Information Systems in Global Business Today.pptx
- 1. INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY Chapter 1
- 2. • How information systems are transforming business – Emerging mobile digital platform – Growing business use of “big data” – Growth in cloud computing • Globalization opportunities – Internet has drastically reduced costs of operating on global scale – Increases in foreign trade, outsourcing – Presents both challenges and opportunities The Role of Information Systems in Business Today
- 3. Information technology capital investment, defined as hardware, software, and communications equipment, grew from 32 percent to 52 percent of all invested capital between 1980 and 2009. FIGURE 1-1 Information Technology Capital Investment
- 4. Information Technology Capital Investment
- 5. • 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 The Role of Information Systems in Business Today
- 6. • Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals • Business firms invest heavily in information systems to achieve six strategic business objectives: 1. Operational excellence 2. New products, services, and business models 3. Customer and supplier intimacy 4. Improved decision making 5. Competitive advantage 6. Survival The Role of Information Systems in Business Today
- 7. In contemporary systems 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 The Interdependence Between Organizations and Information Technology
- 8. • 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 The Role of Information Systems in Business Today
- 9. • 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 The Role of Information Systems in Business Today
- 10. • 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: JCPenney’s information system which links sales records to contract manufacturer The Role of Information Systems in Business Today 10
- 11. • 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 – Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, and so on The Role of Information Systems in Business Today
- 12. • Competitive advantage – Delivering better performance – Charging less for superior products – Responding to customers and suppliers in real time – Examples: Apple, Walmart, UPS The Role of Information Systems in Business Today
- 13. • Survival – Information technologies as necessity of business – Industry-level changes •Example: Citibank’s introduction of ATMs – Governmental regulations requiring record- keeping •Examples: Toxic Substances Control Act, Sarbanes-Oxley Act The Role of Information Systems in Business Today
- 14. • 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. Perspectives on Information Systems
- 15. 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 Data and Information
- 16. • Three activities of information systems 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 Perspectives on Information Systems
- 17. • Feedback: – Output is 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. Perspectives on Information Systems
- 18. 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 Functions of an Information System
- 19. System/Subsystems • A system is a collection of parts that work together to achieve specific goals and function in an environment. • Subsystems are units in a system that share some or all of the characteristics of the system.
- 20. Seven Steps in the Conversion of Data into Information • Data Collection • Classification • Sorting • Processing • Storing • Retrieval • Dissemination
- 21. Characteristics of Information Characteristic Description Subjective value The value of information differs from individual to individual. Information should be pertinent to the decision maker. Decision makers should receive the information at the right time. Information should be free of errors. Information should be presented so that it can be readily used in decision making. The decision maker should have all necessary information to make a good decision. Information should be readily available to those who need it. Relevance Timeliness Accuracy Meaningful format Completeness Accessibility
- 22. Information Technology and Information System • IT consists of all the hardware and software that a firm needs to use in order to achieve its business objectives. • IT are tools and techniques that support the design and development of IS. They include hardware, software, databases, telecommunications and client-servers. This is one of the tool that managers use to cope with change. • Computer Hardware is the physical equipment, Computer Software consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system, Data Management Technology consists of the software governing the organization of data on physical storage media. Networking and Telecommunications technology consists of both physical devices and software, network links two or more computers to share data or resources such as a printer. Intranets are internal corporate networks based on internet technology. Extranets are private intranets extended to authorized users outside the organizations. World Wide Web is a service provided by the internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a page format on the Internet. • All of these technologies, along with the people required to run and manage them, represent resources that can be shared throughout the organization and constitute the firm’s Information Technology (IT) infrastructure.
- 23. Information System (IS) • IS is a set of interrelated components that creates, processes, stores, retrieves and disseminates information to facilitate organizational decision-making process. • IS also help managers and workers analyze problems, visualize complex subjects, and create new products. The input to such a system is data and processed data becomes information. • IS are guided by a set of policies, principles, procedures and resources. • IS and IT are interrelated.
