Information Systems

in Global Business
Today

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1.1 © 2010 by Prentice Hall
 LEARNING OBJECTIVES
• How are information systems
transforming business, and what is
their relationship to globalization?
• Explain why information systems
are so essential in business today.
• Define an information system and
describe its management,
organization, and technology
components.
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1.2 © 2010 by Prentice Hall
 LEARNING OBJECTIVES
(Continued)
• Define complementary assets and
explain how they ensure that
information systems provide genuine
value to an organization.
• Describe the different academic
disciplines used to study information
systems and explain how each
contributes to our understanding of
them.
• Explain what is meant by a
1.3 sociotechnical systems perspective. 3
© 2010 by Prentice Hall
How are information systems transforming
business, and what is their relationship to
globalization?

Digital transformation is the process of using

digital technologies to create new — or modify
existing — business processes, culture, and
customer experiences to meet changing
business and market requirements

Today, digital transformation is not an option; it

is necessary to escape the comfort zone,
reinvent themselves and compete in this world
overrun by technological advances.

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1.4 © 2010 by Prentice Hall
 How and why information systems
transforming business.

We live in a digital, global and hyper-

connected world . Information systems has
big role in globalization, where big economies
and developed countries benefit the most out
of this.

The Internet allows many businesses to buy,

sell, advertise, and solicit customer feedback
through online. The Internet has
stimulated globalization by dramatically
reducing the costs of producing, buying, and
selling goods on a global scale.
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1.5 © 2010 by Prentice Hall
 The Role of Information
Systems in Business Today

Business firms invest heavily in

information systems to achieve six
strategic business objectives:
 Operational excellence
 New products, services, and business models
 Customer and supplier intimacy
 Improved decision making
 Competitive advantage
 Survival

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1.6 © 2010 by Prentice Hall
 Management Information Systems

 Operational excellence:
 Improvement of efficiency to attain higher profitability
 New products, services, and business models:
 IT/IS are the major enabling tools for firms to create
new products and services , as well as new business
models.
 Customer and supplier intimacy:
 Serving customers raises revenues and profits
 Better communication with suppliers lowers costs
 Improved decision making
 Correct data on Real time data leads to better decisions

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© Prentice Prentice
Hall 2011 Hall
 Management Information Systems

 Competitive advantage
 Delivering better performance
 Charging less for superior products
 Responding to customers and suppliers in real
time
 Survival
 Information technologies as necessity of
business
 May be:
 Industry-level changes, e.g. Bank’s introduction

of ATMs
 Governmental regulations requiring record-

keeping
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© Prentice Prentice
Hall 2011 Hall
Interdependence between Information
systems and its Business

 What a business would like to do in near future often

depends on what its systems will able to do/ permit it
to do.
 Changes in strategy, rules, and business processes
1.9 increasingly require changes in hardware, software, 9
© 2010 by Prentice Hall
 Perspectives on Information Systems
 Information system:
 Set of interrelated components
 Collect, process, store, and distribute information
 Support decision making, coordination, and
control
 Information vs. data
 Data are streams of raw facts
 Information is data shaped into meaningful form

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1.10 © 2010 by Prentice Hall
 Perspectives on Information Systems

Data and Information

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful
information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent
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for a specific store or sales territory. © 2010 by Prentice Hall
 Perspectives on Information Systems

 Information system: Three activities

produce information organizations need
1. Input: Captures raw data from organization or
external environment
2. Processing: Converts raw data into meaningful
form
3. Output: Transfers processed information to
people or activities that use it
 Feedback: Information systems also require
feedback, which is output returned to
appropriate members of organization to help
evaluate or correct input stage
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1.12 © 2010 by Prentice Hall
 Functions of an Information System

An information system contains information about an organization and its surrounding

environment. Three basic activities—input, processing, and output—produce the information
organizations need. Feedback is output returned to appropriate people or activities in the
organization to evaluate and refine the input. Environmental actors, such as customers, 13
suppliers,
1.13 © 2010 by Prentice Hall
 Perspectives on Information Systems

Information Systems Are More Than

Computers

Using information systems effectively requires an understanding of the organization,

management, and information technology shaping the systems. An information system
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1.14 © 2010 by Prentice
creates value for the firm as an organizational and management solution to challengesHall
 Perspectives on Information Systems
 Organizational dimension of information systems:
Information System is the integral part of Organization
 Organization have a structure that is composed of

different levels and specialists & this structure reveal a

clear-cut division of labor. Hierarchy on authority &
responsibility.
 Separation of business functions
 Sales and marketing
 Human resources
 Finance and accounting
 Manufacturing and production
 Unique business processes : logically related tasks &
behavior for accomplishing work
 Unique business culture : fundamental set of
assumptions, values, and ways of doing things, that has
been accepted by most of the member 15
1.15 © 2010 by Prentice Hall
 Perspectives on Information Systems

