1 © 2010 by Prentice Hall 1 Chapter Information Systems in Global Business Information Systems in Global Business

2 © 2010 by Prentice Hall LEARNING OBJECTIVES Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business Explain why information systems are so essential in business today. Describe business processes and their relationship to information systems. Explain how enterprise applications, collaboration and communication systems, and intranets improve organizational performance. Explain the difference between e-commerce, e-business, and e-government.

3 © 2010 by Prentice Hall The Role of Information Systems in Business Today Information Technology Capital Investment Figure 1-1 Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

4 © 2010 by Prentice Hall Business firms invest heavily in information systems to achieve six strategic business objectives: –Operational excellence –New products, services, and business models –Customer and supplier intimacy –Improved decision making –Competitive advantage –Survival The Role of Information Systems in Business Today Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

5 © 2010 by Prentice Hall The Role of Information Systems in Business Today The Interdependence Between Organizations and Information Technology 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. Figure 1-2 Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

6 © 2010 by Prentice Hall Information System: –Set of interrelated components (Hardware, Software, Peoples, Organizations, etc…) –Collect, process, store, and distribute information –Support decision making, coordination, and control Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

7 © 2010 by Prentice Hall Data –Data is raw, unorganized facts that need to be processed Information –Information is data shaped into meaningful form (when data is processed, organized, structured or presented in a given context so as to make it useful) Data VS. Information Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

8 © 2010 by Prentice Hall Perspectives on Information Systems 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 Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

9 © 2010 by Prentice Hall Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business Perspectives on Information Systems Figure 1-4 Reference:

10 © 2010 by Prentice Hall Four activities 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 –Feedback: Output returned to appropriate members of organization to help evaluate or correct input stage Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

11 © 2010 by Prentice Hall 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 Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

12 © 2010 by Prentice Hall Perspectives on Information Systems Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems serve each of these levels. Figure 1-5 Levels in a Firm Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

13 © 2010 by Prentice Hall Management Information Systems Combines computer science, management science, operations research and behavioral issues Four main actors Hardware and software Business firms Managers and employees Firm’s environment (legal, social, cultural,….) Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

14 © 2010 by Prentice Hall Sociotechnical Approach Optimal organizational performance achieved by jointly optimizing both social and technical systems used in production Helps avoid purely technological approach Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

15 © 2010 by Prentice Hall Contemporary Approaches to Information Systems In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization mutually adjust to one another until a satisfactory fit is obtained. Figure 1-6 A Sociotechnical Perspective on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

16 © 2010 by Prentice Hall Business Processes and Information Systems Business processes: Workflows of material, information, knowledge Sets of activities, steps May be tied to functional area or be cross- functional Businesses: Can be seen as collection of business processes Business processes may be assets or liabilities Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

17 © 2010 by Prentice Hall Examples of functional business processes –Manufacturing and production Assembling the product –Sales and marketing Identifying customers –Finance and accounting Creating financial statements –Human resources Hiring employees Business Processes and Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

18 © 2010 by Prentice Hall The Order Fulfillment Process Figure 1-7 Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions. Business Processes and Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

19 © 2010 by Prentice Hall Intranets: Used for internal distribution of information to employees Typically utilize private portal providing single point of access to several systems May connect to company’s transaction systems Systems That Span the Enterprise Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

20 © 2010 by Prentice Hall Extranets: Intranets extended to authorized users outside the company Expedite flow of information between firm and its suppliers and customers Can be used to allow different firms to collaborate on product design, marketing, and production Systems That Span the Enterprise Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

21 © 2010 by Prentice Hall Collaboration and communication systems ‘Interaction’ jobs a major part of global economy Methods include: Internet-based collaboration environments and instant messaging (IM) Cell phones and smartphones Social networking Wikis Virtual worlds Systems That Span the Enterprise Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

22 © 2010 by Prentice Hall E-Commerce: is a type of industry where buying and selling of product or service is conducted over electronic systems such as the Internet and other computer networks. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, Internet marketing, online transaction processing, inventory management systems, etc…. Systems That Span the Enterprise Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

23 © 2010 by Prentice Hall E-business: Use of digital technology and Internet to execute major business processes in the enterprise Includes e-commerce (electronic commerce): InternetBuying and selling of goods over Internet E-government: The application of Internet and networking technologies to digitally enable government and public sector agencies’ relationships with citizens, businesses, and other arms of government Systems That Span the Enterprise Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

