A comprehensive summary of Chapters 1, 2, 3 and 4.
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Boeken in lijstBusiness Accounting and FinanceMarketing FundamentalsManagement Information Systems, Global Edition
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Information Systems in Business
Learning objectives: - Understand 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. - 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 sociotechnical systems perspective.
Paragraph 1: The role of Information Systems in Business today
How information systems are transforming business - Emerging mobile digital platform: use devices to communicated and provide information. - Growing business use of ‘big data’ - Growth in cloud computing: where more and more business software runs over the internet
Globalization opportunities - Internet has drastically reduced costs of operating on global scale - Increases in foreign trade, outsourcing - Presents both challenges and opportunities
Information Technology Capital Investment, defined as hardware, software, andcommunications equipment, grew from 32 percent to 52 percent of all invested capitalbetween 1980 and 2009.
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.
Growing interdependence between ability to use information technology and ability toimplement corporate strategies and achieve corporate goals.Business firms invest heavily in information systems to achieve six strategic businessobjectives: 1. Operational excellence 2. New products, services, and business models 3. Costumer and supplier intimacy 4. Improved decision making
- Competitive advantage
- SurvivalIn contemporary systems there is a growing interdependence between a firm’s informationsystems and its business capabilities. Changes in strategy, rules, and business processincreasingly require changes in hardware, software, databases, and telecommunications.Often, what the organization would like to do depends on what its system will permit it to do.
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 systems 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 services to create wealth - Information systems and technology a major enabling tool for new products, services, business models o Examples: Apple’s iPad, Google’s Android OS, and Netflix
Customer and supplier intimacy: Serving customers well leads to customers returning,which raises revenues and profits. o Example: High-end hotels that use computers to track customer preferences and used to monitor and customize environment.
- Intimacy with suppliers allows them to provide vital inputs, which lower costs.o Example: JC Penney’s information system which links sales records tocontract manufacturer.
Improved decision making: - Without accurate information: o Managers must use forecasts, best guesses, luck o Results in: Overproduction, underproduction Misallocation of resources Poor response times o Poor outcomes raise costs, lose customers - Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customers complaints, network performance, line outages, and so on
Competitive advantage - Delivering better performance - Charging less for superior products - Responding to customers and suppliers in real time - Examples: Apple, Walmart, UPS
Survival - Information technologies as necessity of business - Industry-level changes o Example: Citibank’s introduction of ATMs - Governmental regulations requiring record-keeping o Example: Toxic Substance Control Act, Sarbanes-Oxley Act
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 systemcreates value for the firm as an organization management solution to challenges posed bythe environment.
Organization dimension of information systems - Hierarchy of authority, responsibility
Business organizations are hierarchies consisting of three principal levels: seniormanagement, middle management, and operation management. Information systems serveeach of these levels. Scientist and knowledge workers often work with middle management.
Organizational dimension of information systems - Separation of business functions o Sales and marketing o Human resources o Finance and accounting o Manufacturing and production - Unique business processes - Unique business culture - Organizational politics
Management dimensions of information systems - Managers set organizational strategy for responding to business challenges. - In addition, managers must act creatively: o Creation of new products and services o Occasionally re-creating the organization
Middle ManagementScientistsKnowledge workers
Operation managementProduction and servicesData workers
Technology dimension of information systems - Computer hardware and software - Data management technology - Networking and telecommunications technology o Networks, the internet, intranets and extranets, World Wide Web - IT infrastructure: provides platform that system is built on
UPS competes globally with IT - What are the inputs, processing, and outputs of UPS’s packages tracking system? - What technologies are used by UPS? How are these technologies related to UPS’s business strategy? - What business objectives do UPS’s information systems address? - What would happen if these systems were not available?
Business perspective on information systems: Information system is an instrument forcreating value. - Investments in information technology will result in superior returns: o Productivity increases o Revenue increases o Superior long-term strategic positioning
Business information value chain: Raw data acquired and transformed through stagesthat add value to that information. - Value of information systems determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits.
Business perspective: calls attention to organization and managerial nature of informationsystems
From a business perspective, information systems are part of a series of value-addingactivities for acquiring, transforming, and disturbing information that managers can use toimprove decision making, enhance organizational performance, and, ultimately, increase firmprofitability.
