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CHAPTER 1
THE INFORMATION AGE IN WHICH YOU LIVE:
CHANGING THE FACE OF BUSINESS
JUMP TO THE SUPPORT YOU WANT
 Lecture Outline
 Modules, Projects, and Data Files
 Slide Reviews
 Closing Cases
 Short-Answer Questions
 Assignments and Exercises
 Discussion Questions
 Industry & Global Perspectives
 Additional Assignments and Exercises
CONTACT INFORMATION: Stephen Haag (shaag@du.edu)
STUDENT LEARNING OUTCOMES
1. Define management information systems (MIS) and describe the three important
organizational resources within it – people, information, and information technology.
2. Describe how to use break-even analysis to assess the financial impact of information
technology.
3. Describe how to use Porter’s Five Forces Model to evaluate the relative attractiveness of
and competitive pressures in an industry.
4. Compare and contrast Porter’s three generic strategies and the run-grow-transform
framework as approaches to the development of business strategy.
CHAPTER SUMMARY
This chapter serves two primary purposes. First the chapter introduces your students to the
broad notion of management information systems within an organization and the three key
resources on which MIS focuses – people, information, and information technology.
Second, the chapter jumps right into the process of appropriately selecting which technologies
to use based on the industry in which your organization operates, the identified business
strategies for competing in that industry, and how to assess the impact of technology.
The primary sections of this chapter include:
1. MIS Resource #1: Information
2. MIS Resource #2: People
3. MIS Resource #3: Information Technology
4. Financial Impact of IT: Break-Even Analysis
5. Industry Impact of IT: Porter’s Five Forces Model
6. Strategy Impact of IT: Porter (Again) and RGT
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LECTURE OUTLINE
INTRODUCTION (p. 4)
MIS RESOURCE #1: INFORMATION (p. 5)
1. Defining Information Quality
2. Considering Information from an Organizational Perspective
MIS RESOURCE #2: PEOPLE (p. 10)
1. Technology Literacy
2. Information Literacy
3. Your Ethical Responsibilities
MIS RESOURCE #3: INFORMATION TECHNOLOGY (p. 13)
1. Key Technology Categories
FINANCIAL IMPACT OF IT: BREAK-EVEN ANALYSIS (p. 15)
1. Reducing Fixed Costs
2. Reducing Variable Costs
3. Increasing Revenue
INDUSTRY IMPACT OF IT: PORTER’S FIVE FORCES MODEL (p. 19)
1. Buyer Power
2. Supplier Power
3. Threat of Substitute Products or Services
4. Threat of New Entrants
5. Rivalry among Existing Competitors
STRATEGY IMPACT OF IT: PORTER (AGAIN) AND RGT (p. 23)
1. Overall Cost Leadership
2. Differentiation
3. Focus
4. Run-Grow-Transform Framework
END OF CHAPTER (p. 26)
1. Summary: Student Learning Outcomes Revisited
2. Closing Case Study One
3. Closing Case Study Two
4. Key Terms and Concepts
5. Short-Answer Questions
6. Assignments and Exercises
7. Discussion Questions
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MODULES, PROJECTS, AND DATA FILES
Supporting Modules
XLM/A Computer Hardware and Software – comprehensive tour of technology terminology
focusing on personal technologies including application software, system software, input
devices, output devices, storage devices, CPU and RAM, and connecting devices such as cables
and ports.
XLM/K Careers in Business – Extended Learning Module K provides an overview of jobs titles
and descriptions in the fields of accounting, finance, hospitality and tourism management,
information technology, management, marketing, productions and operations management,
and real estate and construction management including what IT skills you should acquire to be
successful in each field.
Group Projects
 Assessing the Value of Customer Relationship Management: Trevor Toy Auto Mechanics
 Analyzing the Value of Information: Affordable Homes Real Estate
 Making the Case with Presentation Software: Information Technology Ethics
 Analyzing Strategic and Competitive Advantage: Determining Operating Leverage
Electronic Commerce Projects
 Searching job databases
 Interviewing and negotiating tips
 Financial aid resources
 Protecting your computer
 Ethical computing guidelines
 Global statistics and resources
Data Files
There are no data files associated with this chapter. There may be data files for the Group
Projects you choose.
