CHAPTER 1 The Modern Organization in the Global, Web-Based Environment 1 Opening Case Can Payment Technology Match the Needs of Organizations and Consumers? The purchasing world is changing. Newspaper circulation is down, music sales are down, while on-line sales are up. How can organizations sell on-line products for a few cents or a dollar when bank charges often add up to the same amount for each deposit? The Business Problem For example, Jane is downtown at a new electronics store and would like to buy a laptop computer, but there is not enough money in her chequing account. She heads to the nearest automated teller machine (ATM) to transfer money from her savings account to her chequing account and finds that it is out of service, so the laptop remains in the store. 2 Opening Case The IT Solution Enter portable banking services and payment methods focused on the cellular telephone. For example, TD Bank launched applications for iPhone and iPod devices on April 14, 2010. In the first two weeks of its service, the bank estimated that it had more than 10,000 downloads per day. TD and the other major Canadian banks now allow most banking activity to be done on a cellular phone (such as checking account balances, paying bills, transferring funds, and sending money to another bank account). The Canadian payment network known as Interac can also be used to complete an e-mail money transfer, perhaps to pay a friend for lunch. 3 Opening Case Discussion Think about the effect of multiple payment methods. Can every retail organization accept every type of payment method? How does this affect competition? Should all banks and credit unions offer the applications describe here? Why or why not? 4 Opening Case What we learned from this case? The opening case illustrated the importance of having low-cost electronic payment systems. Depending upon the banking arrangements that organizations make, they could be paying up to $1.98 for each banking deposit. Without the use of new payment methods, organizations cannot accept small payments, known as micropayments. The opening case illustrates that IT is having a pervasive effect on payment methods and purchasing methods. Other examples of the societal and environmental effects of IT are provided throughout this book. 5 Agenda 1.1 Importance of Planning for IT 1.1.1 Definitions and concepts 1.1.2 IT planning 1.1.3 The IT strategic plan 1.2 Business Processes and Business Process Management 1.2.1 Definition and examples 1.2.2 The importance of BPM 1.3 Information Systems: Concepts and Definitions 1.3.1 Data, information, and knowledge 1.3.2 Information technology architecture 1.3.3 Information technology infrastructure Agenda continues to next slide 6 1.4 The Global, Web-Based Platform 1.4.1 The global, web-based platform 1.4.2 The three stages of globalization 1.5 Business Pressures, Organizational Responses, and IT Support 1.5.1 Business pressures 1.5.2 Organizational responses 1.6 Why Are Information Systems Important to Me? 1.7 The Plan of the Book 7 LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6. 7. Link effective information technology planning to business planning. (1.1) Describe business processes and explain how business process management helps to improve how businesses function. (1.2) Explain the role of data, information, and knowledge. Differentiate between information technology architecture and information technology infrastructure. (1.3) Describe the global business environment and how globalization has affected organizations. (1.4) Discuss the relationships among business pressures, organizational responses, and information systems. (1.5) Provide examples of the relevance of information systems to individuals and organizations. (1.6) Describe the plan of this book. (1.7) 8 CHAPTER OVERVIEW 9 1.1 Importance of Planning for IT 1.1.1 Definitions and concepts 1.1.2 IT planning 1.1.3 The IT strategic plan 10 1.1.1 Definitions and concepts Information technology (IT): relates to any computer-based tool that people use to work with information and to support the information and information-processing needs of an organization. Information system: (IS): collect, process, store, analyze, and disseminate information for a specific purpose. The purpose of IS: to get the right information to the right people at the right time in the right amount and in the right format to support business process and decision making. Management information systems (MIS) deal with the planning for— and the development, management, and use of—information technology tools to help people perform all of the tasks related to information processing and management. 11 1.1.2 IT planning The need for information systems is usually related to organizational planning and to the analysis of organizational performance vis-à-vis its competitors. The planning process for new IT applications begins with analysis of the organizational strategic plan, as shown in Figure 1.1. The organization’s strategic plan states the firm’s overall mission, the goals that follow from that mission, and the broad steps necessary to reach these goals. The strategic planning process modifies the organization’s objectives and resources to meet its changing markets and opportunities. 12 FIGURE 1.1 The information systems planning process 13 1.1.3 The IT strategic plan The IT strategic plan is a set of long-range goals that describe the IT infrastructure and identify the major IT initiatives needed to achieve the organization’s goals. The IT strategic plan must meet three objectives: 1. 2. 3. It must be aligned with the organization’s strategic plan. It must provide for an IT architecture that enables users, applications, and databases to be seamlessly networked and integrated. It must efficiently allocate IS development resources among competing projects so the projects can be completed on time and within budget and have the required functionality. 14 1.2 Business Processes and Business Process Management(BPM) 1.2.1 Definition and examples 1.2.2 The importance of BPM 15 1.2.1 Definition and examples A business process is a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. A process has inputs and outputs, and its activities can be measured. Many processes cross functional areas in an organization, such as product development, which involves design, engineering, manufacturing, marketing, and distribution. Other processes involve only one functional area. 16 17 FIGURE 1.2 a Business process for ordering e-ticket from airline website 18 1.2.2 The importance of BPM To a great degree, an organization’s performance depends on how well it manages its business processes. As a result, organizations emphasize business process management (BPM), which is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes. Initially, BPM helps companies improve profitability by decreasing costs and increasing revenues. Over time, BPM can create a competitive advantage by improving organizational flexibility. 19 1.3 Information Systems: Concepts and Definitions 1.3.1 Data, information, and knowledge 1.3.2 Information technology architecture 1.3.3 Information technology infrastructure 20 1.3.1 Data, information, and knowledge The purpose of IS: to get the right information to the right people at the right time in the right amount and in the right format to support business process and decision making. Information comes from data and information leads to knowledge for better business performance. 