Foundations of Information Systems in Business Chapter 1 McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1-2 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

1-3 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.

1-4 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

1-5 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

1-6 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

1-7 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

1-8 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.

1-9 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.

1-10 What is Information? Figure 1-4 One User’s Information is Another User’s Data

1-11 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?

1-12 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.

1-13 Types of Information Systems

1-14 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

1-15 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

1-16 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

1-17 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

1-18 IT Challenges and Opportunities

1-19 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”

1-20 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?

1-21 IT Careers

1-22 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

1-23 What is a System? Interrelated components Defined boundary Working together Common objectives Accepting inputs and producing outputs Organized transformation process

1-24 A Business as a System

Competing with Information Technology Chapter 2 McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

1-26 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

1-27 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

1-28 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

1-29 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

1-30 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

1-31

1-32 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

1-33 Competitive Forces and Strategies

1-34 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

1-35 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)

1-36 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)

1-37 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

1-38 Using IT to Implement Basic Strategies

1-39 Implementing Competitive Strategies

1-40 Other IT strategies

1-41 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

1-42 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

1-43 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

1-44 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

1-45 Building Customer Value via the Internet

1-46 Activities that add value –Primary processes – direct –Support processes – indirect Value Chain and Strategic IS

1-47 Gain a competitive differentiation –Products –Services –Capabilities Somehow do things better –Just-in-time Strategic Uses of IT

1-48 Called BRP or simply Reengineering –Radical –Seeks improvements High potential High risk Important enabler of reengineering –IT –Process teams –Case managers Business Process Reengineering

1-49 Major role –Increase process efficiencies –Improves communication –Facilitates collaboration Role of Information Technology

1-50 BPR Versus Business Improvement

1-51 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

1-52 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

1-53 Knowledge Management Techniques