1. Foundations of
Information Systems in Business
Chapter
1
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 1-2
• Understand the concept of a system and
how it relates to information systems.
• Explain why knowledge of information
systems is important for business
professionals and identify five areas of
information systems knowledge they need.
Learning Objectives

3. 1-3
Learning Objectives
• Give examples to illustrate how business
applications of information systems can
support a firm’s business processes,
managerial decision making, and strategies
for competitive advantage.
• Provide examples of several major types of
information systems from your experiences
with business organizations in the real
world.

4. 1-4
• Identify several challenges that a business
manager might face in managing the
successful and ethical development and use
of information technology in a business.
• Provide examples of the components of real
world information systems
• Demonstrate familiarity with the myriad of
career opportunities in information systems.
Learning Objectives

5. 1-5
Competitive Advantage
• “Developing products, services, processes,
or capabilities that give a company a
superior business position relative to its
competitors and other competitive forces.”
Glossary, p. 637
• Attributed to a firm that is … “leading an
industry in some identifiable way, such as
sales, revenues or new products.” Ch. 2, p. 53
• “…when a firm sustains profits that exceed
the average for an industry …”
Ch. 2, p. 53

6. 1-6
What is MIS?
• Management Information Systems (MIS) is
the development and use of information
systems to help businesses achieve their
goals and objectives
• An information system (IS) is a group of
components that interact which each other
to produce information

7. 1-7
What is MIS?
• Information systems exist to help people
achieve the goals and objectives of their
business.
– You should take an active role in specifying system
requirements and helping manage development
projects since you are the one who’ll be using the
system to do your job.
• You need to learn how to use an IS
– You have responsibilities for protecting the
security of the system and its data
– You have responsibilities for backing up data

8. 1-8
What is Information?
• We know what an information system is – an
assembly of hardware, software, data,
procedures, and people that interact to
produce information. But what is information?
• Definitions vary. Information is:
– Knowledge derived from data.
– Data presented in a meaningful context.
– Data processed by summing, ordering, averaging,
grouping, comparing, or other similar operations.
• Any of these definitions will do; the important
point is to discriminate between data and
information.

9. 1-9
What is Information?
• Information is subjective
• Information in one person’s context may be
just a data point in another person’s
context, since what may be important to
you may not hold the same level of
importance to someone else.
• Context changes occur in information
systems when the output (information
produced) of one system feeds (is data to)
a second system.

10. 1-10
What is Information?
Figure 1-4 One User’s Information is Another User’s Data

11. 1-11
What are the Characteristics of Good
Information?
• Good information must be:
– Accurate – entering incorrect sales data creates false
information; e.g., GIGO (garbage in, garbage out).
– Timely – knowing that production doesn’t have enough raw
materials for next week’s schedule won’t be useful
information three weeks from now.
– Relevant – if your boss needs to know how many
shipments were late last month, you shouldn’t give him/her a
list of all items that shipped.
– Worth its cost – is it cost worthy to map out the entire
U.S. if you only need one state?

12. 1-12
What is the Difference Between Information
Technology and Information Systems?
• Information technology and information
systems are two closely related terms.
– Information technology refers to the products,
methods, inventions, and standards that are used
for the purpose of producing information.
– Information Systems (IS) refers to the assembly of
hardware, software, data, procedures, and people
that produces information.
• Information technology drives the
development of new information systems.

