TestBank_Ch03

TestBank_Ch03
TestBank_Ch03

Management Information Systems Test Bank

Chapter 3 Information Systems, Organizations, and Strategy

1 True-False Questions

1) The technical and behavioral definitions of organizations are contradictory.

Answer: FALSE

2) From the point of view of economics, information systems technology can be viewed as a factor of production that can be substituted for traditional capital and labor.

Answer: TRUE

3) A firm can be said to have competitive advantage when they have higher stock market valuations than their competitors.

Answer: TRUE

4 Customers are one of the competitive forces that affect an organization's ability to compete. Answer: TRUE

5) Organizational culture restrains political conflict and promotes common understanding, agreement on procedures, and common practices.

Answer: TRUE

6) Strong linkages to customers and suppliers decrease switching costs.

Answer: FALSE

7) Research on project implementation failures demonstrates that the most common reason for failure of large projects to reach their objectives is organizational and political resistance to change.

Answer: TRUE

8) In the strategy of product differentiation, information systems are used to enable new products and services.

Answer: TRUE

9) Customers are one of the competitive forc es that affect an organization’s ability to compete. Answer: TRUE

10) In the value chain model, primary activities are most directly related to the production and distribution of the firm's products and services that create value for the customer.

Answer: TRUE

11) The value chain model classifies all company activities as either primary or support. Answer: TRUE

12) In virtual organizations, work is tied to geographic location.

Answer: FALSE

13) The law of diminishing returns always applies to digital, as well as traditional companies. Answer: FALSE

14) The term business ecosystem describes the interplay between the various organizational forces within a firm.

Answer: FALSE

15) The use of Internet technologies allows companies to more easily sustain competitive advantage.

Answer: FALSE

2 Multiple-Choice Questions

1) A stable, formal social structure that takes resources from the environment and processes them to produce outputs is called a(n):

A) micro system. B) organization.

C) bureaucracy. D) value chain.

Answer: D

2) The interaction between information systems and organizations is

A) primarily guided by the decision making of middle- and senior-managers.

B) a complex, two-way relationship mediated by factors such as the environment and organizational structure.

C) driven by the microeconomic forces of capital and labor.

D) successfully managed when the organization's existing culture and goals are seen as the driving force.

Answer: B

3) 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) collection of social elements.

D) a, b, and c

Answer: D

4) According to the ________ definition of organizations, an organization is seen as a means by which primary production factors are transformed into outputs consumed by the environment. A) microeconomic B) macroeconomic

C) sociotechnical D) behavioral

Answer: A

5) The greatest difficulty of bringing about organizational change – especially the development of new information systems is:

A) computerizing manual systems. B) recruiting qualified employees.

C) political resistance. D)perceiving environmental change.

Answer: C

6) Fundamental assumptions about what products the organization should produce, how it should produce them, where, and for whom is known as:

A) motivational factors. B) organizational culture.

C) business processes. D) standard operating procedures.

Answer: B

7) Routines for producing goods and services are sometimes called:

A) bureaucratic structures. B) standard operating procedures.

C) routine tasks. D) formal structures.

Answer: D

8) All of the following are major features of organizations that impact the use of information systems EXCEPT for

A) business processes. B) environments.

C) goals. D) agency costs.

Answer: D

9) Business processes are collections of

A) informal practices and behaviors. B) formalized and documented practices.

C) routines. D) rights and privileges.

Answer: C

10) The costs incurred when a firm buys on the marketplace what it cannot make itself are referred to as:

A) switching costs. B) transaction costs.

C) procurement. D) agency costs.

Answer: B

11) The ability to offer individually tailored products or services using the same production resources as bulk production referred to as:

A) Mass customization B) Size customization

C) Magnitude customization D) Dimension customization

Answer: A

12) Which of the following statements is NOT true about information technology's impacts on business firms?

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.

Answer: A

13) 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.

Answer: D

14) According to Leavitt's model of 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, tasks.

B) technology, people, culture, and structure.

C) organization, culture, management.

D) tasks, technology, people, and structure.

Answer: D

15) An information system can 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.

Answer: D

16) The ________ model is used to describe the interaction of external forces that affect an organization's strategy and ability to compete.

A) network economics B) competitive forces

C) competitive advantage D) demand control

Answer: B

17) Which of the following is NOT one of the competitive forces?

A) suppliers B) other competitors

C) external environment D) customers

Answer: C

18) Which of the following industries has a low barrier to entry?

A) automotive B) computer chip

C) restaurant D) airline

Answer: C

19) A firm can exercise greater control over its suppliers by having

A) more suppliers. B) fewer suppliers.

C) global suppliers. D) local suppliers.

Answer: A

20) When a firm provides a specialized product or service for a narrow target market better than competitors, they are using a:

A) product differentiation strategy. B) focused on market niche strategy.

C) low cost strategy. D) customization strategy.

Answer: B

21) The four major types of competitive strategy 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. Answer: B

22) Wal-Mart's continuous replenishment system allows it to:

A) provide mass customization.

B) provide an efficient customer response system.

C) strengthen customer intimacy.

D) achieve economy of scale.

