Chapter 1 Information Systems in Bangladesh

Chapter 1
INFORMATION SYSTEMS IN
BUSINESS TODAY
LEARNING OBJECTIVES:
• How are information systems transforming business, and why are
they so essential for running and managing a business today?
• What is an information system? How does it work?
• What are its management, organization, and technology
components and why are complementary assets essential for
ensuring that information systems provide genuine value for
organizations?
• What academic disciplines are used to study information systems
and how does each contribute to an understanding of information
systems?
LEARNING OBJECTIVES:
• Understanding the effects of information systems on business and
their relationship to globalization.
• Define an information system and describe its management,
organization, and technology components.
• What are complementary assets ?
Management Information Systems
CHAPTER 1: INFORMATION IN BUSINESS SYSTEMS TODAY
The Role of Information Systems in Business Today
• How information systems are transforming business

– Increase in wireless technology use, Web sites
– Increased business use of Web 3.0 technologies
– Cloud computing, mobile digital platform allow more
distributed work, decision-making, and collaboration
• Globalization opportunities
– Internet has drastically reduced costs of operating on
global scale
– Presents both challenges and opportunities
• 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 are managed digitally
• Digital firms offer greater flexibility in organization
and management
– Time shifting, space shifting
© Prentice Hall 2011


HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

• Over 247 million Americans • 150 million use Facebook
have mobile phones (67% of the while 48 million use Twitter
population) Smartphones, socia
• 167 million of these people networking, texting, emailing
access the Internet using and Webinars have all becom
smartphones and tablets. essential tools of busines
• 46% of the entire population because that’s where you
now use tablet computers whose customers, suppliers, an
sales have soared. colleagues can be found
• 172 million Americans use (eMarketer, 2014).
online social networks

• By June 2014, more than 114 • In 2013, FedEx moved abou

million businesses worldwide 3.5 million packages daily t
had dot-com Internet sites 220 countries and territorie
registered (Domain Tools, around the world, mostl
2014). overnight, and the United
• Today, 196 million Americans Parcel Service (UPS) move
shop online, and 163 million over 16 million packages dail
will purchase online. worldwide.
• Every day about 90 million • Newspaper print readershi
Americans go online to research continues to decline, more tha
a product or service. (eMarketer, 168 million people read
2014). newspaper online, and million
more read other news sites.
• Many Fortune 500 companies now have Facebook pages,

Twitter accounts, and Tumblr sites.
• E-commerce and Internet advertising continue to expand.

Google’s online ad revenues surpassed $17 billion in 2013, and
Internet advertising continues to grow at more than 15 percent a
year, reaching more than $43 billion in revenues in 2013
(eMarketer, 2014).


- To sense and respond to rapidly
changing customer demand
- To reduce inventories to the lowest
possible levels
Businesses are using - To achieve higher levels of
information operational efficiency
technology - Supply chains have become more
fast-paced, with companies of all
sizes depending on just-in-time
inventory to reduce their overhead
costs and get to market faster


- There are three interrelated changes in the
technology area:
- The widespread adoption of the mobile
computing platform,
- The growing business use of “big data,”
Businesses are using - The growth in “cloud computing,” where
information more and more business software runs over
the Internet.
technology
- IPhones, iPads, Android tablets, and smartphones
are not just gadgets or entertainment outlets.
They represent new emerging computing
platforms based on an array of new hardware and
software technologies.

- More and more business computing is moving

from PCs and desktop machines to these mobile
devices. Managers are increasingly using these
devices to coordinate work, communicate with
employees, and provide information for decision
Businesses are using making. We call these developments the “mobile
information digital platform.”
technology
- Managers routinely use online collaboration and
social technologies in order to make better, faster
decisions.

- The strength of cloud computing and the growth

of the mobile digital platform allow organizations
to rely more on telework, remote work, and
distributed decision making.
Businesses are using - This same platform means firms can outsource
information more work, and rely on markets (rather than
technology employees) to build value.
- It also means that firms can collaborate with

suppliers and customers to create new products,
or make existing products more efficiently

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS
• Business firms invest heavily in information systems

to achieve six strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

• Operational excellence:
– Improvement of efficiency to attain higher profitability
– Information systems, technology an important tool in
achieving greater efficiency and productivity
– Walmart’s Retail Link system links suppliers to stores for
superior replenishment system

• New products, services, and business models:

– Business model: Describes how company produces, delivers, and sells
product or service to create wealth. Now business models are in three
types:
• Brick and Morter (Traditional Business Model)
• Click and Order (Online Business Model)
• Click Only (Online Business Model)
– Information systems and technology a major enabling tool for new
products, services, business models
• Examples: Apple’s iPod, iTunes, iPhone, iPad, Google’s Android
OS, and Netflix

• 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

• 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.

