CHAPTER 14Operations Management Managing Vital Operations .docx

CHAPTER 14
Operations Management:
Managing Vital Operations
and Processes
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Learning Objectives
14-1. Explain the role of operations management in
achieving superior quality, efficiency, and responsiveness to
customers.
14-2. Describe what customers want, and explain why it is
so important for managers to be responsive to their needs.
14-3. Explain why achieving superior quality is so
important.
14-4. Explain why achieving superior efficiency is so
important.
©McGraw-Hill Education.
Operations Management and Competitive Advantage (1 of 4)
Operations Management
The management of any aspect of the production system that
transforms inputs into finished goods and services

3
Production System
The system that an organization uses to acquire inputs, convert
inputs into outputs, and dispose of the outputs
An organization strives to create a good product at a low cost;
an efficient production system helps to achieve this goal.
4
Operations Manager
Manager who is responsible for managing an organization’s
production system and for determining where operating
improvements might be made
Three stages of production
Acquisition of inputs
Control of conversion processes
Disposal of goods and services
An operations manager will make the decisions affecting
production to improve quality, efficiency, and customer

service—always in the service of the organization’s competitive
advantage.
5
Quality
Goods and services that are reliable, dependable, or
psychologically satisfying
Efficiency
Amount of inputs required to produce a given output
Responsiveness to Customers
Action taken to meet the demands and needs of customers
Being responsive to customers means working for quality in an
organization’s goods and services in an efficient way.
6
Topics for Discussion (1 of 4)
Why is it important for managers to pay close attention to their
organization’s production system if they wish to be responsive
to their customers? [LO 14-1]

The attributes of an organization’s outputs—their quality, cost,
and features—are determined by the organization’s production
system. The ability of an organization to satisfy the demands of
its customers is derived from its production system. By
monitoring this system, managers can find ways to improve
quality while keeping prices low, as well as find ways to
increase efficiency. Customers want value for money, and an
organization whose efficient operating system creates high-
quality, low-cost products is best able to deliver this value.
7
The Purpose of Operations Management
Figure 14.1
Jump to Appendix 1 for long image description.
Improving Responsiveness to Customers
Without customers, organizations would cease to exist.
Nonprofit and for-profit firms all have customers.
Managers need to identify who the customers are and their
wants or needs.
© ZUMA Press, Inc/Alamy
9
5
Organizations exist for customers; therefore, it is essential to

identify who the customers are and then determine how best to
meet their needs.
What Do Customers Want?
Most customers prefer:
A lower price to a higher price
High-quality products to low-quality products
Quick service to slow service
Many features over few features
Products that are customized or tailored to their specific needs
10
5
All of these customer preferences seem obvious, especially the
desire for a high-quality product at a low cost. However, these
demands often mean a higher-price. Some will pay the extra
cost for a high-quality product with many features that might be
adapted to the owner’s needs. The Apple iPhone comes to mind.
“Total customer service is the goal toward which most
organizations should strive.” To what degree is this statement
correct? [LO 14-2]

Without customers, most organizations would cease to exist. It
is important for managers to correctly identify and promote
organizational strategies that respond to customer needs. To this
extent, the above statement is correct. Yet organizations should
not strive to have total customer service at the expense of other
important factors in the production process. If an organization
offers a level of responsiveness that is more than that
production system can profitably sustain, the entire system will
suffer in terms of efficiency and cost effectiveness. A company
that customizes every product to the unique demands of the
individual customers will likely see its cost structure become so
high that the cost of production exceeds revenues. Also,
efficiency will suffer because time and effort is required to
customize and provide total customer service. To this extent,
total customer service should be balanced with focus on
efficiency and effectiveness.
11
Designing Production Systems to Be Responsive to Customers
The attributes of an organization’s outputs—their quality, cost,
and features—are determined by the organization’s production
system.
Since the ability of an organization to satisfy the demands of its
customers derives from its production system, managers need to
devote considerable attention to constantly improving
production systems.
The text gives the example of Southwest Airlines and it’s
successful low-cost production system.

