1. Chapter 1 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 1 1-2 CHAPTER 1: LEARNING OUTCOMES 1. Describe the information age and the differences among data, information, business intelligence, and knowledge. 2. Identify the different departments in a company and why they must work together to achieve success. 3. Explain systems thinking and how management information systems enable business communications. 4. Explain why competitive advantages are temporary. 5. Describe Porter ’ s Five Forces Model and explain each of the five forces. 6. Compare Porter ’ s three generic strategies. 7. Demonstrate how a company can add value by using Porter’s value chain analysis.

3. Chapter 1 1-3 COMPETING IN THE INFORMATION AGE Fact—The confirmation or validation of an event or object Information Age—The present time, during which infinite quantities of facts are widely available to anyone who can use a computer The core drivers of the information age:  Data  Information  Business intelligence  Knowledge

4. Chapter 1 1-4 Data, Information, Business Intelligence & Knowledge Data — Raw facts that describe the characteristics of an event or object Information — Data converted into a meaningful and useful context Business Intelligence — Information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making Knowledge — Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources

5. Chapter 1 1-5 THE CHALLENGE: DEPARTMENTAL COMPANIES Companies are typically organized by department or functional area such as:  Accounting: Records, measures, and reports monetary transactions  Finance: Deals with strategic financial issues including money, banking, credit, investments, and assets  Human resources: Maintains policies, plans, and procedures for the effective management of employees  Marketing: Supports sales by planning, pricing, and promoting goods or services  Operations management: Manages the process of converting or transforming of resources into goods or services  Sales: Performs the function of selling goods or services

6. Chapter 1 1-6 THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS Systems Thinking — A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part  Feedback is information that returns to its original transmitter (input, transform, or output) and modifies the transmitter’s actions Management Information Systems (MIS) — A business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving

7. Chapter 1 1-7 MIS Department Roles and Responsibilities Chief Information Officer (CIO)—Oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives Chief Knowledge Officer (CKO)—Responsible for collecting, maintaining, and distributing the organization’s knowledge Chief Privacy Officer (CPO)—Responsible for ensuring the ethical and legal use of information Chief Security Officer (CSO)—Responsible for ensuring the security of IT systems Chief Technology Officer (CTO)—Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT

8. Chapter 1 1-8 IDENTIFYING COMPETITIVE ADVANTAGES Business Strategy—A leadership plan that achieves a specific set of goals or objectives such as:  Developing new products or services  Entering new markets  Increasing customer loyalty  Attracting new customers  Increasing sales Competitive Advantage—A product or service that an organization’s customers place a greater value on than similar offerings from a competitor

9. Chapter 1 1-9 IDENTIFYING COMPETITIVE ADVANTAGES First-Mover Advantage—Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage Competitive Intelligence—The process of gathering information about the competitive environment to improve the company’s ability to succeed Competitive intelligence tools:  Porter’s Five Forces Model  Porter’s Three Generic Strategies  Porter’s Value Chain Analysis

10. Chapter 1 1-10 Buyer & Supplier Power Buyer Power—The ability of buyers to affect the price of an item  Switching Cost—Manipulating costs that make customers reluctant to switch to another product  Loyalty Program—Rewards customers based on the amount of business they do with a particular organization Supplier Power—The suppliers’ ability to influence the prices they charge for supplies  Supply Chain—Consists of all parties involved in the procurement of a product or raw material

11. Chapter 1 1-11 Threat of Substitute Products or Services and Entrants Threat of Substitute Products or Services — High when there are many alternatives to a product or service and low when there are few alternatives Threat of New Entrants — High when it is easy for new competitors to enter a market and low when there are significant entry barriers Entry barrier — A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival

12. Chapter 1 1-12 Rivalry Among Existing Competitors Rivalry Among Existing Competitors—High when competition is fierce in a market and low when competitors are more complacent Product Differentiation—Occurs when a company develops unique differences in its products or services with the intent to influence demand

13. Chapter 1 1-13 Analyzing the Airline Industry Perform a Porter’s Five Forces analysis of each of the following for a company entering the commercial airline industry:  Buyer power  Supplier power  Threat of substitute products/services  Threat of new entrants  Rivalry among competitors

14. Chapter 1 1-14 THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS FOCUS Porter’s Three Generic Strategies

15. Chapter 1 1-15 VALUE CHAIN ANALYSIS EXECUTING BUSINESS STRATEGIES Primary value activities:  Inbound Logistics  Operations  Outbound Logistics  Marketing and Sales  Service Support value activities:  Firm Infrastructure  Human Resource Management  Technology Development  Procurement Value Chain Analysis —Views a firm as a series of business processes that each add value to the product or service.