13. 1-13
Types of Information Systems

14. 1-14
Information systems combine:
• Operations Support Systems (Figure 1.7)
– Transaction Processing systems
– Process Control Systems
– Enterprise Collaboration Systems
• Management Support Systems (Figure 1.9)
– Management Information Systems
– Decision Support Systems
– Executive Information Systems
• Other Systems (Figure 1.11)
– Expert Systems
– Knowledge Management Systems
– Strategic Information Systems

15. 1-15
Two Ways to Process Transactions
• Transaction Processing (batch)
– Accumulate transactions over time
– Process periodically
– Example: a bank receives checks during the day
and processes in a batch at night
• Online Processing (real-time)
– Process transactions immediately
– Example: a bank processes an ATM withdrawal
immediately

16. 1-16
Types of Management Support Systems
• Management Information Systems (MIS)
– Reports and displays
– Example: daily sales analysis reports
• Decision Support Systems (DSS)
– Interactive and ad hoc support
– Example: a what-if analysis to determine
where to spend advertising dollars
• Executive Information Systems (EIS)
– Critical information for executives and
managers
– Example: easy access to actions of
competitors

17. 1-17
Other Information Systems
• Expert Systems
– Example: credit application advisor
• Knowledge Management Systems
– Support creation, organization, and dissemination
of business knowledge Example: intranet access
to best business practices
• Strategic Information Systems
– Help get a strategic advantage over customer
– Examples: shipment tracking, e-commerce Web
systems
• Functional Business Systems
– Focus on operational and managerial applications
Examples: accounting, finance, or marketing

18. 1-18
IT Challenges and Opportunities

19. 1-19
Responsibility and Accountability
• IT plays an integral role in every facet of a
business
• Failure is often pinned on IT
• Cultivate a culture that embraces change
• Break projects into pieces
• Set realistic expectations
• There will always be problems
– “That’s life in IT”

20. 1-20
Challenges and Ethics of IT
• What are the ethical responsibilities?
• What are the risks?
• How can you protect yourself and your
company from computer crime?

21. 1-21
IT Careers

22. 1-22
The IS Function
• Major functional area of business
• Important contributor to
– Efficiency, productivity, morale, customer service
and satisfaction
• Major source of information for decisions
• Vital ingredient in developing competitive
products and services
• Dynamic and challenging career opportunity
• Key component of networked business

23. 1-23
What is a System?
• Interrelated components
• Defined boundary
• Working together
• Common objectives
• Accepting inputs and producing outputs
• Organized transformation process

24. 1-24
A Business as a System

25. Competing with
Information Technology
Chapter
2
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

26. 1-26
• Identify several basic competitive
strategies and explain how they use
information technologies to confront the
competitive forces faced by a business
• Identify several strategic uses of Internet
technologies and give examples of how
they help a business to gain competitive
advantages
• Give examples of how business process
reengineering frequently involves the
strategic use of IT
Learning Objectives

27. 1-27
• Identify the business value of using
Internet technologies to become an agile
competitor or form a virtual company
• Explain how knowledge management
systems can help a business gain
strategic advantages
Learning Objectives

28. 1-28
• Technology is no longer an afterthought in
business strategy, but the cause and driver
• IT can change the way businesses compete
– Vital competitive networks
– Organizational renewal
– Necessary investment
• Integral to success
Strategic IT

29. 1-29
• A strategic information system uses IT to
help an organization…
– Gain a competitive advantage
– Reduce a competitive disadvantage
– Meet other strategic enterprise objectives
• What is Competitive Advantage?
– Capability for advantage over competitive forces
– Leading the industry in some identifiable way
– Sustains profits above the industry average
– Hard to maintain over a long period of time
Competitive Strategy Concepts

30. 1-30
• IT is a business asset, like buildings and land
• Quantify IT Value and Risks
– How much would normal operations cost without
IT systems?
– How much would operations cost if the IT system
goes down?
• IT is investment not cost
• Must align IT with company strategy
RWC 1: Quantify IT Risks and Value

31. 1-31

32. 1-32
• Rivalry of Competitors
– Positive, natural, healthy
• Threat of new entrants
– Apple, TRS 80, Commodore, IBM, HP,
Compaq, Gateway, Dell, Acer
• Threat of substitutes
– Salon shampoo vs Wal-Mart brand
– VCR vs DVD vs BluRay
• Customer bargaining power
– Buy from competitors or don’t buy
• Suppliers bargaining power
– Your competitor pays in days not weeks
Porter’s Five Forces of Competition