21 Data items refer to an elementary description of things, events, activities, and transactions that are recorded, classified, and stored but not organized to convey any specific meaning. Data items can be numbers, letters, figures, sounds, or images. Examples of data items are a student grade in a class and the number of hours an employee worked in a certain week, or the price of a ring tone. 22 Information refers to data that have been organized so that they have meaning and value to the recipient. For example, grade point averages (GPA) are data, but a student’s name coupled with his or her GPA is information. Similarly, a list of ring tones sold stating the frequency of sales is also information. The recipient interprets the meaning and draws conclusions and implications from the information. 23 Knowledge consists of data and/or information that have been organized and processed to convey understanding, experience, accumulated learning, and expertise as they apply to a current business problem. For example, a company recruiting at your school has found over time that students with grade point averages over 3.0 have had the most success in its management program. 24 1.3.2 Information technology architecture An organization’s information technology (IT) architecture is a high-level map or plan of the information assets in an organization. It is both a guide for current operations and a blueprint for future directions. The IT architecture integrates the entire organization’s business needs for information, the IT infrastructure (discussed in the next section), and all applications. 25 FIGURE 1.3 Architecture of an on-line travel agency 26 1.3.3 Information technology infrastructure An organization’s information technology (IT) infrastructure consists of the physical facilities, IT components, IT services, and IT personnel that support the entire organization. 27 FIGURE 1.4 An organization’s IT components, platform, IT services, and IT infrastructure. 28 1.4 The Global, Web-Based Platform 1.4.1 The global, web-based platform 1.4.2 The three stages of globalization 29 1.4.1 The global, web-based platform The global, web-based platform that has recently emerged spans the world and is best represented by the Internet and the functionality of the World Wide Web. The platform enables individuals to connect, compute, communicate, collaborate, and compete everywhere and anywhere, anytime and all the time; to access limitless amounts of information, services, and entertainment; to exchange knowledge; and to produce and sell goods and services. It operates without regard to geography, time, distance, or even language barriers. In essence, this platform makes globalization possible. 30 31 1.4.2 The three stages of globalization The first era, Globalization 1.0, lasted from 1492 to 1800. During this era, the force behind globalization was how much muscle, horsepower, wind power, or steam power a country had and could deploy. Globalization 1.0 focuses on countries The second era, Globalization 2.0, lasted from 1800 to 2000. In this era, the force behind globalization was multinational companies. Globalization 2.0 focuses on companies Around the year 2000, we entered Globalization 3.0, which was driven by the convergence of 10 forces that Friedman calls “flatteners” (discussed below). In era 3.0, the global, web-based platform has emerged. Globalization 3.0 focuses on groups and individuals 32 1.5 Business Pressures, Organizational Responses, and IT Support 1.5.1 Business pressures 1.5.2 Organizational responses 33 1.5.1 Business pressures Business Pressure - The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities. Significant changes in any of these factor are likely to create business pressure on the organization. The three types of business pressures faced are: ◦ Market Pressures ◦ Technology Pressures ◦ Social/Political/Legal Pressures 34 FIGURE 1.5 Business pressures, organizational performance and responses, and IT support. 35 Market Pressures • • • • The global economy and strong competition The need for Real-time operations The changing nature of the workforce Powerful customers 36 Technology Pressures • Technological innovation and obsolescence • Information overload • Example: how was old analog camera replaced by digital cameras Innovation: “Credit card” digital camera Obsolescence: old analog camera 37 Social/Political/Legal Pressures • • • • Social responsibility Government regulation and deregulation Ethical issues Protection against terrorist attacks One Laptop per Child initiative 38 1.5.2 Organizational responses Organizational Responses • Strategic Systems • Customer Focus • Make-to-Order and mass customization • Reebok • Video: Bodymetrics • E-business and E-commerce 39 1.6 Why Are Information Systems Important to You? Information systems and information technologies are integral to your lives IT is used by all departments. Simply put, organizations cannot operate without information technology. For this reason, every manager and professional staff member should learn about IT within his or her specialized field as well as across the entire organization and among organizations. 40 1.7 The Plan of the Book A major objective of this book is to help you understand the roles of information technologies in today’s organizations. The book is also designed to help you think strategically about information systems. That is, we want you to be able look into the future and see how these information technologies can help you, your organization, and your world. Finally, the book demonstrates how IT supports all of the functional areas of the organization. 41 Closing Case Pippalily.com Victoria Turner had started a new small business: the production of comfortable baby slings. The slings were customized to the size of the parent and the child, and also had multiple colours available. The Business Problem Victoria was trying to grow the business. Using word-of-mouth, Victoria gradually increased sales to friends and local businesses. However, she felt that she lacked the expertise in some areas, such as marketing and fashion design, and many tasks took her long hours. How would she obtain these resources without hiring expensive contractors or committing to long-term costs? 42 Closing Case Discussion • What business pressures affect Pippalily.com? How could Victoria deal with these pressures? • What are some additional methods that Pippalily.com could use to market its products using current technology? 43 Closing Case The results Since products are manufactured only for confirmed orders, inventory is kept low, as are costs. The use of on-line payment methods helps ensure that products are paid for before they are manufactured, reducing the need to borrow money to finance the production of goods. Using outsourcing for specialized help reduces costs and means that the company does not need to hire full-time staff, paying only for work that needs to be done. Pippalily.com has been so successful with marketing the idea that other organizations are now available selling these types of slings, such as www.lussobaby.ca. 44 Copyright Copyright © 2011 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (the Canadian copyright licensing agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. 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