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8/11/2019 laudon ch01 http://slidepdf.com/reader/full/laudon-ch01 1/35 1.1 1 Chapter  Information Systems in Global Business Today
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1.1

Chapter  

Information Systemsin Global Business

Today

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1.2

LEARNING OBJECTIVES

Management Information SystemsChapter 1 Information Systems in Global Business Today

• Explain why information systems are so essential

in business today.

• Define an information system from both atechnical and a business perspective.

• Identify and describe the three dimensions of

information systems.

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1.3

• Assess the complementary assets required for

information technology to provide value to a

business.

• Identify the major management challenges to

building and using information systems.

LEARNING OBJECTIVES (Continued)

Management Information SystemsChapter 1 Information Systems in Global Business Today

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1.4

Smart Systems and Smart Ways of Working Help Toyota Become Number One

• Problem: Tough competition and demanding customers.

• Solutions: Redesigned order and production processes 

reduce costs, increase revenue, and improve customer

service.• Oracle E-Business Suite makes it possible to build cars

to order and forecast demand and production

requirements more accurately.

• Demonstrates IT’s role in analyzing market trends andmonitoring quality, efficiency, and costs.

• Illustrates the emerging digital firm landscape where

businesses can use tools to analyze critical data.

Management Information SystemsChapter 1 Information Systems in Global Business Today

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The Role of Information Systems in Business Today

• How information systems are transforming

business

• Increased technology investments by firms (up-to 50%

of total investments)

• Increased responsiveness to customer demands: A

“Fed-Ex” economy 

• Shifts in media and advertising (online newpapers,Internet adverts)

• New security and accounting laws (e.g. storing

employee e-mails for 5 years) leading to growth of

digital information

Management Information SystemsChapter 1 Information Systems in Global Business Today

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The Role of Information Systems in Business Today

• Globalization opportunities

• Internet has drastically reduced costs of operating on a

global scale

• Customers shop in a worldwide marketplace

• Firms reduce costs by finding low cost suppliers and

managing facilities in other countries

• Small firms can act big• Large firms can act small (mass customization)

Management Information SystemsChapter 1 Information Systems in Global Business Today

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• The emerging digital firm – Significant business relationships are digitally enabled

and mediated (external)

 – Core business processes are accomplished throughdigital networks (internal)

 – Key corporate assets (like core competencies,financial and human assets) are managed digitally

• Digital firms offer greater flexibility in organization andmanagement – Time shifting: operating 24 hrs, 7 days

 – Space shifting: no geographic boundaries

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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Consulting firm, 129 000 employees, 48 countries, no headquarters, no

branches

Read the Interactive Session and then discuss the following questions: • What are the advantages of working in a virtual

environment like the one created by Accenture? What are

the disadvantages?

• Would you like to work at a company like Accenture? Whyor why not? Explain your answer.

• What kinds of companies could benefit from being run

virtually like Accenture? Could all companies be run

virtually like Accenture?

Virtual Management at Accenture

The Role of Information Systems in Business Today

Management Information SystemsChapter 1 Information Systems in Global Business Today

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• Business firms invest heavily ininformation systems to achieve sixstrategic business objectives:

 – Operational excellence

 – New products, services, and business models

 – Customer and supplier intimacy

 – Improved decision making – Competitive advantage

 – Survival

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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• Operational excellence:

 – Improvement of efficiency to attain higher

profitability – Information systems, technology an importanttool in achieving greater efficiency andproductivity

 – E.g. Wal-Mart’s RetailLink system linkssuppliers to its 5289 stores wordlwide forsuperior replenishment system

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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• New products, services, and business

models:

 – Business model: describes how company produces,delivers, and sells product or service to create wealth

