Chapter 1 1
IntroductionIntroduction
Anil Tatti aniltatti [at] simca [dot] ac [dot] in Send mail – will reply within 24 hours Walk In Any time – You are Welcome If holiday- make it up in next week / available time slot Copy – Fail
Chapter 1 2
Why Do People Need Information?
Individuals - Entertainment and enlightenment
Businesses - Decision making, problem solving and control
Information SystemsInformation Systems
Chapter 1 3
Data, Information, and SystemsData, Information, and Systems
Data vs. Information
Data A “given,” or fact; a number, a statement, or a picture Represents something in the real world The raw materials in the production of information
Information Data that have meaning within a context Data in relationships Data after manipulation
Chapter 1 4
Data, Information, and SystemsData, Information, and Systems
Data Manipulation
Example: customer survey Reading through data collected from a customer survey with
questions in various categories would be time-consuming and not very helpful.
When manipulated, the surveys may provide useful information.
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Data, Information, and SystemsData, Information, and Systems
What Is a System? System: A set of components that work together to achieve a
common goal
Subsystem: One part of a system where the products of more than one system are combined to reach an ultimate goal
Closed system: Stand-alone system that has no contact with other systems
Open system: System that interfaces with other systems
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Data, Information, and SystemsData, Information, and Systems
Information and Managers
Systems thinking Creates a framework for problem solving and decision
making. Keeps managers focused on overall goals and operations of
business.
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Data, Information, and SystemsData, Information, and Systems
The Benefits of Human-Computer Synergy
Synergy When combined resources produce output that exceeds the
sum of the outputs of the same resources employed separately
Allows human thought to be translated into efficient processing of large amounts of data
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Data, Information, and SystemsData, Information, and Systems
The Four Stages of Data Processing
Input: Data is collected and entered into computer.
Data processing: Data is manipulated into information using mathematical, statistical, and other tools.
Output: Information is displayed or presented.
Storage: Data and information are maintained for later use.
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Why Study IS?Why Study IS?
Information Systems Careers Systems analyst, specialist in enterprise resource planning (ERP),
database administrator, telecommunications specialist, consulting, etc.
Knowledge Workers Managers and non-managers Employers seek computer-literate professionals who know how to use
information technology.
Computer Literacy Replacing Traditional Literacy Key to full participation in western society
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Ethical and Societal IssuesEthical and Societal IssuesThe Not-So-Bright SideThe Not-So-Bright Side
Consumer Privacy Organizations collect (and sometimes sell) huge
amounts of data on individuals.
Employee Privacy IT supports remote monitoring of employees, violating
privacy and creating stress.
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Ethical and Societal IssuesEthical and Societal IssuesThe Not-So-Bright SideThe Not-So-Bright Side
Freedom of Speech IT increases opportunities for pornography, hate speech, intellectual
property crime, an d other intrusions; prevention may abridge free speech.
IT Professionalism No mandatory or enforced code of ethics for IT professionals--unlike
other professions.
Social Inequality Less than 20% of the world’s population have ever used a PC; less than
3% have Internet access.
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Management Information – Related SubsystemsManagement Information – Related Subsystems
Information Technology (IT) is any computer based tool that people use to work with
information and support the information-processing needs of an organisation.
