Chapter

1. 1 Chapter Information Systems in Global Business Today

2. Management Information Systems Chapter 1 Information Systems in Global Business Today LEARNING OBJECTIVES • Explain why information systems are so essential in business today. • Define an information system from both a technical and a business perspective. • Identify and describe the three dimensions of information systems.

3. Management Information Systems Chapter 1 Information Systems in Global Business Today LEARNING OBJECTIVES (Continued) • Assess the complementary assets required for information technology to provide value to a business. • Identify and describe contemporary approaches to the study of information systems and distinguish between computer literacy and information systems literacy.

4. Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • How information systems are transforming business • Increased technology investments • Increased responsiveness to customer demands • Shifts in media and advertising (e.g. online newspapers/music, blogs, Google ads) • New laws • Globalizationopportunities • Internet has drastically reduced costs of operating and transacting on a global scale

5. Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today Information Technology Capital Investment Information technology investment, defined as hardware, software, and communications equipment, grew from 34% to 50% between 1980 and 2004.Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2006. Figure 1-1

6. In the emerging, fully digital firm Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks Key corporate assets are managed digitally Digital firms offer greater flexibility for organization and management Time shifting (24/7 rather than 9 a.m. to 5 p.m.), space shifting (work is done wherever in the world it is best accomplished) Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

7. Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals What a business would like to do in five years often depends on what its systems will be able to do (e.g. increasing market share, employee productivity) Business firms invest heavily in information systems to achieve six strategic business objectives: Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

8. Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in 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

9. Operational excellence: Improvement of efficiency to attain higher profitability Information systems and technologies are important tools in achieving greater efficiency and productivity E.g. Wal-Mart’s RetailLink system links suppliers to stores for superior replenishment system Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

10. New products, services, and business models: Information systems and technologies are a major enabling tool for new products, services, business models E.g. Apple’s iPod, iTunes and Netflix’s Internet-based DVD rentals Business model: describes how a company produces, delivers, and sells product or service to create wealth Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

11. 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 to monitor and customize environment Intimacy with suppliers allows them to provide vital inputs, which lowers costs E.g. J.C.Penney’s information system which links sales records to contract manufacturer (supplier) TAL Apparel Ltd in Hong Kong Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

12. 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 IS and technologies have made it possible for us to use real time data from the market place for decision making E.g. Verizon uses Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

13. Competitive advantage Often achieved when a firm achieves one of first four advantages which lead to: Delivering better performance Charging less for superior products Responding to customers and suppliers in real time e.g. 1. Dell: Consistent profitability over 25 years; Dell remains one of the most efficient producers of PCs in world. Dell’s operational efficiency is achieved through “mass customization”. But Dell has lost some of its advantages to fast followers– HP e.g. 2. Toyota has become the world’s largest automaker through high level of efficiency and quality Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

14. Survival Information technologies as necessities of business May be: Industry-level changes, e.g. Citibank’s introduction of ATMs Governmental regulations requiring record-keeping E.g. Toxic Substances Control Act (retaining records on employee exposure for 30 years), Sarbannes-Oxley Act (retaining audit reports and e-mails for five years) Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

15. Information system: A set of interrelated components that collect, process, store, and distribute information to support decision making, and control in an organization Information vs. data Data are streams of raw facts Information is data shaped into meaningful and useful form Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

16. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Data and Information Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Figure 1-3

17. Information system: Three activities produce information organizations need Input: Captures raw data from organization or external environment Processing: Converts raw data into meaningful form Output: Transfers processed information to people or activities that use it Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

18. Feedback: Output returned to appropriate members of the organization to help evaluate or correct input stage Computer/Computer program vs. information system Computers and related software are the technical foundation, the tools and material, of modern information systems Computers provide the equipment for storing and processing information Computer programs/software are sets of operating instructions that direct and control computer processing Computers are only part of an information system Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

19. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Functions of an Information System 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

20. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Information Systems Are More Than Computers 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

21. Organizational dimension of information systems Hierarchy of authority, responsibility Senior management Middle management (Scientists and Knowledge workers) Operational management (Data workers and Production or service workers) Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

22. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Levels in a Firm 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

23. Organizational dimension of information systems (cont.) Separation of business functions: Sales and marketing; Human resources; Finance and accounting; Production and manufacturing Coordinates work through its hierarchy and its unique business processes Unique business culture (fundamental set of assumptions, values, and ways of doing things) Organizational politics (conflict of different interests and point of view between different groups) Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

24. Management dimension of information system Managers perceive business challenges in the environment They set organizational strategy for responding to business challenges They allocate human and financial resources to coordinate the work and achieve success In addition, managers must act creatively: Creation of new products and services Occasionally re-creating/redesigning the organization Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

25. Technology dimension of information systems IT is one of many tools managers use to cope with change Computer hardware and software Data management technology Networking and telecommunications technology Networks, the Internet, intranets and extranets, World Wide Web IT infrastructure: All of these technologies, along with the people required to run and manage them constitute the firms IT infrastructure IT infrastructure provides the platform on which information systems can be built Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

26. Business perspective on information systems: Information system is an important instrument for creating value Investments in information technology will result in superior returns: Productivity increases Revenue increases Superior long-term strategic positioning Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

27. Business information value chain Each business has an information value chain in which raw data is acquired and transformed through various stages that add value to that information Value of an information system, is, in large part, determined by the extent to which it leads to better management decisions, greater efficiency in business processes, and higher profits Business perspective: Calls attention to organizational and managerial nature of information systems An information system represents an organizational and management solution, based on IT, to a challenge or problem posed by the environment Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

28. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems The Business Information Value Chain 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

29. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Variation in Returns on Information Technology Investment Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms. Figure 1-8

30. Investing in information technology does not guarantee good returns Considerable variation in the returns firms receive from systems investments Factors that ensure superior returns: Adopting the right business model Investing in complementary assets such as new business models, new business processes, management behaviour, organizational culture, or training (also known as organizational and management capital), Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

31. Complementary assets: Assets required to derive value from a primary investment Firms that support their technology investments with investment in complementary assets such as new business models, new business processes, management behaviour, organizational culture, or training, receive superior returns Hence, invest in both technology and the people to make it work properly Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

32. 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 Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems

33. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Contemporary Approaches to Information Systems The study of information systems deals with issues and insights contributed from technical and behavioral disciplines. Figure 1-9

34. Management Information Systems Chapter 1 Information Systems in Global Business Today Contemporary Approaches to Information Systems • Technical approach • Emphasizes mathematically based models • Computer science, management science, operations research • Behavioral approach • Concerned with behavioral issues (strategic business integration, implementation, etc.) • Psychology, economics, sociology

35. Management Information Systems Chapter 1 Information Systems in Global Business Today Contemporary Approaches to Information Systems • Approach of this book: Socio-technical view • Four main actors of management information systems • Suppliers of hardware and software • Business firms • Managers and employees • Firm’s environment (legal, social, cultural context) • Together, these actors produce MIS • MIS combines the work of computer science, management science, and operations research with a practical orientation toward developing system solutions to real-world problems and managing information technology resources

36. Management Information Systems Chapter 1 Information Systems in Global Business Today Contemporary Approaches to Information Systems • Approach of this book: Socio-technical view (Cont…) • It is also concerned with behavioural issues surrounding the development, use, and impact of information systems, which are typically discussed in the fields of sociology, economics, and psychology • Optimal organizational performance is achieved by jointly optimizing both social and technical systems used in production • Adopting a socio-technical systems perspective helps to avoid a purely technological approach to information systems

37. Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems A Sociotechnical Perspective on Information Systems In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization mutually adjust to one another until a satisfactory fit is obtained. Figure 1-10

38. Exercise • If you develop a website for e-commerce for your organization, what management, organization, and technology issues might you encounter?