Investing in information technology does not guarantee good returns. There is considerablevariation in the return 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 abovethose returned by other investments, there is considerable variation across firms.
Complementary assets: - Assets required to derive value from a primary investment - Firms supporting technology investments with investment in complementary assets receive superior returns - Example: invest in technology and the people to make it work properly.
In a sociotechnical perspective, the performance of a system is optimized when both thetechnology and the organization mutually adjust to each other until a satisfactory fit isobtained.Question 1: Which of the following is not one of the current changes taking place ininformation systems technology? a. Growing business use of ‘big data’ b. Growth in cloud computing c. Emerging mobile platform d. Development of video presence software
Question 2: The dimensions of information systems are management, organizations, andinformation technology a. True b. False
Question 3: Verizon’s implementation of a Web-based digital dashboard to providemanagers with real-time information such as customer complaints is an example of ... a. Improved efficiency b. Improved decision making c. Improved flexibility d. Customer and supplier intimacy
Question 4: Three activities in an information system that produce the informationorganizations use to control operations are: a. Input, processing, and output. b. Input, output, and feedback. c. Data analysis, processing, and feedback. d. Information retrieval, research, and analysis.
Question 5: Output a. Transfers processed information to the people who will use it or to the activities for which it will be used. b. Is feedback that has been processed to create meaningful information. c. Is information that is returned to appropriate members of the organization to help them evaluate the input stage. d. Transfers data to the people who will use it or to the activities for which it will be used.
Question 6: You work for an auto manufacturer and distributor. How could you useinformation systems to achieve greater customer intimacy?You could create a Web site that allows customers to customize cars, communicatewith support personnel and other car owners. You could create an automated e-mailservice reminding car owners to take their car in for periodic check-ups. You couldhave an information system that tracks customer preferences in local areas, so youcan provide cars that reflect local customer needs and desires.
Question 7: Studies have consistently shown that firms that invest greater amounts ininformation technology receive greater benefits than firms that invest less. a. True b. False
Question 8: In a(n) sociotechnical perspective, the performance of a system is optimizedwhen both the technology and the organization mutually adjust to one another until asatisfactory fit is obtained.
Global E-business and
Learning objectives: - Define and describe business processes and their relationship to information systems. - Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other. - Explain how enterprise applications improve organizational performance. - Explain the importance of collaboration and teamwork in business and how they are supported by technology. - Asses the role of the information systems function in a business.
Paragraph 1: Business Processes and Information Systems
Business processes: - Flows of material, information, knowledge - Sets of activities, steps - May be tied to functional area or be cross-functional - May be assets or liabilities
Businesses: can be seen as a collection of business processes.
Examples of functional business processes - Manufacturing and production: assembling the product - Sales and marketing: identifying customers - Finance and accounting: creating financial statements - Human resources: hiring employees
Fulfilling a customer order involves a complex set of steps that requires the closecoordination of sales, accounting, and manufacturing functions.
Information technology enhances business processes by: - Increasing efficiently of existing processes – automating steps that where manual - Enabling entirely new processes o Change flow of information
In the system illustrated by this diagram, three TPS supply summarized transaction data tothe MIS reporting system at the end of the time period. Managers gain access to theorganizational data through the MIS, which provides them with the appropriate reports.
Decision support system (DSS): Focusses on problems that are unique and rapidlychanging. DSS uses information from TPS, MIS and external resources. - Serve middle management - Support non-routine decision making o Example: what is the impact on production schedule if December sales doubled? - May use external information as well TPS / MIS data - Model driven DSS: voyage-estimating systems - Data driven DSS: Intrawest’s marketing analysis systems
Executive support systems (ESS): - Support senior management - Address non-routine decisions o Requiring judgement, evaluation, and insight - Incorporate data about external events (e. new tax laws or competitors) as well as summarized information from internal MIS and DSS - Example: digital dashboard with real-time view of firm’s financial performance: working capital, accounts receivable, accounts payable, cash flow, and inventory.