Includes Hardware, Software, Communications, networks, production automation, etc
Any ‘Kit’ concerned with the capture, storage, transmission, and presentation of information
Chapter 1 20
Pioneers of Traditional / Scientific Management
5 Key Functions of Management
- To Plan- To Organise- To Command- To Co-ordinate- To Control
• Principles for Organisational Structure
- Unity of Command
- Small Spans of Control
- Line or Chain of Command
- Division of Work - specialism
- Delegate Authority & Retain Responsibility
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Modern Criticisms of Classical ManagementModern Criticisms of Classical Management
Inhuman working conditions and poor industrial relations
Over-specialisation and restrictive work practices
Bureaucratic organisational structures – long chains of command
Inward- looking organisational structures
Closed Systems – run out of steam when not conscious of environmental influences
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The Matrix ManagementThe Matrix Management
• Project Focussed• Multi-disciplinary teams• Team members have more than one
boss• Project team disbanded when
project completes• New project team for new project• Gives team members an insight into
the workings of other departments• Leadership training ground• Allows people with ideas to carry
them forward • May cause blurring of
communication lines
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Business TrendsBusiness Trends
Changing business environment Specialization Management by Methodology and Franchises Mergers Decentralization and Small Business Temporary Workers Internationalization Service-Oriented Business Re-engineering Recession
Need for faster responses and flexibility
MIS reflecting these requirements -
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Business Trends & ImplicationsBusiness Trends & Implications Specialisation
Increased demand for technical skills Specialized MIS tools Increased communication
Methodology & Franchises Reduction of middle management Increased data sharing Increased analysis by top management Computer support for rules Re-engineering
Mergers Larger companies Need for control and information Economies of scale
Decentralization & Small Business Communication needs Lower cost of management tasks Low maintenance technology
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Business Trends & ImplicationsBusiness Trends & Implications
Temporary Workers Managing through rules Finding and evaluating workers Coordination and control Personal advancement through technology Security
Internationalization Communication Product design System development and programming Sales and marketing
Service Orientation Management jobs are information jobs Customer service requires better information Speed
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Management Information Systems (MIS)Management Information Systems (MIS)
Management information system (MIS) An MIS provides managers with information and support for
effective decision making, and provides feedback on daily operations Output, or reports, are usually generated through accumulation of
transaction processing data Each MIS is an integrated collection of subsystems, which are
typically organized along functional lines within an organization
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Outputs of a Outputs of a Management Information SystemManagement Information System
Scheduled reports Produced periodically, or on a schedule (daily, weekly, monthly)
Key-indicator report Summarizes the previous day’s critical activities Typically available at the beginning of each day
Demand report Gives certain information at a manager’s request
Exception report Automatically produced when a situation is unusual or requires management
action
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Scheduled Report ExampleScheduled Report Example
Daily Sales Detail ReportPrepared: 08/10/xx
Order#
CustomerID
Sales Rep ID
ShipDate Quantity Item # Amount
P12453 C89321 CAR 08/12/96 144 P1234 $3,214
P12453 C89321 CAR 08/12/96 288 P3214 $5,660
P12453 C03214 GWA 08/13/96 12 P4902 $1,224
P12455 C52313 SAK 08/12/96 24 P4012 $2,448
P12456 C34123 JMW 08J/13/96 144 P3214 $720
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Key Indicator Report ExampleKey Indicator Report Example
Daily Sales Key Indicator Report
ThisMonth
LastMonth
LastYear
Total Orders Month to Date $1,808 $1,694 $1,014
Forecasted Sales for the Month $2,406 $2,224 $2,608
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Demand Report ExampleDemand Report Example
Daily Sales by Sales Rep Summary ReportPrepared: 08/10/xx
Sales Rep ID Amount
CAR $42,345
GWA $38,950
SAK $22,100
JWN $12,350
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Exception Report ExampleException Report Example
Daily Sales Exception Report – ORDERS OVER $10,000Prepared: 08/10/xx
Order#
CustomerID
Sales Rep ID
ShipDate Quantity Item # Amount
P12453 C89321 CAR 08/12/96 144 P1234 $13,214
P12453 C89321 CAR 08/12/96 288 P3214 $15,660
P12453 C03214 GWA 08/13/96 12 P4902 $11,224
… … … … … … …
… … … … … … …
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Outputs of a Management Outputs of a Management Information SystemInformation System
Earnings by Quarter (Millions)
Actual Forecast Variance
2ND Qtr 1999 $12.6 $11.8 6.8%
1st Qtr 1999 $10.8 $10.7 0.9%
4th Qtr 1998 $14.3 $14.5 -1.4%
3rd Qtr 1998 $12.8 $13.3 -3.0%
Etc. See Figure 9.2
Drill Down ReportsProvide detailed data about a situation.
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Characteristics of a Management Characteristics of a Management Information SystemInformation System
Provides reports with fixed and standard formats Hard-copy and soft-copy reports
Uses internal data stored in the computer system End users can develop custom reports Requires formal requests from users
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Management Information Systems for Management Information Systems for Competitive AdvantageCompetitive Advantage
Provides support to managers as they work to achieve corporate goals
Enables managers to compare results to established company goals and identify problem areas and opportunities for improvement
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Functional AspectsFunctional Aspects
MIS is an integrated collection of functional information systems, each supporting particular functional areas.
Schematic
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An Organization’sMIS
FinancialMIS
MarketingMIS
HumanResources
MIS
Etc.