Answer: B

23) When a firm provides a specialized product or service for a narrow target market better than competitors, they are using a ________ strategy.

A) product differentiation B) market niche

C) mass customization D) process efficiency

Answer: B

24) ________ is the ability to offer individually tailored products or services using the same production resources as bulk production.

A) Mass customization B) Size customization

C) Magnitude customization D) Dimension customization

Answer: A

25) 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) helps a firm identify points at which information technology can most effectively enhance its competitive position.

Answer: D

26) The primary activities of a firm include

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.

Answer: A

27) The most successful solutions or methods for achieving a business objective are called

A) value activities. B) best processes.

C) core competencies. D) best practices.

Answer: D

28) 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.

Answer: B

29) 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.

Answer: A

30) A virtual company

A) uses the capabilities of other companies without being physically tied to those companies.

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.

Answer: A

3 Fill in the Blanks

1) ________theory states that firms grow larger because they can conduct marketplace transactions internally more cheaply than they can with external firms in the marketplace. Answer: transaction cost

2) A(n) ________ activity is one that is directly related to the production and distribution of a firm's products or services.

Answer: primary

3) A(n) ________ activity is a part of the organization's infrastructure, human resources, technology, and procurement that makes the delivery of the firm's products or services possible. Answer: Support

4) The ________ 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. Answer: value web

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

Answer: core competency

Diff: 2 Page Ref: 105

6) A(n) ________ company uses networks to link people, assets, and ideas, enabling it to work with other companies to create products and services without being limited by traditional

organizational boundaries or physical locations.

Answer: virtual

7) ________ is a competitive strategy for creating brand loyalty by developing new and unique products and services that are not easily duplicated by competitors.

Answer: Product differentiation

8) ________ is the ability to offer individually tailored products and services using the same production resources as mass production.

Answer: Mass customization

9) ________ are 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.

Answer: Switching costs

10) The ________ 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.

Answer: value chain model

4 Essay Questions

1) Define an organization and compare the technical definition of organizations with the behavioral definition.

Answer: The technical definition for an organization defines an organization as a stable, formal social structure that takes resources from the environment and processes them to produce outputs. This definition of an organization focuses on three elements: capital, labor, and production and products for consumption. The technical definition also implies that organizations are more stable than an informal group, are formal legal entities, and are social structures.

The behavioral definition states that an organization is a collection of rights, privileges, obligations, and responsibilities that are delicately balanced over a period of time through conflict and conflict resolution. This definition highlights the people within the organization, their ways of working, and their relationships.

The technical definition shows us how a firm combines capital, labor, and information technology. The behavioral definition examines how information technology impacts the inner workings of the organization.

2) Describe the major economic theories that help explain how information systems affect organizations.

The two economic theories discussed in the book are transaction cost theory and agency theory. The transaction cost theory is based on the notion that a firm incurs transaction costs when it buys goods in the marketplace rather than making products for itself. Traditionally, firms sought to reduce transaction costs by getting bigger, hiring more employees, vertical and horizontal integration, and small-company takeovers. Information technology helps firms lower the cost of market participation (transaction costs) and helps firms shrink in size while producing the same or

greater amount of output.

The agency theory views the firm as a nexus of contracts among interested individuals. The owner employs agents (employees) to perform work on his or her behalf and delegates some

decision-making authority to the agents. Agents need constant supervision and management, which introduces management costs. As firms grow, management costs rise. Information technology reduces agency costs by providing information more easily so that managers can supervise a larger number of people with fewer resources.

3) List and describe four competitive strategies enabled by information systems that firms can pursue.

Answer: The four generic strategies, each of which often is enabled by using information technology and systems include:

●Low-cost leadership: lowest operational costs and the lowest prices. use information systems

to improve inventory management, supply management, and create efficient customer

response systems.

●Product differentiation: enable new products and services, or greatly change the customer

convenience in using existing products and services. use information systems to create

products and services that are customized and personalized to fit the precise specifications of individual customers.

●Focus on market niche: enable a specific market focus and serve this narrow target market

better than competitors. use information systems to produce and analyze data for finely tuned sales and marketing techniques.

●Strengthen customer and suppliers: tighten linkages with suppliers and develop intimacy with

customers. use information systems to facilitate direct access from suppliers to information within the company. Increase switching costs and loyalty to the company

4) Describe the value chain model, and explain how the value chain model can be used to identify opportunities for information systems.

Answer: The value chain model highlights specific activities in the business where competitive strategies can best be applied and where information systems will most likely have a strategic impact. The model identifies specific, critical leverage points where a firm can use information technology most effectively to enhance its competitive position. The value chain model views the firm as a series of basic activities that add a margin of value to a firm’s products or services. The activities are categorized as either primary or support activities. Primary activities are most directly related to production and distribution of the firm’s pr oducts and services, which create value for the customer. Support activities make the delivery of primary activities possible and consist of organization infrastructure. Information systems can be used at each stage of the value chain to improve operational efficiency, lower costs, improve profit margins, and forge a closer relationship with customers and suppliers.

5) Define and describe a virtual company and the benefits of pursuing a virtual company strategy.

Answer: A virtual company uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another

company without being physically tied to that company. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own.

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