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CLOSING CASES
CLOSING CASE STUDY ONE (p. 27)
THE SOCIAL MEDIA MEGAPHONE: TRANSPARENT LIFE INTENSIFIED
This is a good opening case study for the class, as your students will be very familiar with
examples of when people have used social media and made a fool of themselves.
QUESTIONS
1. What do you think of Stacy Snyder’s story? Should she be denied a degree for publicly
endorsing drinking to her underage students? To what extent do you believe that
potential employers should explore social networking sites to validate the “goodness’ of
potential employees? Is there anything on your Facebook page that might turn off
potential employers? If so, are you going to take any action?
DISCUSSION
 This is a great first question that should generate a lot of discussion.
 This is an “extreme” example of when someone’s Facebook posted results in great loss
(i.e., no degree).
 All answers are correct regarding your students’ positions on the use of exploring social
network information to learn about (potential) employees).
2.
The webcasting of funerals is an interesting example of the flatness of the world. Is this an
invasion of privacy or do next-of-kin have the right to make such a decision? What other
significant events in a person’s life might be suitable for webcasting? Identify at least
three such events and then do some research to determine if webcasting of those events
is already taking place.
DISCUSSION
 The next-of-kin definitely have the right to make this decision.
 Other webcasting applications include weddings, graduations, and even baby birthing.
3.
Osama Bin Laden represents a dark image for most Americans. His participation in the
planning of the September 11th attacks will forever mark him in a bad way. Should people,
like Rashard Mendenhall, who make positive or perhaps even neutral comments about
terrorists like Bin Laden be fired from endorsement contracts? Can making such
comments be considered grounds for termination of employment? Dismissal from your
school as a student?
DISCUSSION
 Again, an extreme example of when using social media can result in great loss.
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 Many organizations can and do terminate employees for the positions they post using
social media. It’s legal if the company can prove that the positions may be detrimental
to the company.
 Schools probably won’t dismiss students. (We haven’t heard of any, anyway.)
4.
Very few people would question the service and commitment of military personnel to our
country. The two sergeants who created the YouTube video openly criticized Delta
Airlines for its charging of baggage fees to military personnel. Is this open form of criticism
of businesses and their practices acceptable? Will it help businesses be more accountable
to customers?
DISCUSSION
 This example illustrates the power of social media.
 So many people responded so publicly to this that all airlines changed their baggage fee
policies for military personnel.
 It’s certainly an acceptable form of criticism and will hold businesses more accountable
to their customers.
5.
The use of Facebook (or any other social networking site) can truly make a person’s life
transparent, available for the whole world to see. Should there be legislation regulating
the openness of your life on the Internet? Can we expect society to regulate this without
any laws?
DISCUSSION
 Most people agree that there should be no legislation, except for perhaps things like
sexual acts, etc.
 Society will have to regulate itself.
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CLOSING CASE STUDY TWO (p. 29)
GOOGLE AND APPLE KNOW WHERE YOU ARE, MAYBE
In this second case study, your students will address how organizations are using technology to
track the location of people. In some instances, people don’t even know they are being
tracked.
QUESTIONS
1. Location-based tracking is common to all smartphones, for good reason or bad. The
popular location-based service company Foursquare has an app so you can check in at
various locations to receive discounts, become Mayor, and see who else might be there.
DealLeak, which aggregates deals from the likes of Groupon and Living Social, needs your
location in order to offer local discounts on products and services to you. How many
location-based service apps do you have on your smartphone? How often do you use
them and why?
DISCUSSION
 Answers here will vary according to your students.
2.
Apple and Google defended their processes by stating that their privacy policies very
clearly stated what information would be gathered, how that information would be used,
and how and with whom that information might be shared. When was the last time you
read the privacy policy of any technology tool, such as a Web browser or app? Do you
think very many people actually read these? Do the disclaimers in these privacy policies
give the offering organization the right to do anything with your information?
DISCUSSION
 Again, answers here will vary greatly.
 We all need to start reading those privacy policies.
3.
What about location-based tracking in car systems like GM’s OnStar? Those systems know
the car’s location to give you driving directions and perhaps identify local restaurants or
other venues. Are you comfortable with this? When was the last time you bought a paper
map? How much do you rely on your car’s GPS system?