AccountingMIS
Drill down reports
Exception reports
Demand reports
Key-indicator reports
Scheduled reports
Databasesof
externaldata
Databasesof
validtransactions
Transactionprocessing
systemsBusiness
transactions
Businesstransactions
ExtranetExtranet
InternetInternet
Figure 9.3
Etc.
Chapter 1 40
IntroductionIntroduction
What is MIS? Is a system which gives us the
Right information To the right person At the right place At the right time In the right form At the right cost
Chapter 1 41
RoleRole
Why is it necessary Increased Business and Management complexities
Who is a Good Manager One who minimizes / eliminates the elements of risk &
uncertainty.
Response Simulator Enables a decision maker to give either a reactive or proactive
response May be futuristic.
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Characteristics- Sub SystemsCharacteristics- Sub Systems
Marketing Sales Forecasting , Sales Planning, Customer & Sales
Analysis. Manufacturing
Production Planning, scheduling, cost control analysis. Logistics
Planning & Control of purchasing, inventories, distribution Personnel
Planning Personnel requirements , Analyzing performance, salary administration.
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Characteristics….Characteristics….
Finance & AccountingFinancial analysis, cost analysis, capital requirements,
planning, income measurement.Information Processing
Information system planning , Cost – Benefit analysis.Top Management
Strategic Planning, resource allocation.
Chapter 1 44
Users & CharacteristicsUsers & CharacteristicsType of System Information Inputs Processing Information Outputs Users
ESS/EIS Aggregate data , external , internal
Graphics; simulations, interactive
Projections; response to Queries Senior Managers
DSS Low- Volume data, analytic models
Interactive; simulations, analysis
Special reports; decision analysis; response to Queries
Professionals; Staff Managers
MISSummary Transaction data; high volume data; simple models
Routine reports; simple models; low level analysis
Summary & exception reports Middle Managers
KWS Design Specializations, Knowledge base Modeling, simulations Models, Graphics Professionals; Technical
Staff
OAS Documents, schedules
Document; management; scheduling; communication
Documents; schedules; mail Clerical Workers
TPS Transactions; events Sorting; listing; merging; updating
Detailed reports; list summaries
Operations; Personnel; Supervisors
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MIS RequirementsMIS Requirements
Unified system Should support / facilitate decisions Should be compatible with the organisation’s structure & culture Should be cost effective / beneficial Should be responsive to changes around & within the organisation. Should be speedy & accurate Should provide validated & valid information Should be Management & not Manipulated Information system.
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ApproachesApproaches
Technical Approach Based on Mathematical & normative models Relies heavily on physical technology – CS , MS, OR
Behavioral Approach Behavioral impact / response of people – Political
Science, Psychology, Sociology & organisational Behavior.
Socio-Technical Approach Borrows from both the above approaches.
Chapter 1 47
What is Strategy?What is Strategy?Strategy DefinitionsStrategy Definitions
Strategy A plan Early 1990s definition:
“A well coordinated set of objectives, policies, and plans aimed at securing a long-term competitive advantage. A vision for the organization that is implemented.”
Webster’s Dictionary
“a careful plan or method” “the art of devising or employing plans toward a goal” “the art and science of military command exercised to
meet the enemy in combat under advantageous circumstances”
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Strategic Advantage and ITStrategic Advantage and ITEvolution of Strategy ConceptsEvolution of Strategy Concepts
Competitive Strategy Competitive Advantage
Sustainable Competitive Advantage defensible market position (CQFDS), unique core competence long-term barriers to competition, non-competitive profits (>0)
Temporary (Non-Sustainable) Competitive Advantage
Strategic Advantage Sustainable Strategic Advantage
long-term, dominant strategy, strategic systems, strategic structural changes
Temporary Strategic Advantage
Leverageable Strategic Advantage (Carr)» dominant strategy is only a stepping-stone to future
dominant strategies
StrategySpeeding Up
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Information Systems as a Strategic Information Systems as a Strategic ResourceResource
Inwardly Strategic focused on internal processes
lower costs increase employee productivity improve teamwork enhance communication
Outwardly Strategicaimed at direct competition
beat competitorsnew services
new “knowledge” that leads to new services
Chapter 1 50
Elements of Strategic ManagementElements of Strategic Management
Innovation Response-Management Long-Range Planning
Competitive Intelligence
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Q1 – How does organizational strategy determine information Q1 – How does organizational strategy determine information systems structure?systems structure?
