Information System On Global Businesses Today.

Chapter 1
Information Systems in Global Business Today
1.1
2010 by Prentice Hall
Management Information Systems

Chapter 1 Information Systems in Global Business Today
The Role of Information Systems in Business Today
How information systems are transforming business

Increase in wireless technology use, Web sites Shifts in media and advertising New federal security and accounting laws
Globalization opportunities
Internet has drastically reduced costs of operating on global scale Presents both challenges and opportunities e.g. cost reduction, worldwide market place. Information systems enable globalization
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Information Technology Capital Investment
Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and 2008.
Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2008.
Figure 1-1
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Chapter 2 Global E-Business: How Businesses Use Information Systems
Business Processes and Information Systems
Business processes:
set of logically related task and behavior that organization develop overtime to produce specific business result and the unique manner in which these activities co ordained and organized Refers to the unique way in which organization co ordinate work, information, knowledge and the way in which management chooses to co ordinate the work Workflows of material, information, knowledge, Sets of activities, steps e.g developing a new product, generating & fullfilling a order, hiring employee, creating marketing plan May be tied to functional area or be cross-functional
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Businesses: Can be seen as collection of business processes

Business processes may be assets or liabilities Manufacturing and productio e.g,Assembling the product Sales and marketing e.g ,Identifying customers Finance and accounting e.g Creating financial statements Human resources e.g Hiring employees

Chapter 2 Global E-Business: How Businesses Use Information Systems
Business Processes and Information Systems
The Order Fulfillment Process
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
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In the emerging, fully digital firm

Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks Key corporate assets (intellectual property, core competencies(Activity for which firm is world-class leader.Relies on knowledge, experience, and sharing this across business units) financial and human assets) are managed digitally Any piece of information available anywhere anytime
Digital firms offer greater flexibility in organization and management

Time shifting, space shifting Response to environment more rapidly than traditional firm e.g. Toyota company, Cisco systems and dell computers are close to digital company Accenture company is fully digital company
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Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today
Service industries including personal services ,retail firms, manufacturing companies rely on information technology. Information technology instead of building, telephone line. filing cabinet, elevators foundation of Business 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
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Operational excellence:
Improvement of efficiency to attain higher profitability Information systems, technology an important tool in achieving greater efficiency and productivity Wal-Marts RetailLink system links suppliers to stores for superior replenishment system $379 billion sales that is one tenth of retail sales in USA Sales of wall mart is $28 per square foot but other has$23 or $10
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 is a major enabling tool for new products, services, business models
Examples: Apples inc transformed old business model instead of tapes,reocords and CD to iPod, iTunes, and iPhone Netflixs cahnged their tradnitional DVD rental to Internet-based DVD rentals
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Customer and supplier intimacy:

Serving customers well leads to customers returning, which raises revenues and profits Example:The mandarin hotel in Manhattan & other High-end hotels that use computers to track customer preferences and use to monitor and customize environment The hotel analyze the customer data to identify best customer & develop individualized marketing campaign based on digital profile. Intimacy with suppliers allows them to provide vital inputs, which lowers costs
Example: J.C.Penneys information system which links sales records to contract manufacturer in Hong Kong TAL Apparel ltd.TAL run number through a computer model & decide how many shirts to make.TAL directly sends by passing retailers warehouse.
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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: Verizons Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, storm damaged lines etc.By using IS manager can immediately allocate resources and inform customers
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Competitive advantage
Delivering better performance Charging less for superior products Responding to customers and suppliers in real time All lead to higher sales and higher profits than others Example: Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors information systems are critical to the implementation of TPS, IS help Toyota to implement TPS and make vehicle based on customer ordered. Wal mart enjoing such benefit over other
Survival
Information technologies as necessity of business May be: Industry-level changes, e.g. Citibanks introduction of ATMs due to introduction of ATM by HSBC in 1987 DBBL ATM, Automation of Nationalized bank Governmental regulations requiring record-keeping Examples: Toxic Substances Control Act 1976, Sarbanes-Oxley Act 2002
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The Interdependence Between Organizations and Information Technology
In contemporary systems there is a growing interdependence between a firms 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
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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
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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 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
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Functions of an Information System
An information system contains information about an organization and its surrounding environment. Three basic activitiesinput, processing, and outputproduce 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
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Information Systems Are More Than Computers
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
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Organizational dimension of information systems