DISCUSSION
 Most people are quite comfortable with GPS systems in cars.
 It’s an easy trade-off – privacy for functionality.
4.
What about smartphone tracking for parents who want to know where their children are
and where they’ve been? Minors under the age of 18 have very few privacy rights,
especially when it comes to parents’ knowledge of where they are. Are parents going too
far in wanting to know where their children are? What are the benefits of such systems
for parents? For the children? What does the term “helicopter parent” refer to?
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DISCUSSION
 Great discussion questions.
 Most college-age students don’t like this idea.
 Most parents do.
 Helicopter parents are parents who hover over their children’s lives.
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SHORT-ANSWER QUESTIONS (p. 31)
1. What is the relationship between management information systems (MIS) and information
technology (IT)?
ANSWER: MIS is a broad business function and the study of the use of IT. IT is a set of
tools and a resource within MIS.
2. What is the relationship between data, information, business intelligence (BI), and
knowledge?
ANSWER: Each build on the previous. Data are raw facts, while information is data that
has meaning. Business intelligence is collective information that gives you the ability to
make strategic business decisions. Finally, knowledge is a broad term that can encompass
BI context, how to affect BI, patents and trademarks, and organizational know-how.
3. How does the granularity of information change as it moves from lower to upper
organizational levels?
ANSWER: At the lowest levels, information granularity is very fine because people need
tremendous detail to perform their jobs. As information moves up through the
organization, it becomes more coarse because people don’t need as much detail but rather
aggregations of information.
4. What is the difference between a technology-literate knowledge worker and an
information-literate knowledge worker?
ANSWER: A technology-literate knowledge worker knows how and when to apply
technology; that is, he/she understands the value and role of technology. An informationliterate knowledge worker knows all about information; that is, he/she understands the
value and role of information.
5. How do ethics differ from laws?
ANSWER: Laws either clearly require or prohibit an action. Ethics are more subjective,
more a matter of personal or cultural interpretation.
6. What are the three financial elements of break-even analysis?
ANSWER: The three elements of break-even analysis are fixed costs, variable costs, and
revenue.
7. What role does the Five Forces Model play?
ANSWER: Porter’s Five Forces Model helps business people understand the relative
attractiveness of an industry and the industry’s competitive pressures in terms of buyer
power, supplier power, threat of substitute products or services, threat of new entrants,
and rivalry among existing competitors.
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8. Why are competitive advantages never permanent?
ANSWER: Once an organization creates a competitive advantage, all competitors move to
offer similar or even better competitive advantages, thus nullifying the competitive
advantage of the first organization.
9. What are the three generic strategies according to Michael Porter?
ANSWER: The three generic strategies according to Michael Porter are: overall cost
leadership, differentiation, and focus.
10. How are Porter’s three generic strategies and the RGT framework similar?
ANSWER: They are similar as follows: (1) run = overall cost leadership, (2) grow = focus and
differentiation, and (3) transform = (new) differentiation.
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ASSIGNMENTS & EXERCISES (p. 31)
1. USING PORTER TO EVALUATE THE MOVIE RENTAL INDUSTRY One hotly contested and
highly competitive industry is the movie rental business. You can rent videos from local
video rental stores, you can order pay-per-view from the comfort of your own home, and
you can rent videos from the Web at such sites as NetFlix. Using Porter’s Five Forces Model,
evaluate the relative attractiveness of entering the movie rental business. Is buyer power
low or high? Is supplier power low or high? Which substitute products and services are
perceived as threats? Can new entrants easily enter the market? What are the barriers to
entry? What is the level of rivalry among existing competitors? What is your overall view of
the movie rental industry? Is it a good or bad industry to enter?
DISCUSSION
 This is a good project for your students because they can easily and quickly relate to the
movie rental industry.
 It’s also a fairly easy and simple application of the Five Forces Model.