33. 1-33
Competitive Forces and Strategies

34. 1-34
• Cost Leadership
– Become low-cost producers
– Help suppliers or customers reduce costs
– Increase cost to competitors
• Example: Priceline
• Differentiation Strategy
– Set a firm’s products apart from competitors’
– Focus on a particular segment or niche market
• Example: Dell
Five Competitive Strategies

35. 1-35
• Innovation Strategy
– Unique products, services, or markets
– Radical changes to business processes
• Example: Dell
• Growth Strategy
– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services
• Example: Wal-Mart
Competitive Strategies (continued)

36. 1-36
• Alliance Strategy
– Includes mergers, acquisitions, joint
ventures, virtual companies
– Customers, suppliers, competitors,
consultants, and other companies
• Example: Wal-Mart uses automatic inventory
replenishment by supplier
Competitive Strategies (continued)

37. 1-37
• Not mutually exclusive
– One alone won’t usually fix the problem
– Generally need a combination
• Innovation not necessarily differentiated
– Kindle v. iPad
– MP3 players vs iPod
– Gateway made in US, relaxed office
• Differentiation not necessarily innovative
– Shipping more efficient but not different
– Telecom companies compete
Using Competitive Strategies

38. 1-38
Using IT to Implement Basic Strategies

39. 1-39
Implementing Competitive Strategies

40. 1-40
Other IT strategies

41. 1-41
Other Competitive Strategies
• Lock in Customers and Suppliers
– Deter them from switching to competitors
• Create Switching Costs
– Time, money, effort or inconvenience needed
to switch to a competitor
• Raise Barriers to Entry
– Discourage or delay other companies from
entering the market
– Increase the technology or investment
needed to enter

42. 1-42
Other Competitive Strategies
• Build a strong IT department
• Use IT to:
– Take advantage of strategic opportunities
– Improve efficiency of business practices
– Develop products and services that would not
be possible without a strong IT capability
• Use IT to do more than automate a system,
be creative

43. 1-43
• Keep customers loyal
– Anticipate their future needs
– Respond to customer concerns
– Provide top-quality customer service
• Focus on customer value
– Quality, not price, has become the primary
determinant of value
Customer-Focused Business

44. 1-44
• Companies that consistently offer the
best value from the customer’s
perspective…
– Track individual preferences
– Keep up with market trends
– Supply products, services, and information
anytime, anywhere
– Tailor customer services to the individual
– Use Customer Relationship Management
(CRM) systems to focus on the customer
Providing Customer Value

45. 1-45
Building Customer Value via the Internet

46. 1-46
• Activities that add value
– Primary processes – direct
– Support processes – indirect
Value Chain and Strategic IS

47. 1-47
• Gain a competitive differentiation
– Products
– Services
– Capabilities
• Somehow do things better
– Just-in-time
Strategic Uses of IT

48. 1-48
• Called BRP or simply Reengineering
– Radical
– Seeks improvements
• High potential
• High risk
• Important enabler of reengineering
– IT
– Process teams
– Case managers
Business Process Reengineering

49. 1-49
• Major role
– Increase process efficiencies
– Improves communication
– Facilitates collaboration
Role of Information Technology

50. 1-50
BPR Versus Business Improvement

51. 1-51
• A knowledge-creating company or learning
organization…
– Consistently creates new business knowledge
– Disseminates it throughout the company
– Builds it into its products and services
Building a Knowledge-Creating Company

52. 1-52
• Explicit Knowledge
– Data, documents, and things written down or
stored in computers
• Employee handbook
• Tacit Knowledge
– The “how-to” knowledge in workers’ minds
– Most important information
• Successful knowledge management
– Rewards sharing
– Makes better use of knowledge
Knowledge Management

53. 1-53
Knowledge Management Techniques