Management Information Systems

Organization and Information Systems

What is an Information System?

Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

Information SystemsInformation system: Three activities produce information organizations needInput: Captures raw data from organization or external environmentProcessing: Converts raw data into meaningful formOutput: Transfers processed information to people or activities that use itFeedback: Output returned to appropriate members of organization to help evaluate or correct input stage

Information SystemsAn information system depends on the :Resources of people (end users and IS specialists)Hardware (machines and media)Software (programs and procedures)Data (data and knowledge bases)Networks (communications media and network support)

Components of IS People Resources. People are required for operation of all ISs. People resources include:

End Users : Use the IS or the information it produces. IS Specialists: These people develop and operate the IS.

Hardware Resources. These include all the physical devices and materials used in information processing, including all machines and data media. Key components include:

Computer Systems. These are the CPUs and their related peripherals, such as terminals and networked PCs. Computer Peripherals. These are input and output devices like keyboards, monitors, and secondary storage. Telecommunications Networks. These are the computer systems interconnected by various telecommunications media such as modems.

Components of IS

Software Resources. These include all sets of information processing instructions. Software resources include:

System Software. This controls the computer. Application Software. These are for a specific end user task, such as word-processing. Procedures. These are the operating instructions for the people who use the IS.Data Resources. Data is both the raw material of and among the most valuable organizational resources in the IS. Data can be in alphanumeric, text, image and/or audio form. Data are typically organized into either Databases - which hold processed and organized data; or Knowledge bases - which hold knowledge in a variety of forms such as facts and rules of inference about a given subject.

Components of IS

Components of an Information System

Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

Organizations and Information SystemsWhat is an organization?Technical definition: Stable, formal social structure that takes resources from environment and processes to produce outputs.A formal legal entity with internal rules and procedures, as well as a social structureBehavioral definition: A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution

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The Technical Microeconomic Definition of the OrganizationIn the microeconomic definition of organizations, capital and labor (the primary production factors provided by the environment) are transformed by the firm through the production process into products and services (outputs to the environment). The products and services are consumed by the environment, which supplies additional capital and labor as inputs in the feedback loop.Organizations and Information Systems

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The Behavioral View of OrganizationsThe behavioral view of organizations emphasizes group relationships, values, and structures.Organizations and Information Systems

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Information technology and organizations influence one anotherComplex relationship influenced by organizations structure, business processes, politics, culture, environment, and management decisionsOrganizations and Information Systems

The Two-Way Relationship Between Organizations and Information TechnologyOrganizations and Information Systems

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Organizations and Information SystemsFeatures of organizationsAll modern organizations share some characteristics, such as:Use of hierarchical structureAccountability, authority in system of impartial decision-makingAdherence to principle of efficiencyOther features include: Routines and business processes and organizational politics, culture, environments and structures

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Organizations and Information SystemsOrganizational politicsDivergent viewpoints lead to political struggle, competition, and conflictPolitical resistance greatly hampers organizational change

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Organizations and Information SystemsOrganizational culture:Encompasses set of assumptions that define goal and productWhat products the organization should produceHow and where it should be producedFor whom the products should be producedMay be powerful unifying force as well as restraint on change

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Organizations and Information SystemsOrganizational environments:Organizations and environments have a reciprocal relationshipOrganizations are open to, and dependent on, the social and physical environmentOrganizations can influence their environmentsEnvironments generally change faster than organizationsInformation systems can be instrument of environmental scanning, act as a lens

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Environments and Organizations Have a Reciprocal RelationshipFigure 3-5Environments shape what organizations can do, but organizations can influence their environmentsand decide to change environments altogether. Information technology plays a critical role in helpingorganizations perceive environmental change and in helping organizations act on their environment.Organizations and Information Systems

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Major Roles of Information Systems

Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

Support Business Operations. From accounting to tracking customers' orders, information systems provide management with support in day-to-day business operations. As quick response becomes more important, the ability of information systems to gather and integrate information across business functions is become crucial.

Major Roles of Information Systems

Support Managerial Decision Making. Just as information systems can combine information to help run the business better, the same information can help managers identify trends and to evaluate the outcome of previous decisions. IS helps managers make better, quicker, and more informed decisions. Support Strategic Advantage. Information systems designed around the strategic objectives of the company help create competitive advantages in the marketplace.