12
Customer Relationship Management
Customer Relationship Management (CRM)
Technique that uses IT to develop an ongoing relationship with
customers to maximize the value an organization can deliver to
them over time
Three parts of CRM systems:
sales and selling
after-sales service and support
marketing
A manager employs IT to determine if all parts of this system
are working efficiently and effectively; and if not, to figure out
what is failing and how to improve it.
13
What is CRM, and how can it help improve responsiveness to
customers? [LO 14-2]
CRM is a technique that uses IT to develop an ongoing
relationship with customers to maximize the value an
organization can deliver to them over time. CRM IT monitors,
controls, and links each of the functional activities involved in
marketing, selling, and delivering products to customers, such
as monitoring the delivery of products through the distribution

channel, monitoring salespeople’s selling activities, setting
product pricing, and coordinating after-sales service.
When a company implements after-sales service and support
CRM software, salespeople are required to input detailed
information about their follow-up visits to customers. Because
the system tracks and documents every customer’s case history,
salespeople have instant access to a record of everything that
occurred during previous phone calls or visits. They are in a
much better position to respond to customers’ needs and build
customer loyalty, so a company’s after-sales service improves.
A CRM system can also identify the top 10 reasons for customer
complaints. Finally, as a CRM system processes information
about changing customer needs, this improves marketing in
many ways. Marketing managers, for example, have access to
detailed customer profiles, including data about purchases and
the reasons why individuals were or were not attracted to a
company’s products.
14
Improving Quality
A firm that provides higher quality than others at the same price
is more responsive to customers.
Higher quality can also lead to better efficiency through lower
operating costs.
15
9

The text gives the example of Lexus (in 2017) and it’s higher-
priced yet high-quality, dependable vehicles.
Impact of Increased Quality on Organizational Performance
Figure 14.2
Improving Efficiency (1 of 3)
The fewer the inputs required to produce a given output, the
higher the efficiency of a production system.
17
15
Improving efficiency is at the heart of an organization. An
efficient organization has lower production costs, creating more
profit and attracting more customers.
The text gives the example of personal computers: . . . in 1990
the price of the average personal computer sold in the United
States was $3,000, by 1995 the price was around $1,800, and in
2017 it was around $350.35 This decrease occurred despite the
fact that the power and capabilities of the average personal
computer increased dramatically during this time period
(microprocessors became more powerful, memory increased,
and multimedia capability was added).

Total Factor Productivity
Looks at how well an organization utilizes all of its resources—
such as labor, capital, materials, or energy—to produce its
outputs
One of the disadvantages of this formula is that inputs could be
hours worked or materials used.
18
Partial Productivity
Specific measure of productivity that measures the efficiency of
an individual unit
This formula can be used to determine if a company is using
labor efficiently. In 1994, research found that a Japanese
company’s labor was more efficient than in a British company.
19
Facilities Layout, Flexible Manufacturing, and Efficiency (1 of
2)
Facilities Layout
The operations management strategy whose goal is to design the
machine-worker interface to increase production system

efficiency
20
16
Another consideration in designing a work space is the cost of
setting up the equipment needed.
Three Facilities Layouts
Figure 14.3
Facilities Layout (1 of 3)
Product Layout
Machines are organized so that each operation is performed at
work stations arranged in a fixed sequence.
Example: Mass production systems are set up where workers are
stationary and a belt moves work to them.
22
18

Example: car production, food production.
Modular assembly lines: computers allow the production in
small batches.
Process Layout
Self-contained work stations not organized in a fixed sequence
Provides flexibility in making a wide variety of products
tailored to customers
23
18
The text cites a custom furniture manufacturer and a hospital:
A custom furniture manufacturer might use a process layout so
that different teams of workers can produce different styles of
chairs or tables made from different kinds of woods and
finishes. Such a layout also describes how a patient might go
through a hospital from emergency room to X-ray department,
to operating room, to recovery, and so on.
Fixed-Position Layout
The product stays in a fixed spot and components that are
produced at remote stations are brought to the product for final
assembly.
The assembly of large jet aircraft uses this type of layout.

24
18
Complex products are more likely to require a fixed-position
layout. In addition to airplanes, mainframe computers and gas
turbines are examples.
Facilities Layout, Flexible Manufacturing, and Efficiency (2 of
2)
Flexible Manufacturing
Operations management technique that attempts to reduce the
setup costs associated with a production system
25
16
With flexible manufacturing, a company might be able to create
variations on a product, but in the same time as a static system.
Facilities Manufacturing
Flexible manufacturing aims to reduce the time required to set
up production equipment.
Redesigning the manufacturing process so that production

equipment geared for manufacturing one product can be quickly
replaced with equipment geared to make another product can
dramatically reduce setup times and costs.
Flexible manufacturing increases a company’s ability to be
responsive to its customers.
26
19
The text discusses the Lansing, Michigan General Motors
plant—a small, flexible, successful plant.
Just-in-Time Inventory and Efficiency (1 of 3)
Inventory
The stock of raw materials, inputs, and component parts that an
organization has on hand at a particular time
A company might employ a just-in-time (JIT) inventory system
to locate defects in inputs. See next slide.
27
Just-in-Time (JIT) Inventory

A system in which parts or supplies arrive at an organization
when they are needed, not before
28
19
In a JIT system, inventory holding costs are reduced. This
includes the cost of warehousing, or storage.
One drawback of JIT systems is that they leave an organization
without a buffer stock of inventory.
Although buffer stocks of inventory can be expensive to store,
they can help an organization when it is affected by shortages of
inputs brought about by a disruption among suppliers.
29
19
Without a buffer stock, a company might be caught off guard if
a sudden customer demand occurs.

