Using Advanced Information Technology to Increase Performance chapter eighteen McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives 1.Differentiate between data and information, and list the attributes of useful information 2.Describe three reasons why managers must have access to information to perform their tasks and roles effectively. 3.Describe the computer hardware and software innovations that have created the IT revolution. 4.Differentiate among seven performance-enhancing kinds of management information systems. 5.Explain how IT is helping managers build strategic alliances and network structures to increase efficiency and effectiveness. 18-2

Information and the Manager’s Job Data – Raw, unsummarized, and unanalyzed facts. Information – Data that are organized in a meaningful fashion 18-3

Attributes of Useful Information 18-4

Factors Affecting the Usefulness of Information 18-5 Figure 18.1

What is Information Technology? Information Technology – set of methods or techniques for acquiring, organizing, storing, manipulating, and transmitting information 18-6

What is Information Technology? Management Information System – specific form of IT that managers utilize to generate the specific, detailed information they need to perform their roles effectively 18-7

What is Information Technology? Managers need information for three reasons: 1.To make effective decisions 2.To control the activities of the organization 3.To coordinate the activities of the organization 18-8

Information and Control Managers achieve control by: 1.Establishing measurable goals 2.Measuring actual performance 3.Comparing actual performance with goals 4.Evaluating results and taking any corrective action 18-9

Information and Coordination Coordination problems that managers face in managing global supply chains are increasing Managers have adopted sophisticated IT that helps them coordinate the flow of materials, semifinished goods, and finished goods throughout the world 18-10

The Effects of Advancing IT IT helps create new product opportunities that managers and their organizations can take advantage of IT creates new and improved products that reduce or destroy demand for older, established products 18-11

IT and the Product Life Cycle Product Life Cycle – Refers to the way in which the demand for a product changes in a predictable way over time 18-12

A Product Life Cycle Embryonic stage – Product has yet to gain widespread acceptance – Customers are unsure what a product has to offer Growth stage – Many consumers are buying the product for the first time – Demand increases rapidly 18-13

A Product Life Cycle Mature stage – Market peaks because most customers have already bought the product – Demand is typically replacement demand Decline stage – Advancing IT leads to the development of a more advanced product making the old one obsolete 18-14

A Product Life Cycle Figure 18.2

Computer Networks Network – Interlinked computers that exchange information. Servers are powerful computers that relay information to client computers connected on a Local Area Network (LAN)

A Four-Tier Information System with Cloud Computing Figure 18.3

Types of Management Information Systems Operating system software – software that tells computer hardware how to run Applications software – software designed for a specific task or use 18-18

The Organizational Hierarchy Traditionally, managers have used the organizational hierarchy as the main system for gathering information necessary to make decisions and coordinate and control activities 18-19

The Organizational Hierarchy Drawbacks Can reduce timeliness of information Reduces quality of information Tall structure can make for an expensive information system 18-20

Six Computer-Based Management Information Systems Figure 18.4

Types of Information Systems Transaction Processing Systems – A management information system designed to handle large volumes of routine, recurring transactions. – Were the first computer-based information systems handling billing, payroll, and supplier payments

Types of Information Systems Operations Information Systems – A management information system that gathers, organizes, and summarizes comprehensive data in a form that managers can use in their nonroutine coordinating, controlling, and decision-making tasks. – Can help managers with non-routine decisions such as customer service and productivity

Types of Information Systems Decision Support Systems – An interactive computer-based management information system that managers can use to make nonroutine decisions. – New productive capacity, new product development, launch a new promotional campaign, enter a new market or expand internationally 18-24

Types of Information Systems Executive Support System – A sophisticated version of a decision support system that is designed to meet the needs of top managers. Group Decision Support System – An executive support system that links top managers so that they can function as a team

Expert Systems and Artificial Intelligence Artificial Intelligence – Behavior by a machine that, if performed by a human being, would be called “intelligent” – Already possible to write programs that can solve problems and perform simple tasks 18-26

Expert Systems and Artificial Intelligence Expert Systems – A management information system that employs human knowledge, embedded in a computer, to solve problems that ordinarily require human expertise

Enterprise Resource Planning Systems – Multi-module application software packages that coordinate the functional activities necessary to move products from the design stage to the final customer stage

Enterprise Resource Planning Systems 1.Help each individual function improve its functional-level skills 2.Improve integration among all functions so that they work together to build a competitive advantage for the company 18-29

Types of Information Systems E-Commerce Systems – Trade that takes place between companies, and between companies and individual customers, using IT and the Internet 18-30

Types of E-Commerce Figure 18.5

E-Commerce Systems Business-to-business (B2B) – trade that takes place between companies using IT and the Internet to link and coordinate the value chains of different companies B2B marketplace – Internet-based trading platform set up to connect buyers and sellers in an industry 18-32

E-Commerce Systems Business-to-customer (B2C) – trade that takes place between a company and individual customers using IT and the Internet 18-33

Example – Adorama.com Adorama.com sells cameras and accessories through their web site as well as a physical store in New York City They also provide online training in photography, lighting and composition 18-34

Strategic Alliances, B2B Network Structures, and IT Strategic Alliances – An agreement in which managers pool or share their organization’s resources and know-how with a foreign company, and the two organizations share the rewards and risks of starting a new venture

Strategic Alliances, B2B Network Structures, and IT B2B network structure – A series of global strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product

Flatter Structures and Horizontal Information Flows Boundaryless Organization – An organization whose members are linked by computers, faxes, computer-aided design systems, and video teleconferencing and who rarely, if ever, see one another face-to-face

Flatter Structures and Horizontal Information Flows Knowledge management system – A company specific virtual information system that systematizes the knowledge of its employees and facilitates the sharing and integrating of their expertise

Video Case: Death of the Business Trip What are the benefits of new technologies like TelePresence? What is the impact of TelePresence on organizations? What are the limitations of technologies like TelePresence? 18-39