1. Information Systems in Global Business Today
Chapter 1
Information Systems in Global Business Today

2. Information Technology Capital Investment
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
Information Technology Capital Investment
total investment reached one trillion dollars in 2008, and that over 500 billion dollars of that was invested in information technology. 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, while 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.
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, 2008.
Figure 1-1

3. Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
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:
Operational excellence
New products, services, and business models
Customer and supplier intimacy
Improved decision making
Competitive advantage
Survival
think about some 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?

4. Operational excellence:
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
Operational excellence:
Improvement of efficiency to attain higher profitability
Information systems, technology an important tool in achieving greater efficiency and productivity
Wal-Mart’s RetailLink system links suppliers to stores for superior replenishment system
Wal-Mart is the most efficient retailer in the industry and exemplifies operational excellence. Does it make a difference for customer purchasing? What Web sites strike you as really excellent in terms of customer service? Visit the Wal-Mart site and the Amazon site to compare them in terms of ease of use.

5. New products, services, and business models:
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
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 iPod, iTunes, and iPhone, Netflix’s Internet-based DVD rentals
Name other new products or business models and how they might relate to new information systems or new technology. Consider some really interesting recent digital product innovations. What role will IT be playing in the development of these technologies?

6. Customer and supplier intimacy:
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
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 use to monitor and customize environment
Intimacy with suppliers allows them to provide vital inputs, which lowers costs
Example: J.C.Penney’s information system which links sales records to contract manufacturer

7. Improved decision making
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
Improved decision making
Without accurate information:
Managers must use forecasts, best guesses, luck
Leads to:
Overproduction, underproduction of goods and services
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, etc.

8. Competitive advantage
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
Competitive advantage
Delivering better performance
Charging less for superior products
Responding to customers and suppliers in real time
Example: Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors – information systems are critical to the implementation of TPS
Notice that achieving any of the previous four business objectives represents the achievement of a competitive advantage as well.

9. Survival Information technologies as necessity of business May be:
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
Survival
Information technologies as necessity of business
May be:
Industry-level changes, e.g. Citibank’s introduction of ATMs
Governmental regulations requiring record-keeping
Examples: Toxic Substances Control Act, Sarbanes-Oxley Act
The Sarbanes-Oxley Act requires that public firms keep all data, including , on record for 5 years. The information systems would be useful towards meeting the standards imposed by this legislation.

10. The Interdependence Between Organizations and Information Technology
Management Information Systems
Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
The Interdependence Between Organizations and Information Technology
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.
Notice 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.
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

11. Information system: Information vs. data
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
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
These are some basic background understandings needed for the course. A system refers to a set of components that work together. 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. To get a sense of raw data, consider a stock ticker on a Web financial site. What it means? Then consider the Dow Jones Industrial Index and the S&P 500, and its daily trend (or for that matter switch to a 1 year view of either of these indexes).

12. Data and Information Management Information Systems Figure 1-3
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Data and Information
Tell the distinction between information and data.
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

13. Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Information system: Three 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
Here is another example similar to the one given in the previous slide to illustrate the three activities involved in the function of an information system. the process of collecting students 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.

14. Computer/Computer program vs. information system
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Feedback:
Output 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

15. Functions of an Information System
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Functions of an Information System
The point of this diagram is first of all to highlight the three basic activities of information systems 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. The 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.
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

16. Information Systems Are More Than Computers
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Information Systems Are More Than Computers
These three themes (management, organizations, and technology) will reappear throughout the book. Understanding the interaction between 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.
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

17. Organizational dimension of information systems
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Organizational dimension of information systems
Hierarchy of authority, responsibility
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers
Page 19 in the text provides more specific details on each level of this hierarchy and their job description.

18. Levels in a Firm Management Information Systems Figure 1-6
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Levels in a Firm
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

19. Management dimension of information systems
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
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
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.

20. Technology dimension of information systems
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
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
Information technology is at the heart of information systems. While 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 & 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 (like customers and suppliers). In contrast, the Internet connects millions of different networks across the globe. Students may not immediately understand this distinction.

21. Dimensions of UPS tracking system
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Dimensions of UPS tracking system
Organizational:
Procedures for tracking packages and managing inventory and provide information
Management:
Monitor service levels and costs
Technology:
Handheld computers, bar-code scanners, networks, desktop computers, etc.
Image what the consequences would be if any one of the three dimensions of information systems were lacking at UPS. With poor technology, good management and organizational procedures would not significantly increase efficiency; without good organizational procedures, even the highest-quality technology wouldn’t prevent frequent errors and data loss; and without good management, the company would not make appropriate decisions about how to use the technology and what procedures to use.

