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CHAPTER ONE
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SECTION 1.1 – BUSINESS DRIVEN MIS.
• Competing in the Information Age.
• The Challenge of Departmental Companies and the MIS
Solution.
SECTION 1.2 – BUSINESS STRATEGY.
• Identifying Competitive Advantages.
• The Five Forces Model – Evaluating Industry
Attractiveness.
CHAPTER ONE
OVERVIEW
• The Three Generic Strategies – Choosing a Business Focus.
• Value Chain Analysis – Executing Business Strategies.
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SECTION 1.1:
BUSINESS DRIVEN MIS
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1.
Describe the information age and the
differences between data, information,
business intelligence, and knowledge
2.
Explain systems thinking and how
management information systems enable
business communications
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LEARNING
OUTCOMES 1
4
COMPETING IN THE INFORMATION AGE 1
Did you know . . .
• Avatar, the movie, took over 4 yrs to make and cost
$450 million.
• Lady Gaga’s real name is Joanne Angelina
Germanotta.
• It costs $3.7 million for a 30-second advertising time
slot during the Super Bowl.
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COMPETING IN THE INFORMATION AGE 2
• Fact - The confirmation or
validation of an event or object.
• Information age – A time
infinite quantities of facts are
widely available to anyone who
can use a computer.
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COMPETING IN THE INFORMATION AGE 3
Examples of the power of business and
technology.
• Amazon – Original business focus
was to sell books.
• Netflix – Original business focus
weas to rent videos via mailboxes.
• Zappos – Original business focus
was to sell shoes.
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COMPETING IN THE INFORMATION AGE 4
• Internet of Things (IoT) - A world
where interconnected
Internet-enabled devices or “things”
have the ability to collect and share
data without human intervention.
• Machine-to-Machine (M2M) - Refers
to devices that connect directly to
other devices.
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COMPETING IN THE INFORMATION AGE 5
The core drivers of the information age.
• Data.
• Information.
• Business intelligence.
• Knowledge.
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DATA 1
Data - Raw facts that describe the characteristics
of an event or object.
Big data - A collection of large, complex datasets,
which cannot be analyzed using traditional
database methods and tools.
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Variety - Different forms of structured and
unstructured data.
•
Veracity - The uncertainty of data, including
biases, noise, and abnormalities.
•
Volume - The scale of data.
•
Velocity - The analysis of streaming data as
it travels around the Internet.
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DATA 2
Structured data – Has a defined length,
type, and format and includes numbers,
dates, or strings such as Customer Address
format.
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Machine-generated data – Created by
a machine without human intervention.
•
Human-generated data – Data that
humans, in interaction with computers,
generate.
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DATA 3
Unstructured data – Not defined, does not follow a
specified format, and is typically free-form text such as
emails, Twitter tweets, and text messages does not
follow a specified format.
•
Machine-generated unstructured data – Such as
satellite images, scientific atmosphere data, and
radar data.
•
Human-generated unstructured data – Such as
text messages, social media data, and emails.
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DATA 4
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STRUCTURED DATA
UNSTRUCTURED DATA
Sensor data
Satellite images
Weblog data
Photographic data
Financial data
Video data
Click-stream data
Social media data
Point of sale data
Text message
Accounting data
Voice mail data
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DATA 5
• A fundamental role of all business managers is to be able to take the data and analyze it to find
information to make great business decisions.
Order
Date
Customer
Sales
Representative
Qty
Unit
Price
Total
Sales
Unit
Cost
Total
Cost
Product
Profit
4-Jan
Walmart
PJ Helgoth
Doritos
41
$24
$ 984
$18
$738
$246
4-Jan
Walmart
Roberta Cross
Ruffles
90
$15
$1,350
$10
$900
$450
5-Jan
Safeway
Craig Schultz
Ruffles
27
$15
$ 405
$10
$270
$135
6-Jan
Walmart
Roberta Cross
Ruffles
67
$15
$1,005
$10
$670
$335
7-Jan
7-Eleven
Craig Schultz
Pringles
79
$12
$ 948
$ 6
$474
$474
7-Jan
Walmart
Roberta Cross
Ruffles
52
$15
$ 780
$10
$520
$260
8-Jan
Kroger
Craig Schultz
Ruffles
39
$15
$ 585
$10
$390
$195
9-Jan
Walmart
Craig Schultz
Ruffles
66
$15
$ 990
$10
$660
$330
10-Jan
Target
Craig Schultz
Ruffles
40
$15
$ 600
$10
$400
$200
11-Jan
Walmart
Craig Schultz
Ruffles
71
$15
$1,065
$10
$710
$355
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INFORMATION 1
•
•
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Information - Data converted
into a meaningful and useful
context.
