Chapter 1

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Information Systems in
Business Today

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 What is an Information System?
• Information system:
Set of interrelated components (database, network
infrastructure, security, computer hardware, software)

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Collect, process, store, and distribute information
Support decision making, coordination, and control on business
processes

• Information vs. data

Data are streams of raw facts
Information is data shaped into meaningful form

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Data and Information

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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.

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 3 activities of Information Systems

• Three activities of information systems produce information

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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

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 The Role of Information Systems in
Business Today
• How information systems are transforming business
Businesses use information systems to sense and respond to

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rapidly changing customer demands
Increase in wireless technology use i.e. smartphones, tablets
Web sites for products and services i.e. Bikroy.com, GP e-
Customer Care

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Digital Firms

• In a digital firm:
Significant business relationships are digitally enabled and
mediated i.e. relationship between Agora and its suppliers

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Core business processes are accomplished through digital
networks

• Digital firms offer greater flexibility in organization and

management
Time shifting: GP e-customer care offers services 24/7
Space shifting: Products designed in Apple, and manufacturing
in China. Apple sends its design specification electronically

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Business Objectives of Information
Systems

• Business firms invest heavily in information systems to achieve

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six strategic business objectives:
Operational excellence
New products and services
Customer and supplier intimacy
Improved decision making
Competitive advantage
Survival

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Operational Excellence
Improvement of efficiency to attain higher profitability

Information system is an important tool in achieving greater

efficiency and productivity

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Walmart’s RetailLink system links suppliers to stores for
superior replenishment system

Information system is a major enabling tool for new products,

and services
 Examples: Apple’s iPod, iTunes, Apple Store, iPhone, iPad,
Google’s Android OS, and Netflix

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Customer and Supplier Intimacy

 Serving customers well leads to customers returning, which

raises revenues and profits

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 Example: Netflix lists movies, TV serials as per customers’
preferences and watch lists.

 Intimacy with suppliers allows a firm to provide vital inputs,

which lowers costs
 Example: J.C.Penney’s information system links sales records to
the manufacturers systems in Hong Kong, Bangladesh, China,
Sri Lanka, and India.

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Improved Decision Making

Without accurate information:

 Managers must use best guesses that lead to:
Overproduction, underproduction of goods and services

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

 Misallocation of resources
 Poor response times
 Less customer retentions

A good example of accurate information:

Verizon’s (a cell phone service provider in the USA) web-based digital
dashboard provides managers with real-time data on customer
complaints, network performance, line outages, etc.

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Survival

Information technologies are necessities for businesses:

 “Industry-level changes”, e.g. Citibank’s introduction of

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ATMs lead other competitors to introduce ATMs
 “Government regulations” e.g. requiring record-keeping
including all digital records e.g. Sarbanes-Oxley Act

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Competitive Advantage
When firms achieve any of the strategic business objectives,
chances are they have already achieved a competitive advantage.

Also they do following activities to maintain the advantage:

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Doing things better than competitors e.g. enhanced services
using ATM

Charging less for superior/popular products e.g. no bank

charge to maintain a bank account if there are more debit card
purchases

Responding to customers in real time e.g. complain ticket

These lead to higher sales and higher profits

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Dimensions of Information Systems

Information Systems are More Than

Computers

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To use information systems effectively requires an
understanding of the ORGANIZATION, MANAGEMENT, and
TECHNOLOGY shaping the systems. An information system
creates value for the firm as an organizational and management
solution to challenges posed by the environment.

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Organizational Dimensions of Information Systems

 Organizational levels
Business organizations are hierarchies
consisting of three principal levels:

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senior management, middle
management, and operational
management. Information systems
serve each of these levels.

 Business functions
 Sales and marketing
 Human resources
 Finance and accounting
 Manufacturing and production

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
Management Dimensions of Information Systems

Management’s job is to:

– Make sense out of many situations faced by organizations

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– Make decisions, and formulate plans to solve
problems/situations faced by organizations

Managers use information systems to complete the jobs.

In addition, managers use information systems to create new

products and services

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Technology Dimensions of Information Systems

Computer hardware and software

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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

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon
 Why Invest on Information Systems?

Investments in information technology will result in superior

returns:

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 Productivity increases
 Revenue increases
 Superior long-term strategic positioning

Management Information Systems: Managing the Digital Firm, 12e Authors: Kenneth C. Laudon and Jane P. Laudon