Self-Managed Work Teams
The use of empowered self-managed teams can increase
productivity and efficiency.
Cost savings arise from eliminating supervisors and creating a
flatter organizational hierarchy, which further increases
efficiency.
30
A company can see a 30% increase in efficiency if they use
self-managed teams. The text mentions the success of the GE
Aviation plant in Durham, North Carolina.
Process Reengineering and Efficiency (1 of 2)
Process Reengineering
The fundamental rethinking and radical redesign of the business
process to achieve dramatic improvement in critical measures of
performance such as cost, quality, service, and speed
© Justin Sullivan/Getty Images News/Getty Images
31
The text gives the example of the Ford manager discovering the
efficient, yet small accounts payable department at Mazda in
Japan. The discovery led Ford to reengineer their procurement
process.

Process Reengineering and Efficiency (2 of 2)
Process reengineering can boost efficiency because it eliminates
the time devoted to activities that do not add value.
Top management’s role is to encourage efficiency improvements
by emphasizing the need for continuous improvement or
reengineering.
32
What is efficiency, and what are some of the techniques that
managers can use to increase it? [LO 14-4]
Efficiency refers to the amount of inputs required to produce a
given output. Inputs may include labor, component parts, skills,
knowledge, or time. Outputs can be any goods and services that
the customer wants. These may be products or they may be
intangible things, like customer service.
Managers can increase efficiency in several ways. One is to
improve quality. When quality rises, less employee time is spent
making defective products that have to be discarded or repaired.
Designing products with fewer parts can increase efficiency

since fewer parts to assemble reduces the total assembly time
and makes products easier to assemble (e.g. less effort.)
Managers can also change their facilities layout, or the way in
which machines, robots, and people are grouped together. One
layout may be more effective than another, depending on the
product. Flexible manufacturing can also increase efficiency by
reducing the time required to set up production equipment. Yet
another tactic is just-in-time inventory, which reduces inventory
holding costs and frees capital that would otherwise be tied up
in inventory. Another way is to implement self-managed teams.
33
Operations Management: Some Remaining Issues
Achieving superior responsiveness to customers through quality
and efficiency often requires a profound shift in management
operations and in the culture of an organization.
Making JIT work can pose a significant challenge.
By using JIT, employees may see the demands of their job
increase or they may see themselves reengineered out of a job.
34
A manager may need to balance the ethics of using JIT, flexible
manufacturing, and reengineering when it impacts costs to
employees, such as being reengineered out of their jobs.
BE THE MANAGER
What kinds of techniques discussed in the chapter can help
these managers to increase efficiency?

When hiring people, it will be important to screen for teamwork
skills and the ability to work in a cross-functional type of team
setting. The production facility should be designed to
incorporate flexible manufacturing technologies and to use a
just-in-time inventory system in order to adapt to changing
market conditions and customer demands.
35
APPENDICES
Long descriptions of images
Appendix 1: The Purpose of Operations Management
The graphic shows the production system at the top of the chart.
The three stages underneath are input stage, conversion stage,
and output stage. The input stage includes raw materials,
component parts, and labor. The conversion stage includes
skills, machines, and computers. And the output stage includes
goods and services. Operations management techniques are used
during each stage of production to increase efficiency, quality,
and responsiveness to customers in order to give the
organization a competitive advantage.
Copyright McGraw-Hill Education. Permission required for
reproduction or display.
Return to slide.
Appendix 2: Impact of Increased Quality on Organizational
Performance
A flow chart shows the impact of increased quality on
organizational performance. Increased quality can lead to

increased reliability, higher prices, and higher profit, or it can
lead to increased productivity, lower costs, and higher profits.
Return to slide.
Appendix 3: Three Facilities Layouts
A group of three diagrams is shown, with each diagram showing
a facility layout. Diagram A shows a product layout, diagram B
show a process layout, and diagram C shows a fixed-position
layout.
Diagram A, the product layout, is linear, showing 3 items that
lead to a final product.
Diagram B, the process layout, is square, showing 4 items that
relate in a linear fashion and diagonally with each other. They
all result in the final product.
Diagram C, the fixed-position layout, has the final product in
the middle and four items relating to it.
Return to slide.
Forum Assignment for the Week: 250 Words minimum For this
week's Forum, respond to the following:
How does the culture of an organization come about, and how
do ethics and values shape the culture of an organization? Is it
possible to change the culture of an organization over time? If
so, how?

