CHAPTER ONE: INFORMATION SYSTEMS IN GLOBAL
BUSINESS TODAY
The Role of Information Systems in Business Today
How Information Systems are Transforming Business
• Cell phones, Blackberries, iPhones, email and online Internet conferencing have
all become essential tools of business
• Businesses have become very successful selling goods online
• Businesses use social networking tools to connect their employees, customers,
and managers worldwide
What is New in Management Information Systems?
• Successful firms are those that learn how to use new technologies
• Three interrelated changes in technology area:
1) Emerging mobile digital platform
2) Growth of online software as a service
3) Growth in “cloud computing” (more and more business software runs over
Internet)
• Emerging digital platform:
o Business computing is moving form PCs and desktop machines to mobile
devices
o Managers use to coordinate work, communicate with employees, provide
info
• Strength of cloud computing and growth of mobile digital platform allow
organizations to rely on:
o Telework
o Remote work
o Distributed decisionmaking
o Outsourcing
Globalization Challenges and Opportunities: A Flattened World
• Employment in information systems is expanding
• Wages are stable in nonrecessionary years
• Outsourcing has accelerated development of new systems in Canada and
worldwide
• Internet has reduced costs of operating and transaction on a global scale
• Customers can shop in a worldwide marketplace obtaining price and quality info
24 hours a day
• Google and eBay are able to replicate business models and services in multiple
countries without having to redesign their expensive fixedcost information
systems infrastructure
The Emerging Digital Firm
• Digital firm: o Nearly all of organization’s significant business relationships are digitally
enabled and mediated
o Core business processes are accomplished through digital networks
spanning entire organization or linking multiple organizations
• Business processes:
o Set of logically related tasks/behaviors that organizations develop over
time to produce specific business results
o Ex. developing new product, generating an order, creating marketing plan,
hiring an employee
• Key corporate assets are managed through digital means (ex. intellectual property,
core competencies, financial/human assets)
• Any piece of info required to support business decisions is available at any time
and place in firm
• Sense and respond to environment faster than traditional firms
• More flexible to survive turbulent times
• Time shifting: business is conducted continuously (24/7)
• Space shifting: work takes place in global workshop and within national
boundaries
Strategic Business Objectives of Information Systems
• Operational Excellence:
o Info systems and technologies help managers achieve higher levels of
efficiency and productivity
o Ex. WalMart’s Retail Link system: digitally links supplier to stores so as
soon as customer purchases an item, supplier knows to ship replacement
• New Products, Services, and Business Models:
o Info systems and technologies are major enabling tool for firms to create
new products, services and business models
o Business model: describes how company produces, delivers and sells
product/service
o Ex. Apple transformed old business model of music based on CDs into
online distribution
• Customer and Supplier Intimacy:
o Information systems and technologies can achieve customer and supplier
intimacy
o Ex. hotels that keep track of guests’ preferences so that room conditions
(room temp, checkin time, TV shows) can be set automatically when
customer comes to hotel
• Improved Decision Making:
o Info systems/technologies make it possible for managers to use realtime
data from marketplace when making decisions
o Reduces costs and improves response times
• Competitive Advantage: o Doing things better than competitors, charging less for superior products,
responding to customers/suppliers increase sales and profits
o Ex. Apple, WalMart and UPS are industry leaders
• Survival:
o Info systems/technologies are necessities of doing business
o Federal and provincial legislation in many industries requires significant
information retention and reporting
o Info systems provide capability to respond to requirements
Perspective on Information Systems
• Information technology (IT): all hardware and software that a firm needs to use in
order to achieve business objectives
• Includes: computer machines, storage devices, mobile devices, software
(Windows), Microsoft Office, etc.
What Is an Information System?
