Information Systems in

Global Business Today

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1.1 © 2010 by Prentice Hall
 LEARNING OBJECTIVES
• How are information systems transforming
business, and what is their relationship to
globalization?
• Explain why information systems are so
essential in business today.
• Define an information system and describe its
management, organization, and technology
components.

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1.2 © 2010 by Prentice Hall
 LEARNING OBJECTIVES
(Continued)
• Define complementary assets and explain how
they ensure that information systems provide
genuine value to an organization.
• Describe the different academic disciplines used to
study information systems and explain how each
contributes to our understanding of them.
• Explain what is meant by a sociotechnical systems
perspective.

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1.3 © 2010 by Prentice Hall
How are information systems transforming business, and
what is their relationship to globalization?

Digital transformation is the process of using digital

technologies to create new — or modify existing — business
processes, culture, and customer experiences to meet changing
business and market requirements

Today, digital transformation is not an option; it is necessary to

escape the comfort zone, reinvent themselves and compete in
this world overrun by technological advances.

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1.4 © 2010 by Prentice Hall
 How and why information systems transforming
business.

We live in a digital, global and hyper-connected world .

Information systems has big role in globalization, where big
economies and developed countries benefit the most out of
this.

The Internet allows many businesses to buy, sell, advertise,

and solicit customer feedback through online. The Internet
has stimulated globalization by dramatically reducing the
costs of producing, buying, and selling goods on a global
scale.

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1.5 © 2010 by Prentice Hall
 The Role of Information Systems in
Business Today

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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 Management Information Systems

■ Operational excellence:
❑ Improvement of efficiency to attain higher profitability
■ New products, services, and business models:
❑ IT/IS are the major enabling tools for firms to create new
products and services , as well as new business models.
■ Customer and supplier intimacy:
❑ Serving customers raises revenues and profits
❑ Better communication with suppliers lowers costs
■ Improved decision making
❑ Correct data on Real time data leads to better decisions

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 Management Information Systems

■ Competitive advantage
❑ Delivering better performance
❑ Charging less for superior products
❑ Responding to customers and suppliers in real time
■ Survival
❑ Information technologies as necessity of business
❑ May be:
■ Industry-level changes, e.g. Bank’s introduction of ATMs
■ Governmental regulations requiring record-keeping

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 Interdependence between Information systems
and its Business

■ What a business would like to do in near future often depends on

what its systems will able to do/ permit it to do.
■ Changes in strategy, rules, and business processes increasingly
require changes in hardware, software, databases, and
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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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1.10 © 2010 by Prentice Hall
 Perspectives on Information Systems

Data and Information

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
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for a specific store or sales territory. © 2010 by Prentice Hall
 Perspectives on Information Systems

■ Information system: Three activities 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
❑ Feedback: Information systems also require feedback, which
is output returned to appropriate members of organization to
help evaluate or correct input stage

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1.12 © 2010 by Prentice Hall
 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, 13
competitors, stockholders, and regulatory agencies, interact with the organization and its information systems.
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 Perspectives on 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 firm14as an
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organizational and management solution to challenges posed by the environment. © 2010 by Prentice Hall
 Perspectives on Information Systems

■ Organizational dimension of information systems: Information

System is the integral part of Organization
❑ Organization have a structure that is composed of different levels
and specialists & this structure reveal a clear-cut division of labor.
Hierarchy on authority & responsibility.
❑ Separation of business functions
■ Sales and marketing
■ Human resources
■ Finance and accounting
■ Manufacturing and production
❑ Unique business processes : logically related tasks & behavior for
accomplishing work
❑ Unique business culture : fundamental set of assumptions, values,
and ways of doing things, that has been accepted by most of the
member
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 Perspectives on Information Systems

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 16 with
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middle management. © 2010 by Prentice Hall
 Perspectives on Information Systems

■ Management dimension of information systems

❑ Management’s job is to make the sense out of many
situations faced by organizations, make decisions , and
formulated action plans to solve organizational problems.
❑ 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
❑ Information technology can play a powerful role in helping
managers design and deliver new services and directing
and redesign their organizations.
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 Perspectives on Information Systems

■ Technology dimension of information systems

❑ IT is one of many tools managers use to cope with changes.
❑ Computer hardware and software
❑ Data management technology
❑ Networking and telecommunications technology
■ Networks, the Internet, intranets and extranets, World Wide Web

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1.18 © 2010 by Prentice Hall
 Perspectives on Information Systems

■ Business perspective on information systems:

❑ Managers and business firms invest in IT and systems
because they provide real economic value to the
business.
❑ Investments in information technology will result in
superior returns:
■ Productivity increases
■ Revenue increases
■ Decreasing cost
■ Superior long-term strategic positioning
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1.19 © 2010 by Prentice Hall
 Perspectives on Information Systems

■ 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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1.20 © 2010 by Prentice Hall
 Perspectives on Information Systems

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
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 Perspectives on Information
Systems
Variation in Returns on Information Technology Investment

Although, on average, investments in information technology produce

returns far above those returned by other investments, there is
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considerable variation across firms.
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 Complementary Assets : Organizational Capital
and the Right Business Model

■ Investing in information technology does not guarantee

good returns
■ Considerable variation in the returns firms receive from
systems investments
■ Factors:
1. Should accompanied by supportive values, structures , and
behavior pattern.
2. Adopting the right business model
3. Investing in complementary assets (organizational and
management capital)

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1.23 © 2010 by Prentice Hall
 Perspectives on Information Systems

■ 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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1.24 © 2010 by Prentice Hall
■ Complementary assets include:
❑ Organizational investments, e.g.
■ Appropriate business model

■ Efficient business processes

❑ Managerial investments, e.g.

■ Incentives for management innovation

■ Teamwork and collaborative work environments

❑ Social investments, e.g.

■ The Internet and telecommunications infrastructure

■ IT- enabled educational programs, Laws and

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 Contemporary Approaches to Information Systems

The study of information systems deals with issues and insights contributed from technical and
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behavioral disciplines.
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 Contemporary Approaches to
Information Systems
• Technical approach
• Emphasizes mathematically based models
• Computer science, management science, operations
research
• Behavioral approach
• Behavioral issues (strategic business integration,
implementation, etc.)
• Psychology, economics, sociology

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1.27 © 2010 by Prentice Hall
 Contemporary Approaches to
Information Systems
Sociotechnical view
Combines computer science, management science, operations
research and practical orientation with behavioral issues like
sociology, economics, and psychology .
• Optimal organizational performance is achieved by jointly
optimizing both the social and technical systems.
• Adopting a sociotechnical systems perspective helps to avoid
purely technical approach or behavior approach to IS.
• Technology must be changed and designed in such a way as to fit
organizational and individual needs. Sometime technology may
have to “ de-optimized” to accomplish this fit.
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