WEEK 9

Information Systems
1. Introduction
• Unit 3 Learning Outcome
Students evaluate the quality of information systems in an organization,
including its effects on all stakeholders inside and outside the organization.

• Week 9 Learning Objectives

· Understand components of information systems and how they related
each other.
· Understand the roles of information systems in business is today.
· Analyze ethical and social impacts of implement or change an
information system.

• Prior Knowledge
Information System Design.

2. Theory
• Information Systems
This section contains excerpts and figures from Laudon y Laudon (2018).
Information technology (IT) consists of all the hardware and software that a
firm needs to use in order to achieve its business objectives. This includes
not only computer machines, storage devices, and handheld mobile devices
but also software, such as the Windows or Linux operating systems, the
Microsoft Office desktop productivity suite, and the many thousands of
computer programs that can be found in a typical large firm. “Information
systems” are more complex and can be best understood by looking at them
from both a technology and a business perspective.

An information system can be defined technically as a set of interrelated

components that collect (or retrieve), process, store, and distribute
information to support decision making and control in an organization. In
addition to supporting decision making, coordination, and control,

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information systems may also help managers and workers analyze
problems, visualize complex subjects, and create new products.

Information systems contain information about significant people, places,

and things within the organization or in the environment surrounding it. By
information we mean data that have been shaped into a form that is
meaningful and useful to human beings. Data, in contrast, are streams of
raw facts representing events occurring in organizations or the physical
environment before they have been organized and arranged into a form that
people can understand and use.

Three activities in an information system produce the information that

organizations need to make decisions, control operations, analyze problems,
and create new products or services. These activities are input, processing,
and output. Input captures or collects raw data from within the organization
or from its external environment. Processing converts this raw input into a
meaningful form. Output transfers the processed information to the people
who will use it or to the activities for which it will be used. Information
systems also require feedback, which is output that is returned to
appropriate members of the organization to help them evaluate or correct the
input stage.

Although computer-based information systems use computer technology to

process raw data into meaningful information, there is a sharp distinction
between a computer and a computer program on the one hand and an
information system on the other. Computers and related software programs
are the technical foundation, the tools and materials, of modern information
systems. Computers provide the equipment for storing and processing
information. Computer programs, or software, are sets of operating
instructions that direct and control computer processing. Knowing how
computers and computer programs work is important in designing solutions
to organizational problems, but computers are only part of an information
system.

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A house is an appropriate analogy. Houses are built with hammers, nails,
and wood, but these do not make a house. The architecture, design, setting,
landscaping, and all of the decisions that lead to the creation of these
features are part of the house and are crucial for solving the problem of
putting a roof over one’s head. Computers and programs are the hammers,
nails, and lumber of computer-based information systems, but alone they
cannot produce the information a particular organization needs. To
understand information systems, you must understand the problems they are
designed to solve, their architectural and design elements, and the
organizational processes that lead to the solutions.

Dimensions of Information Systems

To fully understand information systems, you must understand the broader
organization, management, and information technology dimensions of
systems and their power to provide solutions to challenges and problems in
the business environment. We refer to this broader understanding of
information systems, which encompasses an understanding of the
management and organizational dimensions of systems as well as the
technical dimensions of systems, as information systems literacy (see Figure
1). Computer literacy, in contrast, focuses primarily on knowledge of
information technology.

The field of management information systems (MIS) tries to achieve this

broader information systems literacy. MIS deals with behavioral issues as
well as technical issues surrounding the development, use, and impact of
information systems used by managers and employees in the firm.

Let’s examine each of the dimensions of information systems—

organizations, management, and information technology.

Organizations
Information systems are an integral part of organizations. Indeed, for some
companies, such as credit reporting firms, there would be no business

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without an information system. The key elements of an organization are its
people, structure, business processes, politics, and culture.

Organizations have a structure that is composed of different levels and

specialties. Their structures reveal a clear-cut division of labor. Authority
and responsibility in a business firm are organized as a hierarchy, or a
pyramid structure. The upper levels of the hierarchy consist of managerial,
professional, and technical employees, whereas the lower levels consist of
operational personnel.