- 24. Management Information System A management information system (MIS) is a computer system consisting of hardware and software that serves as the backbone of an organization’s operations. An MIS gathers data from multiple online systems, analyzes the information, and reports data to aid in management decision-making. MIS is also the study of how such systems work. Improved Decision-Making The purpose of an MIS is improved decision-making, by providing up-to-date, accurate data on a variety of organizational assets, including: • Financials • Inventory • Personnel • Project timelines • Manufacturing • Real estate • Marketing • Raw materials • R&D The MIS collects the data, stores it, and makes it accessible to managers who want to analyze the data by running reports. Management Information Systems are as the study of information systems in business and management. The term management information systems (MIS) also designates a specific category of information systems serving middle management. MIS provide middle managers with reports on the organization’s current performance. This information is used to monitor and control the business and predict future performance.
- 25. 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 Information Systems Are More Than Computers
- 26. • Organizational dimension of information systems – Hierarchy of authority, responsibility •Senior management •Middle management •Operational management •Knowledge workers •Data workers •Production or service workers Perspectives on Information Systems
- 27. 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 Levels in a Firm
- 28. • Organizational dimension of information systems (cont.) – Separation of business functions: Specialized tasks performed are: • Sales and marketing • Human resources • Finance and accounting • Manufacturing and production – Unique business processes: Logically related tasks and behaviors for accomplishing work. E.g.; Developing a new product, fulfilling an order – Unique business culture: Fundamental set of assumptions, values, and ways of doing things that has been accepted by most of its members. E.g.; UPS’s first priority is customer service, which is an aspect of its organizational culture. – Organizational politics: Conflict is the basis for organizational politics. Perspectives on Information Systems
- 29. • 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 Perspectives on Information Systems
- 30. • 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 Perspectives on Information Systems
- 31. Major Roles of Information Systems Support Strategies for Competitive Advantage Support Business Decision Making Support Business Processes and Operations
- 32. History of the role of Information Systems Data Processing Management Reporting Decision Support Strategic & End User Electronic Commerce 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 Electronic Data Processing - TPS Management Information Systems Decision Support Systems - Ad hoc Reports End User Computing Exec Info Sys Expert Systems SIS Electronic Business & Commerce -Internetworked E-Business & Commerce
- 33. Globalization challenges and opportunities •It helps a company to gain a competitive advantage •The traditional way of doing business has been changed with the development and use of latest technologies. •The numbers of smart phone users increased exponentially and people prefer using internet on those devices. •Smart devices, email, online conferencing over the Internet have all become essential tools of business. •Ecommerce and Internet advertising continue to expand. •Millions of businesses worldwide have dot-com internet sites registered. •Businesses are starting to use social networking tools to connect their employees, customers, and managers worldwide. Many fortune 500 companies now have Facebook pages.
- 34. Globalization challenges and opportunities Information Systems enable globalization: •The emergence of the Internet has drastically reduced the costs of operating and transacting on a global scale. •Communication between offices far apart is now instant and virtually free. •Customers can now shop online •Firms achieve extraordinary cost reductions by finding low- cost suppliers and managing production facilities in other countries.
- 35. 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 Perspectives on Information Systems
- 36. 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 Perspectives on Information Systems
- 37. 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 The Business Information Value Chain
- 38. Investing in information technology does not guarantee good returns. There is considerable variation in the returns firms receive from systems investments. Factors: Adopting the right business model Investing in complementary assets (organizational and management capital) Perspectives on Information Systems
- 39. Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms. Figure 1.8 Variation in Returns on Information Technology Investment
- 40. 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 Perspectives on Information Systems
- 41. Complementary assets include: Organizational assets, for example: Appropriate business model: a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. Efficient business processes Managerial assets, for example: Incentives for management innovation Teamwork and collaborative work environments Social assets, for example: The Internet and telecommunications infrastructure Technology standards Perspectives on Information Systems
Editor's Notes
- #3: New federal security and accounting laws that require companies to store e-mail for 5 years have spurred the growth of digital information, which is increasing at a rate of 5 exabytes annually. Students may be surprised to learn that 5 exabytes of data is equivalent to 37,000 Libraries of Congress. Ask the students to think about what difference it makes to the world economy, or the U.S. economy, if global operations become much less expensive? What are the challenges to American suppliers of goods and services, and to labor?
- #4: Emphasize to students that total investment is more than one trillion dollars in 2012, and that more than 540 billion dollars of that was invested in information technology. You could ask them why it is that the percentage of total investment devoted to IT has increased so much since 1980. Other kinds of capital investment are machinery and buildings. Why would firms increase IT investment faster than machinery and buildings? The answer is capital substitution: the price of IT capital has been falling exponentially, whereas the price of machine and buildings has been growing at slightly more than the rate of inflation. Wherever possible, firms would much rather invest in more IT than machinery or buildings because the returns on the investment are greater.