An organization’s goals and objectives are determined by its competitive strategy.
In turn, an organization’s competitive strategy determines every information system’s
– Structures
– Features
– Functions
Fig 3-1 Organizational Strategy Determines Information Systems
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Q2 – What Five Forces Determine Industry Structure?Q2 – What Five Forces Determine Industry Structure?
You can use Porter’s Five Forces Model to assess an industry structure based on these five questions:How much bargaining power do customers have?
How much of a threat do substitution products or services pose?
How much bargaining power do suppliers have?
How great is the threat of new competitors entering the marketplace?
How great is the rivalry among existing firms?
The intensity of each force determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be.
An organization develops its competitive strategy based on how it intends to respond to these forces.
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Fig 3-2 Porter’s Five Forces Model of Industry Structure
Q2 – What Five Forces Determine Industry Structure?Q2 – What Five Forces Determine Industry Structure?
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Fig 3-3 Examples of Five Forces
Q2 – What Five Forces Determine Industry Structure?Q2 – What Five Forces Determine Industry Structure?
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Q3 – What is Competitive StrategyQ3 – What is Competitive Strategy
A company can choose one of four competitive strategies to help it respond to the structure of its industry.
Be the cost leader across its industry – Wal-Mart is the lowest cost leader in the retail industry.
Differentiate its products from others across its industry – Apple Computer competes on how much better its computers are than PCs.
Be the cost leader in an industry segment – Southwest Airlines is the cost leader in certain portions of the airline industry.
Differentiate its product in an industry segment – Apple’s iPhone competes by being different than other cell phones.
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Fig 3-4 Porter’s Four Competitive Strategies
Q3 – What is Competitive StrategyQ3 – What is Competitive Strategy
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Q4 – What is a Value Chain?Q4 – What is a Value Chain?
Each competitive strategy requires a system whose benefits outweigh the risks and provide value to the customer.
Value is defined as the amount of money a customer is willing to spend on a product, service, or resource.
The difference between the value that an activity generates and the cost of the activity is the margin.
A value chain is a network of value-creating activities and is divided into primary activities and support activities.
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Primary Activities in the value chain include:
Inbound logistics activities involve receiving and managing raw materials.
Operations activities transform raw materials into final products or create services.
Outbound logistic activities deliver finished products to customers.
Marketing and Sales activities create marketing strategies and sell products or services to customers.
Services activities provide after-sale customer support for products or services.
Q4 – What is a Value Chain?Q4 – What is a Value Chain?
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Support Activities in the value chain indirectly enhance production of products and services.
Firm infrastructure includes general management, finance, accounting, legal, and government affairs (if necessary).
Human Resources recruits, compensates, evaluates and trains employees.
Technology Development includes research and development for new processes or techniques.
Procurement finds suppliers and vendors for raw materials, creates contracts, and negotiates prices of raw materials.
Q4 – What is a Value Chain?Q4 – What is a Value Chain?
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Fig 3-5 Porter’s Value Chain Model
Q4 – What is a Value Chain?Q4 – What is a Value Chain?
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Each activity in a value chain links to other activities in the value chain. Linkages are the interactions across the value activities.
Understanding a company’s linkages helps it succeed in designing or redesigning its business process.
Rather than automating or improving existing functional systems, Porter contends companies should create new, more efficient business processes that integrate the activities of the entire value chain.
Q4 – What is a Value Chain?Q4 – What is a Value Chain?
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Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?
Each company has many business processes which are networks of activities that generate value by transforming inputs into outputs.
You determine the cost of each business process by adding the cost of inputs plus the cost of activities used in the process.
You determine the margin of each business process by subtracting the cost of the activity from the value of the output.
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Fig 3-7 Three Examples of Business Processes
Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?
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Each network of activity transforms input resources into output resources. Bicycle parts are transformed into a bicycle through a network of activities, both primary and support.
A company’s resources, like inventory parts, equipment, or cash, flow between or among all the activities used to produce a product.
Facilities, like buildings or banks, store resources used in the company’s network of activities.
Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?
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Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?
The key to a company’s competitive advantage is to increase the margin of its products by adding value, reducing costs, or both.
Business process redesign helps a business streamline its activities in order to increase its margins.
The most difficult part of process redesign is associated with employee resistance.
