the rate of growth of the organization.

2) Which of the following statements about organizations is not true?

A) An organization is a stable, formal social structure that takes resources from the environment
and processes them to produce outputs.
B) An organization is a formal, legal entity with internal rules and procedures that must abide by laws.
C) An organization is a collection of people and other social elements.
D) An informal group can be considered to be an organization.
E) An organization is a collection of rights, privileges, obligations, and responsibilities
delicately balanced over a period of time through conflict and conflict resolution.

3) According to the definition of organizations, an organization is seen as a means by

which capital and labor are transformed by the organization into outputs to the environment.

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A) microeconomic C) sociotechnical E) psychological
B) macroeconomic D) behavioral

4) Which of the following statements about the technical view of organizations is not true?
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 emphasizes group relationships, values and structures.
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.

5) Which of the following is not a major feature of organizations that impacts the use of
information systems?
A) Business processes C) Goals E) Leadership styles
B) Environments D) Agency costs

6) Which of the following statements about business processes is not true?

A) Business processes influence the relationship between an organization and information technology.
B) Business processes are a collection of standard operating procedures.
C) A business firm is a collection of business processes.
D) Business processes are usually ensconced in an organization's culture.
E) Business processes are typically unaffected by changes in information systems.

7) Which of the following technologies disrupted the traditional publishing industry?

A) Instant messaging C) Internet telephony E) World Wide Web
B) e-mail D) PCs

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

fall under the category of:
A) entrepreneurial structures. C) professional bureaucracies. E) machine bureaucracies.
B) divisionalized bureaucracies. D) adhocracies.

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 C) divisionalized E) ad hoc
B) professional D) multidivisional

10) Which of the following is an example of a divisionalized bureaucracy?

A) Startup firm C) Fortune 500 firm E) Consulting firm
B) University D) Midsize manufacturer

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

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

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D) environments. E) routines.

13) Which of the following statements about disruptive technologies is not true?
A) Disruptive technologies radically change the business landscape and environment.
B) Disruptive technologies may be substitute products that perform better than other products
currently being produced.
C) Disruptive technologies may sometimes simply extend the marketplace.
D) Disruptive technologies may put entire industries out of business.
E) Firms that invent disruptive technologies as first movers always become market leaders.

14) As discussed in the chapter opening case, which of the following statements about Verizon is
not true?
A) Verizon is focusing on satellite-based television in its competition with AT&T.
B) Verizon claims that its wireless network is the largest and most reliable in the United States.
C) Verizon is investing in upgrading its high-speed networks.
D) Verizon sees mobile ads and video as an investment for the future.
E) Verizon offers a standalone video service.

15) All organizations have bedrock, unquestioned assumptions that define their goals and products.
(TRUE)

16) A professional bureaucracy is a knowledge-based organization where goods and services depend
on the expertise and knowledge of professionals. (TRUE)

17) Routines are also called standard operating procedures. (TRUE)

18) How are the technical and behavioral definitions of an organization

different? ANSWER:
The behavioral definition of an organization is that it is a collection of
rights, privileges, obligations, and responsibilities that is
delicately balanced over a period of time through conflict and
conflict resolution. The technical definition sees an organization as
an entity that takes inputs from the environment and processes
these to create products that are then consumed by the
environment. The technical view sees capital and labor as
interchangeable units, with the ability to rearrange these units at
will, whereas the behavioral view sees that rearranging some
aspects of the organization, such as an information system, will
have important consequences and changes for the organization's
other units.

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

20) 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.
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C) it helps reduce internal management costs.

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 D) it helps reduce transaction costs.
E) it helps reduce agency costs.

21) 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.

22) 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.

23) List three organizational factors that can prevent a firm in fully realizing the benefits of a
new information system, and provide examples for each.
ANSWER:
1. Culture: All organizations have a foundation of unquestioned
assumptions that define their goals and products. These
assumptions include what products should be produced, how they
should be produced, where and for whom they should be produced.
Sharing the same cultural assumptions, agreement on other
matters is more likely. Any changes that threaten or undermine
these assumptions will most likely be met with resistance. For
example, if a company stops paying overtime at time and a half,
employees might feel undervalued and be less willing to work
extra hours.
2. Politics: People in an organization occupy different positions
with different specialties, concerns, and perspectives. This means
that they naturally have opposing views about how resources,
rewards, and punishments should be distributed. This results in
political struggles for resources, competition, and conflict within
every organization.
3. Environments: Organizations reside in environments which
they draw resources and to which they supply goods and services.
Organization and environments have a reciprocal relationship,
meaning that organizations are depended on the social and
physical environment and organizations can influence their
environment. For example, business firms form alliances with other
businesses to influence the political process (they advertise to
influence customer acceptance of their products.)