 Buyer power – high because of many choices (VOD, Netflix, local rental places, etc)
 Supplier power – low; the opposite of buyer power
 Substitute products and services – mobisodes delivered via cell phone, YouTube, pirated
movies, and many others including the commonly recognized ones
 This is a relatively easy market into which to enter
 Barriers – no late fees, some sort of online facility, etc
 Rivalry among existing competitors is very high
 Probably not a good industry into which to enter
2. REVIEWING THE 100 BEST COMPANIES TO WORK FOR Each year Fortune magazine
devotes an issue to the top 100 best companies to work for. Find the most recent of
Fortune that does this. First, develop a numerical summary that describes the 100
companies in terms of their relative industries. Which industries are the most dominant?
Pick one of the more dominant industries (preferably one in which you would like to work)
and choose a specific highlighted company. Prepare a short class presentation on why that
company is among the 100 best to work for.
DISCUSSION
 Because you’ll be assigning this exercise at different times (and because we wrote this
exercise in mid 2007), we can’t give you the correct answers for this project.
 However, your students should find a considerable number of companies in the IT field
that are the best to work for according to Fortune.
3. BREAK-EVEN ANALYSIS Perform a break-even analysis for the following scenario. Assume
you sell widgets. You have total fixed costs of $12,000. Your manufacturing and shipping of
widgets costs $7 per widget. You sell each widget for $22. What is your break-even point?
How many widgets do you have to sell to realize a net profit of $15,000?
DISCUSSION
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 Great assignment to get your students into Excel and also understanding the impact of
break-even analysis as a tool for financial evaluation.
 Break-even point is 800.
 Break-even point is 1,000 units.
4. BUSINESS STRATEGY FOR ENTERING THE CELL PHONE SERVICE INDUSTRY Assume that you
run a start-up and have decided to enter the cell phone service industry. Which of the three
generic strategies would you choose as your primary business strategy – overall cost
leadership, differentiation, or focus? Explain your choice by elaborating on the product and
services features you would offer to lure customers from the competition.
DISCUSSION
 Again, this is another great interactive in-class project.
 We recommend that you split the class into 3 groups and have each group focus on a
different strategy.
 Your groups will come up with some very interesting ideas.
5. RESEARCHING YOUR CAREER AND INFORMATION TECHNOLOGY To position yourself in
the best possible way to succeed in the business world, you need to start researching your
career right now. Here, we would like you to focus on the IT skills your career requires.
First, consider what career you want to have. Second, visit Monster.com
(www.monster.com) and search for jobs that relate to your career. Read through several of
the job postings and determine what IT skills you need to acquire.
DISCUSSION
 We recommend that you assign this to each individual student and also cover XLM/K
(Careers in Business) in conjunction with it.
 Answers will vary greatly, but try to get all the finance majors to compile a list, all the
marketing majors, etc.
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DISCUSSION QUESTIONS (p. 34)
1. The three key resources in management information systems (MIS) are information,
information technology, and people. Which of these three resources is the most
important? Why? The least important? Why?
DISCUSSION
 The most important resource is people, plain and simple. People are the heart of any
business, regardless of its industry and regardless of the extent to which it uses
technology.
 The least important is really technology. We simply use technology to work with
information. If information were not so important, we would need much less
technology.
2. We often say that hardware is the physical interface to a technology system while software
is the intellectual interface. How is your hardware your physical interface to your
computer? How is your software your intellectual interface to your computer? Do you see
technology progressing to the point that we may no longer distinguish between hardware
and software and thus no longer perceive differing physical and intellectual interfaces?
DISCUSSION
 Hardware is the physical interface because it is the physical devices that make up a
computer. Hardware is the also the set of devices we interact with physically – typing
on a keyboard, moving a mouse, viewing something on the screen.
 Software takes over steps that we would otherwise perform with our mind – adding two
numbers together, creating a graph, etc. So, it is our intellectual interface.
 Who knows if technology will ever progress to the point that we can’t distinguish
between hardware and software.
 However, our view of technology is changing. We see it as an integrated set of tools.
That view may make hardware and software indistinguishable.
3. In a group of three to four students, consider eBay in the context of Porter’s Five Forces
Model. How does eBay reduce the threat of new entrants? If necessary, you may want to
explore eBay’s site (www.ebay.com) and determine the role of buyer and seller ratings, its
integration with PayPal, and how it helps buyers and sellers resolve disputes.
DISCUSSION
 eBay uses many techniques to reduce the threat of new entrants. These essentially
become entry barriers that are costly and time-consuming for new entrants to
implements.