Variable - A data characteristic
that stands for a value that
changes or varies over time.
Tony’s Business Information
Name
Total Profit
Who is Tony’s best customer by total sales?
Walmart
$ 560,789
Who is Tony’s least-valuable customer by total sales?
Walgreens
$
Who is Tony’s best customer by profit?
7-Eleven
$ 324,550
Who is Tony’s least-valuable customer by profit?
King Soopers
$
What is Tony’s best-selling product by total sales?
Ruffles
$ 232,500
What is Tony’s weakest-selling product by total sales?
Pringles
$
54,890
What is Tony’s best-selling product by profit?
Tostitos
$
13,050
What is Tony’s weakest-selling product by profit?
Pringles
$
23,000
Who is Tony’s best sales representative by profit?
R. Cross
$1,230,980
45,673
23,908
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INFORMATION 2
Report - A document containing data
organized in a table, matrix, or graphical
format allowing users to easily
comprehend and understand information.
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Dynamic report - Changes
automatically during creation.
•
Static report - Created once based on
data that does not change.
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BUSINESS INTELLIGENCE 1
• 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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BUSINESS INTELLIGENCE 2
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Data analyst – Collects, queries, and consumers
organizational data to uncover patterns and provide
insights for strategic business decision making.
•
Analytics – The science of fact-based decision making.
•
Business analytics – The scientific process of
transforming data into insight for making better
decisions.
•
Data scientist - Extracts knowledge from data by
performing statistical analysis, data mining, and
advanced analytics on big data to identify trends, market
changes, and other relevant information.
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BUSINESS INTELLIGENCE 3
• Three Key Skills for a
Data Analyst.
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BUSINESS INTELLIGENCE 4
•
Descriptive analytics – Describes part performance
and history.
•
Diagnostic analytics – Examines data or content to
answer the questions, “Why did it happen?”
•
Predictive analytics – Extracts information from data
and uses it to predict future trends and identify
behavioral patterns.
•
Prescriptive analytics – Creates models including the
best decision to make or course of action to take.
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BUSINESS
INTELLIGENCE 5
• Four Categories
of Analytics.
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KNOWLEDGE 1
• Knowledge - Skills, experience, and expertise coupled with
information and intelligence that creates a person’s
intellectual resources.
• Knowledge assets - The human, structural, and recorded
resources available to the organization.
• Knowledge facilitators - Help harness the wealth of
knowledge in the organization.
• Knowledge worker – Individual valued for their ability to
interpret and analyze information.
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KNOWLEDGE 2
• The Transformation
from Data to
Knowledge.
DATA: I have one item.
INFORMATION: The item I have is a product that has the most sales during the
month of December.
BUSINESS INTELLIGENCE: The month of December this year is going to see interest
rates rise by 10 percent and snow storms are expected to cause numerous
problems throughout the East Coast.
KNOWLEDGE: Given the unexpected financial issues caused by the storms and the
interest rate hike, we will offer a discount on purchases in November and December
to ensure sales levels increase by 10 percent.
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SYSTEMS THINKING AND MANAGEMENT INFORMATION
SYSTEMS
• Common departments working
independently.
• Data silo – Occurs when on business
unit is unable to freely communicate
with other business units, making it
difficult tr impossible for organizations
to work cross-functionally.
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THE MIS SOLUTION
• Common departments working
interdependently.
• Data democratization - The ability for
data to be collected, analyzed, and
accessible to all users.
Access the text alternative for slide images.
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SYSTEMS THINKING 1
Goods - Material items or products
that customers will buy to satisfy a
want or need.
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Cars.
•
Groceries.
•
Clothing.
Services - Tasks performed by people that
customers will buy to satisfy a want or need.
•
Teaching.
•
Waiting Tables.
•
Cutting Hair.
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SYSTEMS THINKING 2
• Production - The
process where a
business takes raw
materials and processes
them or converts them
into a finished product
for its goods or services.
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SYSTEMS THINKING 3
• 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.
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SYSTEMS THINKING 4
• 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.
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MIS DEPARTMENT:
ROLES AND
RESPONSIBILITIES 1
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MIS DEPARTMENT: ROLES AND RESPONSIBILITIES 2
Chief information officer (CIO) –information and
ensures the strategic alignment of MIS with business
goals and objectives.
Chief data officer (CDO) – Responsible for determining
the types of information the enterprise will capture,
retain, analyze, and share.
Chief technology officer (CTO) – Responsible for
ensuring the throughput, speed, accuracy, availability,
and reliability of information.
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Chief security officer (CSO).
•
Chief privacy officer (CPO).
•
Chief knowledge officer (CKO).
