Management Information Systems (Assignment 1)

Management Information Systems (MIS)

CHAPTER 1: INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY

 Explain why information systems are so essential in business today.
 Define an information system from both a technical and a business perspective.
 Identify and describe the three dimensions of information systems.
 Assess the complementary assets required for information technology to provide value to a business.
 Identify the major management challenges to building and using information systems.

 Explain why information systems are so essential in business today. (OR)

 List and describe six reasons why information systems are so important for business today.

Information systems are a foundation for conducting business today. In many industries, survival and even
existence is difficult without extensive use of information technology. Information systems have become
essential for helping organizations operate in a global economy. Organizations are trying to become more
competitive and efficient by transforming themselves into digital firms where nearly all core business
processes and relationships with customers, suppliers, and employees are digitally enabled. Businesses
today use information systems to achieve six major objectives: operational excellence; new products,
services, and business models; customer/supplier intimacy; improved decision making; competitive
advantage; and day-to-day survival.

Business firms invest heavily in information systems to achieve six strategic business objectives

 Operational excellence

 Improvement of efficiency to attain higher profitability

 Information systems, technology an important tool in achieving greater efficiency and productivity

 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 are a major enabling tool for new products, services, business
models

 Customer and supplier intimacy

 Serving customers well leads to customers returning, which raises revenues and profits
 E.g. High-end hotels that use computers to track customer preferences (room temperature, TV
channels) and use IS to monitor and customize environment
 Intimacy with suppliers allows them to provide vital inputs, which lowers costs

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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

 Competitive advantage

 Delivering better performance

 Charging less for superior products
 Responding to customers and suppliers in real time
 Often achieved through one of first four strategic business objectives
 E.g. Dell: Consistent profitability over 25 years; Dell remains one of the most efficient producer of
PCs in world (mass customization)
 But Dell has lost some of its advantages to fast followers– HP (competitive advantage is not
sustainable)

 Survival

 Information systems and technologies as a necessity for businesses to survive

 Driven by:
 Industry-level changes, e.g. the introduction of ATMs by one bank forces other banks to follow
 Governmental regulations requiring record-keeping
 Toxic Substances Control Act, Sarbanes-Oxley Act (after the Enron scandal, retain audit
papers and records including e-mails for 5 years)
 Firms need IS capability to respond to these requirements

Information systems are the foundation for conducting business today. In many industries, survival and even
existence without extensive use of IT is inconceivable, and IT plays a critical role in increasing productivity.
Although information technology has become more of a commodity, when coupled with complementary
changes in organization and management, it can provide the foundation for new products, services, and ways
of conducting business that provide firms with a strategic advantage.

 Define an information system from both a technical and a business perspective.

From a technical perspective, an information system collects, stores, and disseminates information from an
organization’s environment and internal operations to support organizational functions and decision
making, communication, coordination, control, analysis, and visualization. Information systems transform
raw data into useful information through three basic activities: input, processing, and output. From a
business perspective, an information system provides a solution to a problem or challenge facing a firm and
provides real economic value to the business.

What Is an Information System?

An information system can be defined technically as a set of interrelated components that collect (or
retrieve), process, store, and distribute information to support decision making and control in an
organization. In addition to supporting decision making, coordination, and control, information systems may
also help managers and workers analyze problems, visualize complex subjects, and create new products.

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 Technical perspectives on Information Systems

 Set of interrelated components

 Collect, process, store, and distribute information
 Support decision making, coordination, and control
 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
 Information vs. data
 Data are streams of raw facts
 Information is data shaped into meaningful form
 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
 Information systems are more than computers

Business perspective on information systems:

 Information systems are instruments for creating value

 Investments in information systems and technology will result in superior returns:
 Productivity increases
 Revenue increases
 Superior long-term strategic positioning

But not always!!

 Investing in information technology does not guarantee good returns (big failures by firms like HP,
Nike, Nestle)
 Considerable variation in the returns firms receive from systems investments
 Success requires a business perspective: attention to the organizational and managerial nature of
information systems
 Success Factors:
 Adopting the right business model
 Investing in complementary assets (organizational and management capital)

 Identify and describe the three dimensions of information systems.

An information system represents a combination of management, organization, and technology elements.

The management dimension of information systems involves leadership, strategy, and management behavior.
The technology dimensions consist of computer hardware, software, data management technology, and
networking/telecommunications technology (including the Internet). The organization dimension of
information systems involves the organization’s hierarchy, functional specialties, business processes,
culture, and political interest groups.

Organizational dimension of information systems

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  Hierarchy of authority, responsibility

 Senior management
 Middle management
 Operational management
 Knowledge workers
 Data workers
 Production or service workers

 Separation of business functions

 Sales and marketing

 Human resources
 Finance and accounting
 Production and manufacturing

 Unique business processes

 Unique business culture

 Organizational politics

 Management dimension of information system

 Managers set organizational strategy for responding to business challenges

 Managers control and coordinate
 In addition, managers must act creatively:
 Creation of new products and services
 Occasionally re-creating the organization

 Technological 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

 Assess the complementary assets required for information technology to provide value to a business.

An information system is part of a series of value-adding activities for acquiring, transforming, and
distributing information to improve management decision making, enhance organizational performance,
and, ultimately, increase firm profitability. Information technology cannot provide this value unless it is
accompanied by supportive changes in organization and management called complementary assets. These
complementary assets include new business models, new business processes, a supportive organizational
culture, incentives for management support and innovation, training, and social assets such as standards,
laws and regulations, and telecommunications infrastructure. Firms that make appropriate investments in
these complementary assets, also known as organizational and management capital, receive superior returns
on their information technology investments.

 Complementary assets
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  Assets required to derive value from a primary investment
 Firms supporting technology investments with investment in complementary assets receive superior
returns
 Value must be added through complementary assets such as new business processes, management
behavior, organizational culture, and training.
 E.g.: invest in technology and the people to make it work properly

Complementary assets include

 Organizational assets

 Supportive culture that values efficiency and effectiveness

 Appropriate business model
 Efficient business processes
 Decentralized authority

 Managerial assets

 Strong senior management support for technology investment and change

 Incentives for management innovation
 Teamwork and collaborative work environments

 Social assets

 The Internet and telecommunications infrastructure

 IT-enriched educational programs raising labor force

 Identify the major management challenges to building and using information systems.

There are five key management challenges in building and using information systems: (1)
designing systems that are competitive and efficient; (2) understanding the system
requirements of a global business environment; (3) creating an information architecture that
supports the organization's goals; (4) determining the business value of information systems;
and (5) designing systems that people can control, understand, and use in a socially and
ethically responsible manner.

Major management challenges

 Design competitive and effective systems: rethinking of business processes, not simple automation
 Understand system requirements of global business environment: language, cultural and regulatory
barriers
 Create information architecture that supports organization’s goal
 Determine the business value of information systems
 Design systems people can control, understand and use in a socially, ethically responsible manner.

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