• Information system: a set of interrelated components that collect, process, store,
and distribute information to support decision making and control in an
organization
• Info systems contain info about significant people, places, things within
organization environment around it
• Information: data that have been shaped into a form that is useful
• Data: streams of raw facts representing events before they have been organized
into a form that people can understand and use
• Three activities in an info system:
o Input: captures/collects raw data from within organization or its external
environment
o Processing: converts raw input into a meaningful form
o Output: transfers processed info to people who will use it or to activities
for which it will be used
• Feedback: output that is returned to appropriate members of organization to help
them evaluate/correct input stage
• Computerbased info systems: use computer technology to process raw data into
meaningful info
Dimensions of Information Systems
• Computer literacy:: knowledge of information technology
• Information systems literacy: understanding of info systems (includes
management and organizational dimensions and technical dimensions)
• Dimensions of information systems
(1) Organizations:
o Organizations have structure composed of different levels/specialties Senior management: Make longrange strategic decisions about
products/services
Ensures financial performance of firm
Middle management: Carries out programs and plans of senior
management
Operational management: Responsible for monitoring daily activities
of business
Knowledge workers Design products/services
(ex. engineers, scientists, architects) Create new knowledge
Data workers Assist with scheduling and communications
(ex. secretaries, clerks) at all levels of firm
Production service workers Produce product or deliver service
o Major business functions include sales and marketing, manufacturing
and production, finance and accounting, HR
o Information systems automate many business processes
o Parts of organization’s culture can always be found in its info systems
(2) Management
o Managers perceive business challenges in environment
o Set organizational strategy for responding to challenges
o Allocate human and financial resources to coordinate work and
achieve success
o Info technology plays powerful role in helping managers design and
deliver new products/services and redirect/redesign organizations
(3) Information Technology
o Managers us IT to cope with change
Computer hardware Physical equipment used for input, processing, output
activities in info system
Computer software Detailed, preprogrammed instructions that control and
coordinate computer hardware components
Data management Software governing organization of data on physical
technology storage media
Networking and Physical devices and software
telecommunications Links various pieces of hardware
technology Transfers data from one physical location to another
Network Links two or more computers to share data/resources
Intranets Connects different systems and networks within firm
Extranets Private intranets extended to authorized users ouside the
organization
It Is Not Just Technology: A Business Perspective on Information Systems
• Information technology/systems provide real economic value to business
• Possible ROIs from IT include:
o Increases in productivity o Increase in revenues
o Superior longterm strategic position
• Value of an info system to a business is determined by extent to which system will
lead to:
o Better management decisions
o More efficient business processes
o Higher firm profitability
• An information system is an important instrument for creating value for the firm
Complementary Assets: Organizational Capital and the Right Business Model
• Considerable variation in returns firms receive from info systems:
Invest little and receive much Invest a great deal and receive a
great deal
Invest little and receive littleInvest an equal amount and
receive few returns
• Reason for differences: complementary assets
• Complementary assets: assets required to derive value from primary investment
• Firms that support IT investments with investments in complementary assets
receive superior returns
• Must adopt:
o New business models
o New business processes
o Management behaviour
o Organizational culture
o Training
• Firms that do not invest in complementary assets receive fewer or no returns
• Organizational and management capital: investments in organization and
management
• Key organizational complementary investments:
1. Business culture that values efficiency and effectiveness
2. Appropriate business model
3. Efficient business processes
4. Decentralization of authority
5. Distributed decision rights
6. Strong IS development team
• Key managerial complementary assets:
1. Strong senior management support for change
2. Incentive systems that reward innovation
3. Emphasis on teamwork
4. Training programs
5. Management culture that values flexibility and knowledge
Contemporary Approaches to Information Systems Technical Approach
• Emphasizes:
o Mathematically based models to study systems
o Physical technology and formal capabilities of systems
• Disciplines that contribute: computer science, management science, operations
research
Behavioural Approach
• Concerned with behavioural issues that arise in development and longterm
maintenance of info systems:
o Strategic business integration
o Design
o Implementation
o Utilization
o Management
• Disciplines that contribute: sociologists, psychologists, economists
• Focuses on changes in attitudes, management and organizational policy
Approach of This Text: Sociotechnical Systems
• Sociotechnical view: optimal organizational performance is achieved by jointly
optimizing both social and technical systems used in production
• Optimize firms performance as a whole
• Technology must fit organizational and individual needs
CHAPTER TWO: HOW BUSINESSES USE INFORMATION
SYSTEMS
Business Processes and Information Systems
Business Processes
• Business processes: manner in which work is organized, coordinated, and focused
to produce valuable product/service
• Performance of a firm depend on how well business processes are
designed/coordinated
• Can be a competitive strength if enable innovation
• Can be a liability if they impede organizational responsiveness and efficiency
• Some business processes cross many functional areas and require coordination
across departments
• Computerbased information systems can make information flow between
departments faster
Functional Area Business Process
Manufacturing and production Assembling product
Checking for quality Producing bills of materials
Sales and marketing Identifying customers
Making customers aware of product
Selling product
Finance and accounting Paying creditors
Creating financial statements
Managing cash accounts
Human resources Hiring employees
Evaluating employees’ job performance
Enrolling employees in benefits plans
How Information Technology Improves Business Processes
• Information systems automate many steps in business processes that were
formerly performed manually
• New technology can:
o Change flow of info
o Make it possible for many more people to access and share info
o Replace sequential steps with tasks that can be performed simultaneously
o Eliminate delays in decision making
Types of Information Systems
• Typical business organization has systems supporting processes for each of major
business functions
• Being replaced with largescale crossfunctional systems that integrate activities
of related business processes
Systems for Different Management Groups
Transaction Processing Systems (TPS)
• Computerized systems that performs and records daily routine transactions
necessary to conduct business
• Used by operational managers
• Keep track of elementary activities and transactions of organization
• Ex. Sales, receipts, cash deposits, payroll, credit decisions, flow of materials in
factory
• Purpose is to track flow of transactions through organization
• Managers need TPS to monitor status of internal operations and firm’s relations
with external environment
• TPS are so important that failure for just a few hours can lead to a firm’s demise
Business Intelligence Systems for Decision Support
• Middle managers need systems to help with monitoring, controlling, decision
making and administrative activities
• Management information systems (MIS):
o Provide reports on organization’s current performance o Info is used to monitor/control business and predict future performance
o Data from TPS are presented in reports
• Decisionsupport systems (DSS):
o Support more nonroutine decision making
o Focus on problems that are unique and rapidly changing
o Use info from TPS and MIS and bring in info from external sources (ex.