 – Information systems and technology are a major

enabling tool for new products, services, business

models

• E.g. Apple’s iPod, iTunes transformed the old business

model of music distribution from CDs into online

• Netflix’s Internet-based DVD rentals vs rental stores

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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• Customer and supplier intimacy: – Serving customers well leads to customers returning,

which raises revenues and profits

• E.g. High-end hotels that use computers to track customerpreferences (room temperature, TV channels) and use IS tomonitor and customize environment

 – Intimacy with suppliers allows them to provide vitalinputs, which lowers costs

• E.g. J.C.Penney’s information system which links shirt salesrecords at each store to contract manufacturer in Hong Kong.Supplier produces (quantity, style, color, size) based on thesales records and delivers directly to stores; no inventorystorage costs for J.C.Penney, lower price to customer

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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• Improved decision-making – Without accurate information:

• Managers must use forecasts, best guesses, luck

• Leads to: – Overproduction/underproduction of goods and services

 – Misallocation of resources

 – Poor response times

• Poor outcomes raise costs, lose customers

 – E.g. Verizon’s (phone company) Web-based digitaldashboard to provide managers with real-time dataon customer complaints, network performance, lineoutages, etc. Fast response through immediateallocation of repair resources

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The Role of Information Systems in Business Today

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• Competitive advantage – Delivering better performance

 – Charging less for superior products

 – Responding to customers and suppliers in real time

 – Often achieved through one of first four strategicbusiness objectives

 – E.g. Dell: Consistent profitability over 25 years; Dellremains one of the most efficient producer of PCs inworld (mass customization)

 – But Dell has lost some of its advantages to fastfollowers – HP (competitive advantage is notsustainable)

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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• Survival

 – Information systems and technologies as a necessity  

for businesses to survive

 – Driven by:• Industry-level changes, e.g. the introduction of ATMs by one

bank forces other banks to follow

• Governmental regulations requiring record-keeping

 – E.g. Toxic Substances Control Act (records of emloyee

exposure for 30 years), Sarbannes-Oxley Act (after the Enronscandal, retain audit papers and records including e-mails for 5

years)

 – Firms need IS capability to respond to these requirements

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

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The Role of Information Systems in Business Today

Management Information SystemsChapter 1 Information Systems in Global Business Today

The Interdependence Between Organizations and

Information Technology

There is a growing interdependence between a firm’s information systems and its business

capabilities. Changes in strategy, rules, and business processes increasingly require

changes in hardware, software, databases, and telecommunications. Often, what the

organization would like to do depends on what its systems will permit it to do.  

Figure 1-2

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• Information system: – Set of interrelated components

 – Collect, process, store, and distribute information

 – Support decision making, coordination, andcontrol

• Information vs. data – Data are streams of raw facts

 – Information is data shaped into meaningful form

• Knowledge?

Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

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• Information system: Three activities

produce information organizations need

 – Input: Captures raw data from organizationor external environment

 – Processing: Converts raw data into

meaningful form

 – Output: Transfers processed information

to people or activities that use it

Perspectives on Information Systems

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• Feedback:

 – Output returned to appropriate members oforganization to help evaluate or correct inputstage

• Computer/Computer program vs.information system

 – Computers and software are technical foundationand tools, similar to the material and tools used tobuild a house

Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

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Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

An information system contains information about an organization and its surrounding environment. Three basic activities —input,

processing, and output—produce the information organizations need. Feedback is output returned to appropriate people or activities in the

organization to evaluate and refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory

agencies, interact with the organization and its information systems.

Figure 1-4

Functions of an Information System

Other

environmental

factors?

(t,p,e)

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Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

Using information systems effectively requires an understanding of the organization,

management, and information technology shaping the systems. An information system

creates value for the firm as an organizational and management solution to challenges posed

by the environment. 

Figure 1-5

Information Systems Are More Than Computers

Computers are like the

tools and materials

used to make a house

(griders,cement,

hammers, nails), but

these by themselves

do not make a house;

you need the

architectural design,

setting and static

knowledge to build the

house.

