chapter 1 Information system in Business today

Management Information Systems
MANAGING THE DIGITAL FIRM, 12TH EDITION
INFORMATION SYSTEMS IN
BUSINESS TODAY
Chapter 1
VIDEO CASES
Case 1: UPS Global Operations with the DIAD IV
Case 2: IBM, Cisco, Google: Global Warming by Computer

CHAPTER 1: INFORMATION IN BUSINESS SYSTEMS TODAY
• Problem: Yankee fans choosing to watch games on TV rather than
attending them in person or choose other forms of entertainment
• Solutions: A stadium of future: use information systems to enhance
experience. Game coverage, statistics, delivered via ubiquitous
HDTV monitors, mobiles can order concessions, view replays
• Cisco Systems provides technology to make Yankee Stadium the
most wired in all of baseball
• Demonstrates IT’s role in providing new products and services.
• Illustrates the benefits of utilizing networks and mobile applications
to enhance entertainment, information.
The New Yankee Stadium Looks to the Future
© Prentice Hall 2011
2

Technologies Changed the way Yankees run their business
3

ICT-Expenditures Worldwide Source: Gartner IT worldwide spending
forecast. Retrieved from
https://www.gartner.com/technology/research/it-spending-forecast/ (Q1 2018)
4

• How information systems are transforming business
– Changes in technology and new, innovative business
models have transformed social life and business practices
– 6.37 billion people worldwide have smartphones (2021)
– An estimated 4.48 billion people now use social networks,
with Facebook accounting for 2.9 billion people alone (‘21)
– 2.14 billion Internet users purchased online (‘21)
– Online commerce is growing at 6 percent annually
– In 2015, FedEx moved 11.5 million packages daily in 220
countries (mostly overnight)
– Global digital advertising accounted for 64.4% of all
advertising in 2021 (‘21)
The Role of Information Systems in Business Today
5

• How information systems are transforming business
– Businesses are using information technology to sense
and respond to rapidly changing customer demand,
reduce inventories to the lowest possible levels, and
achieve higher levels of operational efficiency.
– Supply chains have become more fast-paced, with
companies of all sizes depending on just-in-time
inventory to reduce their overhead costs and get to
market faster
– In comparison with the 2.7 billion people who read a
print newspaper, online newspapers are read by one
billion people, growing at 10% a year
6

• What makes the MIS field the most exciting area of
study in schools of business is the continuous change
in technology, management, and business processes.
• Five changes are of paramount importance
– IT innovations
– New Business Models
– E-commerce Expanding
– Management Changes
– Changes in Firms and Organizations
Why MIS is Important?
7

• IT Innovation
– Crypto currency, AI, cloud computing, the growth of a
mobile digital business platform based on
smartphones, big data, business analytics, and the use
of social networks by managers to achieve business
objectives
– These innovations are enabling entrepreneurs and
innovative traditional firms to create new products
and services, develop new business models
– In the process, some old businesses, even industries,
are being destroyed while new businesses are
springing up
8

• New Business Model
– The emergence of online video services like Netflix for
streaming, Apple iTunes, Amazon Prime etc. changed
how premium video is distributed and even created
– Many are producing premium TV shows and even
movies
– A growing trickle of viewers are unplugging from cable
and using only the Internet for entertainment
– Newspapers have online versions which are more
revenue than its paper version
9

• E-commerce Expanding
– In 2021, retail e-commerce sales amounted to
approximately 4.9 trillion U.S. dollars worldwide. This
figure is forecast to grow by 50 percent over the next
four years, reaching about 7.4 trillion dollars by 2025.
– E-commerce is disrupting the traditional marketing
and advertising industry and putting major media and
content firms in jeopardy.
– Not only goods, information systems and technologies
are the foundation of this new services-based e-
commerce
– Total mobile e-commerce sales are expected to reach
$3.56 trillion by 2021—a more than 250% jump from
$0.97 trillion in 2016.
10

• Management Changes
– Remote salespeople on the road are only seconds
away from their managers’ questions and oversight
– Managers on the move are in direct, continuous
contact with their employees.
– Core Business software and BI provides managers with
instant access to important information and helps
take accurate and timely decisions
– Can react on customer reviews on new products and
services
11

• Changes in Firms and Organizations
– Twenty-first-century business firms put less emphasis
on hierarchy and structure and more emphasis on
employees taking on multiple roles and tasks and
collaborating with others on a team.
– They emphasize higher speed and more accurate
decision making based on data and analysis.
– They use social media to enter into conversations with
consumers and demonstrate a greater willingness to
listen to consumers
12

