COMM110 Summer2014 Lectures Chapter1

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CHAPTER ONE

MANAGEMENT INFORMATION

SYSTEMS

BUSINESS DRIVEN MIS

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CHAPTER ONE OVERVIEW

SECTION 1.1 – BUSINESS DRIVEN MIS• Introduction to Information Systems • Competing in the Information Age• The Challenge: Departmental Companies• The Solution: Management Information Systems

SECTION 1.2 – BUSINESS STRATEGY• Identifying Competitive Advantages• The Five Forces Model – Evaluating Industry Attractiveness• The Three Generic Strategies – Choosing a Business Focus• Value Chain Analysis – Executing Business Strategies



SECTION 1.1

BUSINESS DRIVEN MIS

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LEARNING OUTCOMES1. Differentiate between Information Technology

and Information Systems

2. Describe the information age and the differences between data, information, business intelligence, and knowledge

3. Identify the different departments in a company and why they must work together to achieve success

4. Explain systems thinking

5Management Information SystemsManagement Information Systems

Information Technology Capital Investment

Information technology capital investment, defined as hardware, software, and communications equipment, grew from 32 percent to 52 percent of all invested capital between 1980 and 2009.

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What Is Information Systems (IS)?

IT components = Hardware + Software + DataIS = IT + Procedures + People

Also, IS is a multidisciplinary field

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IS vs. IT Avoid a common mistake: Cannot buy an IS Can buy, rent or lease hardware, software and

databases (IT) People execute procedures to employ new IT. Use of new system requires training,overcoming

employees’ resistance, and managing employees as they use new system.


The Interdependence Between Organizations and Information Technology

In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do.

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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 system creates value for the firm as an organizational and management solution to challenges posed by the environment.

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COMPETING IN THE INFORMATION AGE

Examples of the power of business and technology

• Amazon – Not a technology company; primary business focus is selling books

• Netflix – Not a technology company; primary business focus is renting videos

• Zappos – Not a technology company; primary business focus is selling shoes

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COMPETING IN THE INFORMATION AGE

The core drivers of the information age

• Data

• Information

• Business intelligence

• Knowledge


CHAPTER 1: INFORMATION IN BUSINESS SYSTEMS TODAY

Perspectives on Information Systems

Data and Information

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory.

Figure 1.3

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Data Data - Raw facts that describe the characteristics

of an event or object

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Information Information - Data converted into a meaningful

and useful context

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Business Intelligence

Business intelligence - Information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making

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Knowledge

Knowledge - Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources

Knowledge worker – Individual valued for their ability to interpret and analyze information

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THE CHALLENGE: DEPARTMENTAL COMPANIES

Common Departments Working Independently

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Common Departments Working Interdependently

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS

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Systems thinking – A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part


• Three activities of information systems produce information organizations need1. Input: Captures raw data from organization or external

environment2. Processing: Converts raw data into meaningful form3. Output: Transfers processed information to people or

activities that use it

Feedback: – Output returned to appropriate members of

organization to help evaluate or correct input stage

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Management Information Systems (MIS) – A business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving

Chief information officer (CIO) (IT Manager)– Oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives



SECTION 1.2

BUSINESS STRATEGY

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LEARNING OUTCOMES

4. Explain why competitive advantages are temporary

5. Describe Porter’s Five Forces Model and explain each of the five forces

6. Compare Porter’s three generic strategies

7. Demonstrate how a company can add value by using Porter’s value chain analysis

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IDENTIFYING COMPETITIVE ADVANTAGES

Business strategy – A leadership plan that achieves a specific set of goals or objectives such as Decreasing costs

Developing new products or services

Entering new markets

Increasing customer loyalty

Attracting new customers

Increasing sales

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http://www.blueskydesigngroup.com.au/project/coles-future-market-design-research-project/

Using RFID technology to reduce the costs and increase efficiency and productivity



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RFID Technology

http://www.youtube.com/watch?v=eob532iEpqk



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Competitive advantage – A product or service that an organization’s customers place a greater value on than similar offerings from a competitor

First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

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Competitive intelligence – The process of gathering information about the competitive environment to improve the company’s ability to succeed

Competitive intelligence tools• Porter’s Five Forces Model• Porter’s Three Generic Strategies• Porter’s Value Chain Analysis

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THE FIVE FORCES MODEL – EVALUATING INDUSTRY ATTRACTIVENESS

Porter’s Five Forces Model

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Buyer Power

Buyer power – The ability of buyers to affect the price of an item• Switching cost – Manipulating costs

that make customers reluctant to switch to another product

• Loyalty program – Rewards customers based on the amount of business they do with a particular organization

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Supplier Power Supplier power – The suppliers’ ability to

influence the prices they charge for supplies

• Supply chain – Consists of all parties involved in the procurement of a product or raw material

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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 and low when there are few alternatives

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Threat of New Entrants

Threat of new entrants – High when it is easy for new competitors to enter a market and low when there are significant entry barriers

• Entry barrier – A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival

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Rivalry Among Existing Competitors

Rivalry among existing competitors – High when competition is fierce in a market and low when competitors are more complacent

• Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand

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Exercise: Analyzing the Airline Industry

Perform a Porter’s Five Forces analysis of each of the following for a company entering the commercial airline industry

• Buyer power

• Supplier power

• Threat of substitute products/services

• Threat of new entrants

• Rivalry among competitors

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Analyzing the Airline Industry

Sample Analysis for Airline Industry

SupplierPower

Low: Customerhave many

airlinechoices

Buyer Power

High: CustomerHave many

airlinechoices

Threat of New EntrantsLow: Very hard to start an airline due to FCC regulations

and large capital investments

Threat of Substitute Products or Services

High: Train, Car, Bus, Videoconference

Rivalry High

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THE THREE GENERIC STRATEGIES

CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

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THE THREE GENERIC STRATEGIES

CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES

Business process – A standardized set of activities that accomplish a specific task, such as a specific process

Value chain analysis – Views a firm as a series of business processes that each add value to the product or service

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Primary value activities

• Inbound logistics - Acquires raw materials and resources, and distributes

• Operations - Transforms raw materials or inputs into goods and services

• Outbound logistics - Distributes goods and services to customers

• Marketing and sales - Promotes, prices, and sells products to customers

• Service - Provides customer support

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Support value activities• Firm infrastructure – Includes the company format or

departmental structures, environment, and systems

• Human resource management – Provides employee training, hiring, and compensation

• Technology development – Applies MIS to processes to add value

• Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies

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Porter’s Value Chain


• Value chain model – Highlights activities where competitive strategies can

best be applied– At each stage, determine how information systems

can achieve the competitive advantage

Using Information Systems to Achieve Competitive Advantage

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Value Chain and Porter’s Five Forces Model

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COMM110 Summer2014 Lectures Chapter1