An organization coordinates work through its hierarchy and through its

business processes. Most organizations’ business processes include formal
rules that have been developed over a long time for accomplishing tasks.
These rules guide employees in a variety of procedures, from writing an
invoice to responding to customer complaints. Some of these business
processes have been written down, but others are informal work practices,
such as a requirement to return telephone calls from coworkers or
customers, that are not formally documented. Information systems automate
many business processes. For instance, how a customer receives credit or
how a customer is billed is often determined by an information system that
incorporates a set of formal business processes.

Each organization has a unique culture, or fundamental set of assumptions,

values, and ways of doing things, that has been accepted by most of its
members. You can see organizational culture at work by looking around
your university or college. Some bedrock assumptions of university life are
that professors know more than students, that the reason students attend
college is to learn, and that classes follow a regular schedule. Parts of an
organization’s culture can always be found embedded in its information
systems. For instance, UPS’s first priority is customer service, which is an
aspect of its organizational culture that can be found in the company’s
package tracking systems, which we describe later in this section.

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Different levels and specialties in an organization create different interests
and points of view. These views often conflict over how the company
should be run and how resources and rewards should be distributed. Conflict
is the basis for organizational politics. Information systems come out of this
cauldron of differing perspectives, conflicts, compromises, and agreements
that are a natural part of all organizations.

Management
Management’s job is to make sense out of the many situations faced by
organizations, make decisions, and formulate action plans to solve
organizational problems. Managers perceive business challenges in the
environment, they set the organizational strategy for responding to those
challenges, and they allocate the human and financial resources to
coordinate the work and achieve success. Throughout, they must exercise
responsible leadership. The business information systems described in this
book reflect the hopes, dreams, and realities of real-world managers.

But managers must do more than manage what already exists. They must
also create new products and services and even re-create the organization
from time to time. A substantial part of management responsibility is
creative work driven by new knowledge and information. Information
technology can play a powerful role in helping managers design and deliver
new products and services and redirecting and redesigning their
organizations.

Information Technology
Information technology is one of many tools managers use to cope with
change. Computer hardware is the physical equipment used for input,
processing, and output activities in an information system. It consists of the
following: computers of various sizes and shapes, various input, output, and
storage devices; and telecommunications devices that link computers
together.

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Computer software consists of the detailed, preprogrammed instructions that
control and coordinate the computer hardware components in an
information system. Data management technology consists of the software
governing the organization of data on physical storage media. Networking
and telecommunications technology, consisting of both physical devices and
software, links the various pieces of hardware and transfers data from one
physical location to another. Computers and communications equipment can
be connected in networks for sharing voice, data, images, sound, and video.
A network links two or more computers to share data or resources, such as a
printer.

All of these technologies, along with the people required to run and manage
them, represent resources that can be shared throughout the organization and
constitute the firm’s information technology (IT) infrastructure. The IT
infrastructure provides the foundation, or platform, on which the firm can
build its specific information systems. Each organization must carefully
design and manage its IT infrastructure so that it has the set of technology
services it needs for the work it wants to accomplish with information
systems.

Figure 1. Information Systems are more than Computers

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It Isn’t Just Technology: A Business Perspective on Information
Systems
Every business has an information value chain, in which raw information is
systematically acquired and then transformed through various stages that
add value to that information. The value of an information system to a
business, as well as the decision to invest in any new information system, is,
in large part, determined by the extent to which the system will lead to
better management decisions, more efficient business processes, and higher
firm profitability. Although there are other reasons why systems are built,
their primary purpose is to contribute to corporate value.

The business perspective calls attention to the organizational and managerial

nature of information systems. An information system represents an
organizational and management solution, based on information technology,
to a challenge or problem posed by the environment.

Awareness of the organizational and managerial dimensions of information

systems can help us understand why some firms achieve better results from
their information systems than others. Studies of returns from information
technology investments show that there is considerable variation in the
returns firms receive. Some firms invest a great deal and receive a great
deal; others invest an equal amount and receive few returns. Still other firms
invest little and receive much, whereas others invest little and receive little.
This suggests that investing in information technology does not by itself
guarantee good returns. What accounts for this variation among firms?

The answer lies in the concept of complementary assets. Information

technology investments alone cannot make organizations and managers
more effective unless they are accompanied by supportive values, structures,
and behavior patterns in the organization and other complementary assets.
Business firms need to change how they do business before they can really
reap the advantages of new information technologies.