- #6: Time shifting and space shifting are connected to globalization. You could ask students to explain why a digital firm is more likely to benefit from globalization than a traditional firm. One answer is that by allowing business to be conducted at any time (time shifting) and any place (space shifting), digital firms are ideally suited for global operations which take place in remote locations and very different time zones.
- #7: In the opening case, the UPS Interactive Session later in the chapter, and with many of the Interactive Sessions and opening cases in the book, it will be useful to ask students to explain how various information systems succeeded or failed in achieving the six strategic business objectives. You might ask the students to think about some other business objectives and think about how IT might help firms achieve them. For instance, speed to market is very important to firms introducing new products. How can IT help achieve that objective?
- #8: The basic point of this graphic is that in order to achieve its business objectives, a firm will need a significant investment in IT. Going the other direction (from right to left), having a significant IT platform can lead to changes in business objectives and strategies. Emphasize the two-way nature of this relationship. Businesses rely on information systems to help them achieve their goals; a business without adequate information systems will inevitably fall short. But information systems are also products of the businesses that use them. Businesses shape their information systems and information systems shape businesses.
- #9: Walmart is the most efficient retailer in the industry and exemplifies operational excellence. You could ask students to name other businesses that they believe exhibit a high level of operational excellence. Do customers perceive operational excellence? Does it make a difference for customer purchasing? What Web sites strike students as really excellent in terms of customer service? If you have a podium computer, you might want to visit the Walmart site and the Amazon site to compare them in terms of ease of use.
- #10: You could ask students to name other new products or business models that they’ve encountered and how they might relate to new information systems or new technology. One way to encourage participation is ask students to help you list on the blackboard some really interesting recent digital product innovations. Discussing “green technologies” such as wind, solar, and hybrid vehicles is always fun. In this context, what role will IT be playing in the development of these technologies?
- #11: You could ask students what types of companies might rely more on customer and supplier intimacy more than others and which companies they feel have served them exceptionally well. Ask the students to identify online sites that achieve a high degree of customer intimacy. Sites to visit would include Netflix, Amazon, and other sites which have recommender systems to suggest purchase ideas to consumers.
- #12: You could ask students if they have ever been recipients of exceptional service from a company made possible by improved decision making and whether or not information systems contributed to that level of service. For example, perhaps they had a power outage and it took a very short (or very long) time for the utility company to correct the error.
- #13: Emphasize that achieving any of the previous four business objectives represents the achievement of a competitive advantage as well.
- #14: Ask students if they can name any examples of companies that failed to survive due to unwillingness or inability to update their information systems. The Sarbanes-Oxley Act requires that public firms keep all data, including e-mail, on record for 5 years. You could ask students if they appreciate why information systems would be useful toward meeting the standards imposed by this legislation.
- #15: These are some basic background understandings needed for the course. A system refers to a set of components that work together (hopefully). Can students think of systems other than information systems? The point of an information system is to make sense out all the confusing data in the environment, and put the data into some kind of order. Information is an ordered set of data that you can understand and act on. If the students want to get a sense of raw data, show them a stock ticker on a Web financial site (or Yahoo/finance). Ask them to tell you what it means? Then show them the current value of the Dow Jones Industrial Index and the S&P 500, and its daily trend (or for that matter switch to a one year view of either of these indexes). Looking at the indexes students can quickly get a grasp of whether the market is up or down, and they could act on that information.
- #16: Emphasize the distinction between information and data. You could, for example, ask several students to list their ages and write the numbers on one side of the board—then you could calculate the average age of those students on the other side, oldest student, youngest student, and so forth, to illustrate the difference between raw data and meaningful information.
- #17: Use an example similar to the one given in the previous slide to illustrate the three activities involved in the function of an information system. Continuing with that example, the process of asking students their age would represent input, calculating the average age and determining the oldest and youngest age would represent processing, and writing that information on the board would represent output.
- #18: Explain to students how the “house” analogy works: assuming that a successful information system is like a completed “house”, computers and software only represent the tools and materials used to build the house. Tools and materials don’t just suddenly become a completed house—outside (human) input is required. Systems need to be designed to fit the firms and the humans who work with the systems.
