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    Chapter One Overview

    SECTION 1.1 INFORMATION SYSTEMS IN BUSINESS Information Technologys Role in Business

    Information Technology Basics

    Roles and Responsibilities in Information Technology Measuring Information Technologys Success

    SECTION 1.2 BUSINESS STRATEGY Identifying Competitive Advantages

    The Five Forces Model Evaluating Business Segments The Three Generic Strategies Creating a Business Focus

    Value Chain Analysis Targeting Business Processes

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    McGraw-Hill/I rwin 2008 The McGraw-Hill Companies, All Rights Reserved

    SECTION 1.1

    INFORMATIONSYSTEMS INBUSINESS

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    LEARNING OUTCOMES

    1. Describe the functional areas of a businessand why they must work together for thebusiness to be successful

    2. Explain information technologys role inbusiness and how you measure success

    3. Compare management information systems(MIS) and information technology (IT) anddefine the relationships among people,

    information technology, and information

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    INFORMATION TECHNOLOGYS

    ROLE IN BUSINESS Information technology is everywhere in business

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    Information Technologys Impact

    on Business Operations

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    Information Technologys Impact

    on Business Operations Organizations

    typically operate by

    functional areas orfunctional silos

    Functional areasare interdependent

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    INFORMATION TECHNOLOGY BASICS

    Information technology (IT) anycomputer-based tool that people use to

    work with information and support theinformation and information-processingneeds of an organization

    Information technology is an importantenablerof business success andinnovation

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    INFORMATION TECHNOLOGY BASICS

    Management information systems (MIS) thefunction that plans for, develops, implements,

    and maintains IT hardware, software, and

    applications that people use to support the

    goals of an organization

    MIS is a business function, similar toAccounting, Finance, Operations, and Human

    Resources

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    INFORMATION TECHNOLOGY BASICS

    When beginning to learn about

    information technology it is important to

    understand the following:

    Information

    IT resources

    IT cultures

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    Information

    Data - raw facts that describe thecharacteristic of an event

    Information - data converted into ameaningful and useful context

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    IT Resources

    People use

    Information

    technologyto

    work with

    Information

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    IT Cultures

    Organizational information cultures

    include:

    Information-functional culture Information-sharing culture

    Information-inquiring culture

    Information-discovery culture

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    ROLES AND RESPONSIBILITIES IN IT

    Information technology is a relatively newfunctional area, having only been around

    formally for around 40 years

    Recent IT strategic positions include:

    Chief Information Officer (CIO)

    Chief Technology Officer (CTO)

    Chief Security Officer (CSO)

    Chief Privacy Officer (CPO)

    Chief Knowledge Office (CKO)

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    ROLES AND RESPONSIBILITIES IN IT

    Average CIO compensation by industry

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    ROLES AND RESPONSIBILITIES IN IT

    What concerns CIOs the most

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    ROLES AND RESPONSIBILITIES IN IT

    Chief Technology Officer (CTO) responsible forensuring the throughput, speed, accuracy, availability, andreliability of IT

    Chief Security Officer (CSO) responsible for ensuringthe security of IT systems

    Chief Privacy Officer (CPO) responsible for ensuring

    the ethical and legal use of information

    Chief Knowledge Office (CKO) - responsible forcollecting, maintaining, and distributing the organizations

    knowledge

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    ROLES AND RESPONSIBILITIES IN IT

    Skills pivotal for success in executive IT roles

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    The Gap Between Business

    Personnel and IT Personnel Business personnel possess expertise in

    functional areas such as marketing,

    accounting, and sales

    IT personnel have the technologicalexpertise

    This typically causes a communicationsgap between the business personnel andIT personnel

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    Improving Communications

    Business personnel must seek to increasetheir understanding of IT

    IT personnel must seek to increase theirunderstanding of the business

    It is the responsibility of the CIO to ensureeffective communication betweenbusiness personnel and IT personnel

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    MEASURING INFORMATION

    TECHNOLOGYS SUCCESS Key performance indicator(KPI) measures

    that are tied to business drivers

    Metrics are detailed measures that feed KPIs

    Performance metrics fall into the nebulous area

    of business intelligence that is neither

    technology, nor business centered, but requires

    input from both IT and business professionals

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    Efficiency and Effectiveness

    Metrics Efficiency IT metric measures the

    performance of the IT system itself including

    throughput, speed, and availability

    Effectiveness IT metric measures the impactIT has on business processes and activities

    including customer satisfaction, conversionrates, and sell-through increases

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    Benchmarking Baselining

    Metrics Regardless of what is measured, how it is

    measured, and whether it is for the sake of

    efficiency or effectiveness, there must be

    benchmarks baseline values the system seeksto attain

    Benchmarking a process of continuouslymeasuring system results, comparing those

    results to optimal system performance

    (benchmark values), and identifying steps and

    procedures to improve system performance

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    Benchmarking Baselining

    Metrics E-governement benchmarks

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    The Interrelationships of Efficiency

    and Effectiveness IT Metrics Effectiveness IT metrics focus on an

    organizations goals, strategies, and

    objectives and include: Usability

    Customer satisfaction

    Conversion rates Financial

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    The Interrelationships of Efficiency

    and Effectiveness IT Metrics Security is an issue for any organization offering

    products or services over the Internet

    It is inefficient for an organization to implement

    Internet security, since it slows down processing

    However, to be effective it must implement Internet

    security Secure Internet connections must offer encryption

    and Secure Sockets Layers (SSL denoted by the lock

    symbol in the lower right corner of a browser)

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    The Interrelationships of Efficiency

    and Effectiveness IT Metrics

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    OPENING CASE QUESTIONSApple - Merging Technology, Business and Entertainment

