Montclair State University

School of Business

INFO 290 Raj

Chapter 1

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LEARNING OUTCOMES
1. Define MIS and IT and describe their
relationship.
2. Validate information as a key resource and
describe both personal and organizational
dimensions of information.
3. Explain why people are the most important
organizational resource, define their information
and technology literacy challenges, and discuss
their ethical responsibilities.
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LEARNING OUTCOMES
4. Describe the important characteristics of IT as
a key organizational resource.
5. Define competitive advantage and illustrate
the role of IT in supporting competitive
advantages and business vision.
6. Discuss the impacts IT can and will have on
your life.

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Google
Googles mission is to organize the worlds
information...
Access to information has transformed work,
study and personal accomplishment
Accessibility not appropriate or desirable for
some information

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

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Whats New in MIS?

New technologies
Cloud computing
Software as a service (SaaS)
Mobile digital platform
People and behavior changes
Managers use social networks, collaboration
Business intelligence applications accelerate
Virtual meetings are accepted and used
Organizations
Web 2.0 applications widely adopted
Telework gains momentum
Co-creation of value, collaboration across firms
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You cant just ask people

what they want and then try
to give it to them. By the
time you get it built, theyll
want something else
Steve Jobs, Apple Computer
(on pleasing customers)
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Why Information Systems?

To Support Changing Business Environment
Globalization
Management and control in a global marketplace
markets
Global work groups

Competition in world
Global delivery systems

Transformation of Industrial Economies

Knowledge- and information-based economies
New products and services
Limited employee knowledge base
Knowledge: a central productive and strategic asset

Productivity
Time-based competition
Shorter product life
Turbulent environment

Transformation of the Enterprise

Flattening
Flexibility
independence
Low transaction and coordination costs
Collaborative work and teamwork

Decentralization
Location
Empowerment
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Business Styles are Shifting

Industrial Age
1. Mass Production
2. Hierarchies to control chaos
3. Manage top down
4. Information attached to things
5. Internal focused processes
6. Transaction driven
7. I/S supports
8. Static

Information Age
1. Mass customization
2. Networks to navigate chaos
3. Negotiate laterally in real time
4. Things attached to information
5. Outward - focused cycles
6. Relationship driven
7. I/T is core
8. Dynamic

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Competitive Advantage
ability to obtain a significantly
better return on investment than is
normal for the industry
Distinctive Competence
... possession of superior capabilities in an important
area
(e.g. patents, intellectual
capital, proprietary information system)

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MISPREDICTIONS BY IT
INDUSTRY LEADERS
This telephone has too many shortcomings to be seriously
considered as a means of communication. The device is inherently
of no value to us.
-Western Union internal memo, 1876
I think there is a world market for maybe five computers.
-Thomas Watson, chairman of IBM, 1943
But what [is a microchip] good for?
-Engineer at the Advanced Computing
Systems Division of IBM, 1968
There is no reason anyone would want a computer in their home.
-Ken Olson, president, chairman, and founder
of Digital Equipment Corp., 1977
640K ought to be enough for anybody.
-Attributed to Bill Gates, chairman of Microsoft, 1981
Dell has a great business model, but that dog wont scale.
-John Shoemaker, head of Suns server division, 2000
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Information Age/Knowledge
Worker
Information age a time when knowledge is
power
Knowledge worker you; works with and
produces information as a product
Outnumber all others by at least 4-to-1 margin

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What is Management Information Systems (MIS)?

MIS involves designing and programming systems that provide
information to people in organizations to make decisions and to
accomplish everyday work activities. MIS is an applied field that
combines Computer Science concepts with Business Management
practices.

Computer Programming
Accounting / Financial Procedures
Web Applications
Marketing / Advertising Strategy
Database Systems
Human Resources Management

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MIS
MIS planning for, developing, managing,
and using IT tools to help people perform their
work
IT computer-based tools that people use to
work with information

Traditional computer (notebook, PC, etc)

Bar code scanner
Biometric fingerprint reader
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What do MIS professionals do?

TECHNOLOGY

BUSINESS

Bridge the gap between

business and technical minds
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Information Systems
Information system:

Set of interrelated components

Collect, process, store, and distribute information
Support decision making, coordination, and control

information system is an assembly of hardware, software,

data, procedures, and people that interact to produce
information.

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INFORMATION
Information is
now as
important as
land, labor and
capital.

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INFORMATION AS A KEY
RESOURCE
Data raw facts
Streams of raw facts representing events such
as business transactions

Information data that has meaning

Weather when deciding what to wear
Clusters of facts meaningful and useful to
human beings in the processes such as making
decisions
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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 for a
specific store or sales territory.