 Some include buyer and seller ratings, eBay learning seminars, and PayPal as a financial
cybermediary for payments.
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4. In this chapter, we discussed the use of loyalty programs in the travel industry as a
mechanism for reducing buyer power. What is another industry that also uses loyalty
programs to reduce buyer power? How does that industry use loyalty programs to do so?
DISCUSSION
 Loyalty programs are just about everywhere – restaurants now have programs in which
you accumulate points toward free meals, Office Max and Office Depot have similar
programs, home supply stores do as well, and so on.
5. As an information-literate knowledge worker for a local distributor of imported foods and
spices, you’ve been asked to prepare a customer mailing list that will be sold to
international cuisine restaurants in your area. If you do so, will you be acting ethically?
Suppose you don’t consider the proposal ethical. What will you do if your boss threatens to
fire you if you don’t prepare the list? Do you believe you would have any legal recourse if
you didn’t prepare the list and were subsequently fired?
DISCUSSION
 Answers here will vary according to your students’ ethics.
 It is legal for the distributor to sell a customer mailing list, if it has clearly stated so in its
privacy and information usage policy. So, depending on in which state you work (and
whether or not you work for a union), you may be subject to being fired.
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INDUSTRY & GLOBAL PERSPECTIVES
INDUSTRY PERSPECTIVE – Employment Information Has Gone Social (p. 10)
 Many of your students will be familiar with this
 Most young people are finding jobs by using social networks
 Organizations are making major pushes now to find employees on these social networks
 Lesson – is your Facebook information a detriment to job hunting?
Return to Slide #17
INDUSTRY PERSPECTIVE – Spending Money to Save Customers (p. 18)
 Often times, you have to spend money just to keep your customers from going to the
competition.
 Such is the case with HBO and its HBO Go initiative
 HBO offers this mobile service for free to paid TV subscribers in the hopes that they won’t
abandon HBO for something like Netflix.
Return to Slide #30
INDUSTRY PERSPECTIVE – Valentine’s Day Goes Virtual (p. 24)
 Almost every aspect of our lives is going virtual.
 Now, you don’t even have to buy real (physical) gifts or cards for Valentine’s Day.
 Many organizations offer virtual gifts and cards you can send to someone, while never
leaving your computer.
Return to Slide #42
INDUSTRY PERSPECTIVE – Innovate or Go Home (p. 25)
 All organizations must constantly be innovating in their industries.
 The competition is innovating and so must you.
 There are several great IT-enabled innovations in this perspective.
Return to Slide #50
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ADDITIONAL ASSIGNMENTS AND EXERCISES
E-MAIL: ELECTRONIC MAIL OR EXPENSIVE MAIL?
Note: Use this in the section on ethics and your ethical responsibilities


Provide your students with the above graphic.
Ask them to develop answers to both the “yes” and “no” components at the bottom.
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IDENTIFYING HARDWARE AND SOFTWARE
Note: Use this in the section on information technology as a key resource
Pick up a recent copy of your local newspaper or perhaps a computer magazine such as PC
Magazine or Wired and find an ad for a personal computer system. What is the price of the
complete system? What hardware devices does it include? What software does it include?
Now, compare that system to a similar one that you can find on the Internet (you might want to
start at Dell at www.dell.com). Which is cheaper? Does this surprise you? Why or why not?
Finally, identify all the various computer components and place them in the graphical depiction
of information technology hardware and software in Figure 1.6 on page 15.
DEVELOPING STRATEGIES FOR PROTECTING YOURSELF FROM IDENTITY THEFT
Note: Use this anywhere in the chapter.
Identity theft is not something that happens to someone else. Almost 10 million people in the
United States reported themselves as victims of identity theft in 2002 – that’s about 1 in every
29 people (even less when you take children out of the equation).
Focus on creating a comprehensive list of steps you can take to avoid identity theft. Write
down the most important steps. To help you start, consider visiting these sites:
 Federal Trade Commission – www.ftc.gov
 Identity Theft Prevention and Survival – www.identitytheft.org
 MSN’s Money – http://money.msn.com
 Identity Theft Resource Center – www.idtheftcenter.org
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