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 Research indicates that firms that support their technology investments with
investments in complementary assets, such as new business models, new
business processes, management behavior, organizational culture, or
training, receive superior returns, whereas those firms failing to make these
complementary investments receive less or no returns on their information
technology investments.

Key organizational complementary investments are a supportive business

culture that values efficiency and effectiveness, an appropriate business
model, efficient business processes, decentralization of authority, highly
distributed decision rights, and a strong information system (IS)
development team. Important managerial complementary assets are strong
senior management support for change, incentive systems that monitor and
reward individual innovation, an emphasis on teamwork and collaboration,
training programs, and a management culture that values flexibility and
knowledge. Important social investments (not made by the firm but by the
society at large, other firms, governments, and other key market actors) are
the Internet and the supporting Internet culture, educational systems,
network and computing standards,

• Role of Information Systems in Business Today

This section contains excerpts and figures from Laudon y Laudon (2018).
As managers, most of you will work for firms that are intensively using
information systems and making large investments in information
technology. You will certainly want to know how to invest this money
wisely. If you make wise choices, your firm can outperform competitors. If
you make poor choices, you will be wasting valuable capital.

Information systems are built by managers to serve the interests of the

business firm. At the same time, the organization must be aware of and open
to the influences of information systems to benefit from new technologies.

What does globalization have to do with management information systems?

That’s simple: everything. The emergence of the Internet into a full-blown

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international communications system has drastically reduced the costs of
operating and transacting on a global scale. Communication between a
factory floor in Shanghai and a distribution center in Rapid City, South
Dakota, or Antwerp, Belgium, is now instant and virtually free. Customers
can now shop in a worldwide marketplace, obtaining price and quality
information reliably 24 hours a day. Firms producing goods and services on a
global scale achieve extraordinary cost reductions by finding low-cost
suppliers and managing production facilities in other countries. Internet
service firms, such as Google, Netflix, Alibaba, and eBay, are able to
replicate their business models and services in multiple countries without
having to redesign their expensive fixed-cost information systems
infrastructure. Briefly, information systems enable globalization.

What makes the Management Information Systems (MIS) field the most
exciting area of study in schools of business is the continuous change in
technology, management, and business processes. Five changes are of
paramount importance.

• IT Innovations
Examples include the emergence of cloud computing, the growth of a
mobile digital business platform based on smartphones and tablet
computers, big data, business analytics, and the use of social networks by
managers to achieve business objectives. Most of these changes have
occurred in the past few years. These innovations are enabling
entrepreneurs and innovative traditional firms to create new products and
services, develop new business models, and transform the day-to-day
conduct of business. In the process, some old businesses, even industries,
are being destroyed while new businesses are springing up.

• New Business Models

For instance, the emergence of online video services like Netflix for
streaming, Apple iTunes, Amazon, and many others for downloading
video has forever changed how premium video is distributed and even
created. Netflix in 2016 attracted more than 75 million subscribers
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 worldwide to what it calls the “Internet TV” revolution. Netflix has
moved into premium TV show production with 30 original shows such as
House of Cards and Orange Is the New Black, challenging cable and
broadcast producers of TV shows, and potentially disrupting cable
network dominance of TV show production. Apple’s iTunes now
accounts for 67 percent of movie and TV show downloads and has struck
deals with major Hollywood studios for recent movies and TV shows. A
growing trickle of viewers are unplugging from cable and using only the
Internet for entertainment.

• E-Commerce Expanding
E-commerce generated about $600 billion in revenues in 2016 and is
estimated to grow to nearly $900 billion by 2020. E-commerce is
changing how firms design, produce, and deliver their products and
services. E-commerce has reinvented itself again, disrupting the
traditional marketing and advertising industry and putting major media
and content firms in jeopardy. Facebook and other social networking
sites such as YouTube, Twitter, and Tumblr along with Netflix, Apple
Beats music service, and many other media firms exemplify the new face
of e-commerce in the twenty-first century. They sell services. When we
think of e-commerce, we tend to think of selling physical products. While
this iconic vision of e-commerce is still very powerful and the fastest-
growing form of retail in the United States, growing up alongside is a
whole new value stream based on selling services, not goods. It’s a
services model of e-commerce. Growth in social commerce is spurred by
powerful growth of the mobile platform: 80 percent of Facebook’s users
access the service from mobile phones and tablets. Information systems
and technologies are the foundation of this new services-based e-
commerce. Mobile e-commerce hit $130 billion in 2016 and is growing
at more than 30 percent a year.