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SECTION 1.2:
BUSINESS STRATEGY
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3.
Explain why competitive advantages are
temporary
4.
Identify the four key areas of a SWOT analysis
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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LEARNING
OUTCOMES 2
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IDENTIFYING COMPETITIVE ADVANTAGES 1
Business strategy – A leadership plan that
achieves a specific set of goals or objectives
such as:
• Developing new products or services.
• Entering new markets.
• Increasing customer loyalty.
• Attracting new customers.
• Increasing sales.
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IDENTIFYING COMPETITIVE ADVANTAGES 2
• Stakeholder’s
Interests.
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IDENTIFYING COMPETITIVE ADVANTAGES 3
• 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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IDENTIFYING COMPETITIVE ADVANTAGES 4
• Business Tools for Analyzing
Business Strategies.
Access the text alternative for slide images.
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SWOT ANALYSIS
• A SWOT analysis evaluates an
organization’s Strengths,
Weaknesses, Opportunities, and
Threats to identify significant
influences that work for or against
business strategies.
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THE FIVE FORCES MODEL –
EVALUATING INDUSTRY ATTRACTIVENESS
• 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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STRONG AND WEAK EXAMPLES OF PORTER’S FIVE FORCES
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WEAK FORCE:
DECREASES COMPETITION OR FEW
COMPETITORS
STRONG FORCE: INCREASES
COMPETITION OR LOTS OF
COMPETITORS
BUYER POWER
An international hotel chain
purchasing milk
A single consumer purchasing milk
SUPPLIER POWER
A company that makes airline
engines
A company that makes pencils
THREAT OF SUBSTITUTE PRODUCTS
OR SERVICES
Cancer drugs from a
pharmaceutical company
Coffee from McDonald’s
THREAT OF NEW ENTRANTS
A professional hockey team
A dog walking business
RIVALRY AMONG EXISTING
COMPETITORS
Department of Motor Vehicles
A coffee shop
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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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THE THREE GENERIC STRATEGIES
CHOOSING A BUSINESS FOCUS 1
• Porter’s Three
Generic
Strategies.
Access the text alternative for slide images.
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THE THREE GENERIC STRATEGIES
CHOOSING A BUSINESS FOCUS 2
• Porter’s Three
Generic
Strategies.
Access the text alternative for slide images.
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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES 1
• 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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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES 2
Primary value activities.
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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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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES 3
Support value activities.
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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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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES 4
• Porter’s Value
Chain.
Access the text alternative for slide images.
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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES 5
• Value Chain and
Porter’s Five Forces
Model.
Access the text alternative for slide images.
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• Now that you have finished the
chapter, please review the
learning outcomes in your text.
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LEARNING
OUTCOME
REVIEW
54
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BUSINESS INTELLIGENCE 3 - Text Alternative
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The skills include:
Understanding of math and statistics.
Coding skills to work with data.
Business area subject matter expertise.
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BUSINESS INTELLIGENCE 5 - Text Alternative
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Descriptive analytics:
Describe past performance and history.
Example: Creating a report that includes charts and graphs that explains the data or what happened in the past.
Diagnostic analytics:
Examines data or content to answer the question: "why did it happen?"
Example: Helps you understand why something happened in the past such as decrease in online sales or an
increase in online sales during a particular season.
Predictive analytics:
Techniques that extract information from data to predict future trends and identify behavioral patterns.
Example: Using past sales data to predict what is most likely to happen for future sales.
Prescriptive analytics:
Creates models indicating the best decision to make of course of action to take.
Example: Airline using past purchasing data as inputs into a model that recommends the best pricing strategy
across all flights allowing the company to maximize revenue.
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SYSTEMS THINKING AND MANAGEMENT INFORMATION SYSTEMS Text Alternative
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Accounting:
It includes records, measurements, and reports monetary transactions.
Finance:
Tracks strategic financial issues including money banking, credit, investments, and assets.
Human resources:
It maintains policies, plans, and procedures for the effective management of employees.
Marketing:
It supports sales by planning, pricing, and promoting goods or services.
Operations management:
It manages the process of converting or transforming resources into goods or services.
Sales:
It performs the function of selling goods or services.
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THE MIS SOLUTION - Text Alternative
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Accounting:
It includes transactional data, purchasing data, payroll data, and tax data.
Finance:
It includes investment data, monetary data, and reporting data.
Human resource:
It includes employee, promotion, and vacation data.
Marketing:
It includes promotion, sales, and advertising data.
Operations management:
It includes manufacturing, distribution. and production data.
Sales:
It includes potential customer data, sales report data, commission data, and customer
support data.