24) What is agency theory? How does information technology enable a firm to reduce agency
costs? ANSWER:
Agency theory - economic theory that views the firm as a nexus
of contracts among self-interested individuals who must be
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supervised and managed Information technology reduces the
costs of acquiring and analyzing information, which allows
organizations to reduces agency costs because it becomes easier
for

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managers to oversee a greater number of employees. This,
overall, lowers agency costs. In the long run, firms should have
fewer middle managers and higher revenue per employee, if
they've invested in IT.

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 C) Competitive advantage model E) Agency costs model
B) Competitive forces model D) Demand control model

26) Which of the following industries has the lowest barrier to entry?
A) Automotive C) Solar energy E) Small retailer
B) Computer chip D) Airline

27) All of the following are competitive forces in Porter's model except:
A) suppliers. C) external environment. E) substitute products.
B) new market entrants. D) customers.

28) Which of the following marketplace forces would be of least concern to a manufacturer of deep-
sea oil rigs?
A) Product differentiation D) New market entrants
B) Traditional competitors E) Low number of customers
C) Low number of suppliers

29) Which of the following substitute products would be of most concern for a cable TV distributor?
A) Satellite TV C) Satellite radio E) Terrestrial radio
B) Broadcast TV D) The Internet

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

31) A firm can exercise greater control over its suppliers by having:
A) more suppliers. C) global suppliers. E) only a single supplier.
B) fewer suppliers. D) local suppliers.

32) Amazon's use of the Internet as a platform to sell books more efficiently than traditional
bookstores illustrates which of the following strategies?
A) Low-cost leadership D) Strengthening supplier intimacy
B) Marketing effectiveness E) Developing synergies
C) Focusing on market niche

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.
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D) low-cost leadership, new market entrants, product differentiation, and focus on market niche.
E) customers, suppliers, new market entrants, and substitute products.

34) Walmart's continuous replenishment system allows it to do all of the following except:
A) provide mass customization.
B) transmit orders to restock directly to its suppliers.
C) keep costs low.
D) better meet customer demands.
E) fine-tune merchandise availability.

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

36) The ability to offer individually tailored products or services using the same production resources
as bulk production is known as:
A) mass marketing. C) micro customization. E) mass customization.
B) micromarketing. D) niche customization.

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

A) transform inputs into products and services.
B) analyze the performance of its intranet.
C) identify external events that may affect it.
D) keep track of the temperature within its data centers.
E) develop a unified organizational culture.

38) Which of the following is not a true statement about value webs?
A) Value webs involve a collection of independent firms that use information technology to
coordinate their value chains.
B) Value webs are more customer-driven than traditional value chains.
C) Value webs operate in a less linear fashion than traditional value chains.
D) Value webs are inflexible and cannot adapt quickly to changes in supply and demand.
E) Value webs involve highly synchronized industry value chains.

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.

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) Nike's use of celebrities to market their products.

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41) The Internet increases 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.

42) Procter and Gamble uses InnovationNet for which of the following?
A) To enhance its core competencies
B) To benchmark its progress against competitors
C) To create synergies with its suppliers
D) To take advantage of network economics
E) To establish a virtual company

43) Which of the following is a competitive force challenging the publishing industry?
A) Positioning and rivalry among competitors D) Customers' bargaining power
B) Low cost of entry E) Suppliers' bargaining power
C) Substitute products or services

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.

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

46) Which of the following is a support activity in a firm's value chain?

A) Inbound logistics C) Sales and marketing E) Technology
B) Operations D) Service

47) Which of the following would a company employ to measure and compare its business processes
to similar processes of other companies within their industry?
A) Benchmarking C) Value chain analysis E) Secondary activities
B) Best practices D) Strategic systems analysis

48) The most successful solutions or methods for achieving a business objective are called:
A) value activities. C) core competencies. E) benchmarks.
B) best processes. D) best practices.