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Fig 3-8 Improved Materials Ordering Process
Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?
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Each business must first analyze its industry and choose a competitive strategy. Will it be a low-cost provider or differentiate its products from competitors?
Then it must design its business processes to span value-generating activities.
Once those decisions have been made, a business can structure an information system that supports its business processes.
Q6 – How Does Competitive Strategy Determine Business Q6 – How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?Processes and Structure of Information Systems?
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Fig 3-10 Business Process & Information System for Bike Rental
Q6 – How Does Competitive Strategy Determine Business Q6 – How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?Processes and Structure of Information Systems?
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Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
There are two ways businesses can respond to the five competitive forces.
They can gain a competitive advantage via their products and services.
They can gain a competitive advantage by developing superior business processes.
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A business can gain a competitive advantage via its products by
Creating new products and services, or
Enhancing its existing products or services, or
Differentiating its products and services from its competitors
Information systems can help create a competitive advantage by being part of the product or by providing support to the product.
Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
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A company can gain a competitive advantage by using business processes to
Lock in customers via high switching costs, making it too expensive for the customer to switch to a competitor.
Lock in suppliers via easy-to-use connections, discouraging them from changing to another business.
Create entry barriers for new competitors, thereby raising the costs to enter the market.
Establish alliances with other organizations and set standards, reducing purchase costs and providing benefits for everyone.
Reduce costs which in turn reduces prices and increases profitability.
Q7 – How Do Information Systems Provide Competitive Advantages?
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ABC, Inc, an actual company, used information systems to create a competitive advantages by
Investing heavily in information technology from the beginning and
Leading the shipping industry in application of information systems.
The following slide shows some of the Web pages ABC, Inc uses within its information system.
Q7 – How Do Information Systems Provide Competitive Advantages?
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Fig3-13 ABC, Inc Web Page to Select recipient from customer records
Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
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Fig 3-14 ABC, Inc Web page to select contact from customer records
Q7 – How Do Information Systems Provide Competitive Advantages?
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Fig 3-15 ABC, Inc Web page to specify email notification
Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
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ABC’s information system helps the company create a competitive advantage by
Enhancing its existing services—making it easy for the customer to use its system, and reducing errors.
Differentiating its service from its competitors who don’t have a similar service to provide to customers.
Providing new services for customers that competitors don’t provide.
Locking customers into its system based on the benefits they receive from it.
Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
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ABC’s competitive advantage continued…
Raising barriers for new competitors to enter the market. They will have to provide similar services to customers.
Reducing the costs associated with data input and information output.
Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?
Chapter 1 78
RelationshipRelationship
Chapter 1 79
SummarySummary
Strategic Information System Applications Cost leadership Differentiation Growth Alliances Innovation Improve internal efficiency Customer-oriented approaches
Chapter 1 80
Functional Use Of MISFunctional Use Of MIS
To lower cost in all parts of Value chain Facilitate product delivery Adding value to quality Transform physical processing component into information component Speed / Ability – Competitive Advantage Quality Enhancement Simplification – Product , Process, Cycle Time Organisation – Benchmark , Customer Service, Precision etc
Chapter 1 81
Strategic UseStrategic Use
Out perform rivals Product differentiation Focussed differentiation Right linkages to customers & suppliers Low cost Product Precise development of strategies, planning , forecasting &
monitoring. Problem Solving / Decision making
Chapter 1 82
Strategic Uses Contd….Strategic Uses Contd….
Coordinate activities globally Think Globally, act Locally Competitive Advantage More Flexible & Responsive Flexibility
Chapter 1 83
Information Systems for Competitive AdvantageInformation Systems for Competitive Advantage
Businesses continually seek to establish competitive advantage in the marketplace. There are eight principles:
The first three principles concern products. The second three principles concern the creation of barriers. The last two principles concern establishing alliances and reducing costs.
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Organizational ChangeOrganizational Change Organizational change deals with how organizations plan for,
implement and handle change. Overcoming resistance to change can be the hardest part of bringing information systems into a business. Too many computer systems and new technologies have failed because managers and employees were not prepared for change.
A change model identifies the phases of change and the best way to implement it: Unfreezing is the process of removing old habits and creating a
climate receptive to change Moving is the process of learning new work methods, behaviors
and systems Refreezing involves reinforcing changes to make the new process
second nature, accepted and part of the job