LESSON 1: Information Systems in Global

Business Today
HOW ARE INFORMATION SYSTEMS
What is an information system? TRANSFORMING BUSINESS, AND WHY ARE
-​ A set of interrelated components that collect (or THEY SO ESSENTIAL FOR RUNNING AND
retrieve), process, store, and distribute information MANAGING A BUSINESS TODAY?
to support decision making and control in an
organization. In addition to supporting decision ➢​ As managers, most of you will work for firms
making, coordination, and control, information that are intensively using information systems
systems may also help managers and workers and making large investments in information
analyze problems, visualize complex subjects, and technology. You will certainly want to know how
create new products. to invest this money wisely. If you make wise
choices, your firm can outperform competitors. If
-​ Information systems contain information about you make poor choices, you will be wasting
significant people, places, and things within the valuable capital.
organization or in the environment surrounding it. HOW INFORMATION SYSTEMS ARE
TRANSFORMING BUSINESS
Information
-​ By information we mean data that have been ➢​ Changes in technology and new innovative
shaped into a form that is meaningful and useful to business models have transformed social life and
human beings. business practice.
➢​ Smartphones, social networking, texting,
Data e-mailing, and webinars have all become
-​ Data, in contrast, are streams of raw facts essential tools of business because that’s where
representing events occurring in organizations or your customers, suppliers, and colleagues can be
the physical environment before they have been found (eMarketer, 2018).
organized and arranged into a form that people ➢​ E-commerce and Internet advertising continue to
can understand and use. expand.

WHAT’S NEW IN MANAGEMENT INFORMATION

INPUT, PROCESSING, OUTPUT, FEEDBACK
SYSTEMS?

INPUT - captures or collects raw data from within

➢​ IT Innovations. A continuing stream of
the organization or from its external environment.
information technology innovations is transforming
the traditional business world. Examples include
PROCESSING - converts this raw input into a
the emergence of cloud computing, the growth of
meaningful form.
a mobile digital business platform based on
smartphones and tablet computers, big data and
OUTPUT - transfers the processed information to
the Internet of Things (IoT), business analytics,
the people who will use it or to the activities for
machine learning systems, and the use of social
which it will be used.
networks by managers to achieve business
objectives.
FEEDBACK - which is output that is returned to
appropriate members of the organization to help
them evaluate or correct the input stage.
➢​ New Business Models. For instance, the with customers, suppliers, and employees are
emergence of online video services for streaming digitally enabled and mediated. Core business
or downloading, such as Netflix, Apple iTunes, processes are accomplished through digital
and Amazon, has forever changed how premium networks spanning the entire organization or
video is distributed and even created. linking multiple organizations.​