• Competitive advantage
– Delivering better performance

– Charging less for superior products
– Responding to customers and suppliers in real time
– Examples: Apple, Walmart, UPS
How an organization can gain competitive

advantage ?
• 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 Interdependence Between Organizations and Information Technology
Figure 1.2 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.

Information Systems
Data and Information
Figure 1.3 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.

Information Systems
• Three activities of information systems produce

information organizations need
1. Input: Captures raw data from organization or external

environment
2. Processing: Converts raw data into meaningful form
3. Output: Transfers processed information to people or
activities that use it

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

Functions of an Information System
Functions of an
Information System
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

DIMENSIONS OF INFORMATION SYSTEMS
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

Organizational Dimension of Information Systems

• Hierarchy of authority,
responsibility
• Senior management
• Middle management
• Operational management
• Knowledge workers
• Data workers
• Production or service
workers

Organizational Dimension of Information Systems

– Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
– Unique business processes
– Unique business culture
– Organizational politics

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

Technology Dimension of Information Systems
– Computer hardware and software

– Data management technology
– Networking and telecommunications technology
• Networks,
• Internet
• Intranets and extranets
• World Wide Web
– IT infrastructure: provides platform that system is
built on

A 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

• 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

The Business Information Value Chain
Figure 1-7 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.

COMPLEMENTARY ASSETS: ORGANIZATIONAL CAPITAL AND THE

RIGHT BUSINESS MODEL
Complementary assets are those assets Research indicates that firms that suppor
required to derive value from a primary their technology investments with
investment (Teece, 1988). investments in complementary assets, such
as new business models, new business
For instance, to realize value from processes, management behavior
automobiles requires substantial organizational culture, or training, receive
complementary investments in highways, superior returns.
roads, gasoline stations, repair facilities,
and a legal regulatory structure to set
standards and control drivers.

COMPLEMENTARY ASSETS: ORGANIZATIONAL CAPITAL AND THE

RIGHT BUSINESS MODEL

CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Contemporary
Approaches to
Information
Systems
The study of information
systems deals with issues and
insights contributed from
technical and behavioral
disciplines.
Figure 1.9

Contemporary Approaches to Information Systems

• Technical Approach
– The technical approach to information systems emphasizes
mathematically based models to study information systems, as well as
the physical technology and formal capabilities of these systems.
– The disciplines that contribute to the technical approach are computer
science, management science, and operations research.
• Computer science is concerned with establishing theories of
computability, methods of computation, and methods of efficient data
storage and access.
• Management science emphasizes the development of models for
decision-making and management practices.
• Operations research focuses on mathematical techniques for optimizing
selected parameters of organizations, such as transportation, inventory
control, and transaction costs.

Contemporary Approaches to Information Systems

• Behavioral Approach
– Behavioral issues deal with business integration, design,
implementation, utilization, and management cannot be explored
usefully with the models used in the technical approach. Other
behavioral disciplines contribute important concepts and methods..
– It studies on Psychology, economics, sociology
• Sociologists study on information systems with an eye toward how groups
and organizations shape the development of systems and also how systems
affect individuals, groups, and organizations.
• Psychologists study on information systems with an interest in how
human decision makers perceive and use formal information.
• Economists study on information systems with an interest in
understanding the production of digital goods, the dynamics of digital
markets, and how new information systems change the control and cost
structures within the firm.

Any Question ?
Thank You.
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Chapter 1

The Role of Information Systems in Business Today

• How information systems are transforming business

The Role of Information Systems in Business Today

• In the emerging, fully digital firm

© Prentice Hall 2011

The Role of Information Systems in Business Today

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

© Prentice Hall 2011

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

• By June 2014, more than 114 • In 2013, FedEx moved abou

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

• Many Fortune 500 companies now have Facebook pages,

• E-commerce and Internet advertising continue to expand.

© Prentice Hall 2011

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

© Prentice Hall 2011

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

© Prentice Hall 2011

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

- More and more business computing is moving

© Prentice Hall 2011

HOW INFORMATION SYSTEMS ARE TRANSFORMING BUSINESS

- The strength of cloud computing and the growth

- It also means that firms can collaborate with

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

• Business firms invest heavily in information systems

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

• New products, services, and business models:

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

• Customer and supplier intimacy:

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

• Improved decision making

© Prentice Hall 2011

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

– Delivering better performance

– Examples: Apple, Walmart, UPS

How an organization can gain competitive

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

© Prentice Hall 2011

The Interdependence Between Organizations and Information Technology

© Prentice Hall 2011

Data and Information

© Prentice Hall 2011

• Three activities of information systems produce

1. Input: Captures raw data from organization or external

© Prentice Hall 2011

© Prentice Hall 2011

Functions of an Information System

© Prentice Hall 2011

DIMENSIONS OF INFORMATION SYSTEMS

© Prentice Hall 2011

Organizational Dimension of Information Systems

© Prentice Hall 2011

Organizational Dimension of Information Systems

© Prentice Hall 2011

Management Dimension of Information Systems

– Managers set organizational strategy for