Management Information Systems


Chapter 1 Strategic Use of Information Technology in the Digital Economy

Information Technology For Management 5 th Turban, Leidner, McLean, Wetherbe Lecture Slides by A. Lekacos, Stony Brook University John Wiley & Sons, Inc.


Learning Objectives

• • • • • • • Describe the characteristics of the digital economy and e business.

Recognize the relationships between business pressures, organizational responses, and information systems.

Identify the major pressures in the business environment and describe the major organizational responses to them.

Define computer-based information systems and information technology.

Describe the role of information technology in supporting the functional areas, public services and specific industries List the new technology development in the areas of generic and networked computing and Web-based systems.

Understand the importance of learning about information technology.

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Digital Economy – “New” Economy

• • •


The use of electronic technologies to transact business.


People and Organizations interact, communicate, collaborate and search for information

Information Exchange:

Storing, processing and transmission of information.

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Digital Business

Telecommunications Thin Client PC On-line Single-station Store Field Sales Appliance Appliance Server Store 3 On-line Multi-station Store On-line Salesperson Net Appliance Store 1 POS You r Dom a i n / URL Commercial I nt er net E-commerce Internet Networks E- Com m er ce Ser ver

Linux SSL

Li n u x

Sybase ASE Database

STARS O f f i ce Su i t e Bu si n ess t o Bu si n ess Ser ver Vi d eo Con f er en ci n g Ser ver

SCO Unix

Un i x

Tarentella Cold Fusion

Wi n d ow s 2 0 0 0

Beacon Hill's Stars Apache Server Linux Credit Card Approval

I P Ad d r ess 2

Apache Server

I P Ad d r ess 3 I P Ad d r ess 1 Hu b PC In-house operations PC PC Consumer On-line Customers Consumer & Business STARS Accounting Phone Orders Mail Orders Order Fulfillment Purchasing Thin Client Thin Client In-office Chapter 1 4

The Old Economy

– Taking Photo’s








Buy film in a store Load your camera Take pictures Take roll of film to store for processing Pickup the film when ready Select specific photos for enlargement Mail to family and friends Chapter 1 5

The New Economy

– Taking Photo’s

• • • • 1 st Generation Digital Photography Old economy except 6 and 7 were replaced by using a scanner and emailing • 2 nd Generation Digital Photography Use a Digital Camera, no film, no processing. • 3 rd Generation Digital Photography Your Digital Camera is now your mobile phone, in your binoculars or a palmtop computer.

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Business Models

• A business model is a method of doing business by which a company can generate revenue to sustain itself. The model spells out how the company adds value to create a product or service. (

Value Chain

) • Nokia makes and sells cell phones • • A TV station provides free broadcasting. Its survival depends on a complex model involving advertisers and content providers. Internet portals, such as Yahoo, also use a complex business model.

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Digital Age Business Models

• Name-Your-Own Price • Reverse Auctions • Affiliate Marketing • E-Marketplaces and Exchanges • Electronic aggregation (buying groups) Chapter 1 8

Drivers Forcing Changes In Business Models

Business Pressures

• Environmental, organizational, and technological factors are creating a highly competitive business environment these factors or forces can change quickly, sometimes in an unpredictable manner.

Business Critical Response Activities

• Therefore, companies need to react frequently and quickly to both the threats and the opportunities resulting from this new business environment .

A response can be a reaction to a pressure already in existence, an initiative intended to defend an organization against future pressures, or an activity that exploits an opportunity created by changing conditions. Chapter 1 9

The Drivers of change

• Business Pressures on an Organization that force change.

Technology Market Society

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The Drivers of change


• Business Pressures on an Organization.

Society Market Technology

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Organizational Response to these Drivers

• • • • • • • Strategic Management & Systems Continuous Improvement – Operational Efficiency Restructuring business processes Manufacturer to order, Mass-Customization Customer Focus Strategy Electronic business Business Alliances

Technology is required to effectively implement these critical responses.

