ITM 102 Chapter Notes - Chapter 1-6: Due Process, Management System, Blade Server
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Chapter 1 – Information Systems in Global Business Today
The Emerging Digital Firm
A digital firm is one in which nearly all of the organization’s significant business relationships with
customers, suppliers, and employees are digitally enabled and mediated. Core business process
are accomplished through digital networks spanning the entire organization or linking multiple
Business processes refer to the set of logically related tasks and behaviours that organizations
develop over time to produce specific business results and the unique manner in which these
activities are organized and coordinated. Developing a new product, generating and fulfilling an
order, creating a marketing plan, and hiring an employee are examples of business processes,
and the ways organizations accomplish their business processes can be a source of competitive
strength. A business process has also been defined as a set of activities and tasks that, once
completed, will accomplish an organizational goal.
Digital firms sense and respond to their environments far more rapidly than traditional firms,
giving them more flexibility to survive in turbulent times. Digital firms offer extraordinary
opportunities for more flexible global organization and management. In digital firms, both time
shifting and space shifting are the norm. Time shifting refers to business being conducted
continuously, 24/7, rather than in narrow “work day” time bands of 9 a.m. to 5 p.m. Space
shifting means that work takes place in a global workshop, as well as within national boundaries.
Strategic Business Objectives of Information Systems
Specifically, 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; and survival.
Businesses continuously seek to improve the efficiency of their operations in order to achieve
higher profitability. Information systems and technologies are some of the most important
tools available to managers for achieving higher levels of efficiency and productivity in business
operations, especially when coupled with changes in business practices and management
New Products, Services, and Business Models
Information systems and technologies are a major enabling tool for firms to create new products
and services, as well as entirely new business models. A business model describes how a
company produces, delivers, and sells a product or service to create wealth.
Customer and Supplier Intimacy
When a business really knows its customers, and serves them well, the customers generally
respond by returning and purchasing more. This raises revenues and profits. Likewise with
suppliers: the more a business engages its suppliers, the better the suppliers can provide vital
inputs. This lowers costs.
Improved Decision Making
Many business managers operate in an information fog bank, never really having the right
information at the right time to make an informed decision. Instead, managers rely on forecasts,
best guesses, and luck. The result is over or underproduction of goods and services,
misallocation of resources, and poor response times. These poor outcomes raise costs and lose
customers. In the past decade, information systems and technologies have made it possible for
managers to use real-time data from the marketplace when making decisions.
When firms achieve one or more of these business objectives—operational excellence; new
products, services, and business models; customer/supplier intimacy; and improved decision
making—chances are they have already achieved a competitive advantage. Doing things better
than your competitors, charging less for superior products, and responding to customers and
suppliers in real time all add up to higher sales and higher profits that your competitors cannot
Business firms also invest in information systems and technologies because they are necessities
of doing business. Sometimes these “necessities” are driven by industry-level changes.
Perspectives on Information Systems
Information technology (IT) consists of all the hardware and software that a firm needs to use
in order to achieve its business objectives. This includes not only computer machines, storage
devices, and handheld mobile devices, but also software, such as the Windows or Linux operating
systems, the Microsoft Office desktop productivity suite, and the many thousands of computer
programs that can be found in a typical large firm.
What is an Information System?
An information system can be defined technically as a set of interrelated components that collect
(or retrieve), process, store, and distribute information to support decision making and control
in an organization.
By information we mean data that have been shaped into a form that is meaningful and useful
to human beings. Data, in contrast, are streams of raw facts representing events occurring in
organizations or the physical environment before they have been organized and arranged into a
form that people can understand and use. Information is created through the use of data.
Three activities in an information system produce the information that organizations need to
make decisions, control operations, analyze problems, and create new products or services.
These activities are input, processing, and output.
o Input – Captures or collects raw data from within the organization or from its external
o Processing – Converts this raw input into a meaningful form.
o Output – Transfers the processed information to the people who use it or to the activities
for which it will be used.
Dimensions of Information Systems
Management information system, or MIS, broadly refers to a computer-based system that
provides managers with the tools to organize, evaluate and efficiently manage departments
within an organization. Management Information Systems (MIS) is the study of people,
technology, and organizations.
The key elements of an organization are its people, structure, business processes, politics, and
culture. Their structures reveal a clear-cut division of labor. Authority and responsibility in a
business firm are organized as a hierarchy, or a pyramid structure. The upper levels of the
hierarchy consist of managerial, professional, and technical employees, whereas the lower
levels consist of operational personnel.
o Senior management makes long-range strategic decisions about products and services as
well as ensures financial performance of the firm.
o Middle management carries out the programs and plans of senior management.
o Operational management is responsible for monitoring the daily activities of the
o Knowledge workers, such as engineers, scientists, or architects, design products or
services and create new knowledge for the firm.
o Data workers, such as secretaries or clerks, assist with scheduling and communications
at all levels of the firm.
o Production or service workers actually produce the product and deliver the service.
Experts are employed and trained for different business functions. The major business
functions, or specialized tasks performed by business organizations, consist of sales and
marketing, manufacturing and production, finance and accounting, and human resources.