Laudon Mis16 PPT Ch01

Management Information Systems:
Managing the Digital Firm

Sixteenth Edition
Chapter 1
Information Systems in Global Business
Today
Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
Learning Objectives
1.1 How are information systems transforming business, and why
are they so essential for running and managing a business
today?
1.2. What is an information system? How does it work? What are
its management, organization, and technology components?
Why are complementary assets essential for ensuring that
information systems provide genuine value for organizations?
1.3 What academic disciplines are used to study information
systems, and how does each contribute to an understanding
of information systems?
1.4 How will MIS help my career?
Video Cases
• Case 1: Business in the Cloud: Facebook and eBay Data Centers
• Case 2: U P S Global Operations with the D I A D
• Instructional Video: Tour I B M’s Raleigh Data Center
PCL Construction: The New Digital
Firm (1 of 2)
• Business Challenges
– Widespread operations
– Paper intensive processes
• Solutions
– Mobile devices
– Touch screen kiosks
– Microsoft Azure Cloud
– Virtual design and project management
– Analytics dashboard
PCL Construction: The New Digital
Firm (2 of 2)
• Illustrates how information technology has changed how PCL
runs its business
• Demonstrates I T’s role in redesigning jobs and business
processes
• Illustrates the potential for technology to improve operational
efficiency and customer experience
How Information Systems Are
Transforming Business (1 of 2)
• In 2017, more than 140 million businesses had dot-com
addresses registered
• 273 million adult Americans online; 190 million purchased
online
• 269 million Americans have mobile phones
• 200 million use social networks
How Information Systems Are
Transforming Business (2 of 2)
• Social networking tools being used by businesses to connect
employees, customers, and managers
• Internet advertising continues to grow at more than 20 percent
per year
• New laws require businesses to store more data for longer
periods
• Changes in business result in changes in jobs and careers
Figure 1.1 Information Technology
Capital Investment
What’s New in Management
Information Systems (1 of 3)
• I T Innovations
– Cloud computing, big data, Internet of Things
– Mobile digital platform
– AI and machine learning
• New Business Models
– Online streaming music and video
– On-demand e-commerce services
• E-commerce Expansion
– E-commerce expands to nearly $1 trillion in 2018
– Netflix now has more than 125 million U S subscribers
– Online services now approach online retail in revenue
– Online mobile advertising now larger than desktop
• Management Changes
– Managers use social networks, collaboration tools
– Business intelligence applications accelerate
– Virtual meetings proliferate
• Firms and Organizations Change
– More collaborative, less emphasis on hierarchy and
structure
– Greater emphasis on competencies and skills
– Higher-speed/more accurate decision making based on data
and analysis
– More willingness to interact with consumers (social media)
– Better understanding of the importance of I T
Interactive Session: Management:
Can You Run the Company with
Your iPhone? (1 of 2)
• Class Discussion
– What kinds of applications are described here? What
business functions do they support? How do they improve
operational efficiency and decision making?
– Identify the problems that the business in this case study
solved by using mobile digital devices.
Interactive Session: Management:
Can You Run the Company with
Your iPhone? (2 of 2)
– What kinds of businesses are most likely to benefit from
equipping their employees with mobile digital devices such
as iPhones and iPads?
– One company deploying iPhones has stated, “The iPhone is
not a game changer, it’s an industry changer. It changes the
way that you can interact with your customers” and “with
your suppliers.” Discuss the implications of this statement.
Globalization Challenges and
Opportunities: A Flattened World
(1 of 2)
• Internet and global communications have greatly changed how

and where business is done
– Drastic reduction of costs of operating and transacting on
global scale
– Competition for jobs, markets, resources, ideas
– Growing interdependence of global economies
Globalization Challenges and
Opportunities: A Flattened World
(2 of 2)
– Requires new understandings of skills, markets,

opportunities
– Challenges yes, but opportunities as well
– Over half of the revenue of S&P 500 US firms is generated
off shore
– Information systems enable globalization of commerce
The Emerging Digital Firm
• In a 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
Strategic Business Objectives of
• Growing interdependence between:
– Ability to use information technology
– Ability to implement corporate strategies and achieve
corporate goals
Strategic Business Objectives of
• Firms invest heavily in information systems to achieve six
strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
Figure 1.2 The Interdependence
Between Organizations and
Information Systems
Operational Excellence
• Improved efficiency results in higher profits
• Information systems and technologies help improve efficiency
and productivity
• Example: Walmart
– Power of combining information systems and best business
practices to achieve operational efficiency—and over $485
billion in sales in 2017
– Most efficient retail store in world as result of digital links
between suppliers and stores
New Products, Services, and
Business Models
• Information systems and technologies enable firms to create
new products, services, and business models
• Business model: how a company produces, delivers, and sells its
products and services
• Example: Apple
– Transformed old model of music distribution with iTunes
– Constant innovations—iPod, iPhone, iPad, etc.
Customer and Supplier Intimacy
• Customers who are served well become repeat customers who
purchase more
– Example: Mandarin Oriental Hotel
– Uses I T to foster an intimate relationship with its customers,
keeping track of preferences, etc.
• Close relationships with suppliers result in lower costs
– Examples: Mandarin Oriental Hotel and J C Penney (in text)
– J C Penney uses I T to enhance relationship with supplier in
Hong Kong
Improved Decision Making (1 of 2)
• Without accurate information:
– Managers must use forecasts, best guesses, luck
– Results in:
▪ Overproduction, underproduction
▪ Misallocation of resources
▪ Poor response times
Improved Decision Making (2 of 2)
• Poor outcomes raise costs, lose customers
• Real-time data improves ability of managers to make decisions.
• Example: Verizon’s web-based digital dashboard to provide
managers with real-time data on customer complaints, network
performance, line outages, etc.
Competitive Advantage
• Often results from achieving previous business objectives
• Advantages over competitors
• Charging less for superior products, better performance, and
better response to suppliers and customers
• Examples: Apple, Walmart, U P S are industry leaders because
they know how to use information systems for this purpose
Survival
• Businesses may need to invest in information systems out of
necessity; simply the cost of doing business
• Keeping up with competitors
– Citibank’s introduction of A T Ms
• Federal and state regulations and reporting requirements
– Toxic Substances Control Act and the Sarbanes-Oxley Act
What Is an Information System?
(1 of 3)
• Information technology: the hardware and software a business