49) Information systems can be used at the industry level to achieve strategic advantage by:

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A) building industrywide, IT-supported consortia and symposia.
B) raising the bargaining power of suppliers.
C) encouraging the entry of new competitors.
D) enforcing standards that reduce the differences between competitors.
E) decreasing switching costs.

50) In network economics, the value of a commercial software vendor's software products:
A) increases as more people use them.
B) decreases as more people use them.
C) increases due to higher marginal gain in output.
D) decreases according to the law of diminishing returns.
E) is unrelated to the number of people that use them.

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

52) Which of the following is an example of synergy in business?

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

53) Information systems enhance core competencies by:

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

54) The idea that 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, is referred
to as:
A) the point of no return. D) network inelasticity.
B) the law of diminishing returns. E) virtual economics.
C) supply and demand.

55) Which of the following statements about network economics is not true?
A) Uber is an example of a business model that is based on the principle of network economics.
B) The law of diminishing returns does not always apply to every situation.
C) From a network economics perspective, the value of a community of people grows as the number
of participants in the community increases.
D) Information technology can be strategically useful from a network economics perspective.
E) In network economics, the marginal cost of adding new members to the network is higher
than the marginal gain.

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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.

57) Which of the following is an example of a keystone firm within a business ecosystem?
A) Apple 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

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 D) Strengthening customer intimacy
B) Low-cost leadership E) Strengthening supplier intimacy
C) Focusing on market niche

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. C) differentiation costs. E) variation costs.
B) preservation costs. D) switching costs.

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 C) bargaining power E) rivalry
B) value chain D) new entrant

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 C) secondary E) support
B) auxiliary D) service

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 C) value web E) net marketplace
B) support web D) consortium

63) A(n) is an activity for which a firm is a world-class leader.

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

64) Why does Amazon need to worry about competitors in online shopping?
A) E-commerce is affected by the law of diminishing returns.

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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.

65) Smart products are an example of the Internet of Things. (TRUE)

66) A company's competitive advantages ultimately translate into higher stock market valuations
than its competitors. (TRUE)

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

68) Customers are one of the competitive forces that affect an organization's ability to compete.
(TRUE)

69) High product differentiation is a sign of a transparent marketplace. (FALSE)

70) The effect of the Internet has been to decrease the bargaining power of customers. (FALSE)

71) An efficient customer response system directly links consumer behavior to distribution
and production and supply chains. (TRUE)

72) Information systems are used to enable new products and services via product differentiation. (TRUE)

73) Mass customization offers individually tailored products or services using the same resources
as mass production. (TRUE)

74) Switching costs decrease when customers are strongly linked to products and platforms. (FALSE)

75) The value chain model classifies all company activities as either primary or support activities.
(TRUE)

76) 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.
(FALSE)

77) When the output of some units in a firm can be used as inputs to other units, synergies
develop, which can lower costs and generate profits. (TRUE)

78) According to the network economics perspective, the more people offering products on eBay's
site, the greater the value of the site to all who use it. (TRUE)

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

80) A firm can be said to have competitive advantage when it has access to resources that others do not.
(TRUE)

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 81) The law of diminishing returns only applies to digital products. (FALSE)

82) The inventors of a disruptive technology typically benefit the most from the technology; it is
rare that fast followers catch up quickly. (FALSE)

83) Smart products generally raise switching costs. (TRUE)

84) Mintzberg's classification identifies five forces in an industry's environment that affect the
strategic position of a firm. (FALSE)

85) You are advising the owner of ABC Computers, a small local computer shop that repairs and also
builds custom computers to order. What competitive strategies could ABC Computers employ?
Which ones may it have difficulty executing?
ANSWER:
Low-cost leadership: ABC Computers may have difficulty competing
against the computer sales and warranty services of major national
computer manufacturers, such as Dell, but may be able to implement
low-cost leadership in comparison to any other local computer stores.
Product differentiation: Although many national computer
manufacturers sell customized computers for individuals, ABC
Computers may be able to differentiate its product by using superior
components and adding more services to its product.
Focus on market niche: ABC Computers could focus on a being a local
store with in- store technology support and assistance as a market
niche.
Customer and supplier intimacy: ABC Computers has an
advantage in customer intimacy, in that it can develop relationships
with local customers on a face-to-face basis. This advantage could be
augmented to offset the low-cost leadership of national
manufacturers, such as Dell. Because of much smaller production
scales, ABC Computers will probably not be able to exercise as much
control over suppliers as does Dell or other manufacturers.

