Purposes of Information Systems

1. Purposes of Information Systems

2. Why Firms Seek Competitive Advantage (Porter’s Five-Force Model): • Rivalry among existing competitors • Threat of new entrants • Threat of substitute product and services • Bargaining power of buyers • Bargaining power of suppliers

3. Information Systems for Competitive Advantage • Businesses continually seek to establish competitive advantage in the marketplace. • There are eight principles: • The first three principles concern products. • The second three principles concern the creation of barriers. • The last two principles concern establishing alliances and reducing costs.

4. Information Systems for Problem Solving • Information systems can be used to solve problems. • Problem definition • A problem is a perceived difference between what is and what is not. • A problem is a perception. • A good problem definition defines the differences between what is and what ought to be by describing both the current and desired situations. • Different problem definitions require the development of different information systems. • All personnel in the organization must have a clear understanding of which definition of the problem the information system will address.

5. Decision Making and Problem Solving • Problem solving is the most critical activity a business organization undertakes. Problem solving begins with decision making. • In the intelligence stage, potential problems and /or opportunities are identified and defined • In the designstage, alternative solutions to the problem are developed • In the choicestage, a course of action is selected • In the implementationstage, action is taken to put the solution into effect • In the monitoringstage, the implementation of the solution is evaluated to determine if the anticipated results were achieved and modify the process

6. The Decision Process • Three decision processes (method by which a decision is to be made) are structured, semi-structured, and unstructured. • Structured decision process is one for which there is an understood and accepted method for making the decision. • Semi-structured process is one for part of which there is no accepted method for making the decision. • Unstructured process is one for which there is no agreed on decision making process. • The terms structured and unstructured refers to the decision process-not the underlying subject.

7. Relationship of Decision Level and Decision Type

8. Optimization, Satisficing, and Heuristic • Optimizing is finding the best solution and best fit for problems that can be modeled mathematically with a low degree of estimation risk. For example, find how many iPads to produce to meet a profit goal. • Satisficingis finding a good, but not necessarily the best, solution. Satisficing does not look at all possible solutions, but at those that are likely to give good results. Satisficing is a practical decision method because it is sometimes too expensive to analyze every alternative to get the best solution. For example, when you have to select a location for a new plant. • Heuristics are guidelines or procedures that usually find a good solution by using “rules of thumb”.

9. Different Types of Information Systems for Different Types of Decisions • Automated information systems are those by which the computer hardware and program components do most of the work. • Humans start the programs and use the results. • Augmentation information systems are those in which humans do the bulk of the work. • These systems augment, support, or supplement the work done by People (email, instant messaging, video-conferencing, etc) to aid in decision making.

10. How Decision Level, Decision Type and IS Type Are Related

11. Information Systems for Decision Making • Decision making in organizations is varied and complex. • Decisions occur at three levels in organizations (decision levels): • Operational decisions concern day-to-day activities. • Information systems that support operational decision making are called transaction processing systems (TPS). • Managerial decisions concern the allocation and utilization of resources. • Information systems that support managerial decision making are called management information systems (MIS). • Strategic decision making concern broader-scope organizational issues. • Information systems that support strategic decision making are called executive information systems (EIS).