Management Information System

Chapter 1
Information Systems
in Global Business
Today
1.1 2007 by Prentice Hall

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.

LEARNING OBJECTIVES (Continued)
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.

CASE STUDY

CASE STUDY

CASE STUDY

CASE STUDY

CASE STUDY

CASE STUDY

CASE STUDY
Cost of operations has risen and competition has intensified

CASE STUDY
Information Technology helped to modernize and diversify

services

CASE STUDY
Information Technology also helped to change the way

business is done

CASE STUDY

The Role of Information Systems in Business Today
Role of Information Systems in Business

Today
Email, online conferencing, and cell phones have become essential tools
for conducting business.
Information systems are the foundation of fast-paced supply chains.
The Internet allows many businesses to buy, sell, advertise, and solicit
customer feedback online.
Organizations are trying to become more competitive and efficient by
digitally enabling their core business processes and evolving into digital
firms.
The Internet has stimulated globalization by dramatically reducing the
costs of producing, buying, and selling goods on a global scale.

How information systems are transforming business

Increase in wireless technology use, Web sites
Increased business use of Web 2.0 technologies
Cloud computing, mobile digital platform allow more
distributed work, decision-making, and collaboration
Internet has drastically reduced costs of operating on
global scale
However, Globalization presents both challenges like
capability of competitors to use internet in a similar way
and opportunities like to explore new sources and
destinations for business products and services.

Whats Dominant in Management Information

Systems?
In the technology area, there are three interrelated major contributors:
(1) the emerging mobile digital platform (cell phones, net book)
(2) the growing business use of big data
(3) the growth in cloud computing where more and more
business software runs over the internet.
You Tube, iPhones, and BlackBerrys, and Facebook are adopted by
corporations as business tools to improve management and achieve
competitive advantage.
Managers routinely use so-called Web 2.0 technologies like social
networking, collaboration tools, and wikis in order to make better, faster
decisions.
Millions of managers rely heavily on the mobile digital platform to
1.16 coordinate vendors, satisfy customers, and manage their employees.
2007 by Prentice Hall
What is the impact of increased Information Technology

on Management Processes
Information technology can result in a change in the way

management should act (The case of Yankee Stadium is an
example).
As management behavior changes, how work gets organized,

coordinated and measured also changes.

By connecting employees (separated by continent and time

zones) working on teams and projects, the social network is
where works gets done, where plans are executed, and where
managers manage.
The strength of cloud computing, and the growth of the

mobile digital platform means that organizations can rely more
on telework, remote work and distributed decision making.

What Specific Globalization opportunities

Information Technology offers
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 (access a large market)
Large firms can act small (mass customization)

Globalization Challenges
One major challenge is to develop high-level skills
professionals through education and on-the-job
experience.
The other challenge for business is that their
competitors now have similarly high access to
information about alternatives.

What is a digital firm
A digital firm is any firm whose
Significant business relationships with customers,

suppliers and employees are digitally enabled and
mediated (external)
Core business processes are accomplished through
digital networks (internal)
Key corporate assets (like core competencies,
financial and human assets) are managed digitally

Digital firms offer greater flexibility in organization and

management by
Time shifting: operating 24 hrs, 7 days
Space shifting: no geographic boundaries

Why are Information Systems so Essential

for Running and Managing a Business
Today?
Information Systems have become a foundation for

conducting business today.
In many industries, survival and the ability to
achieve strategic business goals are difficult without
extensive use of information technology.

Business firms today use information systems to

achieve six major objectives:
Operational excellence
New products, services, and business models
Customer and supplier intimacy
Improved decision making
Competitive advantage
Survival

Operational excellence:
Improvement of efficiency to attain higher profitability
Information systems, technology an important tool in
achieving greater efficiency and productivity
E.g. Wal-Marts RetailLink system links suppliers to its
5289 stores wordlwide for superior replenishment
system.
This results in timely availability, and reduction of
over-stocking and under-stocking of inventory.
This result in more sales per investment
(productivity and efficiency).