86) You are consulting with the owner of Better Fitness, a national chain of gyms. What
strategies might Better Fitness use in applying information services to achieve a competitive
advantage? ANSWER:
Better Fitness could use computers, smart products and mobile apps
to monitor and evaluate health and fitness of members and customize
workouts in product differentiation strategy. They could use
information systems for sales and marketing data research in order to
define a niche market that would bring greater profits. They could
allow customers to review their health data and add additional
information or view statistics to create customer intimacy. If the
individual gyms are franchises, then a network could be used for
franchisees to share data and research new sales tactics, etc.

87) The text describes Michael Porter's view of the Internet as somewhat negative. What negative
influences does Porter see? Describe several positive influences the Internet has on business. Do
these outweigh the negative influences?
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ANSWER:
Porter sees the Internet as creating ever more intense rivalry, through
allowing new

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competitors to enter the market, and forcing competition on price
alone, raising the bargaining power of customers, and dampening
profits.
Positive influences of the Internet would be lowering
telecommunications costs, creating new opportunities for building
brands and loyal customer bases, lowering costs of globalization. You
could also view Porter's negative take on lowering the barrier to entry
as a positive for new companies.
The Internet's influence being negative or positive depends in part on
the point of view from which the influence is being seen. For example,
a telephone utility is impacted negatively by the emergence of
Internet telephony, whereas other industries may be impacted
positively either through the use of this technology or through
engaging in Internet telephony as a business.

88) Value chain analysis is useful at the business level to highlight specific activities in the business
where information systems are most likely to have a strategic impact. Discuss this model, identify
the activities, and describe how the model can be applied to the concept of information technology.
ANSWER:
The value chain model identifies specific, critical leverage points
where a firm can use information technology most effectively to
enhance its competitive positions. Exactly where can it obtain the
greatest benefit from strategic information systems? What specific
activities can be used to create new products and services, enhance
market penetration, lock in customers and suppliers, and lower
operational costs? This model views the firm as a series or chain of
basic activities that add a margin of value to a firm's products or
services. These activities can be categorized as either primary
activities or support activities.

Primary activities are most directly related to the production and

distribution of the firm's products and services that create value for
the customer. Primary activities include: inbound logistics, operations,
outbound logistics, sales and marketing, and service.
Support activities make the delivery of the primary activities possible
and consist of: organization infrastructure (administration and
management), human resources (employee recruiting, hiring, and
training), technology (improving products and the production
process), and procurement (purchasing input).

89) How is the concept of core competency relevant to ABC Computers, a local computer store
that repairs and builds custom computers? Give examples.
ANSWER:
A core competency is an activity for which a company is a world
leader, and from this perspective, ABC Computers does not have a
core competency, as there are thousands of similar firms with longer
track records. However, it might be good business practice for ABC
Computers to define its core competencies in ways that differentiate
its products from those of competitors and enable it to provide

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superior service or products. In defining a core competency, the
business management can then determine ways to enable employees
to understand and reach higher levels of quality production and
service. For example, ABC Computers might define a core competency
as being able to advise customers as to the types of system they really
need, and ABC Computers could engage in knowledge gathering
activities to help employees assess customer need.

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90) How is Internet technology useful from a network economics perspective? Give
examples. ANSWER:
A core competency is an activity for which a company is a world
leader, and from this perspective, ABC Computers does not have a
core competency, as there are thousands of similar firms with longer
track records. However, it might be good business practice for ABC
Computers to define its core competencies in ways that differentiate
its products from those of competitors and enable it to provide
superior service or products. In defining a core competency, the
business management can then determine ways to enable employees
to understand and reach higher levels of quality production and
service. For example, ABC Computers might define a core competency
as being able to advise customers as to the types of system they really
need, and ABC Computers could engage in knowledge gathering
activities to help employees assess customer need.