• Management Changes
The management of business firms has changed: With new mobile
smartphones, high-speed wireless Wi-Fi networks, and tablets, remote
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 salespeople on the road are only seconds away from their managers’
questions and oversight. Business is going mobile, along with consumers.
Managers on the move are in direct, continuous contact with their
employees. The growth of enterprise-wide information systems with
extraordinarily rich data means that managers no longer operate in a fog
of confusion but instead have online, nearly instant access to the really
important information they need for accurate and timely decisions. In
addition to their public uses on the web, wikis and blogs are becoming
important corporate tools for communication, collaboration, and
information sharing.

• Changes in Firms and Organizations

Compared to industrial organizations of the previous century, new fast-
growing twenty-first-century business firms put less emphasis on
hierarchy and structure and more emphasis on employees taking on
multiple roles and tasks and collaborating with others on a team. They
put greater emphasis on competency and skills rather than position in the
hierarchy. They emphasize higher speed and more accurate decision
making based on data and analysis. They are more aware of changes in
technology, consumer attitudes, and culture. They use social media to
enter into conversations with consumers and demonstrate a greater
willingness to listen to consumers, in part because they have no choice.
They show better understanding of the importance of information
technology in creating and managing business firms and other
organizations. To the extent organizations and business firms
demonstrate these characteristics, they are twenty-first-century digital
firms.

The Emerging Digital Firm

A digital firm is one in which nearly all of the organization’s significant
business relationships with customers, suppliers, and employees are
digitally enabled and mediated. Core business processes are
accomplished through digital networks spanning the entire organization
or linking multiple organizations.

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Business processes refer to the set of logically related tasks and behaviors
that organizations develop over time to produce specific business results
and the unique manner in which these activities are organized and
coordinated. Developing a new product, generating and fulfilling an
order, creating a marketing plan, and hiring an employee are examples of
business processes, and the ways organizations accomplish their business
processes can be a source of competitive strength.

Key corporate assets—intellectual property, core competencies, and

financial and human assets—are managed through digital means. In a
digital firm, any piece of information required to support key business
decisions is available at anytime and anywhere in the firm. Digital firms
sense and respond to their environments far more rapidly than traditional
firms, giving them more flexibility to survive in turbulent times. Digital
firms offer extraordinary opportunities for more flexible global
organization and management. In digital firms, both time shifting and
space shifting are the norm. Time shifting refers to business being
conducted continuously, 24/7, rather than in narrow “work day” time
bands of 9 a.m. to 5 p.m. Space shifting means that work takes place in a
global workshop as well as within national boundaries. Work is
accomplished physically wherever in the world it is best accomplished.

Many firms, such as Cisco Systems, 3M, and GE, are close to becoming
digital firms, using the Internet to drive every aspect of their business.
Most other companies are not fully digital, but they are moving toward
close digital integration with suppliers, customers, and employees.

Strategic Business Objectives of Information Systems

What makes information systems so essential today? Why are businesses
investing so much in information systems and technologies? In the
United States, more than 57 million managers and 120 million workers in
the information and knowledge sectors in the labor force rely on
information systems to conduct business. Information systems are

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essential for conducting day-to-day business in most advanced countries
as well as achieving strategic business objectives.

Entire sectors of the economy are nearly inconceivable without

substantial investments in information systems. E-commerce firms such
as Amazon, eBay, Google, and E*Trade simply would not exist. Today’s
service industries— finance, insurance, and real estate as well as personal
services such as travel, medicine, and education—could not operate
without information systems. Similarly, retail firms such as Walmart and
Sears and manufacturing firms such as General Motors, Volkswagen,
Siemens, and GE require information systems to survive and prosper.
Just as offices, telephones, filing cabinets, and efficient tall buildings
with elevators were once the foundations of business in the twentieth
century, information technology is a foundation for business in the
twenty-first century.