stock prices, product prices of competitors)
o Ex. Intrawest collects and stores large amount of customer data and
analyzes data to determine value, revenue potential, and loyalty of every
customer
• Business intelligence: data and software tools for organizing, analyzing and
providing access to data to help managers and other enterprise users make more
informed decisions
Executive Support Systems (ESS)
• Help senior management make decisions
• Address nonroutine decisions requiring judgment, evaluation, and insight
because there is no agreedon procedure for arriving at a solution
• ESS present graphs and data from many sources
• Info usually delivered to senior executives through a portal
• Incorporate data bout external events and draw info from internal MIS and DSS
• Digital dashboard: displays graphs and charts of key performance indicators for
managing company on a single screen
Systems for Linking the Enterprise
Enterprise Applications
• Enterprise applications:
o Span functional areas
o Focus on executing business processes across business firm
o Include all levels of management
o Help business become more flexible and productive by coordinating
business processes
• Four major enterprise applications:
(1) Enterprise Systems (ERP)
o Integrate business processes in manufacturing and production, finance
and accounting, sales and marketing, and human resources into single
software system
o Info is stored in single data repository where can be used by different
parts of business
o Managers can use firmwide info to make more precise and timely
decisions
(2) Supply Chain Management Systems (SCM)
o Help manage relationships with suppliers o Help suppliers, purchasing firms, distributors and logistics companies
share info about orders, production, inventory levels and delivery of
products
o Increase firm profitability by lowering costs of moving and making
products
o Enable managers to make better decisions about how to shecule
sourcing, production, distribution
o Interorganizational system (automate flow of info across
organizational boundaries)
(3) Customer Relationship Management Systems
o Helps manage relationships with customers
o Help firm identify, attract and retain most profitable customers
o Provide better service to existing customers
o Increase sales
(4) Knowledge Management Systems (KMS)
o Enable organizations to manage processes for capturing and applying
knowledge and expertise
o Collect all relevant knowledge/expertise in firm
o Make available whenever and wherever it is needed
o Link firm to external sources of knowledge
Intranets and Extranets
• Alternative tools for increasing integration and expediting flow of info within
firm and with customers and suppliers
• Intranets: internal company Web sites accessible only by employees
• Extranets: company Web sites accessible only to authorized vendors and suppliers
EBusiness, ECommerce, EGovernment
• Electronic business:
o Use of digital technology and Internet to execute major business processes
in enterprise
o Includes activities for internal management of firm and for coordination
with suppliers and business partners
• Electronic commerce:
o Deals with buying and selling of goods/service over internet
o Activities supporting market transactions (advertising, marketing,
customer support, security, delivery, payment)
• Egovernment:
o Application of Internet to digitally enable government and publicsector
agencies’ relationships with citizens, businesses, governments
o Makes government operations more efficient
o Empowers citizens
Systems for Collaboration and Teamwork What Is Collaboration?
• Collaboration:
o Working with others to achieve shared and explicit goals
o Focuses on task/mission accomplishment
o Takes place in business or between businesses
• Teams:
o Have specific mission assigned to them
o Members need to collaborate on accomplishment of specific task
o Must collectively achieve team mission
• Collaboration and teamwork are important because of:
(1) Changing nature of work
o Work used to be factory manufacturing, precomputer
o Each stage occurred independently
o Coordinated by supervisors
o Work today requires closer coordination and interaction
(2) Growth of professional work
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