Chapter 1Managing the Digital Firm1-1
Chapter 1
Managing the Digital Firm
True-False Questions
Chrysler uses a Web-enabled system called Saveway that replaces paper-based processes with digital links to supplier systems.Answer: FalseDifficulty: MediumReference: p. 3
Modern digital firms use the Internet and networking technology to make data flow seamlessly among different parts of the organization; streamline the flow of work; and create electronic links with customers, suppliers, and other organizations.
Answer: TrueDifficulty: EasyReference: p. 4
Information technologies and systems are revolutionizing the operation of firms, industries, and markets.
Answer: TrueDifficulty: EasyReference: p. 4
In 2005, U.S. firms alone will spend nearly $1.8 billion on IT and telecommunications equipment and software.
Answer: FalseDifficulty: HardReference: p. 4
Investment in information technology plays a minimal role in increasing the productivity of firms.
Answer: FalseDifficulty: EasyReference: p. 5
It has been proven that information technology can give a firm a long-lasting competitive advantage.
Answer: FalseDifficulty: MediumReference: p. 6
Nicholas Carr, an editor at Harvard Business Review argues that no firm can use IT to achieve a strategic edge over its competitors any more than it could with electricity, telephones, or other infrastructure.
Answer: TrueDifficulty: HardReference: p. 6
The networking and communications revolution is being driven by the growth of the Internet, Internet-based technologies, and new business models and processes that leverage the new technologies.
Answer: TrueDifficulty: EasyReference: pp. 7-8
Relationships with customers, employees, suppliers, and logistic partners are increasingly becoming paper-based relationships.
Answer: False Difficulty: EasyReference: p. 9
Electronic commerce designates the use of the Internet and digital technology to execute all of the activities of the enterprise.
Answer: FalseDifficulty: MediumReference: p. 9
The Internet and the new markets are changing the cost and revenue structure of traditional firms and are hastening the demise of traditional business models.
Answer: TrueDifficulty: MediumReference: p. 9
The Internet and related technologies make it possible to conduct business across firm boundaries almost as efficiently and effectively as it is to conduct business within the firm.
Answer: TrueDifficulty: EasyReference: p. 9
The traditional business firm is a flat, decentralized, unstructured arrangement of generalists who typically rely on a fixed set of standard operating procedures to deliver a customized product.
Answer: FalseDifficulty: MediumReference: p. 10
The success of firms today and in the future no longer depends on their ability to operate globally.
Answer: FalseDifficulty: EasyReference: p. 10
Globalization has transformed the conduct of business.
Answer: TrueDifficulty: EasyReference: p. 10
Knowledge and information work account for 55 percent of the U.S. gross national product and nearly 60 percent of the labor force.
Answer: FalseDifficulty: HardReference: p. 11
In knowledge- and information-based economies, the market value of many firms is based largely on tangible assets, such as buildings, machinery tools, and inventory.
Answer: FalseDifficulty: MediumReference: p. 11
Major industrial powers are being transformed to knowledge- and information-based service economies and leaving manufacturing to the third-world countries.
Answer: TrueDifficulty: EasyReference: p. 11
Information-intense products require a great deal of knowledge and training to produce.
Answer: TrueDifficulty: EasyReference: p. 11
Business processes are those procedures within the company that require accounting.
Answer: FalseDifficulty: MediumReference: p. 12
By digitally enabling and streamlining their work, digital firms have the potential to achieve unprecedented levels of profitability and competitiveness.
Answer: TrueDifficulty: EasyReference: p. 12
Information systems help managers and workers analyze problems, visualize complex subjects, and create new products.
Answer: TrueDifficulty: EasyReference: p. 13
In an information system, input, processing, and output produce data.
Answer: FalseDifficulty: MediumReference: p. 15
Feedback helps the organization evaluate input.
Answer: TrueDifficulty: MediumReference: p. 15
A formal information system can be a manual one.
Answer: TrueDifficulty: EasyReference: p. 16
Firms sometimes invest in information systems to cope with government regulations or other environmental demands.
Answer: TrueDifficulty: MediumReference: p. 18
Few businesses have an information value chain, in which raw information is systematically acquired and then transformed through various stages that add value to that information.
Answer: FalseDifficulty: MediumReference: p. 19
Information systems literacy includes a behavioral as well as a technical approach to studying information systems.
Answer: TrueDifficulty: MediumReference: p. 19
The key elements of an organization are its people, structure, business processes, politics, and culture.
Answer: TrueDifficulty: MediumReference: p. 20
Secretaries, bookkeepers, and clerks would all be considered knowledge workers.
