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Business Administration
BUS 237
Kamal Masri

Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Chapter 1: Information Systems and You • Information system (IS): a group of components that interact to produce information The Five Components of an Information System Hardware Software Data Procedures People More difficult to change --------------------------------------------------------------------------------- • Management information systems (MIS): the development and use of information systems that help businesses achieve their goals and objectives • Information technology (IT): the methods, inventions, standards and products; raw technology that concerns only hardware, software and data components of IS model  IT, by itself, does not help an organization achieve its goals and objectives; it must be embedded into an IS to become useful • Moore’s Law: the number of transistors per square inch on an integrated chip doubles every 18 months  Essentially, this means the speed of computer chips double every 18 months  As a result, the price/performance ratio of computers (and other IT products) has dramatically declined over the years 1 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Chapter 2: Business Processes, Information, and Decision Making • Business process: a network of activities, resources, facilities, and information that interact to achieve some business function (e.g., inventory management, manufacturing, sales and support, etc. – See Figure 2-1, p. 25) Components of a Business Process 1. Activities: transform resources and information of one type into resources and information of another type (e.g., quantity received and shipping invoice information into a payment)  Can be manual, automated or both 2. Resources: Items of value  Includes suppliers and customers 3. Facilities: structures used within a business process (e.g., inventories, databases, equipment, etc.) 4. Information • data: recorded facts or figures • Definitions of information:  Knowledge derived from data (e.g., individual wages in a department– data  average wage in the department – information)  Data presented in a meaningful context (e.g. employee’s wage – data  employee makes half the average wage in the department – information)  Processed data (e.g. data that has been summed, ordered, averaged, grouped, compared, etc.)  A difference that makes a difference Characteristics of Good Information • Accurate • Timely • Relevant…  To context  To subject • Just barely sufficient: We only want enough information to make decisions and no more 2 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy • Worth its cost: Benefits > Costs • Automated system: an activity in a business process where the work formerly done by people following procedures is now done by computers following instructions in software Hardware Software Data Procedures People --------------------------------------------------Work moves from human side to computer side A mostly automated system Hardware Software Data Procedures People ---------------------------------------------------------------- A mostly manual system Hardware Software Data Procedures People ---------------------------------------------------------------- Decision Levels • Operational: concern day-to-day activities (e.g., ordering inventory, extending credit, paying accounts payable, etc.)  Supported by transaction processing systems (TPS) • Managerial: concern the allocation and utilization of resources (e.g., departmental budgeting, employee-project assignment, etc.)  Supported by management information systems (MIS) (NOTE: In this context, we are referring to an information system that supports managerial-level decision making, not the broader definition introduced in Chapter 1) • Strategic: concern broader-scope, organizational issues (e.g. product line expansion, regional expansion, competitor acquisition, etc.)  Supported by executive information systems (EIS) Decision Structures • Structured decision: a decision for which there is an understood and accepted method for making the decision (e.g. inventory reordering in a just-in-time system) 3 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy • Unstructured decision: a decision for which there is no agreed- on decision making method (e.g. assessment of prospective employee suitability for job performance) • Note: We are using the terms “structured” and “unstructured” in relation to the decision process, not the underlying subject. For example, weather forecasting is a structured decision because standardized and agreed-upon methods are used by all meteorologists, but weather itself is unstructured. Relationship between Decision Level and Decision Process • See Figure 2-8, p. 33 Decision Making Steps 1. Intelligence gathering: What is to be decided, what the criteria for the decision will be, what data are available 2. Alternatives formulation: Determining the various alternatives 3. Choice: Analyzing the choices against the criteria using data, selecting an alternative 4. Implementation 5. Review: Evaluate