Chapter 1 Information Systems in Global Business Today

Chapter 1 Information Systems in Global Business Today 1. 1

Management Information Systems Chapter 1 Information Systems in Global Business Today LEARNING OBJECTIVES • Explain why information systems are so essential in business today. • Define an information system from both a technical and a business perspective. • Identify and describe three dimensions of information systems. 1. 2

Management Information Systems Chapter 1 Information Systems in Global Business Today LEARNING OBJECTIVES (Continued) • Assess the complementary assets required for information technology to provide value to a business. • Identify the major management challenges to building and using information systems. 1. 3

Management Information Systems Chapter 1 Information Systems in Global Business Today Smart Systems and Smart Ways of Working Help Toyota Become Number One • Problem: Tough competition and demanding customers. • Solutions: Redesigned order and production processes reduce costs, increase revenue, and improve customer service. • Oracle E-Business Suite makes it possible to build cars to order and forecast demand production requirements more accurately. • Demonstrates IT’s role in analyzing market trends and monitoring quality, efficiency, and costs. • Illustrates the emerging digital firm landscape where businesses can use tools to analyze critical data. 1. 4

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 by firms (up-to 50% of total investments) • Increased responsiveness to customer demands: A “Fed-Ex” economy • Shifts in media and advertising (online newpapers, Internet adverts) • New security and accounting laws (e. g. storing employee e-mails for 5 years) leading to growth of digital information 1. 5

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Globalization opportunities • Internet has drastically reduced costs of operating on a global scale • Customers shop in a worldwide marketplace • Firms reduce costs by finding low cost suppliers and managing facilities in other countries • Small firms can act big • Large firms can act small (mass customization) 1. 6

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • The emerging digital firm – Significant business relationships are digitally enabled and mediated (external) – Core business processes are accomplished through digital networks (internal) – Key corporate assets (like core competencies, financial and human assets) are managed digitally • Digital firms offer greater flexibility in organization and management – Time shifting: operating 24 hrs, 7 days – Space shifting: no geographic boundaries 1. 7

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today Virtual Management at Accenture Consulting firm, 129 000 employees, 48 countries, no headquarters, no branches Read the Interactive Session and then discuss the following questions: • What are the advantages of working in a virtual environment like the one created by Accenture? What are the disadvantages? • Would you like to work at a company like Accenture? Why or why not? Explain your answer. • What kinds of companies could benefit from being run virtually like Accenture? Could all companies be run virtually like Accenture? 1. 8

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Business firms invest heavily in information systems to achieve six strategic business objectives: – – – 1. 9 Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival

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, technology an important tool in achieving greater efficiency and productivity – E. g. Wal-Mart’s Retail. Link system links suppliers to its 5289 stores wordlwide for superior replenishment system 1. 10

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 – Information systems and technology are a major enabling tool for new products, services, business models • E. g. Apple’s i. Pod, i. Tunes transformed the old business model of music distribution from CDs into online • Netflix’s Internet-based DVD rentals vs rental stores 1. 11

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 (room temperature, TV channels) and use IS 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 shirt sales records at each store to contract manufacturer in Hong Kong. Supplier produces (quantity, style, color, size) based on the sales records and delivers directly to stores; no inventory storage costs for J. C. Penney, lower price to customer 1. 12

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 (phone company) Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Fast response through immediate allocation of repair resources 1. 13

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 through one of first four strategic business objectives – E. g. Dell: Consistent profitability over 25 years; Dell remains one of the most efficient producer of PCs in world (mass customization) – But Dell has lost some of its advantages to fast followers– HP (competitive advantage is not sustainable) 1. 14

Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today • Survival – Information systems and technologies as a necessity for businesses to survive – Driven by: • Industry-level changes, e. g. the introduction of ATMs by one bank forces other banks to follow • Governmental regulations requiring record-keeping – E. g. Toxic Substances Control Act (records of emloyee exposure for 30 years), Sarbannes-Oxley Act (after the Enron scandal, retain audit papers and records including e-mails for 5 years) – Firms need IS capability to respond to these requirements 1. 15

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. 16

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 • Information vs. data – Data are streams of raw facts – Information is data shaped into meaningful form • Knowledge? 1. 17

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. 18

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 1. 19

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Functions of an Information System Other environmental factors? (t, p, e) 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. 20

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems Are More Than Computers are like the tools and materials used to make a house (griders, cement, hammers, nails), but these by themselves do not make a house; you need the architectural design, setting and static knowledge to build the house. 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. 21

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. 22 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. 23

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. 24

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 – Managers control and coordinate – In addition, managers must act creatively: • • 1. 25 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: provides platform that system is built on 1. 26

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems UPS Competes Globally with Information Technology • Read the Interactive Session: Technology, and then discuss the following questions: • What are the inputs, processing, and outputs of UPS’s package tracking system? • What technologies are used by UPS? How are these technologies related to UPS’s business strategy? • What problems do UPS’s information systems solve? What would happen if these systems were not available? 1. 27

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Dimensions of UPS tracking system – Organizational: • Procedures for tracking packages and managing inventory and provide information – Management: • Monitor service levels and costs – Technology: • Handheld computers, bar-code scanners, networks, desktop computers, etc. 1. 28

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Business perspective on information systems: – Information systems are instruments for creating value – Investments in information systems and technology will result in superior returns: • Productivity increases • Revenue increases • Superior long-term strategic positioning But not always!! 1. 29

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems • Investing in information technology does not guarantee good returns (big failures by firms like HP, Nike, Nestle) • Considerable variation in the returns firms receive from systems investments • Success requires a business perspective: attention to the organizational and managerial nature of information systems • Success Factors: – Adopting the right business model – Investing in COMPLEMENTARY ASSETS (organizational and management capital) 1. 30

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. 31

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. 32

Management Information Systems Chapter 1 Information Systems in Global Business Today Perspectives on Information Systems 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 1. 33

Management Information Systems Chapter 1 Information Systems in Global Business Today Challenge of Information Systems: Key Management Issues • Major management challenges: 1. Design competitive and effective systems: rethinking of business processes, not simple automation 2. Understand system requirements of global business environment: language, cultural and regulatory barriers 3. Create information architecture that supports organization’s goal 1. 34

Management Information Systems Chapter 1 Information Systems in Global Business Today Challenge of Information Systems: Key Management Issues 4. Determine the business value of information systems 5. Design systems people can control, understand use in a socially, ethically responsible manner 1. 35