Answer: FalseDifficulty: MediumReference: p. 21
Storage technology includes the physical media for storing data, but not the software governing the organization of data on these physical media.
Answer: FalseDifficulty: MediumReference: p. 22
A network requires at least three computers.
Answer: FalseDifficulty: EasyReference: p. 22
The Internet is an international network of commercial networks.
Answer: FalseDifficulty: MediumReference: p. 22
Standards are one type of organizational asset for optimizing returns on information technology.
Answer: FalseDifficulty: HardReference: p. 25
Managerial complementary assets include elements such as strong senior management support for change and incentive systems that monitor and reward individual innovation.
Answer: TrueDifficulty: MediumReference: p. 25
Computer science, management science, and operations research all contribute to the technical approach to information systems.
Answer: TrueDifficulty: MediumReference: p. 26
The behavioral approach to information systems focuses on changes in attitudes, management and organizational policy, and behavior.
Answer: TrueDifficulty: EasyReference: p. 26
To work properly, an information system must balance technology and human behavior and requirements, even if less-than-optimal technology must be used.
Answer: TrueDifficulty: MediumReference: p. 26
The declining cost and growth in power of information technology always translates into productivity enhancements and bottom-line profits.
Answer: FalseDifficulty: EasyReference: p. 27
Security and control will be an ongoing concern for information systems because these problems can never be eliminated.
Answer: TrueDifficulty: EasyReference: p. 30
Multiple-Choice Questions
Internet culture is:a.global.
b.regional.
c.domestic.
d.local.
Answer: aDifficulty: EasyReference: p. 4
What term is used to refer to all of the computer-based information systems used by organizations and their underlying technologies?
a.network technology
b.digital technology
c.information technology
d.productivity technology
Answer: cDifficulty: EasyReference: p. 4
The ultimate end product of the new ways of conducting business electronically is:
a.the extinction of the traditional bureaucracy.
b.more government oversight.
c.a more complicated tax structure.
d.the digital firm.
Answer: dDifficulty: EasyReference: p. 4
The largest component of capital investment for firms in the United States and many industrialized societies is:
a.inventory.
b.information technology.
c.machinery.
d.buildings.
Answer: bDifficulty: EasyReference: p. 4
In 2005, U.S. firms alone will spend nearly $1.8 ______on IT and telecommunications equipment and software.
a.thousand
b.million
c.billion
d.trillion
Answer: dDifficulty: EasyReference: p. 4
The use of the Internet and digital technology to execute all of the activities in the enterprise is referred to as:
a.digital business.
b.electronic business.
c.electronic commerce.
d.digital processes.
Answer: bDifficulty: MediumReference: p. 9
Buying and selling of goods and services electronically with computerized business transactions using the Internet, networks, and other digital technologies is called:
a.electronic commerce.
b.electronic communications.
c.electronic business.
d.electronic exchanges.
Answer: aDifficulty: MediumReference: p. 9
The application of the Internet and related technologies to digitally enable government and public sector agencies’ relationships with citizens, businesses, and other arms of government is called:
a.e-commerce.
b.e-business.
c.e-government.
d.e-technology.
Answer: cDifficulty: EasyReference: p. 9
Experts believe that ______percent of travel sales will be online within a decade.
a.10 to 30
b.30 to 40
c.40 to 50.
d.50 to 70.
Answer: dDifficulty: EasyReference: p. 9
Developing a new product, generating and fulfilling an order, creating a marketing plan, and hiring an employee are examples of:
a.creating feedback.
b.business processes.
c.maintaining a competitive edge.
d.industrial processes.
Answer: bDifficulty: EasyReference: p. 12
These two companies are close to becoming fully digital firms:
a.DaimlerChrysler and General Motors.
b.Cisco Systems and Dell Computers.
c.Wal-Mart and Sears.
d.GKN Aerospace North America and Flextronics.
Answer: bDifficulty: EasyReference: p. 13
Information is:
a.the accumulation of raw data.
b.the way we analyze problems.
c.the best form of knowledge.
d.data shaped into meaningful form.
Answer: dDifficulty: EasyReference: p. 13
Streams of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use are called:
a.wisdom.
b.knowledge.
c.data.
d.expertise.
Answer: cDifficulty: EasyReference: p. 15
Input:
a.captures or collects raw data from within the organization or from the external environment.
b.allows the analysis of problems faced by the organization.
c.is data shaped into meaningful form.
d.converts raw data into meaningful form.
Answer: aDifficulty: EasyReference: p. 15
Converting raw data into a more meaningful form is called:
a.capturing.
b.processing.
c.controlling.
d.feedback.
