LA SAGESSE UNIVERSITY MIS400 – Business Information Systems

Faculty of Business Administration and Finance Fall 2020

CHAPTER 1
INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY
Computers are changing every aspect of our lives from entertainment to shopping, from the work we do
and where we do it, to how we communicate with friends and relatives. Networking technologies are
pervading almost everything we do professionally, socially, and recreationally. Many companies are
remodeling their businesses and information systems with the Internet in mind. It has become more
important than ever for you to understand not just how technology works but also how current and future
advances affect your work life.

1.1 The Role of Information Systems in Business Today

How Information Systems are Transforming Business

Technology, to a large extent, has driven organizations to change the way they operate and that includes
the way they manage. Information systems are the foundation for conducting business today. In many
industries, survival and even existence is difficult without extensive use of information technology. No
longer can we imagine going to work and conducting business without them. As a society we have come
to rely extensively on the use of information appliances such as cell phones, BlackBerrys, IPhones,
handhelds, and other hardware. Communicating and conducting business is increasingly being carried out
through the use of e-mail, online conferencing, and international teleconferencing. Internet technologies
have become essential business tools.
Businesses are responding to the rapidly changing customers demand, reduce inventories to the lowest
possible levels, and achieve higher levels of operational efficiency.

What’s New in Management Information Systems?

It seems that changes in technology are never-ending. The use of technology now extends far beyond the
simple desktop computer, especially in the business world. Three interrelated changes are affecting
companies worldwide:
 The emerging mobile digital platform
 Growth of online software as a service
 Growth of “cloud computing”

Globalization Challenges and Opportunities:

Information systems enable globalization. The internet has reduced the costs of operating and transacting
on a global scale. Globalization presents both challenges and opportunities.

The Emerging Digital Firm

A digital firm is one in which all of the organization’s significant business relationships with customers,
suppliers, and employees are digitally enabled, and key corporate assets are managed through digital
means. The core business processes are accomplished through digital networks.
Digital firms respond more rapidly than traditional firms, offer greater flexibility in organization and
management: Time shifting and space shifting are the norm.
MIS400 – Business Information Systems Prof.: Micheline TABET

Business processes refer to the set of related tasks and behaviors that organizations develop over time to
produce specific business results (Ex.: Developing a new product, generating an order, creating a
marketing plan, hiring an employee…)

1.2 Strategic Business Objectives of Information Systems

There is a growing interdependence between a firm’s ability to use information technology and its ability
to implement corporate strategies and achieve corporate goals. Specifically, business firms invest heavily
in information to achieve six strategic business objectives:
 Operational excellence
 New products, services, and business models
 Customer and supplier intimacy
 Improved decision making
 Competitive advantage
 Survival

1- Operational Excellence (Improvement of efficiency to attain higher profitability)

Businesses continuously seek to improve the efficiency of their operations in order to achieve
higher profitability. Information systems and technologies are some of the most important tools
available to managers for achieving higher levels of efficiency and productivity in business
operations, especially when coupled with changes in business practices and management behavior.

2- New Products, Services, and Business Models

Information systems and technologies are a major enabling tool for firms to create new products
and services, as well as entirely new business models. A business model describes how a
company produces, delivers, and sells a product or service to create wealth. As successful as
Apple Inc, BestBuy, and Wal-Mart were in their traditional brick-and-mortar existence, they have
all introduced new products, services, and business models that have made them both competitive
and profitable.

3- Customer and Supplier Intimacy (Serving customers raises revenues and profits. Better
communication with suppliers means lower costs).
When a business really knows its customers, and serves them well (the way they want to be
served), the customers generally respond by returning and purchasing more. The result is
increased revenues and profits. Likewise with suppliers: The more a business engages its
suppliers, the better the suppliers can provide vital inputs. The result is a lower cost of doing
business. Suppliers are able to ensure the continuous flow of products to the stores in order to
satisfy customer demands.

4- Improved Decision Making (More accurate data leads to better decisions)

Information systems and technologies have made it possible for managers to use real-time data
from the marketplace when making decisions. Previously, managers did not have access to
accurate and current data and as such relied on forecasts, best guesses, and luck. The result is over
or under production of goods and services, misallocation of resources, and poor response times.
The inability to make informed decision resulted in increased costs and lost customers.

5- Competitive Advantage
When firms achieve one or more of these business objectives, chances are they have already
achieved a competitive advantage. Doing things better than your competitors, charging less for
superior products, and responding to customers and suppliers in real time all add up to higher sales
and higher profits that your competitors cannot match. Toyota and Wal-Mart are prime examples
of how companies use information systems and technologies to separate themselves from their
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MIS400 – Business Information Systems Prof.: Micheline TABET

competition. Toyota worked its way to top of its industry with the help of its legendary
information system. Wal-Mart is the most efficient retail store in the industry based in large part
on how well it uses its information resources.

