Why Study Information Systems

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Why Study Information Systems

• Information is increasingly important as key
  resources in the management of organisations.
• IS can support business activities to
• Increase productivity - Reduce costs
• Improve decision making
• Enhance customer and supplier relationships
• Develop new strategic applications

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Objectives

• Recognising the importance of information in
  providing solutions to organisational problems
• Knowing how organisations may use information
  technology to gain competitive advantage
• Be aware of the necessity for an organisation to
  have a information strategy

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Todays Learning Objectives

• Understanding business organisations from a
  systems point of view
• Recognise the relationships between business
  pressures, organisational responses, and
  information systems.
• Categorise and describe various information
  systems and information technology.
• Describe strategic information systems and
  Porters frameworks, highlighting how IT supports
  the attainment of competitive advantage.

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Systems Theory

• System - a collection of interrelated parts that
  work together in harmony to achieve one or more
  common purpose.
• Subsystems and interactions
• Holism - the whole system is greater than the sum
  of its parts
• Boundary and Environment

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Framework for Organisational and Societal Impacts
of IT
External Environment
Organisational Structure and the Culture
Management and Business Process
Information Technology
Organisational Strategy
Individual and Roles
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Major Business Pressures

• Market pressure
• Global competition - Changing workforce
• Powerful customers
• Technology pressure
• Innovations - Obsolescence
• Information overload - Electronic commerce
• Society pressure
• Social responsibility - Ethics
• Government (de)regulations

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Critical Response Activities

• Strategic Systems
• Continuous Improvement
• Business Process Reengineering (BPR)
• Business Alliance
• Electronic Commerce

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Critical Response Activities - Strategic Systems

• Provide organisations with strategic advantages,
  thus enabling them to increase their market
  share, to better negotiate with their suppliers,
  or to prevent competitors from entering their
  territory.
• Case - Federal Express
• overnight delivery system, supported by IT
• able to track the status of every package
• Saving of 6 million per year through Web services

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Critical Response Activities - Continuous
Improvement

• Aim to improve a companys productivity and
  quality.
• Examples include
• Improved productivity ? Managing enterprise
  data
• Just-in-time (JIT) ? Innovation and
  creativity
• Total quality management ? Change management
• Knowledge management ? Customer service

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Critical Response Activities - Business Process
Reengineering

• Business Process Reengineering refers to the
  introduction of a major innovation in an
  organizations structure the way it conducts
  business.
• Reducing cycle time and time to market.
• Empowerment of employees and collaborative work. 
• Customer-focused approach.
• Restructuring and team-based structure.

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Case IT Shortens Time to Market

• Problem In order to assure quality, and
  minimize risk, the FDA requires companies to
  conduct extensive research testing, which can
  take up to 10 years.
• Solution Several software companies enable
  document scanning into databases that saves hours
  in research time. The database is indexed and
  includes full-text-search and retrieval programs.
• Results The time to market of a new drug has
  been reduced by up to a year, saving hundreds of
  lives.

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Organizations Major Responses

• Business Alliances.  Many companies realize that
  alliances with other companies, even competitors,
  can be very beneficial.
• Temporary joint venture companies form a
  special company for a specific, limited-time
  mission.
• Electronic Commerce. Doing business
  electronically is the newest and perhaps most
  promising strategy that many companies can
  pursue.

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Concepts of Information Systems

• MIS is the study of information and its impacts
  on the individual, the organisation, and society.
• Data Streams of raw facts representing events
  such as business transactions
• Information Clusters of facts that are
  meaningful and useful to human beings in the
  processes such as making decisions
• Knowledge Consisting of data or information that
  have been organized and processed to convey
  understanding, experience, accumulated learning,
  and expertise.

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Components of Information Systems

• Network is a connecting system that permits the
  sharing of resources between computers.
• Procedures are the set of instructions about how
  to combine the above components.
• People are those individuals who work with the
  system or use its output.

• Hardware is a set of devices such as processor,
  monitor, keyboard, and printer.
• Software is a set of programs that enable the
  hardware to process data.
• Database is a collection of related files,
  tables, relations, and so on, that stores data.

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Case Managing Accounting Across Asia

• Problem Le Saunda Holding Company (Hong Kong)
  is a shoe manufacturer that manages 32
  subsidiaries in four Asian countries. Their
  financing and cash flow is a very complex
  process.
• Solution To cope with the rapid growth of the
  company, a sophisticated accounting software
  package was installed.
• Results The system is much more reliable
  internal/ external auditing is easier. All
  these improvements have led to a substantial
  growth in revenue and profits for the firm.

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Case the US Presidential Election 2000

• 20-to-30 year old machines (using optical readers
  technology) were used to count votes and
  generated the greatest election confusion ever
  encountered.
• How can such election confusion be avoided in the
  future?
• Perhaps the solution lies in digital-age voting
  machines, which displays a persons vote on a
  computer screen and asks them to verify their
  choice-nonrepudiation.