***Your post must also end with a "Question to the Class" -
something related to the topic that you found thought-provoking
and about which you'd like to know more and have further
dialog. ***
No sources or citations required
General Instructions Applicable to All Forums:
To receive 100% as a grade (the exemplary level) for the
weekly forums, you should ensure that your responses meet the
following criterion:
Critical Analysis - Discussion postings display an excellent
understanding of the required readings and underlying concepts
including correct use of terminology. Postings are made in time
for others to read and respond as well as deliver information
that is full of thought, insight, and analysis. The information
presented makes connection to previous or current content or to
real-life situations, and must contain rich and fully developed
new ideas, connections, or applications. (It is important that you
integrate the weekly readings in your response. One way to do
that is to make position statements, then discuss supporting
evidence (i.e. research and/or personal experience).
Professional Communication and Etiquette - Written
interactions in the Forum show respect and sensitivity to peers'
background and beliefs (Regardless of the position you are
taking, please ensure that your participation comments are
respectful to your peers’ background and beliefs).
Writing Skills - Written responses are free of grammatical,
spelling or punctuation errors. The style of writing facilitates
communication. (Make sure your work is free of errors. If there
are any errors as outlined above, you will not receive 100% for
the forum).
There are three characteristics that form the foundation of an

organization’s corporate culture:
1. Corporate culture is shared (i.e., represents a common
understanding and interpretation of what is important and not
important within the framework of an organization);
2. Corporate culture is intangible (i.e., reflects the values,
norms, and assumptions upon which an organization is
unwilling to compromise);
3. Corporate culture affects the way that human capital assets
behave.
Readings for the Week:
Eide, P. K., & Allen, C. D. (2012). The more things change,
acquisition reform remains the same. Defense A R
Journal, 19(1),
99+. http://ezproxy.apus.edu/login?url=http://search.proquest.co
m/docview/929761542?accountid=8289
Popa, B. M. (2013). Risks resulting from the discrepancy
between organizational culture and leadership. Journal of
Defense Resources Management, 4(1),
179+. http://ezproxy.apus.edu/login?url=http://search.proquest.c
om/docview/1372955109?accountid=8289
Yaseen, A., Liaquat, M., Hassan, I., & Masood, H. (2015).
Impact of organizational culture and social influence on
organizational citizenship behavior with mediating effect on
interactional justice.Science
International, 27(4). https://advance-lexis-
com.ezproxy1.apus.edu/document/index?crid=b5a9a555-cfd8-
4be0-a9ca-15745d2067a1&pdpermalink=a4b78201-7493-46f5-
995a-0e85146a39b0&pdmfid=1516831&pdisurlapi=true
1
CHAPTER 13
Effective Communication and IT Management

©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives (1 of 2)
13-1. Explain why effective communication helps an
organization gain competitive advantage.
13-2. Describe the communication process.
13-3. Define information richness, and describe the
information richness of communication media available to
managers.
Learning Objectives (2 of 2)
13-4. Articulate three reasons why managers must have
access to information to perform their tasks and roles
effectively.
13-5. Describe the advances in IT and their impact on
management and business operations.
13-6. Explain the differences between six different kinds of
management information systems.

Communication and Management
Communication
The sharing of information between two or more individuals or
groups to reach a common understanding
Be it email, electronic reports, Twitter, or Facebook, humans
are the common ingredient—people either individually or in
groups, sharing information. However, communication has not
been accomplished until an understanding is reached.
4
Importance of Good Communication
Increased efficiency in new technologies and skills
Improved quality of products and services
Increased responsiveness to customers
More innovation through effective communication
Communication is extremely important to an organization. It
lets all members know what the goals are and how to get
achieve them. How else would subordinates know what their
tasks are? How would management know of problems and
challenges at all levels? How would members of a team ask for
needed resources? There must be communication, effective

communication, in order for an organization to work properly.
5
The Communication Process (1 of 5)
Transmission Phase
Information is shared by two or more individuals or groups
Feedback Phase
A common understanding is assured
© Christopher Robbins/Digital Vision/Getty Images RF
6
In both phases, a number of distinct stages must occur for
communication to take place.
Transmission Phase:
Sender sends message.
Message is encoded and sent through a medium.
The receiver decodes the message.
Feedback Phase:
The process is essentially reversed.
See following slide for figure.
Figure 13.1

A sender encodes and sends a message through a medium.
The receiver receives and decodes the message.
In the feedback phase, the receiver becomes the sender and
encodes and sends the message through a medium, and the
initial sender, now the receiver, decodes the message.
7
Sender
Person or group wishing to share information
Message
Information that a sender wants to share
Encoding
Translating a message into understandable symbols or language
Noise
Anything that hampers any stage of the communication process
8
Starting the transmission phase, the sender, the person or group
wishing to share information with some other person or group,
decides on the message, what information to communicate. Then
the sender translates the message into symbols or language, a
process called encoding; often messages are encoded into
words. Noise is a general term that refers to anything that
hampers any stage of the communication process.

