Chapter 1 Information System in Global Business Today

Chapter 1 Information System in Global Business Today 1. 1

Topics • • • 1. 2 Digital Business with old & new Economy Major roles of IS in Business Today Data Vs. Information Concept of Information System Applications and operations of IS Information System is more than a computer

Digital Business Telecommunications Networks Field Sales Internet Consumer In-office 1. 3

The Old Economy – Taking Photo’s 1. 2. 3. 4. 5. 6. 7. 1. 4 Buy film in a store Load your camera Take pictures Take roll of film to store for processing Pickup the film when ready Select specific photos for enlargement Mail to family and friends

The New Economy – Taking Photo’s • 1 st Generation Digital Photography – • 2 nd Generation Digital Photography – • Use a Digital Camera, no film, no processing. 3 rd Generation Digital Photography – 1. 5 Old economy except 6 and 7 were replaced by using a scanner and emailing Your Digital Camera is now your mobile phone, in your binoculars or a palmtop computer.

• The differences between 'Old Economy' with “Digital Economy" • Old economy is actually the traditional company/industry that running businesses physically before the dot. com era. These old economy industry did not do involve much in the investment which means that they seldom offer new investment potential for a company's cash. 1. 6

• The digital economy nowadays is using the latest technology to work together in their company/industry. On the other hand, old-economy stocks tend to be valued based on more stable business models and less robust growth expectations, resulting in less variance of analyst expectations and more accurate earnings estimates. 1. 7

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • How information systems are transforming business • • Increased technology investments (Refer Figure) Increased responsiveness to customer demands Shifts in media and advertising New federal security and accounting laws • Globalization opportunities • Internet has drastically reduced costs of operating on global scale 1. 8

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today Information Technology Capital Investment Information technology investment, defined as hardware, software, and communications equipment, grew from 34% to 50% between 1980 and 2004. Source: Based on data in U. S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2006. Figure 1 -1 1. 9

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • In the emerging, fully digital firm – Significant business relationships are digitally enabled and mediated – Core business processes are accomplished through digital networks – Key corporate assets are managed digitally • Digital firms offer greater flexibility in organization and management – Time shifting, space shifting 1. 10

Case: DELL uses the internet to success Since the first Dell PC was introduced in 1986, Dell has continued to shape the industry by breaking new ground and pioneering critical developments in home, small business and enterprise computing. Dell promotes and sells it's company products through it's website. Customers may just visit to the dell. com and view the latest products produced by Dell. After using the dot. com era has been expended, more and more people start using the internet to purchase the products. (Dell, 2011) 1. 11

• To deliver effective solutions that meet customer challenges, Dell focuses on pivotal standards that drive future technology innovation. Dell's industry leadership places it in a unique position to help establish the core building blocks for the future innovation - in the home, the office and the enterprise. (Dell, 2011) With a long track record of pioneering work and wide network of strong industry alliances, Dell can drive adoption of open standards that give customers more choices, lower costs and complexity, and interoperability. 1. 12

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today The Interdependence Between Organizations and Information Technology 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 1. 13

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today v 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 – Survival 1. 14

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Operational excellence: – Improvement of efficiency to attain higher profitability – Information systems, is an important tool in achieving greater efficiency and productivity – E. g. Wal-Mart’s Retail. Link system links suppliers to stores for superior replenishment system 1. 15

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • New products, services, and business models: – Business model: describes how company produces, delivers, and sells product or service to create wealth (Refer next slide) – Information systems and technology are major enabling tool for new products, services, business models • E. g. Apple’s i. Pod, i. Tunes and Netflix’s Internetbased DVD rentals 1. 16

Business Models • A business model is a method of doing business by which a company can generate revenue to sustain itself. The model spells out how the company adds value to create a product or service. – Nokia makes and sells cell phones – A radio station provides free broadcasting. Its survival depends on a complex model involving advertisers. – Internet portals, such as Yahoo, also use a complex business model. 1. 17

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Customer and supplier intimacy: – Serving customers well leads to customers returning, which raises revenues and profits • E. g. High-end hotels that use computers to track customer preferences and use to monitor and customize environment – Intimacy with suppliers allows them to provide vital inputs, which lowers costs • E. g. J. C. Penney’s information system which links sales records to contract manufacturer 1. 18

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Improved decision-making Without accurate information: • Managers must use forecasts, best guesses, luck • Leads to: – Overproduction, underproduction of goods and services – Misallocation of resources – Poor response times • Poor outcomes raise costs, lose customers – E. g. Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. 1. 19