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SYSTEMS THINKING 2 - Text Alternative
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Input:
Lettuce, tomatoes, patty, bun, and ketchup.
Process:
Cook the patty, put the ingredients together.
Output:
Hamburger.
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SYSTEMS THINKING 3 - Text Alternative
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Input:
Data that is entered into the computer.
Process:
Computer program that processes the data.
Output:
The resulting information from the computer program.
The feedback is sent to the process. It controls to ensure correct processing.
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MIS DEPARTMENT: ROLES AND RESPONSIBILITIES 1 - Text Alternative
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Chief security officer (CSO):
Responsible for ensuring the security of business systems and developing strategies and safeguards against
attacks by hackers and viruses.
Chief knowledge officer (CKO):
Responsible for collecting maintaining, and distributing company knowledge.
Chief technology officer (CTO):
Responsible for ensuring the speed, accuracy, availability, and reliability of the MIS.
Chief information officer (CIO):
Responsible for overseeing all uses of MIS and ensuring that MIS strategically aligns with the business goals and
objectives.
Chief privacy officer (CPO):
Responsible for ensuring the ethical and legal use of information within a company.
Chief data officer (CDO):
Responsible for determining the types of information the enterprise will capture, retain, analyze, and share.
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IDENTIFYING COMPETITIVE ADVANTAGES 2 - Text Alternative
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Government:
Adherence to regulations or laws, increases employment, and ethical taxation reporting.
Customers:
Exceptional customer service, high quality products, and ethical dealing.
Employees:
Fair compensation, job security, ethical conduct or treatment.
Community:
Professional associations, ethical recycling, and increased employment.
Shareholders or investors:
Profit maximization, market share growth, and high return on investment.
Partners or suppliers:
Reliable contracts, ethical materials handling, and responsible production.
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IDENTIFYING COMPETITIVE ADVANTAGES 4 - Text Alternative
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Swot analysis evaluates project position.
The five forces model evaluates industry attractiveness.
The three generic strategies choose business focus.
The value chain analysis executes business strategy.
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SWOT ANALYSIS - Text Alternative
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The four dimensions of SWOT analysis are as follows:
Strengths: Core competencies, market leaders, cost advantages, and excellent
management.
Weaknesses: Lack of strategic direction, obsolete technologies, lack of
managerial talent, and outdated product line.
Opportunities: Expanded product line, increase in demand, new markets, and
new regulations.
Threats: New entrants, substitute products, shrinking markets, and costly
regulatory requirements.
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THE FIVE FORCES MODEL –EVALUATING INDUSTRY
ATTRACTIVENESS - Text Alternative
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Threat of substitute, product of services: The power of customers to purchase
alternatives.
Supplier power:
The power of suppliers to drive up prices of materials.
Buyer power:
The power of customers to drive down prices.
Threat of new entrants:
The power of competitors to enter a market.
All these direct to:
Rivalry among existing competitors:
The power of competitors.
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THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS
FOCUS 1 - Text Alternative
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Competitive scope (broad market), cost strategy (low cost): cost leadership.
Competitive scope (broad market), cost strategy (high cost): differentiation.
Competitive scope (narrow market), cost strategy (low to high cost): focused
strategy.
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THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS
FOCUS 2 - Text Alternative
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Competitive scope (broad market), cost strategy (low cost): Walmart.
Competitive scope (broad market), cost strategy (high cost): Neiman Marcus.
Competitive scope (narrow market), cost strategy (low to high cost): Payless
shoes and Tiffany and Co.
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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES 4 - Text
Alternative
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Support value activities show values in percentage as:
Firm infrastructure, 3.1; human resource management, 7.1; technology
development (and R and D), 4.2; procurement, 27.
Primary value activities show values in percentage as:
Receive and store raw materials, 5.2; make the product or service, 40.3; deliver
the product or service, 6.6; market and sell the product or service, 4.3; and
service after the sale, 2.2.
All these services appear with value added at the end.
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VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES 5 - Text
Alternative
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Support value activities show values in percentage as:
Firm infrastructure, 3.1; human resource management, 7.1; technology development (and R
and D), 4.2; procurement, 27.
Primary value activities show values in percentage as:
Receive and store raw materials, 5.2; make the product or service, 40.3; deliver the product
or service, 6.6; market and sell the product or service, 4.3; and service after the sale, 2.2.
All these services appear with value added at the end.
Supplier power, the power of suppliers to drive up prices of materials, points to procurement.
Threat of substitute products or services, the power of customers to purchase alternatives
points to firm infrastructure.
Buyer power, the power of customers to drive down prices points to value add.
Threat of new entrants, the power of competitors to enter a market points to deliver the
product or service.
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