IS is the intergal part of the organization The key elements of an organization are its: People, Structure. Business processes. Politics.Culture Hierarchy of authority, responsibility Senior management: Responsible for long rang decision Middle management: Carries out the program and plan of senior management. Operational management: responsible for monitoring the daily activities. Knowledge workers: design product &services &create new knowledge Data workers: assist the paper work at all levels Production or service worker: produce the product and deliver the services Information system automate many business process. e.g granting loan or how customer willl be billed. Parts of culture should be embedded in IS e,g UPS service customer first included in Package tracking systems
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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
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Organizational dimension of information systems (cont.) Separation of business functions

Sales and marketing Human resources Finance and accounting Manufacturing and production Unique business processes Unique business culture Organizational politics
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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 responsibility is to create work driven by new knowledge and IS Occasionally re-creating the organization Information technology can play powerful role in helping manager design and deliver new products and services &redirecting and redesigning the organization

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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

Chapter 3 Information Systems, Organizations, and Strategy
Using Information Systems to Achieve Competitive Advantage
Why do some firms become leaders within their industry?

In search engine Google is leader, In Online retailer Amazon is leader In automotive Toyota is leader, In online music Apples is leader. They are successful and make loads of money. They could easily rest on their laurels, kick back, and relax. If they are so successful, why do they keep working so hard to continually introduce new products and services and improve the old ones? Because someone, somewhere, is trying to take their place and become the new giant. These companies must constantly work to keep their competitive advantage and they are using information systems to do so.
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Michael Porters competitive forces model

Provides general view of firm, its competitors, and environment
Porters competitive forces model contends that much of the success or failure of a business depends on its ability to respond to its external environment.
Five competitive forces shape fate of firm

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Traditional competitors New market entrants Substitute products and services Customers Suppliers

Chapter 3 Information Systems, Organizations, and Strategy Using Information Systems to Achieve Competitive Advantage
Porters Competitive Forces Model
In Porters competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four forces in the industrys environment: new market entrants, substitute products, customers, and suppliers.
Figure 3-10
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Traditional competitors
All firms share market space with competitors who are continuously devising new products, services, efficiencies, attract customers by new product & increase switching costs
New market entrants

Some industries have high barriers to entry, e.g. computer chip business, huge capital required New companies have several advantages e.g. locked into plant and equipment, hire younger employee they are more hungry disadvantage for new companies: depending on outside for financing, less experienced labor &little brand recognition
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Substitute products and services

Substitutes customers might use if your prices become too high, e.g. internet telephone for traditional telephone, iTunes substitutes for CDs, fiber optic for cable TV line
Customers
Can customers easily switch to competitors products? Can they force businesses to compete on price alone in transparent marketplace where there is little product differentiation? All prices are known instantly. E.g. online new books/ used books
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Suppliers
Market power of suppliers when firm cannot raise prices as fast as suppliers.The different supplier has, the greater control it can exercise over supplier.e.g. manufacturer of laptop pc have multiple supplier such as keyboard, hard drive Complementary :Power, vigor and competetence of coplementors Number of complementors boosts demand and profit for the company. Eg. Supply of high quality software increase the demand of pc.
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How can the firm use information systems for counteract some of these forces? How do you prevent substitutes and inhibit new market entrants? Many companies have found that effective and efficient information.
Four generic strategies for dealing with competitive forces, enabled by using IS Low-cost leadership Product differentiation Focus on market niche Strengthen customer and supplier intimacy
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Low-cost leadership
produce products and services at a lower price than competitors while enhancing quality and level of service. E.g. Wal-Mart over head cost is 16.6% while the etail industry average overhead cost 20.7%, Dell, Hypercity use JDA software for advanced store replenishment that increase ROI 25-30%
Efficient customer response systems provide a company and its suppliers with an integrated view of customers. These systems provide instantaneous information to the company and its suppliers. Every staff member can have access to the information in the system to help reduce costs and prices well below that of the competition. Processes such as supply replenishment are automated between companies and suppliers. When products reach a certain re-order point, the system automatically sends a message to the supplier who can quickly send out new stock. These systems help companies achieve low-cost leadership in their industry.
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Product differentiation
Enable new products or services, greatly change customer convenience and experience E.g. Google (Google maps), Apple(iPhone,ipod video player,smartphone),Dell inc sells directly to customers(toll free telephone call),Tajlands End use electronic systems. Apple uses product differentiation to help market its iPod and online music system to a broad swath of the population and create barriers that its competitors are having difficulty overcoming. People like to feel that they are unique individuals with their own needs and desires. One of the best strategies for dealing with competitors is to offer customers exactly what they want, when they want it, and how they want it.The Internet provides a new outlet for mass customization by allowing customers to order one-of-a-kind products.
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Focus on market niche