Levels in a Firm

Business organizations are hierarchies consisting of three principal levels: senior management,
middle management, and operational management. Information systems serve each of these16
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levels. Scientists and knowledge workers often work with middle management.© 2010 by Prentice Hall
 Perspectives on Information Systems

 Management dimension of information

systems
 Management’s job is to make the sense out of
many situations faced by organizations, make
decisions , and formulated action plans to solve
organizational problems.
 Managers set organizational strategy for
responding to business challenges
 In addition, managers must act creatively:
 Creation of new products and services
 Occasionally re-creating the organization
 Information technology can play a powerful role in
helping managers design and deliver new services
1.17 and directing and redesign their organizations. 17
© 2010 by Prentice Hall
 Perspectives on Information Systems

 Technology dimension of information

systems
 IT is one of many tools managers use to cope
with changes.
 Computer hardware and software
 Data management technology
 Networking and telecommunications technology
 Networks, the Internet, intranets and extranets, World
Wide Web

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1.18 © 2010 by Prentice Hall
 Perspectives on Information
Systems
 Business perspective on
information systems:
 Managers and business firms invest in IT
and systems because they provide real
economic value to the business.
 Investments in information technology will
result in superior returns:
 Productivity increases
 Revenue increases
 Decreasing cost
1.19  Superior long-term strategic positioning 19
© 2010 by Prentice Hall
 Perspectives on Information
Systems
 Business information value chain
 Raw data acquired and transformed through
stages that add value to that information
 Value of information system determined in part
by extent to which it leads to better decisions,
greater efficiency, and higher profits

 Business perspective: Calls attention to

organizational and managerial nature of
information systems

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1.20 © 2010 by Prentice Hall
 Perspectives on Information Systems

The Business Information Value Chain

From a business perspective, information systems are part of a series of

value-adding activities for acquiring, transforming, and distributing
information that managers can use to improve decision making,
1.21 enhance
© 2010
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by Prentice Hall
 Perspectives on
Information Systems
Variation in Returns on Information Technology
Investment

Although, on average, investments in information technology produce

returns far above those returned by other investments, there is
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considerable variation across firms.
1.22 © 2010 by Prentice Hall
 Complementary Assets :
Organizational Capital and the Right
Business Model
 Investing in information technology does not
guarantee good returns
 Considerable variation in the returns firms
receive from systems investments
 Factors:
1. Should accompanied by supportive values,
structures , and behavior pattern.
2. Adopting the right business model
3. Investing in complementary assets
(organizational and management capital)

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1.23 © 2010 by Prentice Hall
 Perspectives on Information Systems

 Complementary assets:
 Assets required to derive value from a primary
investment
 Firms supporting technology investments with
investment in complementary assets receive
superior returns
 E.g.: invest in technology and the people to
make it work properly

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1.24 © 2010 by Prentice Hall
 Complementary assets include:
 Organizational investments, e.g.
 Appropriate business model

 Efficient business processes

 Managerial investments, e.g.

 Incentives for management innovation

 Teamwork and collaborative work environments

 Social investments, e.g.

 The Internet and telecommunications

infrastructure
 IT- enabled educational programs, Laws and

1.25 regulations 25
© 2010 by Prentice Hall
 Contemporary Approaches to
Information Systems

The study of information systems deals with issues and insights contributed
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from technical and behavioral disciplines.
1.26 © 2010 by Prentice Hall
 Contemporary Approaches to
Information Systems
• Technical approach
• Emphasizes mathematically based models
• Computer science, management science,
operations research
• Behavioral approach
• Behavioral issues (strategic business
integration, implementation, etc.)
• Psychology, economics, sociology

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1.27 © 2010 by Prentice Hall
 Contemporary Approaches to
Information Systems
Sociotechnical view
Combines computer science, management science,
operations research and practical orientation
with behavioral issues like sociology, economics, and
psychology .
• Optimal organizational performance is achieved by
jointly optimizing both the social and technical
systems.
• Adopting a sociotechnical systems perspective helps
to avoid purely technical approach or behavior
approach to IS.
• Technology must be changed and designed in such a
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1.28 way as to fit organizational and individual
© 2010 by needs.
Prentice Hall