Receiver
Person or group for which a message is intended
Medium
Pathway through which an encoded message is transmitted to a
receiver
Decoding
Interpreting and trying to make sense of a message
Once encoded, a message is transmitted through a medium to
the receiver, the person or group for which the message is
intended. A medium is simply the pathway, such as a phone
call, a letter, a memo, or face-to-face communication in a
meeting, through which an encoded message is transmitted to a
receiver. At the next stage, the receiver interprets and tries to
make sense of the message, a process called decoding. This is a
critical point in communication.
9
Verbal Communication
The encoding of messages into words, either written or spoken
Nonverbal Communication
The encoding of messages by means of facial expressions, body
language, and styles of dress

10
Nonverbal communication:
Facial expressions
Body language
Style of dress
Other examples?
Ask students for some goals of nonverbal communication and
how to achieve them, without verbal communication.
Information Richness and Communication Media (1 of 7)
Information Richness
The amount of information that a communication medium can
carry and the extent to which the medium enables the sender
and receiver to reach a common understanding
Managers and their subordinates can become effective
communicators by:
Selecting an appropriate medium for each message—there is no
one “best” medium
Considering information richness
A medium with high richness can carry much more information
to aid understanding.
11
Each circumstance needs an appropriate communication devise,
or medium, determined by management.
How should promotions or new hires be communicated to the
members of the organization?
What is the best medium of communication when a company
announces layoffs?
When are emails appropriate and when are they not?

The Information Richness of Communication Media (2 of 7)
Figure 13.2
Face-to-Face Communication
Has highest information richness
Can take advantage of verbal and nonverbal signals
Provides for
instant feedback
© Digital Vision/Getty Images RF
13
Face-to-face communications often help a manager to cut to the
quick; it is much faster than the exchange of a number of
emails, and could well avoid any misunderstandings that might
happen with emails. Emails, and even emails with emojis—
which are discouraged in business, are devoid of valuable
nonverbal human signs—smiles, frowns, knitted brows of
concern.
Why is face-to-face communication between managers still
important in an organization? [LO 13-2, 13-3 ]

Face-to-face communication is the medium that is highest in
information richness. When managers communicate face-to-
face, they not only can take advantage of verbal communication
but they also can interpret each other’s nonverbal signals such
as facial expressions and body language. Managers can respond
to these nonverbal signals on the spot. Face-to-face
communication also enables managers to receive instant
feedback. Points of confusion, ambiguity, or misunderstanding
can be resolved, and managers can cycle through the
communication process as many times as they need to, to reach
a common understanding.
State-of-the art information systems can improve the
competitiveness of an organization. Indeed, the search for
competitive advantage is driving much of the rapid development
and adoption of IT systems. By improving the decision making
capability of managers, management information systems
should help an organ1zation enhance its competitive position.
14
Management by Wandering Around
Face-to-face communication technique in which a manager
walks around a work area and talks informally with employees
about issues and concerns

A manager might take a stroll through a cubicle-laden floor or
walk among the workers on the factory floor. Doing so not only
opens up the manager and employees to better relationships, but
allows employees the chance to informally address concerns or
issues. The manager gains information on the workings at the
lower levels, and employees to get to know the manager better.
However, increasingly people are working remotely, decreasing
the chance for “wandering around.” The weekly check-in call,
or even video call, might be advisable.
15
Spoken Communication Electronically Transmitted
Has the second-highest information richness
Telephone conversations are information rich with tone of
voice, sender’s emphasis, and quick feedback, but provide no
visual nonverbal cues
16
Even though employees often work from home now, or even if
management works at one site and employees at another, face-
to-face communication is not lost. Companies often use apps
such as Skype or Facetime for a face-to-face communication.
Many job interviews are now conducted remotely as well.
Personally Addressed Written Communication
Has a lower richness than the verbal forms of communication

but still is directed at a given person
Excellent media for complex messages requesting follow-up
actions by receiver
17
This low-richness form of communication can enhance a face-
to-face communication. With a follow-up written letter, a
manager can solidify the essence of the meeting and reiterate
the details discussed. Written communication is often preferred
for complex instructions or reports.
The text gives the example of Karen Stracker, a hospital
administrator and how she communicated new instructions for
denial of insurance benefits.
Impersonal Written Communication
Has the lowest information richness
Good for messages to many receivers where little or no
feedback is expected (such as newsletters, reports)
18