24 © 2010 by Prentice Hall NBA Teams Make a Slam Dunk with Information Technology Problem: Lack of hard data usable in decision-making processes, costly and competitive market. Solutions: Developed a new system designed to collect and organize data using video clips of games. Synergy Sports Technology tags video of each game with hundreds of descriptive categories and allows coaches and players to stream game footage from the Web. Demonstrates IT’s role in innovation and improving business processes. Management Information Systems Chapter 1 Information Systems in Global Business Today and Global E-Business

25 © 2010 by Prentice Hall 2Chapter Information Systems, Organizations, and OrganizationsStrategy Information Systems, Organizations, and Organizations Strategy

26 © 2010 by Prentice Hall LEARNING OBJECTIVES Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy Identify and describe important features of organizations that managers need to know about in order to build and use information systems successfully. Demonstrate how information systems help businesses use synergies, core competencies, and network-based strategies to achieve competitive advantage.

27 © 2010 by Prentice Hall EBay Fine-Tunes Its Strategy Problem: Losing market share to other online retailers. Solutions: Acquire other businesses and adjust its business model to maintain online dominance. Purchase of PayPal, deal with Buy.com allowed eBay to grow and diversify its business. Demonstrates IT ’ s role in the development of eBay ’ s organization as it expands and makes acquisitions. Illustrates the challenges of maintaining a competitive advantage in a fast-moving, constantly-changing marketplace. Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

28 © 2010 by Prentice Hall Organizations and Information Systems Information technology and organizations influence one another Complex relationship influenced by organization’s structure, business processes, politics, culture, environment, and management decisions Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

29 © 2010 by Prentice Hall The Two-Way Relationship Between Organizations and Information Technology Figure 2-1 This complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment. Organizations and Information Systems Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

30 © 2010 by Prentice Hall Organizations and Information Systems What is an organization? Technical definition: Stable, formal social structure that takes resources from environment and processes them to produce outputs Behavioral definition: A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

31 © 2010 by Prentice Hall The Behavioral View of Organizations Figure 2-2 The behavioral view of organizations emphasizes group relationships, values, and structures. Organizations and Information Systems Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

32 © 2010 by Prentice Hall Organizations and Information Systems Organizational politics Divergent viewpoints lead to political struggle, competition, and conflict Political resistance greatly hampers organizational change Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

33 © 2010 by Prentice Hall Organizations and Information Systems Organizational culture: Encompasses set of assumptions that define goal and product What products the organization should produce How and where it should be produced For whom the products should be produced May be powerful unifying force as well as restraint on change Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

34 © 2010 by Prentice Hall Organizations and Information Systems Organizational environments: Organizations and environments have a reciprocal relationship Organizations are open to, and dependent on, the social and physical environment Organizations can influence their environments Environments generally change faster than organizations Information systems can be instrument of environmental scanning Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

35 © 2010 by Prentice Hall Organizations and Information Systems Organizational structure Five basic kinds of structure Entrepreneurial: Small start-up business Machine bureaucracy: Midsize manufacturing firm Divisionalized bureaucracy: Fortune 500 firms Professional bureaucracy: Law firms, school systems, hospitals Adhocracy: Consulting firms Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

36 © 2010 by Prentice Hall How Information Systems Impact Organizations and Business Firms Transaction cost theory Firms seek to economize on cost of participating in market (transaction costs) IT lowers market transaction costs for firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

37 © 2010 by Prentice Hall The Transaction Cost Theory of the Impact of Information Technology on the Organization Figure 2-3 Firms traditionally grew in size to reduce transaction costs. IT potentially reduces transaction costs for a given size. How Information Systems Impact Organizations and Business Firms Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

38 © 2010 by Prentice Hall How Information Systems Impact Organizations and Business Firms Agency theory: Firm is nexus of contracts among self- interested parties requiring supervision Firms experience agency costs (the cost of managing and supervising) which rise as firm grows IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

39 © 2010 by Prentice Hall The Agency Cost Theory of the Impact of Information Technology on the Organization Figure 2-4 As firms grow in size and complexity, traditionally they experience rising agency costs. How Information Systems Impact Organizations and Business Firms Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