Answer: bDifficulty: EasyReference: p. 15
______systems depend on fixed definitions of data and procedures for collecting, storing, processing, disseminating, and using the data.
a.Informal
b.Modern
c.Traditional
d.Formal
Answer: dDifficulty: Easy Reference: pp. 15-16
______use paper-and pencil-technology.
a.Manual systems
b.Bureaucracies
c.Most established companies
d.Reactionaries
Answer: aDifficulty: EasyReference: p. 16
Electronic computers and related software programs are the technical foundation, the tools and materials, of:
a.all business procedures.
b.information accumulation.
c.modern information systems.
d.all industrialized countries.
Answer: cDifficulty: MediumReference: p. 16
Sets of operating instructions that direct and control computer processing are called:
a.protocols.
b.policies.
c.computer programs.
d.procedures.
Answer: cDifficulty: EasyReference: p. 16
One of the information processing activities in the business information value chain is:
a.modeling
b.planning multinational organizations.
c.dissemination satellite communications systems.
d.knowledge management
Answer: cDifficulty: MediumReference: p. 19
The primary purpose why information systems are built is to:
a.contribute to corporate value.
b.comply with government regulations.
c.link up with business partners.
d.gather competitive knowledge.
Answer: aDifficulty: EasyReference: p. 19
A broad-based understanding of information systems that includes behavioral knowledge about organizations and individuals using information systems as well as technical knowledge about computers is called:
a.computer literacy.
b.technology literacy.
c.management literacy.
d.information systems literacy.
Answer: dDifficulty: MediumReference: p. 19
Which of the following would not be classified as a management activity in the business information value chain?
a.Disseminating
b.Planning.
c.Coordinating.
d.Controlling.
Answer: aDifficulty: MediumReference: p. 19
Promoting the organization’s products and services is a business function of:
a.manufacturing and production.
b.finance and accounting.
c.human resources.
d.sales and marketing.
Answer: dDifficulty: EasyReference: p. 21
Creating products and services is a business function of:
a.manufacturing and production.
b.finance and accounting.
c.human resources.
d.sales and marketing.
Answer: aDifficulty: EasyReference: p. 21
Managing the organization’s financial assets is a business function of:
a.manufacturing and production.
b.finance and accounting.
c.human resources.
d.sales and marketing.
Answer: bDifficulty: EasyReference: p. 21
Maintaining the organization’s financial records is a business function of:
a.accounting and finance.
b.manufacturing and production.
c.human resources.
d.sales and marketing.
Answer: aDifficulty: EasyReference: p. 21
Maintaining the organization’s labor force is a business function of:
a.manufacturing and production.
b.finance and accounting.
c.human resources.
d.sales and marketing.
Answer: cDifficulty: EasyReference: p. 21
Engineers or architects who design products or services are called:
a.data workers.
b.service workers.
c.information specialists.
d.knowledge workers.
Answer: dDifficulty: MediumReference: p. 21
Secretaries, bookkeepers, or clerks are called:
a.data workers.
b.service workers.
c.information specialists.
d.knowledge workers.
Answer: aDifficulty: MediumReference: p. 21
Long-range strategic decisions about what products and services to produce are done by:
a.middle managers.
b.senior managers.
c.operational managers.
d.supervisory personnel.
Answer: bDifficulty: EasyReference: p. 21
An intranet uses:
a.mainframe technology.
b.infrared telecommunications systems.
c.the telecommunications capacities of fiber optic networks.
d.Internet technology within the boundaries of the firm.
Answer: dDifficulty: MediumReference: p. 22
The shared information technology resources for the organization are called its:
a.MIS plan.
b.operational network.
c.IT infrastructure.
d.business infrastructure.
Answer: cDifficulty: MediumReference: p. 23
______assets are required to derive value from a primary investment.
a.Complementary
b.Supplemental
c.Core
d.Capital
Answer: aDifficulty: MediumReference: p. 24
Investments in new business processes, management behavior, or training to enhance returns on information technology investments are called ______.
a.organizational investments
b.organizational and management capital
c.social capital
d.business investments
Answer: bDifficulty: MediumReference: p. 24
An example of a managerial asset required to optimize returns from information technology investments would be:
a. decentralized authority
b. teamwork and collaborative work environment
c. laws and regulations
d. distributed decision-making rights
Answer: bDifficulty: HardReference: p. 25
An example of a social asset required to optimize returns from information technology investments would be:
a. teamwork.
b. culture valuing efficiency and flexibility.
c. telecommunications infrastructure.
d. training programs.