IBM’s employee communications typically comes through the
company’s intranet, known internally as W3, and it has led a
transformation from professional to user-generated content
within the company.
Which medium (or media) do you think would be appropriate
for each of the following kinds of messages a subordinate could
receive from his or her boss: (a) a raise, (b) not receiving a
promotion, (c) an error in a report prepared by a subordinate,
(d) additional job responsibilities, and (e) the schedule for
company holidays for the upcoming year? Explain your choices.
[LO 13-3]
a. A raise should be communicated face-to-face and then
followed up in writing.
b. Not receiving a promotion should be communicated face-to-
face.
c. An error in a report should be communicated face-to-face
because nonverbal cues are important in this case.
d. Additional job responsibilities should be originally
communicated face-to-face to ensure that the subordinate
understands the change and then followed up in writing.
e. The holiday schedule should be sent to employees by email or
memo, enabling them to keep the document for further
reference.
19
Impersonal Written Communication (1 of 2)
Information Overload

A superabundance of information that increases the likelihood
that important information is ignored or overlooked and
tangential information receives attention
One of the challenges for today’s managers and employees is
determining which emails to access first and which can sit in
the inbox longer, and for how long, and which can even be
deleted. Most email applications are addressing these challenges
with how they are organized.
20
Impersonal Written Communication (2 of 2)
Blog
A website on which an individual, group, or organization posts
information, commentary, and opinions and to which readers
can often respond with their own commentary and opinions
Social Networking Site
A website that enables people to communicate with others with
whom they have some common interest or connection
Blogs can be written by managers and intended for company
use, and corporations can also sponsor their own blogs intended
for intra-company use. A corporate blog might tout a new
advancement for the company, introduce new employees, or

highlight employees’ accomplishments.
Social networking sites have become an integral part of today’s
society, but one of the concerns it brings for managers is the
possibility of “loafing” by employees.
21
Information and the Manager’s Job
Data
Raw, unsummarized, and unanalyzed facts
Information
Data that is organized in a meaningful fashion
22
2
Information technology turns data into information, making
managerial decisions easier.
Factors Affecting the Usefulness of Information
Figure 13.3
Attributes of Useful InformationAttributesQualityThe accuracy
and reliability of available information affects the quality of
decisions that managers make using the

information.TimelinessThe availability of real-time information
that reflects current conditions, thereby allowing managers to
maximize the effectiveness of their
decisions.CompletenessComplete information allows managers
to consider all relevant factors when making
decisions.RelevanceHaving information specific to a situation
assists managers in making better decisions.
What Is Information Technology?
Information Technology
The set of methods or techniques for acquiring, organizing,
storing, manipulating, and transmitting information
Management Information System
A specific form of IT that managers utilize to generate the
specific, detailed information they need to perform their roles
effectively
Essential to a company’s success in today’s environment is the
use of information technology. Not using it or using it
ineffectively, can make a company uncompetitive.
Recent IT: inventory management and customer relationship
management (CRM) systems
25
Information and Decisions
Most of management is about making decisions.
To make effective decisions, managers need information, both
from inside the organization and from external stakeholders.

© Jose Luis Pelaez Inc/Blend Images LLC RF
The marketing manager must decide what price to charge for a
product, what distribution channels to use, and what
promotional messages to emphasize to maximize sales.
The manufacturing manager must decide how much of a product
to make and how to make it.
The purchasing manager must decide from whom to purchase
inputs and what inventory of inputs to hold.
The human relations manager must decide how much employees
should be paid, how they should be trained, and what benefits
they should be given.
The engineering manager must make decisions about new
product design.
26
What is the relationship between information systems and
competitive advantage? [LO 13-1]
To achieve high performance, managers in various functions
and divisions must have access to information concerning the
activities in other functions and divisions. The greater the flow
of information and knowledge between functions and divisions,
the more learning that can take place. Such knowledge and
expertise is often the source of competitive advantage and
profitability.