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Information System

• An information system (IS) collects, processes, stores, analyzes, and disseminates information for a specific purpose. Like any other system, an information system includes (data, instructions) and


the operation.


electronic networks and a


(reports, calculations). It the inputs by using technology such as PCs and produces outputs that are sent to users or to other systems via


mechanism that


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Information System Is A System

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Computer Based Information System

• • • • • • Hardware Software Data Network Procedures People

and software

Hardware Software People Chapter 1 15

Applications and Operations

• • • • • • • Retail operations Wholesale Manufacturing Human Resources Marketing Content management … Chapter 1 16

Information Systems

Functional Perspective


• • • • • Identify customers Determine what they want Planning products Advertising and promoting products Determine prices for products Chapter 1 17

Information Systems

Functional Perspective


• • • • • Contact customers Sell the product Take the order Follow-up on the sale 5 year sales forecast Chapter 1 18

Information Systems

Functional Perspective


• • • • • Control Equipment and machinery Design new products When and quantity of products to produce New production facilities Generate the work order Chapter 1 19

Information Systems

Functional Perspective


• • • • • Which vendors Quantity to purchase Coop, rebate tracking Handle delivery discrepancies Generate the purchase order Chapter 1 20

Information Systems

Functional Perspective


• • • • Financial Assets Investment management Banking Long term budgets Chapter 1 21

Information Systems

Functional Perspective


• • • • • Accounts Receivable Disbursements Payroll Depreciation Earned Coop and Rebates Chapter 1 22

Information Systems

• • • • •

Functional Perspective

Human Resources

• Employee wages, salaries & benefits Long term labor requirements Tracking vacation, sick, Track employee skills Interview and review employees Chapter 1 23

Trends in Technology

• • • • • Cost-performance ratio of chips keeps improving.

Moore’s Law

, his prediction was that the processing power of silicon chips would double every 18 months.

According to McGarvey &, states that the performance of optical communication networks is growing by a factor of 10 every three years Several new devices and methods to increase storage capacity price performance Object technology enables the development of self contained units of software that can be shared Networked and distributed computing is emerging rapidly

Metcalfe’s Law.

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Trends in Technology


• • • • • Internet Mobile Computing and M-Commerce Wireless networks Pervasive Computing Smart Devices Chapter 1 25

Trends in Technology


• • • • •

The Networked Enterprise

The Network Computer Optical Networks Storage Area Networks Intranets & Extranets The Internet Chapter 1 26

Why Study Information Systems?

• • • • You will be more effective in your chosen career if you understand how successful information systems are built, used, and managed.

You also will be more effective if you know how to recognize and avoid unsuccessful systems and failures.

According to the US Bureau of Labor Statistics, “Top seven fastest growing occupations fall within IT or computer related field” Developing “Computer” Literacy will only enhance your “Information” Literacy Chapter 1 27

The Outline

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• • • • • •


Recognizing opportunities for using IT and Web-based systems.

Who will build, operate, and maintain the information systems. This is a critical issue because management wants to minimize the cost of IT while maximizing its benefits. Some alternatives are to outsource portions, or even all, of the IT activities, and to divide the remaining work between the IS department and the end users.

How much IT? This is a critical issue related to IT planning. IT does not come free, but not having it may be much costlier. How important is IT? In some cases, IT is the only approach that can help organizations. As time passes, the comparative advantage of IT increases.

Is the situation going to change? Yes, the pressures will be stronger as time passes. Therefore, the IT role will be even more important.

Globalization. Global competition will have an impact on many companies. However, globalization opens many opportunities, ranging from selling and buying products and services online in foreign markets, to conducting joint ventures or investing in them. IT supports communications, collaboration, and discovery of information regarding all the above.

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• •



Ethics and social issues. The implementation of IT involves many ethical and social issues that are constantly changing due to new developments in technologies and environments. These topics should be examined any time an IT project is undertaken.

Transforming the organization to the digital economy. The transformation can be done on several fronts. Management should study the opportunities, consider alternatives and prioritize them.

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Chapter 1

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