    1. What might have happened to Apple if its top executiveshad not supported investment in iPods?

    2. Formulate a strategy for how Apple can use efficiency IT

    metrics to improve its business

    3. Formulate a strategy for how Apple can use effectivenessIT metrics to improve its business

    4. Why would it be unethical for Apple to sell its iTunescustomer information to other businesses?

    5. Evaluate the effects on Apples business if it failed to

    secure its customers information and it was accidentallyposted to an anonymous Web site

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    McGraw-Hill/I rwin 2008 The McGraw-Hill Companies, All Rights Reserved

    SECTION 1.2

    BUSINESSSTRATEGY

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    LEARNING OUTCOMES

    6. Explain why competitive advantages aretypically temporary

    7. List and describe each of the five forces inPorters Five Forces Model

    8. Compare Porters three generic strategies

    9. Describe the relationship between businessprocesses and value chains

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    IDENTIFYING COMPETITIVE

    ADVANTAGES

    To survive and thrive an organization

    must create a competitive advantage

    Competitive advantage a product orservice that an organizations customers

    place a greater value on than similar offerings

    from a competitor

    First-mover advantage occurs when anorganization can significantly impact its

    market share by being first to market with a

    competitive advantage

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    IDENTIFYING COMPETITIVE

    ADVANTAGES

    Organizations watch their competition throughenvironmental scanning Environmental scanning the acquisition and

    analysis of events and trends in the environmentexternal to an organization

    Three common tools used in industry to analyze

    and develop competitive advantages include: Porters Five Forces Model

    Porters three generic strategies

    Value chains

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    THE FIVE FORCES MODEL

    EVALUATING BUSINESS SEGMENTS

    Porters Five Forces Model determines therelative attractiveness of an industry

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    Buyer Power

    Buyer power high when buyers havemany choices of whom to buy from andlow when their choices are few

    One way to reduce buyer power isthrough loyalty programs

    Loyalty program rewards customersbased on the amount of business they dowith a particular organization

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    Supplier Power

    Supplier power high when buyers havefew choices of whom to buy from and low

    when their choices are many

    Supply chain consists of all parties involved inthe procurement of a product or raw material

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    Supplier Power

    Organizations that are buying goods and

    services in the supply chain can create a

    competitive advantage by locatingalternative supply sources (decreasing

    supplier power) through B2B marketplaces

    Business-to-Business (B2B) marketplace

    an Internet-based service that brings together

    many buyers and sellers

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    Supplier Power

    Two types of business-to-business (B2B)marketplaces

    Private exchange a single buyer posts itsneeds and then opens the bidding to anysupplier who would care to bid

    Reverse auction an auction format in

    which increasingly lower bids are solicitedfrom organizations willing to supply thedesired product or service at an increasinglylower price

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    Threat of Substitute Products or

    Services Threat of substitute products or

    services high when there are many

    alternatives to a product or service andlow when there are few alternatives from

    which to choose

    Switching cost costs that can makecustomers reluctant to switch to another

    product or service

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    Rivalry Among Existing

    Competitors Rivalry among existing competitors

    high when competition is fierce in a

    market and low when competition is morecomplacent

    Although competition is always moreintense in some industries than in others,

    the overall trend is toward increased

    competition in just about every industry

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    THE THREE GENERIC STRATEGIES

    CREATING A BUSINESS FOCUS

    Organizations typically follow one of

    Porters three generic strategies when

    entering a new market Broad cost leadership

    Broad differentiation

    Focused strategy

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    THE THREE GENERIC STRATEGIES

    CREATING A BUSINESS FOCUS

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    Value Creation

    Once an organization chooses itsstrategy, it can use tools such as thevalue chain to determine the success or

    failure of its chosen strategy Business process a standardized set of

    activities that accomplish a specific task, suchas processing a customers order

    Value chain views an organization as aseries of processes, each of which addsvalue to the product or service for eachcustomer

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    Value Creation

    Value chains with Porters Five Forces

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    OPENING CASE QUESTIONSApple - Merging Technology, Business and Entertainment

    6. Did Apple gain a competitive advantage from its decisionto invest in an online music business?

    7. How can Apple use environmental scanning to gainbusiness intelligence?

    8. Using Porters Five Force Model, analyze Apples buyerpower and supplier power

    9. Which of the three generic strategies is Apple following?

    10. Which of Porters Five Forces did Apple address through

    its introduction of the iPod?

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    CLOSING CASE ONESay Charge It with Your Cell Phone

    3. Which of Porters three genericstrategies is this new technologyfollowing?

    4. Describe the value chain of using cellphones as a payment method

    5. What types of regulatory issues mightoccur due to this type of technology?

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    CLOSING CASE TWO

    Innovative Business Managers1. Choose one of the companies listed above and

    explain how it could use a CIO, CTO, and CPOto improve business

    2. Why is it important for all of DreamWorksfunctional business areas to work together?Provide an example of what might happen if theDreamWorks marketing department failed towork with its sales department

    3. Why is information technology important to anorganization like the Boston Red Sox? Every

    organization needs information to remain

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    CLOSING CASE TWO

    Innovative Business Managers4. Which of Porters Five Forces is most

    important to Home Depots business?

    5. Which of the three generic strategies isPepsiCo following?

    6. Explain the value chain and how acompany like GE can use it to improveoperations

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    CLOSING CASE THREEThe World is Flat Thomas Friedman

    1. Do you agree or disagree with Friedmansassessment that the world is flat? Be sure to

    justify your answer

    2. What are the potential impacts of a flat world fora student performing a job search?

    3. What can students do to prepare themselves forcompeting in a flat world?

    4. Identify a current flattener not mentioned on