22. The Business Information Value Chain
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
The Business Information Value Chain
The end result of the business information value chain is (almost) always firm profitability. One reason to create a system that is not primarily profit oriented is to meet the information reporting requirements of government and other authorities.
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

23. Variation in Returns on Information Technology Investment
Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems
Variation in Returns on Information Technology Investment
Notice 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.
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

24. Global E-Business: How Businesses Use Information Systems
Chapter 2
Global E-Business: How Businesses Use Information Systems

25. Workflows of material, information, knowledge
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
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
Business processes are at the heart of every business. This could include anything from ordering a hamburger at McDonalds, to applying for a driver’s license at the DMV. Studying a firm’s business processes is an excellent way to learn a great deal about how that business actually works.

26. Examples of functional business processes
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Business Processes and Information Systems
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
Other examples include checking the product for quality (manufacturing and production), selling the product (sales and marketing), paying creditors (finance and accounting), and evaluating job performance (human resources).

27. The Order Fulfillment Process
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Business Processes and Information Systems
The Order Fulfillment Process
Each rectangle represents one part of the larger business process of order fulfillment. Notice that this business process spans more than one type mentioned on the previous slide.
Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions.
Figure 2-1

28. Information technology enhances business processes in two main ways:
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Business Processes and Information Systems
Information technology enhances business processes in two main ways:
Increasing efficiency of existing processes
Automating steps that were manual
Enabling entirely new processes that are capable of transforming the businesses
Change flow of information
Replace sequential steps with parallel steps
Eliminate delays in decision making
Examples of entirely new business processes made possible by information technology are downloading a song from iTunes or buying a book from Amazon. The Amazon book reader Kindle is continuously connected to the Internet and allows customers to download books and pay for them using Amazon’s one click purchase method.

29. Transaction processing systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Transaction processing systems
Perform and record daily routine transactions necessary to conduct business
Examples: sales order entry, payroll, shipping
Allow managers to monitor status of operations and relations with external environment
Serve operational levels
Serve predefined, structured goals and decision making
The purpose of these systems is to answer routine questions about the flow of transactions through the organization. These systems are a necessity for any business.

30. A Payroll TPS Management Information Systems Figure 2-2
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
A Payroll TPS
Note that the outputs of the payroll system are useful not only within the company to managers, but also to regulatory agencies and other entities relying on the accuracy of the reported data.
A TPS for payroll processing captures employee payment transaction data (such as a time card). System outputs include online and hard-copy reports for management and employee paychecks.
Figure 2-2

31. Management information systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Management information systems
Serve middle management
Provide reports on firm’s current performance, based on data from TPS
Provide answers to routine questions with predefined procedure for answering them
Typically have little analytic capability
Management information systems is a specific category of information systems for middle management.

32. Decision support systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Decision support systems
Serve middle management
Support nonroutine decision making
Example: What is impact on production schedule if December sales doubled?
Often use external information as well from TPS and MIS
Model driven DSS
Voyage-estimating systems
Data driven DSS
Intrawest’s marketing analysis systems
DSS are specifically designed to assist managers in making nonroutine type of decision.

33. Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
How Management Information Systems Obtain Their Data from the Organization’s TPS
MIS receive data from an organization’s TPS systems and create outputs that management can use to make strategic decisions.
In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports.
Figure 2-3

34. Sample MIS Report Management Information Systems Figure 2-4
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Sample MIS Report
This graphic represents the “reports” portion of the previous figure, Notice the decimals in the “ACTUAL versus PLANNED” category, where anything above 1.00 represents more sales than planned and anything less represents a disappointing result of fewer sales than planned.
This report, showing summarized annual sales data, was produced by the MIS in Figure 2-3.
Figure 2-4

35. Voyage-Estimating Decision Support System
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Voyage-Estimating Decision Support System
DSS can rely on either analytical models or large databases to provide valuable information. Examples include what vessels to send to particular destinations to maximize profit, the optimal rate at which vessels should travel to maximize efficiency while still meeting their schedules, and so forth.
This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts.
Figure 2-5

36. Executive support systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Executive support systems
Support senior management
Address nonroutine decisions requiring judgment, evaluation, and insight
Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS
Example: ESS that provides minute-to-minute view of firm’s financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory
The connection between ESS, MIS, and DSS. ESS rely on accurate inputs from a firm’s MIS and DSS to provide useful information to executives. These systems should not exist in isolation from one another. If they are isolated from each other, it is a kind of organizational dysfunction, probably inherited from the past.