Enterprise applications: systems that span functional areas, focus on executing businessprocesses across the business firm and include all levels of management. - Systems for linking the enterprise - Four major applications: o Enterprise systems o Supply chain management systems o Customer relationship management systems o Knowledge management systems
Enterprise applications automate processes that span multiple business functions andorganizational levels and may extend outside the organization.
Enterprise systems: collects data from different firm functions and stores data in singlecentral data repository - Resolves problem of fragmented data - Enable: o Coordination of daily activities o Efficient response to customer orders (production, inventory)
o Help managers make decisions about daily operations and longer-term planning
Supply chain management (SCM) systems: helps management firm’s relationships withsuppliers. - Share information about: Orders, production, inventory levels, delivery of products and services - Goal: right amount of products to destination with least amount of time and lowest cost.
Customer relationship management systems (CRM): provide information to coordinate allof the business processes that deal with customers. o Sales o Marketing o Customer service
- Helps firms identify, attract, and retain most profitable customers
Knowledge management systems (KMS): Support processes for capturing and applyingknowledge and expertise o How to create, produce, deliver products and services
- Collect internal knowledge and experience within firm and make it available toemployees
- Link to external sources of knowledge
Also used to increase integration and expedite the flow of information - Intranets: internal company Web sites accessible only by employees - Extranets: company Web sites accessible externally only to vendors and suppliers o Often used to coordinate supply chain
e-business: use of digital technology and Internet to drive major business processes.e-commerce: subset of e-business. Buying and selling goods and services through internet.e-government: using Internet technology to deliver information and services to citizens,employees and businesses.
Paragraph 3: Systems for collaboration and social Business
Collaboration - Short-lived or long-term - Informal of formal (teams) - Growing importance of collaboration o Changing nature of work o Growth of professional work – ‘interaction jobs’ o Changing organization of the firm o Changing scope of the firm o Emphasis on innovation o Changing culture of work
Social business - Use of social networking platforms, internal and external - Engage employees, customers, and suppliers - Goal is to deepen interaction and expedite information sharing - ‘Conversations’ - Requires information transparency: driving the exchange of information without intervention from executives or others
Business benefits of collaboration and teamwork - Investments in collaboration technology can bring organizations improvements, returning high ROI - Benefits: o Productivity o Quality o Innovation o Customer service o Financial performance: profitability, sales, sales growth
Successful collaboration requires an appropriate organizational structure and culture, alongwith appropriate collaboration technology.
Building a collaborative culture and business processes - ‘Command and control’ organizations: no value placed on teamwork or lower-level participation decisions - Collaborative business culture o Senior managers rely on teams of employees. o Policies, products, designs, processes, and systems rely on teams. o The managers purpose is to build teams.
Tools for collaboration and teamwork - E-mail and instant messaging - Wikis - Virtual worlds - Collaboration and social business platforms o Virtual meeting systems (telepresence) o Google Apps/Google sites o Cyber lockers o Microsoft SharePoint o Lotus Notes o Enterprise social networking tools
Enterprise social networking software capabilities - Profiles - Content sharing - Feeds and notifications - Groups and team workspaces - Tagging and social bookmarking - Permissions and privacy
Two dimensions of collaboration technologies - Space (or location) – remote or co-located - Time – synchronous or asynchronous
Six steps in evaluating software tools 1. What are your firm’s collaboration challenges? 2. What kind of solutions are available? 3. Analyse available products’ cost and benefits 4. Evaluate security risks 5. Consult users for implementation and training issues 6. Evaluate product vendors
Collaboration technologies can be classified in terms of whether they support interactions atthe same or different time or place or whether these interactions are remote or co-located.
Paragraph 4: The Information Systems function in Business
Information systems department: formal organizational unit responsible for informationtechnology services - Often headed by chief information officer (CIO) o Other senior positions include: chief security officer (CSO), chief knowledge officer (CKO), chief privacy officer (CPO) - Programmers - Systems analysts - Information systems managers
End users: representatives of other departments for whom applications are developed. - Increasing role in system design, development
IT Governance: - Strategies and policies for using IT in the organization - Decision rights - Accountability - Organization of information systems function: Centralized, decentralized, and so on.
are consumed by the environment, which supplies additional capital and labour as inputs inthe feedback loop.