6- Survival
Firms also invest in information systems and technologies because they are necessities of doing
business. Information systems are not a luxury. In most businesses, information systems and
technology are the core to survival. Firms turn to information systems and technologies to provide
the capability to respond to challenges. (Ex.: Citibank was the first banking firm to introduce
ATMs. In doing so, they had a major competitive advantage over their competitors. In order to
remain and survive in the retail banking industry, other banks had no choice but to provide ATM
services to banking customers).

1.3 Perspectives on Information Systems

Information technology (IT) consists of all the hardware and software that a firm needs to use in order to
achieve its business objectives.

What is an Information System?

It is a set of interrelated components that collect (or retrieve), process,

store and distribute information to support decision making,
coordination and control, and to help managers and employees analyze
problems, visualize complex subjects, and create new products. Most of
us think only of hardware and software when we think of an
information system. There is another component of the triangle that
should be considered, and that’s the people side or “persware”:

Data vs. Information

Data: raw facts representing events occurring in organizations or the physical environment before they
have been organized and arranged into a form that people can understand and use.
Information: data that have been shaped into a form that is meaningful and useful to human beings.

Three activities in an information system produce the information that organizations need: the input,
processing, and output.

Input: captures or collects raw data from within the

organization or from its external environment.
Processing: converts this raw input into a meaningful form.
Output: transfers processed information to people or activities
that use it.

Information systems also require feedback, which is output

that is returned to appropriate members of the organizations to
help them evaluate or correct the input stage.

Dimensions of Information Systems

There is a distinct difference between possessing information systems literacy and simple computer
literacy. Information systems literacy focuses on understanding the management and organizational
dimensions of systems as well as the technical dimensions of systems. Computer literacy, in contrast,
focuses primarily on knowledge of information technology.
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MIS400 – Business Information Systems Prof.: Micheline TABET

Management information systems (MIS) deals with behavioral issues

as well as technical issues surrounding the development, use, and
impact of information systems used by managers and employees in the
firm. As such, MIS is defined as the study of information systems
focusing on their use in business and management.

Three dimensions of information systems: organizations, management,

and information technology.

1- Organizations

Organizations exist everywhere, and each has its own structure, just as workplace organizations
have structures and personalities to fit their needs, or in some cases, their old habits. The key
elements of an organization are its: People, Structure, Business processes, Politics, and Culture.

In every organization you’ll find senior management

making long-range decisions and ensuring financial
performance of the firm, middle management carrying
out the plans and goals set by senior managers,
designing products and creating new knowledge for the
firm, and operational management handling the day-
to-day operations of the company.

A business organization requires different employees to

help it succeed. Knowledge workers help create new
knowledge for the organization and data workers help
process the paperwork necessary to keep an
organization functioning. Without production or
service workers, how would the company get its
products and services to the customer?

Business organizations have their major business functions, which need many kinds of
employees who are well-trained and well-informed, in order to succeed. Ex.: Human Resources,
Sales and Marketing, Manufacturing and production, Finance and Accounting….

7- Management

Every good organization needs good managers: Pretty simple, pretty reasonable. Managers make
decisions, formulate action plans to solve organizational problems, and set the organizational
strategy for responding to business challenges. They allocate the human and financial resources to
coordinate the work and achieve success. In addition, managers must act creatively: creation of
new products or services, re-creation of the organization.

8- Information Technology

It is one of many tools managers use to cope with change: Computer hardware – physical
equipment used for input, processing, and output activities in an information system. Computer
software – detailed, preprogrammed instructions that control and coordinate the computer
hardware components in an information system. Data management technology - software that is

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MIS400 – Business Information Systems Prof.: Micheline TABET

designed to organize the data on physical storage media. Networking and telecommunications
technology – both physical devices and software, links the various pieces of hardware and
transfers data from one physical location to another. A network links two or more computers to
share data or resources. The world’s largest and most widely used network is the Internet.
Internal corporate networks based on internet technology are called Intranets. Private intranets
extended to authorized users outside the organization are called Extranets. The World Wide
Web is a service provided by the Internet that uses universally accepted standards for storing,
retrieving, formatting and displaying information in a page format on the Internet. A Web site,
consisting of a few pages or hundreds of pages, enables businesses to get close and stay close to
their customers in new ways. All of these technologies, along with the people required to run and
manage them, constitute the firm’s information technology (IT) infrastructure. The IT
infrastructure provides the foundation, or platform, on which the firm can build its specific
Information systems.

It Isn’t Just Technology: A Business Perspective on Information Systems

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. The decision to build or maintain an information
system assumes that the returns on this investment will be superior to other investments in buildings,
machines, or other assets. Investments in information technology will result in superior returns:
 Increased productivity
 Increased revenues
 Decreased costs
 Superior long-term strategic positioning of the firm in certain markets.

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