State-of-the art information systems can improve the
competitiveness of an organization. Indeed, the search for
competitive advantage is driving much of the rapid development
and adoption of IT systems. By improving the decision making
capability of managers, management information systems
should help an organ1zation enhance its competitive position.
27
Information and Control
Managers achieve control over organizational activities by:
Establishing measurable standards of performance
Measuring actual performance
Comparing actual performance against established goals
Evaluating the results and taking corrective action if necessary
The text gives the example of UPS in its discussion of
information and controls.
28
Information and Coordination
Managers use information technology to coordinate department
and divisional activities to achieve organizational goals

Example: Starbucks’ Origin Experience, discussed in the text.
29
Effects of Advancing IT
IT helps create new product opportunities that managers can
take advantage of.
IT creates new and improved products that reduce or destroy
demand for established products.
Traditional telephone companies such as AT&T, Verizon, and
other long-distance companies the world over have seen their
market dominance threatened by companies offering Internet,
broadband, and wireless technology. They have been forced to
respond by buying wireless cellphone companies, building their
own high-powered broadband networks, and forming alliances
with companies such as Apple and Samsung to make phones that
will work on their networks.
30
IT and the Product Life Cycle
Product Life Cycle
The way demand for a product changes in a predictable pattern
over time
Figure 13.4
Jump to Appendix 3 long image description.

31
6
Demand for every generation of a digital device such as a PC,
smartphone, or tablet falls off when the current leaders’
technology is superseded by new products that incorporate the
most recent IT advances. One reason the IT revolution is so
important for managers is that advances in technology are one
of the most significant determinants of the length of a product’s
life cycle, as well as the level of competition in an industry.
How can information technology help in the new product
development process? [LO 13-3 ]
The new product development process is often global in nature.
Information technology can help a company coordinate aspects
of product development around the world. This can be done
through conference calls, videoconferencing, emails, and even
developing an internal website devoted to a product.
An operations information system can gather comprehensive
data, organize it, and summarize it in a form that is of value to
product development. A decision support system can provide
models that help managers make better nonprogrammed

decisions. Also, enterprise resource planning (ERP) systems can
allow a company to link and coordinate the entire set of
functional activities and operations necessary to move through
the product development process.
32
The Network of Computing Power
Network
Interlinked computers that exchange information
Four-tier network solution
Common
“External” mobile computing devices connect to desktops and
laptops, which then go through “internal” rack servers to a
company’s mainframe
The ability to hook into a company’s IT system from afar has
abetted the change from an in-office-only work force to a
flexible, remote one—an employee can even work from the
beach!
33
Software Developments
Operating System Software
Software that tells computer hardware how to run
Applications Software
Software designed for a specific task or use

The advancements in microprocessors and the development of
user-friendly software applications, have enabled managers to
acquire, organize, and communication information.
34
The Organizational Hierarchy (1 of 2)
Traditionally, managers have used the organizational hierarchy
as the main system for gathering information necessary to make
decisions and to coordinate and control activities.
Drawbacks
Timeliness of information can be reduced.
Information can be distorted.
A tall structure can make for an expensive information system.
Daniel McCallum, superintendent of the Erie Railroad in the
1850s
Management hierarchy also represented channels of
communication
First modern management information system.
Example: Regular daily and monthly reports were fed up the
management chain so that top managers could make decisions
about, for example, controlling costs and setting freight rates.

35
Six Computer-Based Management Information Systems
Figure 13.5
The Organizational Hierarchy (2 of 2)
Information Distortion
Changes in meaning that occur as information passes through a
series of senders and receivers
Tall hierarchies have the disadvantage of effectively processing
date in a timely manner, delaying the delivery of relevant and
high-quality information to managers.
However, management hierarchy is still the best way to
disseminate information today.
37
Types of Information Systems (1 of 3)
Transaction Processing Systems
Systems designed to handle large volumes of routine
transactions
First computer-based information systems handling billing,
payroll, and supplier payments

38
11
Supermarket managers use a transaction-processing system to
record the sale of items and to track inventory levels.
Operations Information Systems
Systems that gather, organize, and summarize comprehensive
data in a form that managers can use in their nonroutine
coordinating, controlling, and decision-making tasks
Assist managers with nonroutine decisions, such as customer
service and productivity
Decision Support Systems
An interactive computer-based management information system
with model-building capability that managers can use when they
must make nonroutine decisions
Transaction-processing system > data into useful information >
accessible form for managers
39
Artificial Intelligence
Behavior performed by a machine that, if performed by a human

being, would be called “intelligent”
Expert System
A management information system that utilizes human
knowledge embedded in computer software to solve problems
that ordinarily require human expertise
Enterprise Resource Planning (ERP) Systems
Multimodule application software packages that coordinate the
functional activities necessary to move products from the design
stage to the final customer
40
12
Mimicking human expertise (and intelligence) requires
technology that can, at a minimum, (1) recognize, formulate,
and solve a problem; (2) explain the solution; and (3) learn from
the experience.
Many companies have reported that it is difficult to implement
advanced management information such as ERP. Why do you
think that this is so? How might the roadblocks to
implementation be removed? [LO 13-4 ]