There is a growing interdependence between a firm’s ability to use

information technology and its ability to implement corporate strategies
and achieve corporate goals (see Figure 2). What a business would like to
do in five years often depends on what its systems will be able to do.
Increasing market share, becoming the high-quality or low-cost producer,
developing new products, and increasing employee productivity depend
more and more on the kinds and quality of information systems in the
organization. The more you understand about this relationship, the more
valuable you will be as a manager.

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Figure 2. The Interdependence between Organizations and Information
Systems

Specifically, business firms invest heavily in information systems to

achieve six strategic business objectives: operational excellence; new
products, services, and business models; customer and supplier intimacy;
improved decision making; competitive advantage; and survival.

• Operational Excellence
Businesses continuously seek to improve the efficiency of their
operations in order to achieve higher profitability. Information
systems and technologies are some of the most important tools
available to managers for achieving higher levels of efficiency and
productivity in business operations, especially when coupled with
changes in business practices and management behavior. Walmart, the
largest retailer on earth, exemplifies the power of information systems
coupled with state of the art business practices and supportive
management to achieve world-class operational efficiency. In fiscal
year 2016, Walmart achieved $499 billion in sales—nearly one-tenth
of retail sales in the United States—in large part because of its Retail
Link system, which digitally links its suppliers to every one of
Walmart’s stores. As soon as a customer purchases an item, the
supplier monitoring the item knows to ship a replacement to the shelf.

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 Walmart is the most efficient retail store in the industry, achieving
sales of more than $600 per square foot, compared with its closest
competitor, Target, at $425 a square foot and other large general
merchandise retail firms producing less than $200 a square foot.

• New Products, Services, and Business Models

Information systems and technologies are a major enabling tool for
firms to create new products and services as well as entirely new
business models. A business model describes how a company
produces, delivers, and sells a product or service to create wealth.

Today’s music industry is vastly different from the industry a decade

ago. Apple Inc. transformed an old business model of music
distribution based on vinyl records, tapes, and CDs into an online,
legal distribution model based on its own iPod technology platform.
Apple has prospered from a continuing stream of innovations,
including the iTunes music service, the iPad, and the iPhone.

• Customer and Supplier Intimacy

When a business really knows its customers and serves them well, the
customers generally respond by returning and purchasing more. This
raises revenues and profits. Likewise with suppliers, the more a
business engages its suppliers, the better the suppliers can provide
vital inputs. This lowers costs. How to really know your customers or
suppliers is a central problem for businesses with millions of offline
and online customers.

The Mandarin Oriental hotel group which operates hotels in Asia,

Europe, and the Americas, exemplifies the use of information systems
and technologies to achieve customer intimacy. These hotels use
computers to keep track of guests’ preferences. When a customer
arrives at one of these hotels, the system automatically changes the
room conditions, such as dimming the lights, setting the room
temperature, or selecting appropriate music, based on the customer’s
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 digital profile. The hotels also analyze their customer data to identify
their best customers and to develop individualized marketing
campaigns based on customers’ preferences.

• Improved Decision Making

Many business managers operate in an information fog bank, never
really having the right information at the right time to make an
informed decision. Instead, managers rely on forecasts, best guesses,
and luck. In the past decade, information systems and technologies
have made it possible for managers to use real-time data from the
marketplace when making decisions.

For instance, Privi Organics Ltd., a leading Indian company that

manufactures, supplies, and exports aroma chemical products
worldwide, uses the Oracle Human Capital Management system for
real-time insight into individual employee information—including
performance rating and compensation history. The system helps
managers make faster human resource decisions, such as promotions
or transfers, by integrating all employee records across the
organization. Managers are able to quickly review employee
performance ratings for the previous three years and drill down into
more details.

• Competitive Advantage
When firms achieve one or more of these business objectives—
operational excellence; new products, services, and business models;
customer/supplier intimacy; and improved decision making—chances
are they have already achieved a competitive advantage. Doing things
better than your competitors, charging less for superior products, and
responding to customers and suppliers in real time all add up to higher
sales and higher profits that your competitors cannot match. Apple
Inc., Walmart, and the Mandarin Group are industry leaders because
they know how to use information systems for this purpose.