New products, services, and business

models:
Business model of a firm describes how company
produces, delivers, and sells product or service to create
wealth
Information systems and technology are also a major
enabling tool for new products, services, business models
E.g. Apples iPod, iTunes transformed the old business
model of music distribution from CDs into online
Netflixs Internet-based DVD rentals vs rental stores
Online application submission, bill payment, etc.

Customer and supplier intimacy:

Customer and supplier intimacy means knowing more and
accurately about needs of customer and suppliers.
Serving customers well leads to customers returning, which
raises revenues and profits
E.g. High-end hotels that use computers to track customer
preferences (room temperature, TV channels) and use IS to
monitor and customize environment
Intimacy with suppliers allows them to provide vital inputs, which
lowers costs
E.g. J.C.Penneys information system which links shirt sales
records at each store to contract manufacturer in Hong Kong.
Supplier produces (quantity, style, color, size) based on the
sales records and delivers directly to stores; no inventory
storage costs for J.C.Penney, lower price to customer
Improved decision-making
Good decisions can not be made without accurate information.
Lack of accurate information leads managers to rely more on
guesses which result in:
Overproduction/underproduction of goods and services
Misallocation of resources
Poor response times
These poor outcomes raise costs, lose customers
Information technology helps provide accurate and timely
information and thus improve decision making.
Verizons (phone company) Web-based digital dashboard to
provide managers with real-time data on customer complaints,
network performance, line outages, etc. Fast response through
immediate allocation of repair resources.

Competitive advantage
When firms achieve one or more of these business
objectives
Operational excellence
New products, services and business models
Customer and supplier intimacy and
Improved decision making
Then the firm has a chance to enjoy competitive

advantage. It can then
Charge less for superior products
Deliver better performance
However, competitive advantage is short-lived

Survival
Sometimes, information systems and technologies
become a necessity for businesses to survive
Such circumstances are 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 Enron
scandal, retain audit papers and records including e-mails for 5
years)

The Interdependence Between Organizations and

Information Technology
There is a growing interdependence between a firms 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
Perspectives on Information Systems
What exactly is an Information system:
Technical Perspective
An information systems
manages interrelated components
collect, process, store, and distribute information in order
to
support decision making, coordination, and control
Information systems transform raw data into useful

information through three basic activities: input,
processing and output.

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

Feedback is an important part of

Information Systems:
Constructive criticisms on input, processing and
outputs help evaluate and improve quality of
information systems.
Computer/Computer program are only a
part of the information system
Computers and software are technical foundation
and tools, similar to the material and tools used to
build a house

Functions of an Information System
An information system contains information about an organization and its surrounding environment. Three basic activitiesinput,
processing, and outputproduce 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 1-3
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.
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 1-4
Behavioral Perspective
An information system
Provide solution to a problem or challenge facing the firm and
Combines organization, management and technology dimensions.
The organization dimension involves issues such as the
organizations hierarchy, functional specialties, business
processes, culture and political interest groups.
The management dimension of information systems involves
issues such as leadership, strategy, and management behavior.
The technology dimension consists of computer hardware,
software, data management technology, and
networking/telecommunications technology (including the
1.37
Internet) 2007 by Prentice Hall
Behavioral Perspective
Computer literacy alone can not support information system
requirements.
Computer literacy focuses on knowledge of information technology
only.
But Information systems literacy focuses on knowledge technology
as well as knowledge of management and organization.
The field of Management Information Systems (MIS) tries to
achieve broader information systems literacy.
MIS deals with behavioral issues as well as technical issues
surrounding the development, use, and impact of information
systems used by managers and employees in the firm.

What do Organizational dimension of

information systems involve?
The organization dimension of information
systems involve
Hierarchy of authority and responsibility
Separation of business functions
Unique business processes
Unique business culture
Organizational politics

Hierarchy of authority, responsibility

Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers

Senior management makes long-range strategic decisions about

products and services as well as ensures financial performance of
the firm.
Middle management carries out the programs and plans of senior
management.
Operational management is responsible for monitoring the daily
activities of the business.
Knowledge workers such as engineers, scientists, or architects
design products or services and create new knowledge for the firm.
Data workers such as secretaries or clerks, assist with paperwork at
all levels of the firm.
Production or service workers actually produce the product or
deliver the service.
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 1-5
Separation of business functions

Sales and marketing
Human resources
Finance and accounting
Production and manufacturing

Unique business processes

Some businesses have developed formal rules that have
been developed over a long time for accomplishing
tasks.
These rules may vary with different businesses.

