Information Systems in Global Business Today

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Information Systems in Global Business Today
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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 the three dimensions of
  information systems.

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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.

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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 and
  production requirements more accurately.
• Demonstrates ITs 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.

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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 federal security and accounting laws (e.g.
  storing employee e-mails for 5 years) leading to
  growth of digital information

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Management Information Systems Chapter 1
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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)

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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

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Management Information Systems Chapter 1
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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?

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Management Information Systems Chapter 1
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The Role of Information Systems in Business Today

• 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

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Management Information Systems Chapter 1
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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-Marts RetailLink system links suppliers
  to its 5289 stores wordlwide for superior
  replenishment system

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Management Information Systems Chapter 1
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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. Apples iPod, iTunes transformed the old
  business model of music distribution from CDs
  into online
• Netflixs Internet-based DVD rentals vs rental
  stores

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Management Information Systems Chapter 1
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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.Penneys 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

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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. Verizons (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

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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)

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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

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The Role of Information Systems in Business Today
The Interdependence Between Organizations and
Information Technology
There is a growing interdependence between a
firms 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
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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?

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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

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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 are technical foundation
  and tools, similar to the material and tools used
  to build a house

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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 activitiesinput, processing, and
outputproduce 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
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Perspectives on Information Systems
Information Systems Are More Than Computers
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
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Perspectives on Information Systems

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

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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
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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

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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
• Creation of new products and services
• Occasionally re-creating the organization

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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

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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
  UPSs package tracking system?
• What technologies are used by UPS? How are these
  technologies related to UPSs business strategy?
• What problems do UPSs information systems solve?
  What would happen if these systems were not
  available?

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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.

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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!!

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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)

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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

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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

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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
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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
  organizations goal

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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
  and use in a socially, ethically responsible
  manner