91) Define and describe a business ecosystem. Give an example of a business

ecosystem. ANSWER:
A business ecosystem is a collection of loosely coupled but
interdependent industries (suppliers, distributors, technology
manufacturers, etc.) that provides related services and products. It is
similar to a value web, except that cooperation takes place across
many industries rather than many firms.
Business ecosystems can be characterized as having one or a few
keystone firms that dominate the ecosystem and create the platforms
used by other niche firms. Keystone firms in the Microsoft ecosystem
include Microsoft and technology producers such as Intel and IBM.
Niche firms include thousands of software application firms, software
developers, service firms, networking firms, and consulting firms that
both support and rely on the Microsoft products.
Another example of a business ecosystem is the mobile Internet
platform. In this ecosystem there are four industries: device makers
(Apple iPhone, Samsung, Motorola, LG, and others), wireless
telecommunication firms (AT&T, Verizon, T-Mobile, Sprint, and
others), independent software applications providers (generally small
firms selling games, applications, and ring tones), and Internet
service providers (who participate as providers of Internet service to
the mobile platform).

92) Select a popular product or company that you are familiar with, such as Apple's iPad. Apply
Porter's competitive forces model to that product and/or company. Which of the four generic strategies
is the company using?
ANSWER:
Competitors to the iPad include the Microsoft Surface and many
others, but few as widely known.
New market entrants: There is not a huge barrier to entry in this field;
many other technology companies offer tablet computers.
Substitute products and services: Smartphones are a substitute

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product or service.
Customers: The iPad still has the highest brand recognition among
consumers, diminishing the bargaining power of customers.
However, this advantage has diminished as other similar products
that are as well designed enter the marketplace. In terms of the iPad,
Apple seems to be focused on product differentiation by creating

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a product with unique features and capabilities.

93) Why are disruptive technologies "tricky"? Provide examples.

ANSWER:
Disruptive technologies can be tricky because firms that invent
disruptive technologies as first movers do not always benefit if they
lack the resources to exploit the technology or fail to see the
opportunity. For example, the MITS Altair 8800 is widely regarded as
the first PC, but its inventors did not take advantage of their first-
mover status. Second movers, so-called fast followers such as IBM and
Microsoft, reaped the rewards. Citibank's ATMs revolutionized retail
banking, but other banks copied them. Now all banks use ATMs, and
the benefits go mostly to the consumers.

94) Why has the Internet made competitive rivalry more intense?
ANSWER:
The Internet has made competitive rivalry more intense because
Internet technology is based on universal standards that any
company can use, making it easier for rivals to compete on price
alone and for new competitors to enter the market. Because
information is available to everyone, the Internet also raises the
bargaining power of customers, who can quickly find the lowest-cost
provider on the web, which may dampen profits. The Internet also
widens the geographic market, increasing the number of competitors
and reducing differences among competitors, and makes it more
difficult to sustain operational advantages.

95) You are consulting for a natural food products 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

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

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

98) The use of Internet technologies allows companies to more easily sustain competitive advantage.
(FALSE)

99) What are the major factors to consider when performing a strategic systems
analysis? ANSWER:
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One major factor is the structure of the industry the firm is in. For
example, what competitive forces are at work in the industry, and what
is the basis for competition?

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What is the nature and direction of change in the industry, and how
does the industry use IT?

A second major factor is determining the firm and industry value

chains. For example, how is the company creating value for the
customer? Are best practices being used and core competencies
leveraged? Is the industry supply chain or customer base changing,
and what will the effect be? Can the firm benefit from strategic
partnerships or value webs? And where in the value chain will
information systems provide the greatest value to the firm?

The third major factor to consider is has the firm aligned IT with its
business strategy and goals. Have these goals been correctly stated or
defined? Is IT improving the right business processes and activities in
accordance with the firm's goals? Are we using the right metrics to
measure progress?

100) Research has shown that the more successfully a firm can align its IT with its business goals,
the more profitable it will be. What practical steps should a firm use in aligning IT with its goals?
ANSWER:
Steps to align IT with your organization's goals include: identifying
your business strategy and goals and breaking these goals into
concrete activities and processes; identifying how you measure
progress toward these goals; determining how IT can help achieve
these goals and improve business processes and activities; and
measuring the actual performance of the business.

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