Serve narrow target market better than competitor ( Zoom by City cell) Information systems enable firm to analyze customers buying pattern, tastes, preference so that they can campaign in a smaller market Use information systems to enable a focused strategy on a single market niche; specialize. E.g. Hilton hotel use ONQ to collect information. types of holiday, Auto nation mines customer data to determine which models and options they are most likely to buy. Identify profitable customer revenue increased from 41% to 61%
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Strengthen customer and supplier intimacy
Use information systems to develop strong ties and loyalty with customers and suppliers; Chrysler corporation use information system to facilitate direct access to customer in supplier to production schedule even permit the supplier how and when to ship the supplier. increase switching costs. E.g., Amazon keep track of user preferences for book and CD purchase & recommend others., Tata motors provide direct access by supplier. Implementing these competitive strategies requires precise coordination of people, technology and the organization. A company can pursue one or more of these strategies but cannot isolate any of the three dimensions of an information system. They must all work in concert together to have any hope of success 2010 by Prentice Hall
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Chapter 3 Information Systems, Organizations, and Strategy The Internets impact on competitive advantage
Of course the Internet has turned many traditional management practices to dust. Customers have access to much more information and data than they ever did before. They can compare product prices across hundreds of companies with a few clicks. Before the Internet, customers may have had access to a limited number of retailers. Through the Internet, they now have access to hundreds of retailers open 24 hours a day. Once retailers had only local competition. Now they have to compete with other retailers located halfway around the world. Transformation, destruction, threat to some industries First wave: Books, music and air travel . Second wave: Telephone services, movie, television, jewelery real state, hotels, bill payments and software Competitive forces still at work, but rivalry more intense Universal standards of intenet, allow new rivals, entrants to market New opportunities for building brands and loyal customer bases eg
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e-bay,overstock.com,amazon.com,google.
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Business perspective on information systems:

Information system is instrument for creating value Investments in information technology will result in superior returns:
Productivity increases Revenue increases Superior long-term strategic positioning e.g IS for analyzing supermarket checkout can increase firm profitability
There are three ways an information system can add value to a business: Help managers make better decisions Help make business processes more efficient Increase profitability Primary purpose is to contribute to corporate value.
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Business information value chain

Raw data acquired and transformed through stages that add value to that information Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits
Business perspective: Calls attention to organizational and managerial nature of information systems
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The Business Information Value Chain
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
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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 & where information systems are most likely to have a strategic impact. Primary activities vs. secondary activities At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy Utilize benchmarking, industry best practices By effectively using an information system in a strategic role at any, or preferably all, levels of the organization, a digital firm can provide more value in their products than the competition. If they cant provide more value, then the strategic information system should help them provide the same value but at a lower price.
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The Value Chain Model
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 firms products or services.
Figure 3-11
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Network-based strategies
The availability of internet and networking technologies take advantage of firms abilities to network with each other Include use of: Network economics Virtual company model Business ecosystems
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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 eg-bay,ivillage More people offering the product on ebay site the more valuable the ebay site because more products are listed. Value of software grows as installed customer base grows
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Virtual company strategy