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 • Survival
Business firms also invest in information systems and technologies
because they are necessities of doing business. Sometimes these
“necessities” are driven by industry-level changes. Today, most
national banks in the world have ATMs and link to national and
international ATM networks, such as CIRRUS. Providing ATM
services to retail banking customers is simply a requirement of being
in and surviving in the retail banking business.

• Ethic and Social Issues in Information Systems

This section contains excerpts and figures from Laudon y Laudon (2018).
Although these major instances of failed ethical and legal judgment were not
masterminded by information systems departments, information systems
were instrumental in many of these frauds. In many cases, the perpetrators of
these crimes artfully used financial reporting information systems to bury
their decisions from public scrutiny in the vain hope they would never be
caught.

Ethics refers to the principles of right and wrong that individuals, acting as
free moral agents, use to make choices to guide their behaviors. Information
systems raise new ethical questions for both individuals and societies
because they create opportunities for intense social change and, thus,
threaten existing distributions of power, money, rights, and obligations. Like
other technologies, such as steam engines, electricity, the telephone, and the
radio, information technology can be used to achieve social progress, but it
can also be used to commit crimes and threaten cherished social values. The
development of information technology will produce benefits for many and
costs for others.

Ethical issues in information systems have been given new urgency by the
rise of the Internet and e-commerce. Internet and digital firm technologies
make it easier than ever to assemble, integrate, and distribute information,
unleashing new concerns about the appropriate use of customer information,
the protection of personal privacy, and the protection of intellectual property.
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Other pressing ethical issues that information systems raise include
establishing accountability for the consequences of information systems,
setting standards to safeguard system quality that protects the safety of the
individual and society, and preserving values and institutions considered
essential to the quality of life in an information society. When using
information systems, it is essential to ask, “What is the ethical and socially
responsible course of action?”

A Model For Thinking About Ethical, Social, and Political Issues

Ethical, social, and political issues are closely linked. The ethical dilemma
you may face as a manager of information systems typically is reflected in
social and political debate (see Figure 3). Imagine society as a more or less
calm pond on a summer day, a delicate ecosystem in partial equilibrium with
individuals and with social and political institutions. Individuals know how
to act in this pond because social institutions (family, education,
organizations) have developed well-honed rules of behavior, and these are
supported by laws developed in the political sector that prescribe behavior
and promise sanctions for violations. Now toss a rock into the center of the
pond. What happens? Ripples, of course.

Imagine instead that the disturbing force is a powerful shock of new

information technology and systems hitting a society more or less at rest.
Suddenly, individual actors are confronted with new situations often not
covered by the old rules. Social institutions cannot respond overnight to
these ripples—it may take years to develop etiquette, expectations, social
responsibility, politically correct attitudes, or approved rules. Political
institutions also require time before developing new laws and often require
the demonstration of real harm before they act. In the meantime, you may
have to act. You may be forced to act in a legal gray area.

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Figure 3. The Relationship Between Ethical, Social and Political Issues in an
Information Society

We can use this model to illustrate the dynamics that connect ethical, social,
and political issues. This model is also useful for identifying the main moral
dimensions of the information society, which cut across various levels of
action—individual, social, and political.

The major ethical, social, and political issues that information systems raise
include the following moral dimensions.
• Information rights and obligations. What information rights do individuals
and organizations possess with respect to themselves? What can they
protect?
• Property rights and obligations. How will traditional intellectual property
rights be protected in a digital society in which tracing and accounting for
ownership are difficult and ignoring such property rights is so easy?
• Accountability and control. Who can and will be held accountable and
liable for the harm done to individual and collective information and
property rights?

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• System quality. What standards of data and system quality should we
demand to protect individual rights and the safety of society?
• Quality of life. What values should be preserved in an information- and
knowledge-based society? Which institutions should we protect from
violation? Which cultural values and practices does the new information
technology support?