Read the Interactive Session and discuss the following questions
• 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
• Business processes
– Business processes refer to the set of logically related tasks
and behaviors that organizations develop over time to
produce specific business results and the unique manner
in which these activities are organized and coordinated
The Emerging Digital Firm
13

Read the Interactive Session and discuss the following questions
• 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. Work is accomplished
physically wherever in the world it is best accomplished.
The Emerging Digital Firm
14

• There is a growing interdependence between ability
to use information technology and ability to
implement corporate strategies and achieve
corporate goals
• Business firms invest heavily in information systems
to achieve six strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
15

• Operational excellence
–Improvement of efficiency to attain higher
profitability
–Information systems, technology an
important tool in achieving greater
efficiency and productivity
–Walmart’s RetailLink system links suppliers
to stores for superior replenishment system
16

• New products, services, and business
models
– Business model: describes how a company
produces, delivers, and sells product or service to
create wealth
– Information systems and technology a major
enabling tool for new products, services, business
models
• Examples: Apple’s iPod, iTunes, Youtube, Uber,
bKash, NexusPay, Netflix, HoiChoi
17

• Customer and supplier intimacy
– Serving customers well leads to customers
returning, which raises revenues and profits
• Example: High-end hotels that use computers
to track customer preferences
• Amazon, Google shows personalized search
results
– Intimacy with suppliers allows them to provide
vital inputs, which lowers costs
• Example: J.C.Penney’s information system
which links sales records to contract
manufacturer
18

• Improved decision making
– Without accurate information
• Managers must use forecasts, best guesses, luck
leading to:
– Overproduction, underproduction of goods and services
– Misallocation of resources
– Poor response time
• Poor outcomes raise costs, lose customers
– Information systems and technologies have made it
possible for managers to use real-time data from the
marketplace when making decisions.
19

• Competitive advantage
– Delivering better performance, charging less for
superior products, responding to customers and
suppliers in real time all add up to higher sales
and higher profits that your competitors cannot
match
– Examples: Apple, Walmart, Amazon, Uber
20

• Survival
– Business firms invest in information systems and
technologies because they are necessities of doing
business.
– May be:
• Providing ATM service to retail customer is a
must for any bank now
• Governmental regulations requiring record-
keeping
– public firms are bound to keep all data, including e-
mail, on record for 5 years
21

The Interdependence Between Organizations and Information Technology
In contemporary systems there is a growing interdependence between a firm’s 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
22

• Information system:
– A set of interrelated components that collect, process,
store, and distribute information to support decision
making, coordination, and control
• Information vs. data
– Data are streams of raw facts
– Information is data shaped into meaningful form
Perspectives on Information Systems
23

Data and Information
Raw data from a supermarket checkout counter can be processed and organized to produce meaningful
information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a
specific store or sales territory.
Figure 1.3
24

• Three activities of information systems
produce information organizations need
1. Input: Captures raw data from organization or
external environment
2. Processing: Converts raw data into meaningful
form
3. Output: Transfers processed information to
people or activities that use it
25

• Feedback:
– Output returned to appropriate members of
organization to help evaluate or correct input stage
• Computer/Computer program vs.
information system
– Computers and software are technical foundation and
tools, similar to the material and tools used to build a
house
26

Functions of an
Information System
An information system
contains information about an
organization and its
surrounding environment.
Three basic activities—input,
processing, and output—
produce 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 1.4
27

Information Systems
Are More Than
Computers
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 1.5
28

• Organizational dimension of information
systems
– Hierarchy of authority, responsibility
• Senior management
• Middle management
• Operational management
• Knowledge workers
• Data workers
• Production or service workers
29

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 1.6
30

• Organizational dimension of information
systems (cont.)
– Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
– Unique business processes
– Unique business culture
• fundamental set of assumptions, values, and ways of
doing things, accepted by most of its members.
– Organizational politics
31

• Management dimension of information
systems
– Managers set organizational strategy for
responding to business challenges
– In addition, managers must act creatively
• Creation of new products and services
• Occasionally re-creating the organization
– Information technology can play a powerful role in
helping managers design and deliver new
products and services and redirecting and
redesigning their organizations
32

• 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
33

• Business perspective on information
systems:
– Information system is instrument and an important
investment for creating value for the firm
– Investments in information technology will result
in superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning
34

• Business information value chain
– Raw data acquired and transformed through
stages that add value to that information
– Value of information system determined in part by
extent to which it leads to better decisions,
greater efficiency, and higher profits
• Business perspective:
– Calls attention to organizational and
managerial nature of information systems
35

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 1-7
36

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 1.8
37

• Investing in information technology does not
guarantee good returns
• Considerable variation in the returns firms
receive from systems investments
• Factors:
– Adopting the right business model
– Investing in complementary assets (organizational
and management capital)
38

• 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
39

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