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• Organizational dimension of

information systems

 – Hierarchy of authority, responsibility• Senior management

• Middle management

• Operational management

• Knowledge workers• Data workers

• Production or service workers

Perspectives on Information Systems

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Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

Business organizations are hierarchies consisting of three principal levels: senior

management, middle management, and operational management. Information systems serve

each of these levels. Scientists and knowledge workers often work with middle management.

Figure 1-6

Levels in a Firm

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• Organizational dimension of information

systems (cont.)

 – Separation of business functions

• Sales and marketing

• Human resources

• Finance and accounting

• Production and manufacturing

 – Unique business processes – Unique business culture

 – Organizational politics

Perspectives on Information Systems

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• Management dimension of

information system

 – Managers set organizational strategy forresponding to business challenges

 – Managers control and coordinate

 – In addition, managers must act creatively:

• Creation of new products and services

• Occasionally re-creating the organization

Perspectives on Information Systems

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• Technology dimension of informationsystems

 – Computer hardware and software – Data management technology

 – Networking and telecommunications technology

• Networks, the Internet, intranets and extranets, WorldWide Web

 –  IT infrastructure: provides platform that system isbuilt on

Perspectives on Information Systems

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• Read the Interactive Session: Technology, and then

discuss the following questions:

• What are the inputs, processing, and outputs of

UPS’s package tracking system? 

• What technologies are used by UPS? How are these

technologies related to UPS’s business strategy? • What problems do UPS’s information systems solve?

What would happen if these systems were not

available? 

UPS Competes Globally with Information Technology

Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

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• Dimensions of UPS tracking system

 – Organizational:

• Procedures for tracking packages and managinginventory and provide information

 – Management:

• Monitor service levels and costs

 – Technology:

• Handheld computers, bar-code scanners, networks,desktop computers, etc.

Perspectives on Information Systems

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• Business perspective on informationsystems: – Information systems are instruments for creating

value – Investments in information systems and

technology will result in superior returns:• Productivity increases

• Revenue increases

• Superior long-term strategic positioning

But not always!!

Perspectives on Information Systems

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• Investing in information technology does notguarantee good returns (big failures by firms like HP,Nike, Nestle)

• Considerable variation in the returns firms receive

from systems investments• Success requires a business perspective:

attention to the organizational and managerial natureof information systems

• Success Factors:

 –  Adopting the right business model – Investing in COMPLEMENTARY ASSETS (organizational

and management capital)

Perspectives on Information Systems

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• Complementary assets: 

 – Assets required to derive value from a

primary investment

 – Firms supporting technology investments

with investment in complementary assets

receive superior returns – E.g.: invest in technology and the people to

make it work properly

Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

M I f i S

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• Complementary assets include:

 – Organizational investments, e.g.

•  Appropriate business model• Efficient business processes

 – Managerial investments, e.g.

• Incentives for management innovation

• Teamwork and collaborative work environments

 – Social investments, e.g.

• The Internet and telecommunications infrastructure

• Technology standards

Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

M t I f ti S t

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Perspectives on Information Systems

Management Information SystemsChapter 1 Information Systems in Global Business Today

From a business perspective, information systems are part of a series of value-adding

activities for acquiring, transforming, and distributing information that managers can use to

improve decision making, enhance organizational performance, and, ultimately, increase firm

profitability.

Figure 1-7

The Business Information Value Chain

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• Major management challenges:

1. Design competitive and effective systems: rethinking

of business processes, not simple automation

2. Understand system requirements of global businessenvironment: language, cultural and regulatory barriers

3. Create information architecture that supportsorganization’s goal 

Management Information SystemsChapter 1 Information Systems in Global Business Today

Challenge of Information Systems: Key Management Issues

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4. Determine the business value of information

systems

5. Design systems people can control,

understand and use in a socially, ethically

responsible manner

Management Information SystemsChapter 1 Information Systems in Global Business Today

Challenge of Information Systems: Key Management Issues


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