uses to achieve objectives
• Information system: interrelated components that manage
information to:
– Support decision making and control
– Help with analysis, visualization, and product creation
• Data: streams of raw facts
• Information: data shaped into meaningful, useful form
Figure 1.3 Data and Information
What Is an Information System?
(2 of 3)
• Activities in an information system that produce information:

– Input
– Processing
– Output
– Feedback
• Sharp distinction between computer or computer program
versus information system
What is an Information System?
(3 of 3)
• Feedback
– Output is returned to appropriate members of organization
to help evaluate or correct input stage
• Computer/computer program vs. information system
– Computers and software are technical foundation and tools,
similar to the material and tools used to build a house
Figure 1.4 Functions of an
Information System
Dimensions of Information Systems
• Organizations
• Management
• Technology
Figure 1.5 Information Systems Are
More Than Computers
Dimensions of Information Systems:
Organizations (1 of 2)
• Hierarchy of authority, responsibility
– Senior management
– Middle management
– Operational management
– Knowledge workers
– Data workers
– Production or service workers
Figure 1.6 Levels in a Firm
Organizations (2 of 2)
• Separation of business functions
– Sales and marketing
– Human resources
– Finance and accounting
– Manufacturing and production
• Unique business processes
• Unique business culture
• Organizational politics
Management
• 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
• Computer hardware and software
• Data management technology
• Networking and telecommunications technology
– Networks, the Internet, intranets and extranets, World Wide
Web
• I T infrastructure: provides platform that system is built on
Interactive Session: Technology: U P
S Competes Globally with
Information Technology
– What are the inputs, processing, and outputs of U P S’s
package tracking system?
– What technologies are used by U P S? How are these
technologies related to U P S’s business strategy?
– What strategic business objectives do U P S’s information
systems address?
– What would happen if U P S’s information systems were not
available?
Dimensions of U P S Tracking
System
• Organizational
– Procedures for tracking packages and managing inventory
and provide information
• Management
– Monitoring service levels and costs
• Technology
– Handheld computers, bar-code scanners, networks, desktop
computers, and so on
It Isn’t Just Technology: A Business
Perspective on Information Systems
(1 of 3)
• Information system is instrument for creating value

• Investments in information technology will result in superior
returns
– Productivity increases
– Revenue increases
– Superior long-term strategic positioning
(2 of 3)
• 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
(3 of 3)
• Investing in information technology does not guarantee good

returns
• There is considerable variation in the returns firms receive from
systems investments
• Factors
– Adopting the right business model
– Investing in complementary assets (organizational and
management capital)
Figure 1.7 The Business Information
Value Chain
Figure 1.8 Variation in Returns on
Information Technology
Complementary Assets:
Organizational Capital and the Right
Business Model (1 of 2)
• 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
Complementary Assets:
Organizational Capital and the Right
Business Model (2 of 2)
• Complementary assets
– Examples of organizational assets
▪ Appropriate business model
▪ Efficient business processes
– Examples of managerial assets
▪ Incentives for management innovation
▪ Teamwork and collaborative work environments
– Examples of social assets
▪ The Internet and telecommunications infrastructure
▪ Technology standards
Figure 1.9 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
Approach of This Text:
Sociotechnical Systems (1 of 2)
• Management information systems
– Combine computer science, management science,
operations research, and practical orientation with
behavioral issues
• Four main actors
– Suppliers of hardware and software
– Business firms
– Managers and employees
– Firm’s environment (legal, social, cultural context)
Approach of This Text:
Sociotechnical Systems (2 of 2)
• Sociotechnical view
– Optimal organizational performance achieved by jointly
optimizing both social and technical systems used in
production
– Helps avoid purely technological approach
Figure 1.10 A Sociotechnical
How Will MIS Help My Career?
• The Company: Power Financial Analytics Data Services
• Position: Financial client support and sales assistant
• Job Requirements
• Interview Questions
• Author Tips

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Management Information Systems:

Managing the Digital Firm

• Internet and global communications have greatly changed how

– Requires new understandings of skills, markets,

• Information technology: the hardware and software a business

• Activities in an information system that produce information:

• Information system is instrument for creating value

• Business information value chain

• Investing in information technology does not guarantee good

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