The behaviour view of organizations emphasizes group relationship, values, and structures.
Features of organizations - Use of hierarchical structure - Accountability, authority in system of impartial decision making - Adherence to principle of efficiency - Routines and business processes - Organizational politics, culture, environments, and structures
Routines and business processes - Routines: (standard operating procedure) precise rules, procedures and practices developed to cope with virtually all expected situations. - Business processes: collection of routines - Business firm: collection of business processes
All organizations are composed of individual routines and behaviours, a collection of whichmake up a business processes make up the business firm. New information systemapplications require that individual routines and business processes change to achieve highlevels of organizational performance.
Organizational politics: divergent viewpoint lead to political struggle, competition, andconflict. - Political resistance greatly hampers organizational change.
Organizational culture: encompasses set of assumptions that define goal and product - What products the organization should produce - How and where it should be produces - For whom the products should be produced - May be powerful unifying force as well as a restraint on change
Organizational environments: - Organizations and environments have reciprocal relationship. - Organizations are open to, and dependent on, the social and physical environment. - Organizations can influence their environments. - Environments generally change faster than organizations. - Information systems can be instrument of environmental scanning, act as a lens.
Environments shape what organizations can do, but organizations can influence theirenvironments and decide to change environments altogether. Information technology plays a
critical role in helping organizations perceive environmental change and in helpingorganizations act on their environment.
Disruptive technologies - Technology that brings about sweeping change to businesses, industries, markets - Examples: personal computers, word processing software, the internet, the PageRank algorithm - First movers and fast followers o First movers: inventors of disruptive technologies o Fast followers: firms with the size and resources to capitalize on that technology
Five basic kinds of organizational structure: - Entrepreneurial: small start-up business - Machine bureaucracy: midsize manufacturing firm - Divisionalized bureaucracy: fortune 500 firms - Professional bureaucracy: law firms, school systems, hospitals - Adhocracy: consulting firms
Other organizational features: - Goals: coercive, utilitarian, normative, and so on - Constituencies - Leadership styles - Tasks - Surrounding environments
Paragraph 2: How information Systems Impact Organizations and
Economic impacts: - IT changes relative costs of capital and the costs of information - Information systems technology is a factor of production, like capital and labour - IT affects the cost and quality of information and changes economics of information o Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets) – outsourcing
Transaction cost theory: firm seek to economize on transaction cost (the costs ofparticipating in markets). o Vertical integration, hiring more employees, buying suppliers and distributors.
- IT lowers market transaction costs for firm, making it worthwhile for firms to transactwith other firms rather than grow the number of employees.
Agency theory: - Firm is nexus of contracts among self-interested parties requiring supervision. - Firms experience agency costs (the cost of managing and supervising) which rise as firm grows. - IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees.
Organizational and behavioural impacts: - IT flattens organizations: decision making is pushed to lower levels. o Fewer managers are needed (IT enables faster decision making and increases span of control).
Organizational factors in planning a new system: - Environment - Structure: hierarchy, specialization, routines, business processes - Culture and politics - Type of organization and style of leadership - Main interest groups affected by systems; attitudes of end users - Task, decisions, and business processes the systems will assist
Paragraph 3: Using Information Systems to achieve Competitive
Why do some firms become leaders in their industry?Michael Porter’s competitive forces model: provides general view of firm, its competitors,and environment.
Five competitive forces shape fate of firm: 1. Traditional competitors: all firms share market space with competitors who are continuously devising new products, services, efficiencies, and switching costs. 2. New market entrants: some industries have high barriers to entry, for example, computer chip business. New companies have new equipment, younger workers, but little brand recognition. 3. Substitute products and services: substitutes customers might use if your prices become too high, for example, iTunes substitutes for CDs. 4. Customers: can customers easily switch to competitor’s products? Can they force businesses to compete on price alone in transparent marketplace? 5. Suppliers: market power of suppliers when firm cannot raise prices as fast as suppliers.
In Porter’s competitive forces model, strategic position of the firm and its strategies aredetermined not only by competition with its traditional direct competitors but also by fourother forces in the industry’s environment: new market entrants, substitute products,customers, and suppliers.