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Management InformationSystems

Chapter 1Information Systems in Global

Business Today

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The Role of Information Systems in Business

Today

How information systems are transformingbusiness

Increased technology investments

Increased responsiveness to customer demands.

economy Shifts in media and advertising

Globalizationopportunities Internet has drastically reduced costs of operating on

global scale

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In the emerging, fully digital firm

Significant business relationships are digitallyenabled and mediated

Core business processes are accomplishedthrough digital networks

Key corporate assets are managed digitally

Digital firms offer greater flexibility in organizationand management

Time shifting, space shifting

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Growing interdependence between ability

to use information technology and ability toimplement corporate strategies andachieve corporate goals

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

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Operational excellence: Improvement of efficiency to attain higher profitability

Information systems, technology an important tool inachieving greater efficiency and productivity

E.g. Wal-Marts RetailLink system links suppliers tostores for superior replenishment system

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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 a major enabling

tool for new products, services, business models E.g. Apples iPod, iTunes and Netflixs Internet-based DVD

rentals

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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 customer preferences and use tomonitor and customize environment

Intimacy with suppliers allows them to provide vital

inputs, which lowers costs

E.g. J.C.Penneys information system whichlinks sales records to contract manufacturer

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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

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Operational excellence: Improvement of efficiency to attain higher profitability

New products, services, and business models:

Enabled by technology

Customer and supplier intimacy:

Serving customers raises revenues and profits

Better communication with suppliers lowers costs

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Competitive advantage Delivering better performance

Charging less for superior products

Responding to customers and suppliers in real time

Often achieved when firm achieves one of first fouradvantages

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

But Dell has lost some of its advantages to fastfollowers-- HP

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Survival

Information technologies as necessity of business

May be:

Industry-level changes, e.g. Citibanks introduction

of ATMs Governmental regulations requiring record-keeping

E.g. environmental protection act.

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The Interdependence Between Organizations andInformation Technology

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Information system:

Set of interrelated components

Collect, process, store, and distribute information

Support decision making, coordination, and control Information vs. data

Data are streams of raw facts

Information is data shaped into meaningful form

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Data and Information

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Information system: Three activities produceinformation organizations need

Input: Captures raw data from organization orexternal environment

Processing: Converts raw data into meaningfulform

Output: Transfers processed information to peopleor activities that use it

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Feedback:

Output returned to appropriate members oforganization to help evaluate or correct input stage

Computer/Computer program vs.information system

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

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Functions of an Information System

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Information Systems Are More Than

Computers

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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

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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

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Management dimension of informationsystem

Managers set organizational strategy for

responding to business challenges In addition, managers must act creatively:

Creation of new products and services

Occasionally re-creating the organization

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Technology dimension of informationsystems

Computer hardware and software

Data management technology

Networking and telecommunicationstechnology

Networks, the Internet, intranets and extranets, WorldWide Web

IT infrastructure: provides platform that

system is built on

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Business perspective on informationsystems: Information system is instrument for creating

value

Investments in information technology willresult in superior returns: Productivity increases

Revenue increases

Superior long-term strategic positioning

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Business information value chain Raw data acquired and transformed through

stages that add value to that information

Value of information system determined in part by

extent to which it leads to better decisions, greaterefficiency, and higher profits

Business perspective: Calls attention toorganizational and managerial nature ofinformation systems

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The Business Information Value Chain

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Variation in Returns onInformation Technology Investment

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Investing in information technology does not

guarantee good returns

Considerable variation in the returns firmsreceive from systems investments

Factors:Adopting the right business model

Investing in complementary assets (organizational

and management capital)

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Complementary assets:

Assets required to derive value from a primary

investment

Firms supporting technology investments with

investment in complementary assets receivesuperior returns

E.g.: invest in technology and the people to make it

work properly

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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 telecommunicationsinfrastructure

Technology standards

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Contemporary Approaches to Information Systems

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Technical approach

Emphasizes mathematically based models

Computer science, management science,operations research

Behavioral approach

Behavioral issues (strategic business

integration, implementation, etc.) Psychology, economics, sociology

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Management Information Science Combines computer science, management science,

operations research and practical orientation withbehavioral issues

Four main actors Suppliers of hardware and software Business firms Managers and employees

Firms environment (legal, social, cultural context)

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Approach of the book: Socio-technical view Optimal organizational performance achieved

by jointly optimizing both social and technicalsystems used in production

Helps avoid purely technological approach

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A Sociotechnical Perspective on Information Systems