Virtual company uses networks to link people,assets,ideas to ally with other companies to create and distribute products without being limited by traditional organizational boundaries or physical locations.One company can use the capabilities of other without being physically tied to that company. E.g.Fashion companies Guess,levi strauss & Reebok depends onLi fung. Li Fung manages production, shipment of garments for major fashion companies, outsourcing all work to over 7,500 suppliers in 37 countries Companies are no longer tied to suppliers and business partners located in specific geographical areas but can find the best service provider or business partner around the world.
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Business ecosystems
Porters model confines the marketplace in one industry.Instead of participating one indurty,firms are aware to participate in industry sets Business ecosystems is another term that loosely coupled but interdependent network of supplier,distributors,outsourcing firms,traportation services and technology manufacrer. The idea is to drive down the cost of supplies and make the entire industry more efficient. While things havent gone as smoothly as originally hoped for, the idea has been planted and is now spreading to other industries. Main difference with value web that cooperatin takes places many industries rather than many firms Industry sets of firms providing related services and products Microsoft platform used by thousands of firms for their own products Wal-Marts 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 E.g. mobile internet platform:Device makers(LG,motorola)Wireless telecommunication frim(AT&T,verizon,independent software applications providers(ring tone,games)internet service provider 2010 by Prentice Hall
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An Ecosystem Strategic Model
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.
Figure 3-13
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Investing in information technology does not guarantee good returns Considerable variation in the returns firms receive from systems investments Factors:
Adopting the right business model Investing in complementary assets (organizational and management capital)
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Complementary assets:
Assets required to derive value from a primary investment Firms supporting technology investments with investment in complementary assets receive superior returns E.g.: invest in technology and the people to make it work properly
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Complementary assets include:

Organizational investments, e.g. Appropriate business model Efficient business processes Decentralized authority Strong IS development team Managerial investments, e.g. Incentives for management innovation Teamwork and collaborative work environments Strong senior management support Social investments, e.g.
The Internet and telecommunications infrastructure Technology standards Technology and service firm to assist implementation
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Information System On Global Businesses Today.

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Chapter 1

Information Systems in Global Business Today

2010 by Prentice Hall

Management Information Systems

The Role of Information Systems in Business Today

How information systems are transforming business

Management Information Systems

The Role of Information Systems in Business Today

Information Technology Capital Investment

Management Information Systems

Business Processes and Information Systems

Businesses: Can be seen as collection of business processes

Management Information Systems

Business Processes and Information Systems

The Order Fulfillment Process

Management Information Systems

In the emerging, fully digital firm

Digital firms offer greater flexibility in organization and management

Management Information Systems

2010 by Prentice Hall

Management Information Systems

The Role of Information Systems in Business Today

New products, services, and business models:

2010 by Prentice Hall

Management Information Systems

The Role of Information Systems in Business Today

Customer and supplier intimacy:

Management Information Systems

The Role of Information Systems in Business Today

Improved decision making

Management Information Systems

Management Information Systems

The Role of Information Systems in Business Today

The Interdependence Between Organizations and Information Technology

2010 by Prentice Hall

Management Information Systems

Perspectives on Information Systems

2010 by Prentice Hall

Management Information Systems

Perspectives on Information Systems

2010 by Prentice Hall

Management Information Systems

Perspectives on Information Systems

Functions of an Information System

Management Information Systems

Perspectives on Information Systems

Information Systems Are More Than Computers

Management Information Systems

Organizational dimension of information systems

2010 by Prentice Hall

Management Information Systems

Perspectives on Information Systems

Management Information Systems

Perspectives on Information Systems

Organizational dimension of information systems (cont.) Separation of business functions

2010 by Prentice Hall

Management Information Systems

Management dimension of information systems

Technology dimension of information systems

Management Information Systems

Using Information Systems to Achieve Competitive Advantage

Why do some firms become leaders within their industry?

Michael Porters competitive forces model