Managing Information Systems

Seventh Canadian Edition

Laudon, Laudon and Brabston

CHAPTER 1
Information Systems in Business Today

Copyright © 2015 Pearson Canada Inc. 1-1

 Learning Objectives

• Understand the effects of information systems on

business and their relationship to globalization.
• Explain why information systems are so essential in
business today.
• Define an information system and describe its
management, organization, and technology
components.

Continued …
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 Learning Objectives (continued)

• Define complementary assets and explain how they

ensure that information systems provide genuine
value to an organization.
• Describe the different academic disciplines used to
study information systems and explain how each
contributes to our understanding of them.
• Explain what is meant by a sociotechnical systems
perspective.

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 Pricing at the Canadian Wheat Board: A Little
More than Numbers

• Problem: Current system for evaluating deals was

not robust enough to adapt to organizational growth
and was slow to respond to changing market
regulations
• Solutions: Installed Numerix analytics, a package that
was quick to install, required little maintenance, and
integrated seamlessly into the CWB operations.

Continued …

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 Pricing at the Canadian Wheat Board: A Little
More than Numbers (cont.)

• Numerix transformed a complicated and labour-

intensive process into a streamlined, nearly fully
automated process.
• Demonstrates IT’s role in producing accurate and
timely results for all derivative products, as well as
adapting to regulations.
• Savings are expected to be significant.

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Copyright © 2015 Pearson Canada Inc. 1-6
 How Information Systems Are
Transforming Business

• Increased e-commerce
• Emerging mobile digital platform
• Growing business use of “big data”

• Growth in cloud computing

• New government regulations affect business

responsibilities

• Shifts in media: more news delivered online

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 What is New in Management
Information Systems

[INSERT TABLE 1.1]

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 Globalization challenges and opportunities
• A “flattened” world
• Internet has drastically reduced costs of
operating on global scale

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 Running the Business From the Palm
of Your Hand

Read the Window on Management, and then discuss

the following questions:
1. What kinds of applications are described here? What
business functions do they support? How do they
improve operational efficiency and decision making?
2. Identify the problems that these businesses solved
using mobile digital devices.

Continued …

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 MIS in Your Pocket (cont.)

3. What kinds of businesses are most likely to benefit

from equipping their employees with mobile digital
devices?
4. One company deploying iPhones has said, “The
iPhone is not a game changer, it’s an industry
changer. It changes the way that you can interact
with your customers and with your suppliers.”
Discuss the implications of this statement.

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 The Emerging 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

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 Strategic Business Objectives of Information
Systems

1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

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 INSERT FIGURE 1.2]

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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
– Walmart’s Retail Link system links suppliers to
stores for superior replenishment system

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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 a major
enabling tool for new products, services, business
models
• Examples: Apple’s iPad, Google’s Android OS,
and Netflix

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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.
• Example: High-end hotels that use computers
to track customer preferences and used to
monitor and customize environment
– Intimacy with suppliers allows them to provide
vital inputs, which lowers costs.
• Example: Nygard’s information system which
links sales records to contract manufacturer
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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
• Results in:
–Overproduction, underproduction
–Misallocation of resources
–Poor response times
• Poor outcomes raise costs, lose customers

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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
– Examples: Apple, Walmart, UPS

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 The Role of Information Systems in
Business Today

• Survival
– Information technologies as necessity of business
– Industry-level changes
• Example: Citibank’s introduction of ATMs
– Governmental regulations requiring record-
keeping
• Example: Canadian Sarbanes-Oxley Act

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 Perspectives on Information Systems

• Information technology:
– The hardware and software that a firm needs to
achieve business objectives
• Information system:
– Set of interrelated components that
– Collect, process, store, and distribute information
– Support decision making, coordination, and
control

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 Perspectives on Information Systems

• Information vs. data

– Data are streams of raw facts.
– Information is data shaped into meaningful form.

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 [INSERT Figure 1.3]

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 [INSERT Figure 1.4]

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 Perspectives on Information Systems

Four activities of information systems:

– 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
– Feedback: output returned to members of the
organization to help them evaluate or correct the
input and/or processing

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 Perspectives on Information Systems

• 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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 [INSERT FIGURE 1.5]

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 Perspectives on Information Systems

• Information Systems are an integral part of

organizations
– Key elements of organizations include
• People
• Structure
• Business processes
• Politics
• Culture

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 Perspectives on Information Systems

Hierarchy of authority, responsibility

• Senior management
• Middle management
• Operational management
• Knowledge workers
• Data workers
• Production or service workers

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 [INSERT FIGURE 1.6]

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 [INSERT Table 1.2]

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 Organizational dimension of Information
Systems

• Separation of business functions

– Sales and marketing
– Human resources
– Finance and accounting
– Manufacturing and production
• Unique business processes
• Unique business culture
• Organizational politics

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 Management

• Management dimension of information systems

– Managers set organizational strategy for
responding to business challenges
– In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization

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 Information Technology

• 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

Copyright © 2015 Pearson Canada Inc. 1-34

 UPS Competes Globally With
Information Technology

Read the Window on Technology and answer the

following questions:
• What are the inputs, processing, and outputs of
UPS’s package tracking system?
• What technologies does UPS used? How are these
technologies related to UPS’s business strategy?
• What strategic business objectives do UPS’s
information systems address?
• What would happen if UPS’s information systems
were not available?

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 Dimensions of UPS’s tracking systems

• 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, and so on

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 A 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

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 [INSERT FIGURE 1.7]

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 Business Information Value Chain

• 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

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 [INSERT FIGURE 1.8]

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 [INSERT Table 1.3]

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 Complementary Assets

• Assets required to derive value from a primary

investment
• Firms supporting technology investments with
investment in complementary assets receive
superior returns
• Example: Invest in technology and the people
to make it work properly

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 Complementary Assets include:

• Organizational assets, for example:

• Appropriate business model
• Efficient business processes

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 Complementary Assets include:

• Managerial assets, for example:

• Incentives for management innovation
• Teamwork and collaborative work
environments
• Social assets, for example:
• The Internet and telecommunications
infrastructure
• Technology standards

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 Contemporary Approaches to
Information Systems

• Technical approach
– Emphasizes mathematically based models
– Computer science, management science,
operations research
• Behavioral approach
– Behavioral issues (strategic business integration,
implementation, etc.)
– Psychology, economics, sociology

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 Contemporary Approaches to
Information Systems

• Management Information Systems

– Combines computer science, management
science, operations research and practical
orientation with behavioral issues
• Four main actors
– Suppliers of hardware and software
– Business firms
– Managers and employees
– Firm’s environment (legal, social, cultural context)

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 Contemporary Approaches to
Information Systems

• Approach of this book: Sociotechnical view

– Optimal organizational performance achieved by
jointly optimizing both social and technical
systems used in production
– Helps avoid purely technological approach

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 [INSERT Figure 1.9]

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 Managing Information Systems
Seventh Canadian Edition

Laudon, Laudon and Brabston

CHAPTER 1
Information Systems in Business Today

Copyright © 2015 Pearson Canada Inc. 1-49