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1
Chapter
Information Systemsin Global Business
Today
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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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• 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)
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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.
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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
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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)
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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
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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
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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
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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
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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
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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
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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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• 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)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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!!
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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)
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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
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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
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Challenge of Information Systems: Key Management Issues