Individual users might exhibit resistance to use the information
system. This could be from fear of the new technology
(technophobia), a failure to appreciate the power of the
technology, and lack of in-house support staff. This roadblock
can be removed by making the technology more user-friendly
and accessible to managers. In addition adequate training and
support staff should be readily available. Also, implementation
of information technology systems can change the way in which
an organization is managed, and some managers may find these
changes threatening to their power, authority, and job security.
41
E-Commerce
Trade that takes place between companies and between
companies and individual customers using technology and the
Internet
42
12
Although not totally replacing brick-and-mortar stores, online
stores have enhanced the sales of many companies.
There are examples of online-only “stores,” however, that have
proved successful. eBay and Etsy are two examples. And only

recently has Amazon gone from online-only to adding some
“brick and mortar” to their company.
E-Commerce Systems
Business-to-Business (B2B) Commerce
Trade that takes place between companies using technology and
the Internet to link and coordinate the value chains of different
companies
B2B Marketplace
An Internet-based trading platform set up to connect buyers and
sellers in an industry
Business-to-Customer (B2C) Commerce
Trade that takes place between a company and individual
customers using technology and the Internet
43
12
The goal of B2B commerce is to increase the profitability of
making and selling goods and services.
Through the use of technology, B2B commerce increases
profitability because it allows companies to reduce operating
costs and may improve overall quality.
BE THE MANAGER
As an expert in communication, how would you advise Chen?

Perhaps you are not using your technological communication
tools to the fullest extent. Email can be sent with an urgent
notice or it can be sent as a task assignment with a required
response. Using the task assignment feature would allow you to
receive feedback from your employees and monitor where they
are at any given time on a project. You also need to meet
personally with your employees to set up a prioritizing system
and seek more opportunities for face-to-face communication.
Your employees appear to respond well to direct communication
and may feel isolated from you if you only use email.
44
APPENDICES
Long descriptions of images
Appendix 1: The Communication Process
The chart shows the flow of information during the
communication process. During the transmission phase, the
message is encoded using a medium and is then decoded by the
receiver. During the feedback phase, the receiver (now sender)
sends a message back by encoding it using a medium. The
original sender (now receiver) decodes this message. Noise can
affect all aspects of the communication process.
Return to slide.

Appendix 2: The Information Richness of Communication
Media
A graphic shows forms of communication on a scale from high-
information richness to low-information richness. From high to
low, the forms of communication are face-to-face
communication, spoken communication electronically
transmitted, personally addressed written communication, and
impersonal written communication.
Return to slide.
Appendix 3: I T and the Product Life Cycle
The graphic shows how the demand for a product changes over
time. During this process, a product goes through the product
life cycle, which includes the embryonic stage, the growth
stage, the maturity stage, and the decline stage. The growth is
slow during the embryonic stage, steep in the growth stage,
somewhat level during the maturity stage, and then downward
during the decline stage.
Return to slide.
Appendix 4: Six Computer-Based Management Information
Systems
The graphic shows a six computer-based management
Information system along a continuum from programmed

decision making to nonprogrammed decision making. Starting
from programmed decision making, the systems include
transaction processing systems, operation information systems,
decision support systems, expert systems, enterprise resource
planning systems, and e-commerce systems.
Return to slide.
Discussion Article Analysis Form
This is only an example of how to set up your analysis. You
may want to write it without following the sections in this form
but be sure to include all the necessary parts.
Title of the Analysis /concept being applied
☐ Start with a definition of the concept from the text book
and how it applies to the news article. Be sure to include a
description of how managers and management is involved.Short
Summary of the News Article
☐ Continue with a short summary of the news article.
Include what is happening, who is involved and what the impact
on the business or organization will be. Look for the 5 W's.
These answer Who? What? Where? When? and Why? This is
where you provide the background against which the
management concept will be applied. Analyze based upon the
management concept
☐ Now add the section about how the textbook concept
applies to the situation that you described above. Use quotes
from the textbook where necessary to expand upon your
analysis. Look for the textbook concepts or issues being
discussed. Consider if the managers are planning, organizing,
leading, or controlling. Ask yourself if the writer is educating
you with the facts or if he is trying to get you to think a certain

way or follow a given action. Look at both sides of the
argument. Consider the solutions proposed if he gives any.
☐ Add your conclusions and opinions. Based upon your
readings this week do you agree with the solutions given in the
article. Do the concepts for the week conflict with the
information in the article? What is the impact to the
organization in the short term and the long term? What should
managers within the organization do?Identify your sources
☐ identify the source, from the approved list, that you used
to prepare this assignment. If you researched other sites to
broaden the analysis be sure to include them as well.
Remember that other students or the instructor may want to go
to your sources to better understand as they prepare their
responses, so include the web address and other related
information.

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