Ethical choices are decisions made by individuals who are responsible for
the consequences of their actions. Responsibility is a key element of ethical
action. Responsibility means that you accept the potential costs, duties, and
obligations for the decisions you make. Accountability is a feature of
systems and social institutions; it means that mechanisms are in place to
determine who took action and who is responsible. Systems and institutions
in which it is impossible to find out who took what action are inherently
incapable of ethical analysis or ethical action. Liability extends the concept
of responsibility further to the area of laws. Liability is a feature of political
systems in which a body of laws is in place that permits individuals to
recover the damages done to them by other actors, systems, or organizations.
Due process is a related feature of law-governed societies and is a process in
which laws are known and understood, and ability exists to appeal to higher
authorities to ensure that the laws are applied correctly.

Ethical Analysis
When confronted with a situation that seems to present ethical issues, how
should you analyze it? The following five-step process should help.
1. Identify and describe the facts clearly
Find out who did what to whom and where, when, and how. In many
instances, you will be surprised at the errors in the initially reported facts,
and often you will find that simply getting the facts straight helps define
the solution. It also helps to get the opposing parties involved in an
ethical dilemma to agree on the facts.
2. Define the conflict or dilemma and identify the higher-order values
involved

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 Ethical, social, and political issues always reference higher values. The
parties to a dispute all claim to be pursuing higher values (e.g., freedom,
privacy, protection of property, and the free enterprise system).
Typically, an ethical issue involves a dilemma: two diametrically
opposed courses of action that support worthwhile values. For example,
the chapter -opening case study illustrates two competing values: the
need to make organizations more efficient and cost-effective and the
need to respect individual privacy.
3. Identify the stakeholders
Every ethical, social, and political issue has stakeholders: players in the
game who have an interest in the outcome, who have invested in the
situation, and usually who have vocal opinions. Find out the identity of
these groups and what they want. This will be useful later when
designing a solution.
4. Identify the options that you can reasonably take
You may find that none of the options satisfy all the interests involved
but that some options do a better job than others. Sometimes arriving at a
good or ethical solution may not always be a balancing of consequences
to stakeholders.
5. Identify the potential consequences of your options
Some options may be ethically correct but disastrous from other points of
view. Other options may work in one instance but not in similar
instances. Always ask yourself, “What if I choose this option consistently
over time?”

Candidate Ethical Principles

Once your analysis is complete, what ethical principles or rules should you
use to make a decision? What higher-order values should inform your
judgment? Although you are the only one who can decide which among
many ethical principles you will follow, and how you will prioritize them, it
is helpful to consider some ethical principles with deep roots in many
cultures that have survived throughout recorded history.
1. Do unto others as you would have them do unto you (the Golden Rule).
Putting yourself in the place of others and thinking of yourself as the

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 object of the decision, can help you think about fairness in decision
making.
2. If an action is not right for everyone to take, it is not right for anyone
(Immanuel Kant’s categorical imperative). Ask yourself, “If everyone did
this, could the organization, or society, survive?”
3. If an action cannot be taken repeatedly, it is not right to take at all. This is
the slippery slope rule: An action may bring about a small change now
that is acceptable, but if it is repeated, it would bring unacceptable
changes in the long run. In the vernacular, it might be stated as “once
started down a slippery path, you may not be able to stop.”
4. Take the action that achieves the higher or greater value (utilitarian
principle). This rule assumes you can prioritize values in a rank order and
understand the consequences of various courses of action.
5. Take the action that produces the least harm or the least potential cost
(risk aversion principle). Some actions have extremely high failure costs
of very low probability (e.g., building a nuclear generating facility in an
urban area) or extremely high failure costs of moderate probability
(speeding and automobile accidents). Avoid actions which have
extremely high failure costs; focus on reducing the probability of
accidents occurring.
6. Assume that virtually all tangible and intangible objects are owned by
someone else unless there is a specific declaration otherwise. (This is the
ethical no-freelunch rule.) If something someone else has created is
useful to you, it has value, and you should assume the creator wants
compensation for this work.

Actions that do not easily pass these rules, deserve close attention and a great
deal of caution. The appearance of unethical behavior may do as much harm to
you and your company as actual unethical behavior.

7. References
Laudon, K. C. & Laudon, J. P. (2018). Management Information Systems.
Managing The Digital Firm (15th ed.). Harlow, England: Pearson
Education.

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8. Extra Material
• The 5 Components of an Information System
https://youtu.be/XlcolUHMnh0

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