40 © 2010 by Prentice Hall How Information Systems Impact Organizations and Business Firms Organizational and behavioral impacts IT flattens organizations Decision making pushed to lower levels Fewer managers needed (IT enables faster decision making and increases span of control) Postindustrial organizations Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

41 © 2010 by Prentice Hall Flattening Organizations Figure 2-5 Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower- level employees more decision- making authority. How Information Systems Impact Organizations and Business Firms Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

42 © 2010 by Prentice Hall Four generic strategies for dealing with competitive forces, enabled by using IT Low-cost leadership Product differentiation Focus on market niche Strengthen customer and supplier intimacy Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

43 © 2010 by Prentice Hall Low-cost leadership produce products and services at a lower price than competitors while enhancing quality and level of service Examples: Wal-Mart, Dell Product differentiation Enable new products or services, greatly change customer convenience and experience Examples: Google, Land’s End, Apple iPhone Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

44 © 2010 by Prentice Hall Focus on market niche Use information systems to enable a focused strategy on a single market niche; specialize Example: Hilton Hotels Strengthen customer and supplier intimacy Use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs Example: Chrysler, Amazon Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

45 © 2010 by Prentice Hall The Internet’s impact on competitive advantage Transformation, destruction, threat to some industries E.g. travel agency, printed encyclopedia, newspaper Competitive forces still at work, but rivalry more intense Universal standards allow new rivals, entrants to market New opportunities for building brands and loyal customer bases Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

46 © 2010 by Prentice Hall Business value chain model Views firm as series of activities that add value to products or services Highlights activities where competitive strategies can best be applied Primary activities vs. support activities At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy Utilize benchmarking, industry best practices Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

47 © 2010 by Prentice Hall The Value Chain Model Figure 2-6 This figure provides examples of systems for both primary and support activities of a firm and of its value partners that can add a margin of value to a firm’s products or services. Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

48 © 2010 by Prentice Hall Value web: Collection of independent firms using highly synchronized IT to coordinate value chains to produce product or service collectively More customer driven, less linear operation than traditional value chain Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

49 © 2010 by Prentice Hall The Value Web Figure 2-7 The value web is a networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand. Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

50 © 2010 by Prentice Hall Information systems can improve overall performance of business units by promoting synergies and core competencies Synergies When output of some units used as inputs to others, or organizations pool markets and expertise Example: merger of Bank of NY and JPMorgan Chase Purchase of YouTube by Google Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

51 © 2010 by Prentice Hall Core competencies Activity for which firm is world-class leader Relies on knowledge, experience, and sharing this across business units Example: Procter & Gamble’s intranet and directory of subject matter experts Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

52 © 2010 by Prentice Hall Network-based strategies Take advantage of firm’s abilities to network with each other Include use of: Network economics Virtual company model Business ecosystems Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

53 © 2010 by Prentice Hall Network economics Traditional economics: Law of diminishing returns The more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional outputs Network economics: Marginal cost of adding new participant almost zero, with much greater marginal gain Value of community grows with size Value of software grows as installed customer base grows Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

54 © 2010 by Prentice Hall Virtual company strategy Virtual company uses networks to ally with other companies to create and distribute products without being limited by traditional organizational boundaries or physical locations Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

55 © 2010 by Prentice Hall Business ecosystems Industry sets of firms providing related services and products Microsoft platform used by thousands of firms for their own products Wal-Mart’s order entry and inventory management system Keystone firms: Dominate ecosystem and create platform used by other firms Niche firms: Rely on platform developed by keystone firm Individual firms can consider how IT will enable them to become profitable niche players in larger ecosystems Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

56 © 2010 by Prentice Hall An Ecosystem Strategic Model Figure 2-8 The digital firm era requires a more dynamic view of the boundaries among industries, firms, customers, and suppliers, with competition occurring among industry sets in a business ecosystem. In the ecosystem model, multiple industries work together to deliver value to the customer. IT plays an important role in enabling a dense network of interactions among the participating firms. Using Information Systems to Achieve Competitive Advantage Management Information Systems Chapter 2 Information Systems, Organizations, and OrganizationsStrategy and Organizations Strategy

57 © 2010 by Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall