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Foundations of Information Systems in Business
Chapter1
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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• Understand the concept of a system and how it relates to information systems.
• Explain why knowledge of information systems is important for business professionals and identify five areas of information systems knowledge they need.
Learning Objectives
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Learning Objectives
• Give examples to illustrate how business applications of information systems can support a firm’s business processes, managerial decision making, and strategies for competitive advantage.
• Provide examples of several major types of information systems from your experiences with business organizations in the real world.
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• Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business.
• Provide examples of the components of real world information systems
• Demonstrate familiarity with the myriad of career opportunities in information systems.
Learning Objectives
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Competitive Advantage
• “Developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forces.”
Glossary, p. 637
• Attributed to a firm that is … “leading an industry in some identifiable way, such as sales, revenues or new products.” Ch. 2, p. 53
• “…when a firm sustains profits that exceed the average for an industry …”
Ch. 2, p. 53
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What is MIS?• Management Information Systems (MIS) is
the development and use of information systems to help businesses achieve their goals and objectives
• An information system (IS) is a group of components that interact which each other to produce information
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What is MIS?• Information systems exist to help people
achieve the goals and objectives of their business. – You should take an active role in specifying system
requirements and helping manage development projects since you are the one who’ll be using the system to do your job.
• You need to learn how to use an IS– You have responsibilities for protecting the security
of the system and its data– You have responsibilities for backing up data
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What is Information?• We know what an information system is – an
assembly of hardware, software, data, procedures, and people that interact to produce information. But what is information?
• Definitions vary. Information is:– Knowledge derived from data.– Data presented in a meaningful context.– Data processed by summing, ordering, averaging,
grouping, comparing, or other similar operations.• Any of these definitions will do; the important
point is to discriminate between data and information.
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What is Information?• Information is subjective• Information in one person’s context may be
just a data point in another person’s context, since what may be important to you may not hold the same level of importance to someone else.
• Context changes occur in information systems when the output (information produced) of one system feeds (is data to) a second system.
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What is Information?
Figure 1-4 One User’s Information is Another User’s Data
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What are the Characteristics of Good Information?
• Good information must be: – Accurate – entering incorrect sales data creates false
information; e.g., GIGO (garbage in, garbage out).– Timely – knowing that production doesn’t have enough raw
materials for next week’s schedule won’t be useful information three weeks from now.
– Relevant – if your boss needs to know how many shipments were late last month, you shouldn’t give him/her a list of all items that shipped.
– Worth its cost – is it cost worthy to map out the entire U.S. if you only need one state?
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What is the Difference Between Information Technology and Information Systems?
• Information technology and information systems are two closely related terms.– Information technology refers to the products,
methods, inventions, and standards that are used for the purpose of producing information.
– Information Systems (IS) refers to the assembly of hardware, software, data, procedures, and people that produces information.
• Information technology drives the development of new information systems.
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Types of Information Systems
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Information systems combine:
• Operations Support Systems (Figure 1.7)
– Transaction Processing systems– Process Control Systems– Enterprise Collaboration Systems
• Management Support Systems (Figure 1.9)
– Management Information Systems– Decision Support Systems– Executive Information Systems
• Other Systems (Figure 1.11)
– Expert Systems– Knowledge Management Systems– Strategic Information Systems
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Two Ways to Process Transactions
• Transaction Processing (batch)– Accumulate transactions over time – Process periodically– Example: a bank receives checks during the day
and processes in a batch at night
• Online Processing (real-time)– Process transactions immediately– Example: a bank processes an ATM withdrawal
immediately
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Types of Management Support Systems
• Management Information Systems (MIS)– Reports and displays – Example: daily sales analysis reports
• Decision Support Systems (DSS)– Interactive and ad hoc support– Example: a what-if analysis to determine where
to spend advertising dollars
• Executive Information Systems (EIS)– Critical information for executives and
managers– Example: easy access to actions of
competitors
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Other Information Systems
• Expert Systems– Example: credit application advisor
• Knowledge Management Systems– Support creation, organization, and dissemination
of business knowledge Example: intranet access to best business practices
• Strategic Information Systems– Help get a strategic advantage over customer– Examples: shipment tracking, e-commerce Web
systems
• Functional Business Systems– Focus on operational and managerial applications
Examples: accounting, finance, or marketing
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IT Challenges and Opportunities
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Responsibility and Accountability
• IT plays an integral role in every facet of a business
• Failure is often pinned on IT• Cultivate a culture that embraces change• Break projects into pieces• Set realistic expectations• There will always be problems
– “That’s life in IT”
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Challenges and Ethics of IT
• What are the ethical responsibilities?• What are the risks?• How can you protect yourself and your
company from computer crime?
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IT Careers
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The IS Function
• Major functional area of business
• Important contributor to – Efficiency, productivity, morale, customer service
and satisfaction
• Major source of information for decisions
• Vital ingredient in developing competitive products and services
• Dynamic and challenging career opportunity
• Key component of networked business
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What is a System?
• Interrelated components
• Defined boundary
• Working together
• Common objectives
• Accepting inputs and producing outputs
• Organized transformation process
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A Business as a System
Competing withInformation Technology
Chapter2
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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• Identify several basic competitive strategies and explain how they use information technologies to confront the competitive forces faced by a business
• Identify several strategic uses of Internet technologies and give examples of how they help a business to gain competitive advantages
• Give examples of how business process reengineering frequently involves the strategic use of IT
Learning Objectives
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• Identify the business value of using Internet technologies to become an agile competitor or form a virtual company
• Explain how knowledge management systems can help a business gain strategic advantages
Learning Objectives
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• Technology is no longer an afterthought in business strategy, but the cause and driver
• IT can change the way businesses compete
– Vital competitive networks
– Organizational renewal
– Necessary investment
• Integral to success
Strategic IT
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• A strategic information system uses IT to help an organization…– Gain a competitive advantage
– Reduce a competitive disadvantage
– Meet other strategic enterprise objectives
• What is Competitive Advantage?
– Capability for advantage over competitive forces
– Leading the industry in some identifiable way
– Sustains profits above the industry average
– Hard to maintain over a long period of time
Competitive Strategy Concepts
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• IT is a business asset, like buildings and land
• Quantify IT Value and Risks
– How much would normal operations cost without IT systems?
– How much would operations cost if the IT system goes down?
• IT is investment not cost
• Must align IT with company strategy
RWC 1: Quantify IT Risks and Value
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• Rivalry of Competitors– Positive, natural, healthy
• Threat of new entrants– Apple, TRS 80, Commodore, IBM, HP,
Compaq, Gateway, Dell, Acer
• Threat of substitutes– Salon shampoo vs Wal-Mart brand– VCR vs DVD vs BluRay
• Customer bargaining power– Buy from competitors or don’t buy
• Suppliers bargaining power– Your competitor pays in days not weeks
Porter’s Five Forces of Competition
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Competitive Forces and Strategies
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• Cost Leadership– Become low-cost producers
– Help suppliers or customers reduce costs
– Increase cost to competitors• Example: Priceline
• Differentiation Strategy– Set a firm’s products apart from competitors’
– Focus on a particular segment or niche market• Example: Dell
Five Competitive Strategies
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• Innovation Strategy– Unique products, services, or markets
– Radical changes to business processes• Example: Dell
• Growth Strategy– Expand company’s capacity to produce
– Expand into global markets
– Diversify into new products or services• Example: Wal-Mart
Competitive Strategies (continued)
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• Alliance Strategy
– Includes mergers, acquisitions, joint ventures, virtual companies
– Customers, suppliers, competitors, consultants, and other companies
• Example: Wal-Mart uses automatic inventory replenishment by supplier
Competitive Strategies (continued)
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• Not mutually exclusive– One alone won’t usually fix the problem– Generally need a combination
• Innovation not necessarily differentiated– Kindle v. iPad – MP3 players vs iPod– Gateway made in US, relaxed office
• Differentiation not necessarily innovative– Shipping more efficient but not different– Telecom companies compete
Using Competitive Strategies
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Using IT to Implement Basic Strategies
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Implementing Competitive Strategies
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Other IT strategies
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Other Competitive Strategies
• Lock in Customers and Suppliers– Deter them from switching to competitors
• Create Switching Costs– Time, money, effort or inconvenience needed
to switch to a competitor
• Raise Barriers to Entry– Discourage or delay other companies from
entering the market– Increase the technology or investment
needed to enter
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Other Competitive Strategies
• Build a strong IT department• Use IT to:
– Take advantage of strategic opportunities– Improve efficiency of business practices– Develop products and services that would not
be possible without a strong IT capability
• Use IT to do more than automate a system, be creative
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• Keep customers loyal– Anticipate their future needs– Respond to customer concerns– Provide top-quality customer service
• Focus on customer value– Quality, not price, has become the primary
determinant of value
Customer-Focused Business
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• Companies that consistently offer the best value from the customer’s perspective…– Track individual preferences
– Keep up with market trends
– Supply products, services, and information anytime, anywhere
– Tailor customer services to the individual
– Use Customer Relationship Management (CRM) systems to focus on the customer
Providing Customer Value
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Building Customer Value via the Internet
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• Activities that add value– Primary processes – direct– Support processes – indirect
Value Chain and Strategic IS
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• Gain a competitive differentiation
– Products
– Services
– Capabilities
• Somehow do things better
– Just-in-time
Strategic Uses of IT
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• Called BRP or simply Reengineering– Radical– Seeks improvements
• High potential• High risk• Important enabler of reengineering
– IT– Process teams– Case managers
Business Process Reengineering
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• Major role
– Increase process efficiencies
– Improves communication
– Facilitates collaboration
Role of Information Technology
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BPR Versus Business Improvement
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• A knowledge-creating company or learning organization…
– Consistently creates new business knowledge
– Disseminates it throughout the company
– Builds it into its products and services
Building a Knowledge-Creating Company
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• Explicit Knowledge– Data, documents, and things written down or
stored in computers• Employee handbook
• Tacit Knowledge– The “how-to” knowledge in workers’ minds– Most important information
• Successful knowledge management– Rewards sharing– Makes better use of knowledge
Knowledge Management
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Knowledge Management Techniques