INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY Chapter 1.

INFORMATION SYSTEMS IN GLOBAL

BUSINESS TODAY

INFORMATION SYSTEMS IN GLOBAL

BUSINESS TODAY

Chapter 1

Management Information SystemsChapter 1 Information Systems in Global Business Today

• In this lecture• Understanding the effects of information systems on

business and 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.

• Define complementary assets and explain how they ensure that information systems provide genuine value to an organization.


IPL Team Make a Slam Dunk with Information Technology

IPL Cricket is also a business, INR 20 lakh, Problem: Traditional cricket game statistic failed to provide all the details

associated with every play, Lack of hard data usable in decision-making processes, costly and competitive market.

Solutions: Developed a new system designed to collect and organize data using video clips of games, (sports mechanics) by Ramki

Synergy Sports Technology tags video of each game with hundreds of descriptive categories and allows coaches and players to stream game footage from the Web. Demonstrates IT’s role in innovation and improving business processes.

Illustrates how the Web has allowed businesses to use new tools to analyze critical data.


The Role of Information Systems in Business Today

• How information systems are transforming business• 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, BlackBerry's, 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


A digital firm is one in which nearly 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.

A truly digital firm has several characteristics that distinguish it from most of the firms claiming to be digitized:

Significant business relationships with customers, suppliers, and employees are digitally enabled.

Core business processes are accomplished through digital networks and span the entire organization or link multiple organizations.

Key corporate assets — intellectual property, core competencies, and financial and human assets are managed through digital means.

Internal and external environments are quickly recognized and dealt with.

Digital firms offer greater flexibility in organization and management Time shifting 24/7, space shifting eBay, General Motors

In the emerging, fully digital firm


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

Operational excellence (Wal-Mart) Improvement of efficiency to attain higher profitability Information systems, technology an important tool in

achieving greater efficiency and productivity Wal-Mart’s RetailLink system links suppliers to stores

for superior replenishment system



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



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 a major enabling

tool for new products, services, business models Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-

based DVD rentals



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 Example: Toyota and TPS (Toyota Production

System) enjoy a considerable advantage over competitors – information systems are critical to the implementation of TPS



Survival Information technologies as necessity of business Example:

Industry-level changes, e.g. Citibank’s introduction of ATMs



Perspectives on Information Systems

Data and InformationInformation vs. data

Data are streams of raw factsInformation is data shaped into meaningful form

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.


What is an Information system? Set of interrelated components Collect, process, store, and distribute information Support decision making, coordination, and control

OR A group of interrelated components working

together toward a common goal by accepting inputs and producing outputs in an organized transformation process (dynamic system).



Information system: 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




Functions of an Information System


Dimensions of Information Systems: These three themes (Organizations, Management

and Technology) will reappear throughout the course. Understanding the interaction between these factors

and information systems is known as information system literacy.

Knowing how to optimize

the relationship between

technology, organizations,

and management is the

purpose of this course.




Examining each of the dimensions of IS: Organizations, organizational structure (three levels)


Organizational dimension of information systems (cont.) 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, the Internet, intranets and extranets, World Wide Web

IT infrastructure: provides platform that system is built on


Investing in information technology does not guarantee good returns

Considerable variation in the returns firms receive from systems investments

Factors: Adopting the right business model Investing in complementary assets (organizational

and management capital)





Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms.

Variation in Returns on Information Technology Investment

Quadrant 1 represents firms that invest much less in IT but still receive strong returns.Quadrant 2 represents firms that invest a great deal in IT and receive a great deal in returns.Quadrant 3 represents firms that invest much less in IT and receive poor returns.Quadrant 4 represents firms that invest a great deal in IT but receive poor returns.


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



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 Technology standards


Components of an INFORMATION System

Components of an Information System (Continued)

Information Systems Recourses & Technology

Recourses People Resources

End Users IS Specialists

Hardware Resources Computer systems Peripherals

Software Resources System software (Operating systems) Application software (Payroll program, Word) Procedures (filling out a paper form)

Components of an Information System (Continued)

Information Systems Recourses & Technology

Data Resources Data versus Information(Product description,

customer records, employee files, inventory database)

Network Resources Communication media Network support

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Information System (IS) versus Information Technology (IT)

IS is all the components and resources necessary to deliver information and functions to the organization

IT is hardware, software, networking and data management



The study of information systems deals with issues and insights contributed from technical and behavioral disciplines.

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

Contemporary Approaches to Information Systems


Read the Interactive Session and then discuss the following questions:

• What are the advantages of using videoconferencing technologies? What are the disadvantages?

• What is telepresence and what sorts of companies are best suited to use it as a communications tool?

• What kinds of companies could benefit from using videoconferencing? Are there any companies that might not derive any benefits from this technology?

Virtual Meetings: Smart Management



INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY Chapter 1.

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