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Competitive advantage – – Delivering better performance Charging less for superior products Responding to customers and suppliers in real time Often achieved when firm achieves one of first four advantages – E. g. Dell: Consistent profitability over 25 years; Dell remains one of the most efficient producer of PCs in world. – But Dell has lost some of its advantages to fast followers-- HP 1. 20

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Survival – Information technologies as necessity of business – May be: • Industry-level changes, e. g. Citibank’s introduction of ATMs • Governmental regulations requiring record-keeping – E. g. Toxic Substances Control Act, Sarbannes-Oxley Act 1. 21

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Information system: – – Set of interrelated components Collect, process, store, and distribute information Support decision making, coordination, and control Help Managers and workers analyze problems and resolve it • Information vs. data – Data are streams of raw facts – Information is data shaped into meaningful form 1. 22

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems 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 1. 23

Information System • An information system (IS) collects, processes, stores, analyzes, and disseminates information for a specific purpose. Like any other system, an information system includes inputs (data, instructions) and outputs (reports, calculations). It processes the inputs by using technology such as PCs and produces outputs that are sent to users or to other systems via electronic networks and a feedback mechanism that controls the operation. 1. 24

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems 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 1. 25

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Information system: Three activities produce information organizations need – Input: Captures raw data from organization or external environment – Processing: Converts raw data into meaningful form – Output: Transfers processed information to people or activities that use it 1. 26

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Feedback: – Output returned to appropriate members of organization to help evaluate or correct input stage • Computer/Computer program vs. information system – Computers and software technical foundation and tools, similar to the material and tools used to build a house e. g. houses are built with hammer, nails, and wood but these do not make a house. 1. 27

Applications and Operations • • 1. 28 Retail operations Wholesale Manufacturing Human Resources Marketing Content management …

Information Systems • Functional Perspective Marketing – Identify customers – Determine what they want – Planning products – Advertising and promoting products – Determine prices for products 1. 29

Information Systems • Functional Perspective Sales – Contact customers – Sell the product – Take the order – Follow-up on the sale – 5 year sales forecast 1. 30

Information Systems • Functional Perspective Manufacturing – Control Equipment and machinery – Design new products – When and what quantity of products to produce – New production facilities – Generate the work order 1. 31

Information Systems • Functional Perspective Purchasing – Which vendors – Quantity to purchase – Order status tracking – Handle delivery discrepancies – Generate the purchase order 1. 32

Information Systems • Functional Perspective Finance – Financial Assets – Investment management – Banking – Long term budgets 1. 33

Information Systems • Functional Perspective Accounting – Accounts Receivable – Disbursements – Payroll – Depreciation – Earned Revenues and Rebates 1. 34

Information Systems • Functional Perspective Human Resources – – – 1. 35 Employee wages, salaries & benefits Long term labor requirements Leave Tracking Track employee skills Interview and review employees

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on 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 1. 36

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Organizational dimension of information systems – Hierarchy of authority, responsibility • • • 1. 37 Senior management Middle management Operational management Knowledge workers Data workers Production or service workers

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems 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 1. 38

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Organizational dimension of information systems (cont. ) – Separation of business functions • • Sales and marketing Human resources Finance and accounting Production and manufacturing – Unique business processes – Unique business culture – Organizational politics 1. 39

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Management dimension of information system – Managers set organizational strategy for responding to business challenges – In addition, managers must act creatively: • • 1. 40 Creation of new products and services Occasionally re-creating the organization

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • 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: • Comprises of all these technologies and the people who run and manage them • provides platform on which information system is built on 1. 41

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Business perspective on information systems: – Information system is instrument for creating value – Investments in information technology will result in superior returns: • Productivity increases • Revenue increases • Superior long-term strategic positioning 1. 42

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • 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 1. 43

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • 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) 1. 44

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • 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 1. 45

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Complementary assets include: – Organizational investments, e. g. • Appropriate business model • Efficient business processes – Managerial investments, e. g. • Incentives for management innovation • Teamwork and collaborative work environments – Social investments, e. g. • The Internet and telecommunications infrastructure • Technology standards 1. 46

Management Information Systems Chapter 1 Information Systems in Global Business Today Contemporary Approaches to Information Systems • Management Information Science • Combines computer science, management science, operations research and practical orientation with behavioral issues • Four main actors • • 1. 47 Suppliers of hardware and software Business firms Managers and employees Firm’s environment (legal, social, cultural context)

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