Thursday July 7th, 2011
Chapter 3
Creating Business Value
Business Organizations and Business Processes:
-A number of different tasks need to be coordinated to deliver a product or service therefore a company
needs a business strategy
-A strategy is a broad-based formula for how a business is going to compete, what its goals should be,
and what plans and policies will be needed to carry out those goals
-strategy becomes a road map for what needs to be done in order to create business values and
competitive advantage
Businesses as Open Systems:
-Organizations use various resources, processes and structure to create business
-organizations use various resources, processes and structures to create business value
-input process output model is used to define IS, now we expand the model into a general mode of an
organization known as open systems model
-open systems model indicates that business operates by transforming inputs into outputs and
formatting inputs into outputs and by interacting with its environments
-2 significant components of business environments:
Stakeholders and Boundaries in the Business Environment:
-A stakeholder is a person or entity that has an interest and an influence on how a business will function
-A stakeholder can be external or internal relative to the business
-All open systems have an organizational boundary that separates them from their environment but still
allows them to interact with their environment
-the way business adopts to their environments contributes greatly to how their structures develops
and helps determine whether they succeed or fail
-Example of stakeholder:
You may be interested in how a certain company handles online shopping transactions, if you
email the company about a problem on the website your suggestions may influence future e-
commerce operations because you had both an interest and influence, therefore you are a
- Open boundary allows a business to receive inputs and to produce outputs
Interaction with environment comes risk especially when the environment change
Example: new technology can become serious threat to an organization
How Business Creates Value:
-All business organizations possess structures that organize information, responsibility, and authority
-Types of organizational structures include functional, decentralized, and matrix structures
-In functional and decentralized structures lines of authority are vertically oriented
-A matrix organization is a blend of functional and decentralized organizations that uses teams
-companies adapt their structures to their unique business situations that suit their competitive
environment, strategy and preference
-teams are an important part of business
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