➢​ E-commerce Expansion. E-commerce is BUSINESS PROCESSES

changing how firms design, produce, and deliver -​ refer to the set of logically related tasks and
their products and services. E-commerce has behaviors that organizations develop over time
reinvented itself again, disrupting the traditional to produce specific business results and the
marketing and advertising industry and putting unique manner in which these activities are
major media and content firms in jeopardy. organized and coordinated. Developing a new
product, generating and fulfilling an order,
➢​ Management Changes. With new mobile creating a marketing plan, and hiring an
smartphones, high speed wireless Wi-Fi employee are examples of business processes,
networks, and tablets, remote salespeople on the and the ways organizations accomplish their
road are only seconds away from their managers’ business processes can be a source of
questions and oversight. Management is going competitive strength.
mobile. Managers on the move are in direct,
continuous contact with their employees. The Key corporate assets—intellectual property, core
growth of enterprise-wide information systems competencies, and financial and human assets—are
with extraordinarily rich data means that managed through digital means. In a digital firm, any
managers no longer operate in a fog of confusion piece of information required to support key business
but instead have online, nearly instant access to decisions is available at any time and anywhere in the
the really important information they need for firm.
accurate and timely decisions.
In digital firms, both time shifting and space shifting are
➢​ Changes in Firms and Organizations. the norm. Time shifting refers to business being
Compared to industrial organizations of the conducted continuously, 24/7, rather than in narrow
previous century, new fast-growing twenty-first “work day” time bands of 9 a.m. to 5 p.m. Space
century business firms put less emphasis on shifting means that work takes place in a global
hierarchy and structure and more emphasis on workshop as well as within national boundaries. Work is
employees taking on multiple roles and tasks and accomplished physically wherever in the world it is best
collaborating with others on a team. They put accomplished.
greater emphasis on competency and skills rather
than position in the hierarchy. They emphasize
higher-speed and more-accurate decision making OPERATIONAL EXCELLENCE
based on data and analysis. They are more aware -​ Businesses continuously seek to improve the
of changes in technology, consumer attitudes, and efficiency of their operations in order to achieve
culture. higher profitability. Information systems and
technologies are some of the most important tools
THE EMERGING DIGITAL FIRM available to managers for achieving higher levels
-​ A digital firm is one in which nearly all of the of efficiency and productivity in business
organization’s significant business relationships
 operations, especially when coupled with changes decision making—chances are they have
in business practices and management behavior. already achieved a competitive advantage.
Doing things better than your competitors,
NEW PRODUCTS, SERVICES, AND BUSINESS charging less for superior products, and
MODELS responding to customers and suppliers in real
-​ Information systems and technologies are a time all add up to higher sales and higher
major enabling tool for firms to create new profits that your competitors cannot match.
products and services as well as entirely new
business models. A business model describes SURVIVAL
how a company produces, delivers, and sells a -​ Business firms also invest in information systems
product or service to create wealth. and technologies because they are necessities of
doing business. Sometimes these “necessities” are
CUSTOMER AND SUPPLIER INTIMACY driven by industry-level changes.
-​ 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 LESSON 2: Global E-Business and Collaboration
suppliers, the more a business engages its
suppliers, the better the suppliers can provide WHAT ARE BUSINESS PROCESSES? HOW ARE
vital inputs. This lowers costs. How to really THEY RELATED TO INFORMATION SYSTEMS? \
know your customers or suppliers is a central -​ In order to operate, businesses must deal with
problem for businesses with millions of offline many different pieces of information about
and online customers. suppliers, customers, employees, invoices, and
payments, and of course their products and
IMPROVED DECISION MAKING services. They must organize work activities that
-​ Many business managers operate in an use this information to operate efficiently and
information fog bank, never really having the enhance the overall performance of the firm.
right information at the right time to make an Information systems make it possible for firms to
informed decision. Instead, managers rely on manage all their information, make better
forecasts, best guesses, and luck. The result is decisions, and improve the execution of their
over- or underproduction of goods and business processes.
services, misallocation of resources, and poor
response times. These poor outcomes raise BUSINESS PROCESSES
costs and lose customers. In the past decade, -​ The manner in which work is organized,
information systems and technologies have coordinated, and focused to produce a valuable
made it possible for managers to use real-time product or service. Business processes are the
data from the marketplace when making collection of activities required to produce a
decisions. product or service. These activities are supported
by flows of material, information, and knowledge
COMPETITIVE ADVANTAGE among the participants in business processes.
-​ When firms achieve one or more of these
business objectives—operational excellence;
new products, services, and business models;
customer/supplier intimacy; and improved
 TRANSACTION PROCESSING SYSTEM
➢​ Operational managers need systems that keep
HOW INFORMATION TECHNOLOGY IMPROVES track of the elementary activities and transactions
BUSINESS PROCESSES of the organization, such as sales, receipts, cash
-​ Information systems automate many steps in deposits, payroll, credit decisions, and the flow of
business processes that were formerly materials in a factory. Transaction processing
performed manually, such as checking a systems (TPS) provide this kind of information.
client’s credit or generating an invoice and A transaction processing system is a
shipping order. But today, information computerized system that performs and
technology can do much more. New records the daily routine transactions
technology can actually change the flow of necessary to conduct business, such as sales
information, making it possible for many more order entry, hotel reservations, payroll, employee
people to access and share information, record keeping, and shipping.
replacing sequential steps with tasks that can
be performed simultaneously, and eliminating
delays in decision making. SYSTEMS FOR BUSINESS INTELLIGENCE
➢​ Business intelligence is a contemporary
term for data and software tools for
organizing, analyzing, and providing access
to data to help managers and other
enterprise users make more informed
decisions. Business intelligence addresses
HOW DO SYSTEMS SERVE THE DIFFERENT the decision-making needs of all levels of
MANAGEMENT GROUPS IN A BUSINESS, AND management.
HOW DO SYSTEMS THAT LINK THE ENTERPRISE
IMPROVE ORGANIZATIONAL PERFORMANCE?
DECISION-SUPPORT SYSTEMS (DSS)
➢​ A typical business organization has systems ➢​ Decision-support systems (DSS) focus on
supporting processes for each of the major problems that are unique and rapidly
business functions—sales and marketing, changing, for which the procedure for
manufacturing and production, finance and arriving at a solution may not be fully
accounting, and human resources. Operational predefined in advance. They try to answer
management, middle management, and senior questions such as these: What would be the
management each use systems to support the impact on production schedules if we were to
decisions they must make to run the company. double sales in the month of December? What
would happen to our return on investment if a
➢​ Systems for Different Management Groups factory schedule were delayed for six months?