Answer: cDifficulty: HardReference: p. 25
______focuses on mathematical techniques for optimizing selected parameters of organizations, such as transportation costs.
a.Behavioral science
b.Computer science
c.Management science
d.Operations research
Answer: dDifficulty: MediumReference: p. 26
Because information systems are so essential to business, government, and daily life, organizations must take special steps to ensure:
a.that all managers know and understand the basics of copyright law.
b.that the systems are accurate, reliable, and secure.
c.that references are checked before employees are hired.
d.that software is updated frequently.
Answer: bDifficulty: EasyReference:p. 27
Fill in the Blanks
A(n) digital firm is one where nearly all significant business processes and relationships are managed through digital means.Difficulty: EasyReference: p. 4
The term, information technology refers to all of the computer-based information systems used by organizations and their underlying technologies.
Difficulty: MediumReference: p. 4
Dell, Amazon.com, eBay, and Wal-Mart are examples of companies with unique competitive advantage in their industries.
Difficulty: MediumReference: p. 7
The Internet has inspired entirely new business models for the digital distribution of music, journals, and Hollywood films.
Difficulty: MediumReference: p. 7
Allowing people to renew their drivers’ licenses online is an example of e-government.
Difficulty: MediumReference: p. 9
Electronic business, designates the use of the Internet and digital technology to execute all of the activities in the enterprise.
Difficulty: EasyReference: p. 9
Electronic commerce deals with the buying and selling of goods and services electronically with computerized business transactions using the Internet, networks, and other digital technologies.
Difficulty: EasyReference: p. 9
E-government is the application of the Internet and related technologies to digitally enable government and public sector agencies’ relationships with citizens, businesses, and other arms of government.
Difficulty: EasyReference: p. 9
A(n) traditional business firm is a hierarchical, centralized, structured arrangement of specialists relying on a fixed set of standard operating procedures to deliver a mass-produced product or service.
Difficulty: MediumReference: p. 10
A(n) knowledge- and information-intense product is one that requires a great deal of learning and knowledge to produce.
Difficulty: EasyReference: p. 11
A(n) digital firm is one where nearly all significant business processes and relationships are managed through digital means.
Difficulty: EasyReference: p. 11
Developing a new product, generating and fulfilling an order, or hiring an employee are all examples of business processes.
Difficulty: MediumReference: p. 12
A(n) information system is composed of interrelated components working together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization.
Difficulty: EasyReference: p. 13
Information is data that has been shaped into a form that is meaningful and useful to human beings.
Difficulty: EasyReference: p. 15
Streams of raw facts representing events occurring in organizations or the physical environment before they have organized and arranged into a form that people can understand and use is referred to as data.
Difficulty: EasyReference: p. 15
Processing is the conversion, manipulation, and analysis of raw input into a form that is more meaningful to humans.
Difficulty: EasyReference: p. 15
Feedback allows members of the organization to evaluate and correct input.
Difficulty: EasyReference: p. 15
Formal systems rely on accepted and fixed definitions of data and procedures for collecting, storing, processing, disseminating, and using these data.
Difficulty: EasyReference: p. 16
A(n) computer-based information system relies on computer hardware and software for the processing and dissemination of information.
Difficulty: EasyReference: p. 16
Computer programs/software are sets of operating instructions to direct and control computer processing.
Difficulty: EasyReference: p. 16
Information systems literacy encompasses an understanding of the management and organizational dimensions of systems as well as the technical dimensions of systems.
Difficulty: EasyReference: p. 19
A(n) information value chain transforms raw information through various stages that add value to that information.
Difficulty: MediumReference: p. 19
The business perspective calls attention to the managerial/organizational nature of information systems.
Difficulty: MediumReference: p. 19
A(n) business function is a specialized task performed in the business organization.
Difficulty: EasyReference: p. 20
A(n) data worker processes the organization’s paperwork.
Difficulty: EasyReference: p. 21
A(n) operational manager monitors the day-to-day activities of the organization.
Difficulty: EasyReference: p. 21
A(n) Web site comprises all of the Web pages maintained by an organization or an individual.
Difficulty: EasyReference: p. 22
A(n) intranet is an internal network based on Internet technology and standards.
Difficulty: EasyReference: p. 22
The physical equipment used for input, processing, and output activities in an information system is the computer hardware.
Difficulty: EasyReference: p. 22
A(n) network links two or more computers to share data or resources such as a printer.
Difficulty: EasyReference: p. 22
The World Wide Web is a system with universally accepted standards for storing, retrieving, formatting, and displaying information in a networked environment.
Difficulty: EasyReference: p. 22
The world’s largest and most widely used network is the Internet.