37. Model of an Executive Support System
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Model of an Executive Support System
The digital dashboard is a common feature of modern-day ESS. A critical feature of ESS is ease of use and simplicity of display. Executives using an ESS want quick access to the most critical data affecting their firm.
This system pools data from diverse internal and external sources and makes them available to executives in easy-to-use form.
Figure 2-6

38. Relationship of systems to one another
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Relationship of systems to one another
TPS: Major source of data for other systems
ESS: Recipient of data from lower-level systems
Data may be exchanged between systems
In reality, most businesses’ systems only loosely integrated
This slide once again emphasizes the relationship between different types of systems.

39. Enterprise Application Architecture
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
Enterprise Application Architecture
Representing an integrated enterprise system in a single graphic is very difficult. The basic point is that enterprise systems are very large and diverse databases that pull information from many parts of the firm, and many systems, and then dispense that information to a very wide variety of groups. This is precisely their advantage: one system, one company, one world.
The multi-colored triangle represents an organization – the ovals represent the business functions and organizational levels affected by enterprise applications. The horizontal oval extends outside of the triangle because even business functions involving outside entities may be automated by enterprise applications.
Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization.
Figure 2-7

40. Enterprise Systems Management Information Systems Figure 2-8
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Enterprise Systems
Emphasize the central repository used in enterprise systems for all types of information collected and used by the business.
Enterprise systems integrate the key business processes of an entire firm into a single software system that enables information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors.
Figure 2-8

41. Supply chain management systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
Supply chain management systems
Manage firm’s relationships with suppliers
Share information about
Orders, production, inventory levels, delivery of products and services
Goal: Right amount of products to destination with least amount of time and lowest cost
SCM systems are interorganizational systems, automating the flow of information across organizational boundaries. This distinction is important because SCM systems must be designed with the business processes of potential partners and suppliers in mind.

42. Example of a Supply Chain Management System
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Example of a Supply Chain Management System
This example of Haworths supply chain management system features ‘middleware’ that connects company warehouses to its distributors. That way, both groups are able to get up-to-the-minute information about the stock of particular goods in their own warehouses as well as their partner’s.
Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworth’s Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems.
Figure 2-9

43. Customer relationship management systems:
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
Customer relationship management systems:
Provide information to coordinate all of the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention
Integrate firm’s customer-related processes and consolidate customer information from multiple communication channels
CRM systems are extremely important for both marketing and customer service. For example, a customer fills out a survey for a company. The information entered was provided as input to a CRM system for analysis.

44. Salesforce.com Executive Team Dashboard
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Types of Business Information Systems
Salesforce.com Executive Team Dashboard
Salesforce is a pioneer of the software-as-a-service business model, under which they provide their CRM services online to companies without proprietary CRM systems or companies looking to acquire useful marketing information at a reduced cost.
Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer service.

45. Knowledge management systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
Knowledge management systems
Support processes for acquiring, creating, storing, distributing, applying, integrating knowledge
Collect internal knowledge and link to external knowledge
Include enterprise-wide systems for:
Managing documents, graphics and other digital knowledge objects
Directories of employees with expertise
Knowledge management systems are useful for helping a firm’s employees understand how to perform certain business processes or how to solve problems.

46. Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
Intranets:
Internal networks built with same tools and standards as Internet
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
Intranets and extranets are technology platforms more so than applications, but they are critical to the function of all enterprise applications. Also notice the ability of intranets to connect to a company’s TPS and related systems.

47. Extranets: Intranets extended to authorized users outside the company
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
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

48. Collaboration and communication systems
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
Systems That Span the Enterprise
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
‘Interaction’ jobs refer to jobs in which talking, ing, presenting, or persuading other people is the primary value-adding activity. Each of the listed systems make interaction with others easier in some way.

49. Information systems department:
Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems
The Information Systems Function in Business
Information systems department:
Formal organizational unit responsible for information technology services
Includes programmers, systems analysts, project leaders, information systems managers
Often headed by chief information officer (CIO), also includes chief security officer (CSO) and chief knowledge officer (CKO)
End-users:
Representatives of other departments, for whom applications are developed
Defined simply, the information systems department of a firm is responsible for coordinating all of the systems previously mentioned in this chapter. Pay attention that end users play a prominent role in how information systems are designed as well as the role that the information systems department plays in a firm.