Unique business culture

Culture are fundamental assumptions, values, and ways
of doing things that has been accepted by most of the
members of the organization.
Each organization has a unique culture.

Organizational Politics
Different levels and specialties in an organization create
different interests and points of view.
These views conflict over how the company should be
run and how resources and rewards should be
distributed.
These are the characteristics of organizational politics.
The nature of organizational politics and how conflict are
resolved also vary with organizations.

Management dimension of
information system
The management dimension of information
systems relies on the ability of managers
to manage the existing businesses and
to create new services and business models.
Managers hopes, dreams and perception of
reality influences highly what kind of Information
systems would be accepted to them and to be
best run by them.

Technology dimension of information

systems
Computer hardware and software
Data management technology
Networking and telecommunications technology
Networks, the Internet, intranets and extranets, World
Wide Web
IT infrastructure: provides platform that system is
built on

Computer hardware is the physical equipment used for input, processing

and output activities in an information system. It consists of computers of
various sizes and shapes, various input, output and storage devices, and
telecommunication devices that link computers together.
Computer software consists of the detailed preprogrammed instructions
that control and coordinate the computer hardware components in an
information system.
Data management technology consists of the software governing the
organization of data on physical storage media.
Networking and telecommunications technology consists of physical
devices and software, that links the various pieces of hardware and
transfers data from one physical location to another.

A network links two or more computers to share data or resources, such as

a printer. The worlds largest and most widely used network is the
Internet.
Internet is a global network of networks that uses universal standards to
connect millions of different networks with more than 1.4 billion users in
over 230 countries around the world.
Internal corporate networks based on internet technology are called
intranets.
Private intranets extended to authorized users outside the organization are
called extranets.
The World Wide Web is a service provided by the Internet that uses
universally accepted standards for storing, retrieving, formatting, and
displaying information in a page format on the Internet.

All of these technologies, along with the people required to run and manage
them, represent resources that can be shared throughout the organization
and constitute the firms information technology (IT) infrastructure.
The IT infrastructure provides the foundation, or platform, on which the
firm can build its specific information systems.
Each organization must carefully design and manage its information
technology infrastructure so that it has the set of technology it needs for the
work it wants to accomplish with information systems.

UPS Competes Globally with Information Technology
Read the Interactive Session: Technology, and then

discuss the following questions:
What are the inputs, processing, and outputs of
UPSs package tracking system?
What technologies are used by UPS? How are these
technologies related to UPSs business strategy?
What problems do UPSs information systems solve?
What would happen if these systems were not
available?

Dimensions of UPS tracking system

Organizational:
Procedures for tracking packages and managing
inventory and provide information
Management:
Monitor service levels and costs
Technology:
Handheld computers, bar-code scanners, networks,
desktop computers, etc.

Are Information Systems Alone Enough

For Success
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!!

Investing in information technology does not

guarantee 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 nature
of information systems
Success Factors:
Adopting the right business model
Investing in COMPLEMENTARY ASSETS (organizational
and management capital)

What are 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

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


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 1-6
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 1-7

The study of information systems is a multidisciplinary field. No single

theory or perspective dominates.
In general, this field can be divided into technical and behavioral
approaches.
The technical approach to information systems emphasize mathematically
based models to study information systems, as well as the physical
technology and formal capabilities of these systems. The disciplines that
contribute to the technical approach are computer science, management
science, and operations research.
Computer science is concerned with establishing theories of computability,
methods of computation, and methods of efficient data storage and access.
Management science emphasizes the development of models for decision
making and management practices.
Operations research focuses on mathematical techniques for optimizing
selected parameters of organizations, such as transportation, inventory, etc.
Contemporary
Approaches to
Information
Systems
The study of
information
systems deals with
issues and insights
contributed from
technical and
behavioral
disciplines.
Figure 1.8