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Classifications of Information Systems

• Information Systems can be classified according
  to
• Organizational Structure
• Functional Area
• Support Provided
• System Architecture
• Activity Supported

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Classification by Support Provided

• The major types of systems under this
  classification are
• Transaction processing system (TPS)
• Management information system (MIS)
• Knowledge management system (KMS)
• Office automation system (OAS)
• Decision support system (DSS)
• Executive information system (EIS)
• Group support system (GSS)
• Intelligent support system

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Strategic Information Systems

• Computer systems at any level of an
  organization,outward versus Inward
• Changes goals, operations, products, services, or
  environmental relationships
• Helps organisation gain a competitive, and
  sustainable, advantage

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Competitive Advantage
Competitive Advantage Look for a competitive
necessity, which will help your company keep up
with the competitors.
Competitive Strategy Search for a competitive
advantage in an industry, which leads to control
of the market.
Sustainable Strategic Advantage Maintain
profitable sustainable position against the
forces that determine industry competition.
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Case-Federal Express vs UPS

• Competing for leadership of the express package
  delivery market
• FedEx was the first to use the Web with an online
  package tracking service in 11/1994
• Followed by UPS 6 months later
• Then in 3/1996 UPS beat FedEx with a complete Web
  shipping service
• FedEx followed with similar services 4 to 5
  months later

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Caterpillar Fends off Competitors

• The problem
• World leader in manufacturing heavy machinery
• In 1982, Komatsu offering products 40 lower
• In 1985, CAT losses amounted to 953 million
• Market share declined and losses increased
• Solution Computer-aided manufacturing and
  robots
• Computerized inventory management
• Supply chain web-based management
• Global Intranet EDI
• Results CAT experienced such a high rate of
  success that their main competitor was forced to
  shift its strategy.

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Porters Competitive Forces Model

• New Entrants
• additional capacity
• reduced prices
• new basis for
• competition

• Rivalry
• among Firms
• price competition
• need to develop new
• products and service
• distribution and
• service become critical
• customer loyalty
• required

• Substitute
• limits potential
• market profit
• imposes price
• ceilings

• Buyers
• forces prices down
• higher quality
• demanded
• service flexibility
• required
• encourage
• competition

• Suppliers
• raises prices
• reduces quality of
• supply
• reduces
• availability

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Response Strategies

• Cost leadership - producing products or services
  at the lowest cost in the industry
• mass production or customisation
• standardise customer service - automation
• Differentiation - being unique in the industry
• product features - price - promotion -
  after-sales service
• Innovation finding new ways of doing business
• unique products - unique markets
• making radical changes to the business processes

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Locking in Customers and Suppliers Wal-Mart

• Building new valuable relationships
• Satellite network - quality information -
  operational efficiency - better quality products
  and services
• Interorganisational information systems link
  customers (Internet) and suppliers (EDI)
• Automatic inventory replenishment

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Creating Switching Costs SABRE and APOLLO

• Expense incurred in terms of time and expenditure
  of resources when changing from one supplier or
  system to another
• SABRE and APOLLO - computerised airline
  reservation systems used by most agents
• Investments in IT to make customers or suppliers
  dependent on the use of IS
• Competitive barriers and switching costs, gaining
  reservations for the provider, and Major new line
  of information products

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Porters Model in Action

• Step 1 The players in each force are listed.
• Step 2 An analysis is made which relates
  Porters determining factors.
• Step 3 A strategy is devised to defend against
  these factors.
• Step 4 Support information technologies are
  employed.

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Porters Value Chain Analysis Model
Primary Activities
Inbound Logistics (raw materials handling and
warehous- ing)
Operations (machining, assembling, testing)
Marketing and sales (advertising, promotion, prici
ng, channel relations)
Outbound Logistics (warehous- ing and
distribution of finished products)
Service (installation, repair, parts)
Support activities the firm infrastructure,
technology development, and procurement
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The Value Chain and SIS
Primary Activities
Inbound Logistics Automated JIT
Ware- housing EDI
Operations CAM, CAD
Marketing and sales Interactive Marketing
Outbound Logistics Online Order Processing EDI
Service Help Desk Expert System
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The Value Chain Model

• The Value System Model is used to
• Evaluate a companys process and competencies.
• Investigate whether adding IT supports the value
  chain.
• Enable managers to assess the information
  intensity and the role of IT.

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Major Benefits of SISs

• Create barriers to competitors entry into the
  market
• Often increase customers switching costs
• Change the basis of competition by offering new
  products, services, or information
• Develop a business process that allows the firm
  to choose an optimal pricing strategy for
  products and services
• Offers benefits to customers by providing them
  with reliable, cost effective and improved
  solutions

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Main Challenge-The Sustainability of Competitive
Advantage

• MEDIATING FACTORS
• Environment
• Culture
• Structure
• Standard Procedures
• Politics
• Management Decisions
• Chance

The two-way relationship
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Relative Market Share
Down
Up
Air Products Chemicals America Airlines Toys
R Us Federal Express
American Express Chemical Bank IBM
Up
Relative Profitability
Merrill Lynch Procter Gamble Citicorp Banc One
Chase Manhattan Mellon Bank United Airlines
Down
Winners and Losers in Sustaining Strategic
Advantage with IT - Source from Kettinger W
Grover V. (1995), Information Systems Management
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Sustaining SIS Strategic Advantage

• A Major problem that companies face is how to
  sustain their SIS competitive advantage.
• 3 Major approaches
• Create inward systems which are not visible to
  competitors.
• Provide a comprehensive, innovative expensive
  system that is difficult to duplicate.
• Combine SIS with structural changes. This would
  include business processes, reengineering
  organizational transformation.