Introduction to Management Information Systems
Chapter 2 Purpose of Information Systems
HTM 304
Fall 07
Learning Objectives
Understand the three purposes of information
systems
Know the eight principles of competitive
advantage
Understand how information systems create
competitive advantage
Define problem
Recognize that different information systems
are needed to solve different problem
definitions
Know the characteristics of decision making
Understand how information systems facilitate
decision making
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Review
Definition of management information systems
Process of information system development
Focus of this chapter
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Three main purposes of information systems
To gain competitive advantage
To solve problems
To assist in decision making
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1. Competitive Advantage
There is an old African proverb …
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Every morning a gazelle wakes up and knows
it will have to run faster than the fastest lion
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Every morning a lion wakes up and knows it
will have to run faster than the slowest gazelle
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But lion or gazelle, one thing is sure: when
the day begins, you’d better start running
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Competitive Advantages
Definition – An advantage over competitors
in some measure such as cost, quality, or
speed, leads to control of a market and to
larger- than average profits.
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Market Competition: Porter’s Five Forces Model
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Internet has changed the five forces
Read the assignment and choose a verb for each blank:
(try not to use the same words)
1. Internet __________ traditional barriers to entry.
2. Internet ______ the intensity of competition among
existing competitors.
3. Internet ______ the bargaining power of suppliers.
4. Internet ______ the bargaining power of customers.
5. Internet ______ the existence of substitute products
and services.
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Eight Principles of Competitive Advantage
Create &
improve
products
Raise
barriers
Increase trust
& cut costs
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Information System may help in all the eight areas.
Case: IS Creates & Enhances Amazon
Mission
To be Earth's most customer-centric company where
people can find and discover anything they want to
buy online
Technology innovation drives Amazon growth
Personalized shopping experience
Book discovery through Search Inside the Book
1-Click® Shopping
Gold Box New Deals
Community features like Listmania and Wish Lists
Shares storefront technology via Web services
Technologies used to manage logistics and reduce costs
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Personalized Shopping
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Personal Address Book Locks In
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1-click check out
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Gold Box New Deals
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Custom Book Recommendations
• Uses IS to compare your shopping preferences to
millions of others for recommendations
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Strategic Alliance
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Amazon’s Competitive Advantages
 1. Create new product or service?
 2. Enhance products or services?
 3. Differentiate products or services?
 4. Lock in customers and buyers?
 5. Lock in suppliers?
 6. Raise barriers to market entry?
 7. Establish alliances?
 8. Reduces costs
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Be Careful
Websites also provide product descriptions (+ Search inside the book) to
better inform shoppers. Will this become a competitive advantage for the
store?
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2. Problem Solving
Information Systems can be used for problem solving
A Laptop Problem (page 30)
Problem: a perceived difference between what is and what ought to be.
Problem definition: defines the difference by describing both the current
situation and the desired situation,
e.g. the customer support representative do not have data about the
prior call to best assist a customer
Solution:
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1.
A CRM System to store customer information and all the
interactions (Chapter 7)
2.
Knowledge Management System to provide customer procedures
to fix the laptops (Chapter 9)
3.
A Manufacturing Quality-Control Information System to eliminate
possible faulty laptops
Other problems
MIS in use 2-1 (page 32)
Some other examples:
Company directory updates.
Company A has personnel transfer between department frequently.
Jessie is the personnel in charge of publishing company phone
books. Every 6 months, she send out a form to all the employees to
see if they need to update their contact information. She then
organize the changes into a new file and order new prints which will
be available for distribution in 2 weeks
Problem:
–
Costly publishing
–
phone books become obsolete quickly
how IS can help?
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3. Decision Making
Information System can facilitate decision making
Decision Levels
Operational: day-to-day activities
How many widgets should we order?  e.g. Transaction
processing systems (TPS)
Managerial: allocation and utilization of resources.
How much should we budget for computer hardware and
software for department A?  e.g. Management Information
Systems (MIS)
Strategic: broader-scope, organizational issues.
Should we acquire company A? or allied with company B?  e.g.
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Executive information systems (EIS)
Decision Process
Structured Decision
Well understood and accepted methods for decision making
For example: Formula available to calculate when and how
many units of material to order.
Many formulae can be learnt from HTM 406.
Unstructured Decision
Implicit decisions. No agree-on decision making method.
For example, predicting of the future economy and effect of
strategic alliance.
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Relationship
Decision
Process
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Decision Type
IS for Decision Making
Use formula to produce results. Computers
do the work.
Computers help communication among people. People do the job.
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Structured
Decision
Making
Unstructured
Decision
Making
Summary
Three main purposes of IS (interrelated)
Gain Competitive Advantages
Solve Problems
Facilitate Decision Marking
Eight Principles of competitive advantages
Explain what is a problem? Problem Definition
Decision Types and Processes
Relationships between decision types and processes
Explain the concept of automated information systems and
augmented information systems.
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Opposing Forces: I don’t need a computer to do business
G. Robinson Old Prints and Maps (Page 31a,b)
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Suggested Blogging Topic
Read the reflection guide and discuss:
“what is your personal competitive advantage?”
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Reading Assignment
Read the opening story of Chapter 7 “Universal
Electronics” (page 194 & 195)
What do you think about the COOs answer? Are you
satisfied with the answer? What do you learn from the
answer?
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