➢​ A business firm has systems to support different ➢​ Although DSS use internal information from
groups or levels of management. These systems TPS and MIS, they often bring in information
include transaction processing systems and from external sources, such as current stock
systems for business intelligence. prices or product prices of competitors. These
systems are employed by “super-user”
managers and business analysts who want to
 use sophisticated analytics and models to products and services so they can source,
analyze data. produce, and deliver goods and services efficiently.
The ultimate objective is to get the right amount of
their products from their source to their point of
EXECUTIVE SUPPORT SYSTEMS (ESS) consumption in the least amount of time and at the
➢​ Address nonroutine decisions requiring lowest cost. These systems increase firm
judgment, evaluation, and insight because profitability by lowering the costs of moving and
there is no agreed-on procedure for arriving making products and by enabling managers to
at a solution. ESS present graphs and data make better decisions about how to organize and
from many sources through an interface schedule sourcing, production, and distribution.
that is easy for senior managers to use.
Often the information is delivered to senior CUSTOMER RELATIONSHIP MANAGEMENT
executives through a portal, which uses a web SYSTEMS
interface to present integrated personalized ➢​ Firms use customer relationship management
business content. (CRM) systems to help manage their
relationships with their customers. CRM
➢​ ESS are designed to incorporate data about systems provide information to coordinate all of the
external events, such as new tax laws or business processes that deal with customers in
competitors, but they also draw summarized sales, marketing, and service to optimize revenue,
information from internal MIS and DSS. They customer satisfaction, and customer retention. This
filter, compress, and track critical data, information helps firms identify, attract, and retain
displaying the data of greatest importance to the most profitable customers; provide better
senior managers. Increasingly, such systems service to existing customers; and increase sales.
include business intelligence analytics for
analyzing trends, forecasting, and “drilling KNOWLEDGE MANAGEMENT SYSTEMS
down” to data at greater levels of detail. ➢​ Some firms perform better than others because
they have better knowledge about how to create,
produce, and deliver products and services. This
ENTERPRISE SYSTEMS firm knowledge is unique, is difficult to imitate, and
➢​ Firms use enterprise systems, also known as can be leveraged into long-term strategic benefits.
enterprise resource planning (ERP) systems, to Knowledge management systems (KMS)
integrate business processes in manufacturing and enable organizations to better manage
production, finance and accounting, sales and processes for capturing and applying
marketing, and human resources into a single knowledge and expertise. These systems
software system. Information that was previously. collect all relevant knowledge and experience
in the firm and make it available wherever and
whenever it is needed to improve business
SUPPLY CHAIN MANAGEMENT SYSTEMS processes and management decisions. They
➢​ Firms use supply chain management (SCM) also link the firm to external sources of knowledge.
systems to help manage relationships with
their suppliers. These systems help suppliers, INTRANETS AND EXTRANETS
purchasing firms, distributors, and logistics ➢​ Intranets are simply internal company
companies share information about orders, websites that are accessible only by
production, inventory levels, and delivery of employees. The term intranet refers to an
 internal network, in contrast to the Internet,
which is a public network linking organizations
and other external networks. Intranets use the
same technologies and techniques as the
larger Internet, and they often are simply a
private access area in a larger company
website. Likewise with extranets, which are
company websites that are accessible to
authorized vendors and suppliers and are
often used to coordinate the movement of
supplies to the firm’s production apparatus.

COLLABORATION
➢​ Collaboration is working with others to achieve
shared and explicit goals. Collaboration
focuses on task or mission accomplishment
and usually takes place in a business or other
organization and between businesses.