Major Roles of Information Systems

How Information Systems Impact Organizations and Business FirmsEconomic impactsIT changes relative costs of capital and the costs of information Information systems technology is a factor of production, like capital and laborIT affects the cost and quality of information and changes economics of informationInformation technology helps firms contract in size because it can reduce transaction costs

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How Information Systems Impact Organizations and Business FirmsOrganizational and behavioral impactsIT flattens organizationsDecision-making pushed to lower levelsFewer managers needed (IT enables faster decision-making and increases span of control)Postindustrial organizationsOrganizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions

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Flattening OrganizationsHow Information Systems Impact Organizations and Business Firms

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Why do some firms become leaders within their industry? Michael Porters competitive forces modelProvides general view of firm, its competitors, and environmentFive competitive forces shape fate of firmTraditional competitors New market entrants Substitute products and servicesCustomersSuppliers

Using Information Systems to Achieve Competitive Advantage

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Porters Competitive Forces ModelUsing Information Systems to Achieve Competitive Advantage

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Traditional competitorsAll firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costsNew market entrants Some industries have high barriers to entry, e.g. computer chip businessNew companies have new equipment, younger workers, but little brand recognition

Using Information Systems to Achieve Competitive Advantage

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Substitute products and servicesSubstitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDsCustomers Can customers easily switch to competitors products? Can they force businesses to compete on price alone in transparent marketplace?SuppliersMarket power of suppliers when firm cannot raise prices as fast as suppliers

Using Information Systems to Achieve Competitive Advantage

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Four generic strategies for dealing with competitive forces, enabled by using ITLow-cost leadership Product differentiationFocus on market nicheStrengthen customer and supplier intimacy

Using Information Systems to Achieve Competitive Advantage

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Low-cost leadershipproduce products and services at a lower price than competitors while enhancing quality and level of service.HyperCITYProduct differentiationEnable new products or services, greatly change customer convenience and experienceE.g. Google Map, Apple iPhone

Using Information Systems to Achieve Competitive Advantage

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Focus on market nicheUse information systems to enable a focused strategy on a single market niche; specialize.E.g. Hilton Hotels Strengthen customer and supplier intimacyUse information systems to develop strong ties and loyalty with customers and suppliers; increase switching costsE.g. Tata Motors

Using Information Systems to Achieve Competitive Advantage

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Business value chain modelViews firm as series of activities that add value to products or servicesHighlights activities where competitive strategies can best be appliedPrimary activities vs. secondary activitiesAt each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacyUtilize benchmarking, industry best practices

Using Information Systems to Achieve Competitive Advantage

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The Value Chain ModelUsing Information Systems to Achieve Competitive Advantage

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Strategic advantage at industry level:Use IT to develop industry-wide standards for exchanging information or transactions electronically, to increase efficiency, make product substitution less likely, and perhaps raise entry costsValue web: Collection of independent firms using highly synchronized IT to coordinate value chains to produce product or service collectivelyMore customer driven, less linear operation than traditional value chain

Using Information Systems to Achieve Competitive Advantage

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The Value WebUsing Information Systems to Achieve Competitive Advantage

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Information systems can improve overall performance of business units by promoting synergies and core competenciesSynergiesWhen output of some units used as inputs to others, or organizations pool markets and expertiseE.g. merger of CBOP and HDFCPurchase of YouTube by Google

Using Information Systems to Achieve Competitive Advantage

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Core competenciesActivity for which firm is world-class leaderRelies on knowledge, experience, and sharing this across business unitsE.g. Procter & Gambles intranet and directory of subject matter experts

Using Information Systems to Achieve Competitive Advantage

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Network-based strategiesNetwork economicsTraditional economics: Law of diminishing returnsThe more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional outputsNetwork economics:Marginal cost of adding new participant almost zero, with much greater marginal gainValue of community grows with sizeValue of software grows as installed customer base grows

Using Information Systems to Achieve Competitive Advantage

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Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

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Introduction to Information Systems Chapter 1 2002 McGraw-Hill Companies *

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