Issues such as strategic business integration, design, implementation,

utilization, and management can not be explored usefully with the models
in the technical approach. Important concepts and methods are contributed
from other behavioral disciplines for this purpose.
Important behavioral disciplines are sociology, psychology and economics.
Sociologists study information systems with an eye toward how groups and
organizations shape the development of systems and also how systems
affect individuals, groups and organizations.
Psychologists study information systems with an interest in how human
decision makers perceive and use formal information.
Economists study information systems with an interest in understanding
how new information systems change the control and cost structures within
the firm.
The behavioral approach does not ignore technology, but instead of
focusing on technical solutions, it concentrates in attitudes, management
1.63 and policy. 2007 by Prentice Hall

Combines computer science, management
science, operations research and practical
orientation with behavioral issues
Four main actors
Suppliers of hardware and software
Business firms
Managers and employees
Firms environment (legal, social, cultural context)
Approach of this book:

Sociotechnical view
Optimal organizational performance
achieved by jointly optimizing both
social and technical systems used in
production
Helps avoid purely technological
approach
A Sociotechnical Perspective on Information Systems
Figure In a sociotechnical perspective, the performance of a system is optimized when both

1-9 the technology and the organization mutually adjust to one another until a
satisfactory fit is obtained.
Challenge of Information Systems: Key Management Issues
Major management challenges:
1. Design competitive and effective systems: rethinking

of business processes, not simple automation
2. Understand system requirements of global business

environment: language, cultural and regulatory barriers
3. Create information architecture that supports

organizations goal

Challenge of Information Systems: Key Management Issues
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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Chapter 1

1.1 2007 by Prentice Hall

Explain why information systems are so essential

Define an information system from both a

Identify and describe the three dimensions of

1.2 2007 by Prentice Hall

LEARNING OBJECTIVES (Continued)

Assess the complementary assets required for

Identify the major management challenges to

1.3 2007 by Prentice Hall

1.4 2007 by Prentice Hall

1.5 2007 by Prentice Hall

1.6 2007 by Prentice Hall

1.7 2007 by Prentice Hall

1.8 2007 by Prentice Hall

1.9 2007 by Prentice Hall

Cost of operations has risen and competition has intensified

1.10 2007 by Prentice Hall

Information Technology helped to modernize and diversify

1.11 2007 by Prentice Hall

Information Technology also helped to change the way

1.12 2007 by Prentice Hall

1.13 2007 by Prentice Hall

The Role of Information Systems in Business Today

Role of Information Systems in Business

1.14 2007 by Prentice Hall

The Role of Information Systems in Business Today

How information systems are transforming business

1.15 2007 by Prentice Hall

The Role of Information Systems in Business Today

Whats Dominant in Management Information

The Role of Information Systems in Business Today

What is the impact of increased Information Technology

Information technology can result in a change in the way

As management behavior changes, how work gets organized,

1.17 2007 by Prentice Hall

The Role of Information Systems in Business Today

By connecting employees (separated by continent and time

The strength of cloud computing, and the growth of the

1.18 2007 by Prentice Hall

The Role of Information Systems in Business Today

What Specific Globalization opportunities

1.19 2007 by Prentice Hall

The Role of Information Systems in Business Today

1.20 2007 by Prentice Hall

The Role of Information Systems in Business Today

What is a digital firm

A digital firm is any firm whose

Significant business relationships with customers,

1.21 2007 by Prentice Hall

The Role of Information Systems in Business Today

Digital firms offer greater flexibility in organization and

Time shifting: operating 24 hrs, 7 days

Space shifting: no geographic boundaries

1.22 2007 by Prentice Hall

The Role of Information Systems in Business Today

Why are Information Systems so Essential

Information Systems have become a foundation for

1.23 2007 by Prentice Hall

The Role of Information Systems in Business Today

Business firms today use information systems to

1.24 2007 by Prentice Hall

The Role of Information Systems in Business Today

1.25 2007 by Prentice Hall