results of decision, repeat process if necessary 4 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Chapter 3: Organizational Strategy, Information Systems, and Competitive Advantage • Productivity paradox: the lack of evidence of an increase in worker productivity associated with the massive increase in investment in IT  Difficulty in measuring productivity in increasingly service- based economy partly responsible  Intangible productivity benefits associated with IT • Three ways through which the value of IT can be realized: 1. Productivity increases: More output from the same inputs, better output, or faster output production 2. Structure of competition: Altering the way corporations compete (e.g., when one corporation in an industry invests in IT, competing firms often do the same to not be at a competitive disadvantage) 3. By the customer: Increased competition  productivity increases  reduced costs  savings passed on to customers • Productivity in organizations can be increased through increased  Efficiency: Business processes accomplished more quickly or with fewer resources and facilities, or both – “doing things right”  Effectiveness: Changing business processes to deliver something new and improved – “doing the right things” • Value chain: formalized by Michael Porter, a network of activities that improve effectiveness (or value) of a good or service (e.g., rubber harvested  shipped to manufacturer  tire designed  rubber manufactured into tire  tire packaged  tire sent to retailer  tire offered with warranty)  Each business process adds more and more value  In general, the more value a company adds to good/service, the higher the price it can charge  Margin: the difference between the price the customer is willing to pay and the cost the company incurs in moving the good or service through the value chain • Primary activities: activities where value is added directly to the product (e.g., inbound logistics, operations, outbound logistics, marketing/sales, service, etc.) 5 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy • Support activities: activities that contribute indirectly to value creation (e.g., procurement, technology, human resources, company’s infrastructure, etc.) • Porter’s Five Forces Model: five competitive forces determine industry profitability: 1. Bargaining power of customers 2. Threat of substitutions 3. Bargaining power of suppliers 4. Threat of new entrants 5. Rivalry among existing firms  See Figure 3-4, p. 51 • Competitive strategy: the strategy an organization chooses to succeed in its industry Porter’s Four Competitive Strategies Cost Differentiation Industry- Lowest cost across Better wide industry product/service across industry Focus Lowest cost within Better industry segment product/service within industry segment Types of Technological Innovation • Sustaining technologies: changes in technology that maintain the rate of improvement in customer value (e.g., improvements in production of rubber allowing the production of tires that perform better)  Help make processes more efficient (and often more effective)  create value for organizations • Disruptive technologies: technologies that introduce a very new package of attributes to the accepted mainstream products (e.g., the change from cassette tapes and CDs to MP3 players)  When used to gain competitive advantage, can alter structure of the industry or even create a new industry • IT can act as either type of technological innovation 6 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Principles of Competitive Advantage Product Implementations 1. Create a new product/service 2. Enhance products/services 3. Differentiate products/services System Implementations 4. Lock in customers/buyers 5. Lock in suppliers  Switching costs: Costs incurred when switching from one company’s products/services to another’s (can be created by making it difficult to switch to competitors, or by making it easy to work with the organization) 6. Establish alliances  Alliances establish standards, promote product awareness, develop market size, reduce purchase costs, etc. 7. Reduce costs • Because the effects of IT are easily seen, competing technologies are quickly developed and become readily available, and therefore it is difficult to sustain competitive advantage from IT • When IT is integrated into an IS, different organizations will likely have largely different results  Long-term competitive advantage lies not with technology, but how an organization adopts technology  Requires organizations to find distinctive ways to compete 7 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Chapter 4: Hardware and Software History of Computers • Early computers (1939-1952) o First digital computer: ENIAC o Could only run one program at a time o Housed in universities • Mainframes (1952-Present) o Mainframe: first digital machines used in business and government o First-generation based on vacuum tubes; second generation built with transistors o Third-generation mainframes included operating systems and multiprocessing, but cost millions of dollars • Microcomputers (1975-Present) o First microcomputer: MITS Altair 8800 o Companies such as Microsoft began writing programming languages, programs and operating systems for use on microcomputers o Evolved into what we use today • Networking Personal Computers (1985-Present) o Local Area Networks (LANs) using Ethernet to share data among microcomputers o 1990s: Commercialization of Wide Area Networks (WANs) such as the Internet • Hardware: electronic components and related gadgetry that input, process, output, store and communicate data according to instructions encoded in computer programs or software • E-cycling: the recycling of electronic hardware 8 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy Computer Hardware Stora ge Input Proce Outpu ss t • Input hardware: keyboard, mouse, document scanners, barcode scanners, microphones, webcams, tablets, etc. • Central processing unit (CPU): selects instructions, processes them, performs arithmetic and logical comparisons, and stores results of operations in memory (e.g., Intel Core 2 Duo/Quad, AMD Athlon 64/Phenom) o Performance factors:  Speed (clock rate): the rate at which a CPU can perform operations  cache memory: fast memory that stores frequently used instructions • This memory is volatile, which means its contents are lost when the computer is shut off  Data bus/channel: the means by which the CPU reads/writes instructions from/to main memory  data bus/channel speed: how fast instructions can be moved from main memory to the CPU  data bus/channel width: how many instructions can be transferred through the data bus at the same time • main memory (RAM): a set of cells in which each cell holds a byte of data or instructions; each cell has an address, and the CPU uses the addresses to identify particular data items o Also volatile o Performance factors  Size: the greater the quantity of memory, the more programs that can be run at the same time (or the same amount of programs more smoothly)  Speed o If a new program is opened or more data is created and not enough memory is available, the operating system, by 9 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy a process known as memory swapping, will remove existing programs/data from memory and place it temporarily on the hard drive to make room for the new program/data. This greatly reduces computer performance. • Special function cards: add special functionality to a computer (e.g., video card for enhanced 3D capability; sound card to add/enhance audio; etc.) • Output hardware: monitors (CRT, LCD), printers, speakers, projectors, etc. • Storage hardware: saves data and programs o These are all nonvolatile, which means that the data are preserved when power is disconnected o Types of storage hardware:  Magnetic disk • Performance factors: o Size o Channel type and speed o Rotational speed o Seek time: the time it takes for the read head to get in position over the data on the disk  CD (700mb)  DVD (Single layer: 4.7GB, Dual Layer: 8.5GB)  Magnetic tape: usually only used for backup purposes Computer Data • Binary digit (bit): how computers represent all data; a bit is either a 0 (off) or a 1 (closed) • Byte: a group of 8 bits; represents one character byte 8 bits kilobyte (KB) 1024 bytes megabyte 1024KB (MB) gigabyte (GB) 1024MB terabyte (TB) 1024GB 10 Midterm Study Notes (Ch. 1-6) BUS 237 Summer 2008 Steven Toy • Note: Hardware manufacturers often simplify these conversions so each unit is 1000 of the smaller unit (i.e., 1GB = 1000MB) Difference between Clients and Servers • Client: a computer that provides word processing, spreadsheets, database access, and usually a network connection o Thin client: a software application that requires nothing more than a browser and can be run only on the user’s computer o Thick client: a software application that requires programs other than just the browser on a user’s computer (i.e., requires code on both client and server computers) • Does not need network access to run • Server: a computer that provides some type of service, such as hosting a database, publishing a website, etc. o Faster, larger and more powerful than client computers o Server farm: a large collection of server computers that coordinates the activities of the servers, usually for commercial purposes Software • Operating system (OS): a program that controls the computer’s resources o Manages contents of main memory, processes keystrokes and mouse movements, sends signals to the monitor, reads and writes files, and controls the processing of other programs • Instruction set: the commands that a CPU can process o Operating systems only work with processors that conform to a certain instruction set (e.g., Windows on Intel/AMD instruction set, Mac OS on PowerPC instruction set) • When purchasing software, you are not buying the software, you are buying a license to use the software • Application software: programs that perform a business function (e.g., Word, Excel, QuickBooks, etc.) o Horizontal-market application: software that provides capabilities common across all organi
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