- #19: The point of this diagram is first of all to highlight the three basic activities of information systems, so that students can understand what an information system is doing at its most fundamental level. But the diagram also puts information systems into the context of organizations (firms), and then puts the firm into its respective environment composed of shareholders, higher level authorities (government), competitors, suppliers and customers. Suddenly, students should see that information systems play a central role mediating and interacting with all these players. Hence, systems play a key role in the operations and survival of the firm. You could also explain this diagram by relating it back to the opening case, as the book does. The two types of input into the Synergy system are manually entered data as well as video. The system processes that data and creates the output, video and statistics about specific types of players and plays.
- #26: These three themes (management, organizations, and technology) will reappear throughout the book. Understanding the interaction among these factors and information systems is known as information system literacy. Knowing how to optimize the relationship between technology, organizations, and management is the purpose of this book and course.
- #27: Pages 18 and 19 in the text provide more specific details on each level of this hierarchy. You can ask students to talk about an organization where they currently work, or have worked in the past. What was their contact with senior management, middle management, and operational (supervisory) management? Many younger students will have had little or no contact with senior and middle management. Older students most likely will have experience. You might need to provide more description about exactly what senior managers do for the firm (and middle managers).
- #28: Ask students to think about how information systems would factor into the day-to-day jobs of each of the three types of workers in the pyramid.
- #29: The point of this slide is to let students know there are many organizational factors that will shape information systems. A common observation is that “Every business is different.” Does this mean every business will have different information systems? Every business has its unique culture and politics. Systems reflect these business cultures. For an example of how information systems shed light on a firm’s unique business processes and culture, you might describe the UPS Interactive Session later in the chapter. The company’s package tracking systems exemplify their commitment to customer service and putting the customer first.
- #30: How might information systems assist managers in the development of new products and services? What is meant by re-creating the organization? Why do organizations need to be continually re-created? The answer is that they quickly become obsolete unless they continue to change. Ask students to help you list some organizations that have recently failed, or are about to fail.
- #31: Information technology is at the heart of information systems. Although organization and management are important too, it’s the technology that enables the systems and the organizations and managers who use the technology. The distinction between the Internet and intranets and extranets has to do with their scope. Intranets are private networks used by corporations and extranets are similar except that they are directed at external users (such as customers and suppliers). In contrast, the Internet connects millions of different networks across the globe. Students may not immediately understand this distinction.
- #32: Chapter 1
- #33: Chapter 1
- #36: You could ask students to consider how this view of information systems might contrast with the sociotechnical view or other views. You could also ask them to consider the circumstances under which information systems might not result in increased productivity and revenue.
- #37: During this and the next slide, emphasize that the end result of the business information value chain will always be profitability. Questions for students: What aspects of the business perspective might be lacking? Are there other perspectives that might provide a different picture? (sociotechnical)
- #38: The information value chain is one way to visualize the relationship between information activities, business processes, and management activities. You could also ask students if they could imagine any reason to create an information system besides profitability or strategic positioning (it’s not likely that they will think of one, which will prove the point). One reason to create a system that is not primarily profit-oriented is to meet the information reporting requirements of government and other authorities.
- #39: Connect this slide to the previous slide. Many firms make significant investments in IT for very little benefit to the bottom line. Discuss why companies experience a wide variety of outcomes in their efforts to invest in IT. Consider the factors we use in this book: organizational and management factors.
- #40: Emphasize that each quadrant of the graph represents a different type of firm. Quadrant 1 represents firms that invest much less in IT but still receive strong returns. Quadrant 2 represents firms that invest a great deal in IT and receive a great deal in returns. Quadrant 3 represents firms that invest much less in IT and receive poor returns. Quadrant 4 represents firms that invest a great deal in IT but receive poor returns. Ask students where they want their firms to show up? The purpose of the course and book is to show students how to end up in top quadrant (2).
- #41: The example used in the book for complementary assets is for automobile companies: these companies rely on investments in highways, other roads, gas stations, repair facilities, and so on to maximize the value of their primary investment. Ask students to provide a different example of another company’s or industries complementary assets.
- #42: Emphasize that firms that make significant investment in complementary assets tend to derive greater benefit from information technology investment than those that do not. Consideration of complementary assets should be a part of any firm’s broader view of how to create and implement their information systems. Stress to students that managers must consider dimensions such as complementary assets in order to derive benefit from information systems and be successful.