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INFORMATION AS A KEY
RESOURCE
Business intelligence knowledge about
competitors, suppliers, your own internal
operations, etc
Combined forms of information to create real
knowledge
Encompasses everything that affects your business
Helps you make strategic business decisions

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Data-Information-Knowledge

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INFORMATION TECHNOLOGY
(IT)
Generally accepted term that
encompasses the rapidly
EQUIPMENT
Computers, Data
storageof:
devices,
expanding
range
Network Communications

APPLICATIONS

Enable business strategies,

Administrative infrastructure,
Key business processes

SERVICES

E.g., End-user computing, Help

application development

Used by organizations to deliver data, information,

and knowledge.
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FRONTIER

Developing
competitive
advantages

ENHANCEMENT
UTILITIES

The Contribution of Information Technology

Contribution Of IT

Internet enterprise
Applications

Enhancing key business functions

Client/ Server
Business Process
Re-engineering
Personal Computer
Word-processing &
Spreadsheet s/w

Automating individual tasks

Automating existing back-office processes

1970

1980

1990

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2000

Difference between information

technology and information systems
Because many people confuse the two terms,
compare what each one consists of and how
the two differ.
Information technology

pertains to
Products
Methods
Inventions
Standards

Information Systems include

five components
Hardware
Software
Data
Procedures
People

Information technology drives the development of new

information systems.

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Five-Component Framework

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Computer Price/Performance Ratio

Decreases

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Interactive Session: Technology

UPS Competes Globally with Information
Technology
Using a handheld computer
called a Delivery
Information Acquisition
Device (DIAD), UPS
drivers automatically
capture customers
signatures along with
pickup, delivery, and time
card information. UPS
information systems use
these data to track
packages while they are
being transported.

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NBA Teams Make a Slam Dunk with Information

Technology
Problem: Escalating
salaries and travel
costs, difficulty of
increasing revenue
by improving
employee
performance.
Solutions: High
resolution, organized
video allows teams
to review games and
scout new players
more efficiently.
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NBA Teams Make a Slam Dunk with

Information Technology
Synergy Sports Technologys tools help collect,
organize, and distribute video of NBA games.
Demonstrates ITs role in reducing cost, organizing
data, and increasing efficiency.
Illustrates the emerging digital firm landscape where
businesses can use tools to analyze critical data.

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How Information Systems Are

Transforming Business
In 2015, more than 150 million businesses had
dot-com addresses registered.
More than 106 million people receive their news
online; 74 million Americans read blogs
Internet advertising continues to grow at more
than 14 percent per year
New laws require businesses to store more data
for longer periods
Changes in business result in changes in jobs and
careers
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Business Drivers of Information Systems

Businesses invest in IT to achieve six important
business objectives
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

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Operational Excellence:
Improved efficiency results in higher profits
Information systems and technologies help improve
efficiency and productivity
E.g. Wal-Mart:
Power of combining information systems and best business
practices to achieve operational efficiencyand $482.2
billion in sales in 2015
Most efficient store in world as result of digital links
between suppliers and stores
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New products, services, and business

models:
Information systems and technologies enable
firms to create new products, services, and
business models
Business model: How a company produces,
delivers, and sells its products and services

E.g. Music industry

Drastic changes in business models in recent years
Apple: Successful innovations iPod, iTunes, etc.
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New products, services, and business

models:
With its stunning multitouch
display, full Internet
browsing, digital camera,
and portable
music player, Apples iPhone
set a new standard for mobile
phones. Other Apple products
have transformed the music
and entertainment industries.
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Customer and supplier intimacy:

Customers who are served well become repeat customers
who purchase more
Mandarin Oriental hotel
Uses IT to foster an intimate relationship with its
customers, keeping track of preferences, etc.
Close relationships with suppliers result in lower costs
JCPenney
IT to enhance relationship with supplier in Hong
Kong
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Improved decision making:

A companys bottom line can be hurt by
managers being swamped with data that is not
timely or helpful, forcing them to use guesswork
Real-time data improves ability of managers to
make decisions
Verizon: Web-based digital dashboard to update
managers with real-time data on customer complaints,
network performance, and line outages
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Improved decision making:

Information
Builders digital
dashboard delivers
comprehensive and
accurate information
for decision making.
The graphical
overview of key
performance
indicators helps
managers quickly
spot areas that need
attention.
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Competitive advantage:
Often results from achieving previous
business objectives
Advantages over competitors:
Charging less for superior products, better
performance, and better response to suppliers and
customers
Toyota: Uses TPS (Toyota Production System) to
achieve high levels of efficiency and quality
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Competitive advantage:
In a Toyota factory, the
assembly line produces a
superior product in less
time, using less
inventory, and having
fewer defects than the
competition. Toyota uses
information systems to
monitor inventory levels
and manage production
scheduling.
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Survival:
Businesses may need to invest in
information systems out of necessity;
simply the cost of doing business
Keeping up with competitors

Citibanks introduction of ATMs

Federal and state regulations and reporting

requirements

Toxic Substances Control Act and the Sarbanes-Oxley

Act
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PORTERS FIVE FORCES MODEL

Five Forces Model helps determine the
relative attractiveness of an industry and
includes
1.
2.
3.
4.
5.

Buyer power
Supplier power
Threat of substitute products and services
Threat of new entrants
Rivalry among existing competitors
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PORTERS FIVE FORCE MODEL

You can use Porters Five Forces Model to assess an industry
structure based on these five questions:

How much bargaining power do customers have?

How much of a threat do substitution products or services pose?
How much bargaining power do suppliers have?
How great is the threat of new competitors entering the marketplace?
How great is the rivalry among existing firms?

The intensity of each force determines the characteristics of the

industry, how profitable it is, and how sustainable that profitability
will be.
An organization develops its competitive strategy based on how it
intends to respond to these forces.
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PORTERS FIVE FORCE MODEL

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Porters Competitive Forces

Model

In Porters competitive forces model, the strategic position of the firm and its strategies are determined not only by competition
with its traditional direct competitors but also by four forces in the industrys environment: new market entrants, substitute
products, customers, and suppliers.

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Buyer Power
Buyer power high when buyers have many
choices; low when there are very few choices
As a provider of products and services want
low buyer power
As a consumer of products and services want
high buyer power

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Buyer Power
IT can help you (as a provider) reduce buyer
power
Examples (all enabled by IT)
Loyalty program rewards customers for repeated
business

Airline industry
Hotels
Grocery stores

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Buyer Power

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Supplier Power
Supplier power high when buyers have few
choices; low when buyers have many choices
The opposite of buyer power
As a business, you want

High buyer power when making purchases

High supplier power when selling products and
services

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Supplier Power

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Threat of Substitute Products or

Services
Threat of substitute products or services
high when there are many alternatives; low
when there are few
Switching costs can help
Switching cost costs that make customers
reluctant to switch

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Threat of Substitutes

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Threat of New Entrants

Threat of new entrants high when it is easy
for new competitors to start; low when it is not
Entry barrier feature that customers want
and new competition must provide to enter
market
ATMs, online banking, etc

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Threat of New Entrants

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Rivalry Among Existing Competitors

Rivalry among existing competitors high in
a fiercely competitive market; low in a more
complacent market
Example retail grocers

Highly competitive
Use IT to compete on price

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Rivalry Among Existing Competitors

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Five Forces Model Summary

Helps determine the attractiveness of an
industry
Should enter or expand operations in an
industry?
How can IT help?
Increase/reduce buyer/supplier power?
Create/eliminate an entry barrier?

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Competitive Strategy
A company can choose one of four competitive strategies to help it
respond to the structure of its industry.
Be the cost leader across its industry Wal-Mart is the lowest cost
leader in the retail industry.
Differentiate its products from others across its industry Apple
Computer competes on how much better its computers are than PCs.
Be the cost leader in an industry segment Southwest Airlines is the
cost leader in certain portions of the airline industry.
Differentiate its product in an industry segment Apples iPhone
competes by being different than other cell phones.
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Competitive Strategy

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THE THREE GENERIC STRATEGIES

CHOOSING A BUSINESS FOCUS

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THE VALUE CHAIN

A TOOL DEVELOPED BY
DR. MICHAEL PORTER OF
HARVARD BUSINESS SCHOOL

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THE VALUE CHAIN

CAN BE USED TO EXAMINE THE VARIOUS
ACTIVITIES OF THE FIRM AND HOW THEY
INTERACT IN ORDER TO PROVIDE A SOURCE OF
COMPETITIVE ADVANTAGE BY:
- PERFORMING THESE ACTIVITIES BETTER
OR
- AT A LOWER COST THAN THE COMPETITORS

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VALUE CHAINS
Value chain organization as a chain or
series of processes, each of which either add
to or reduce value
Business process set of activities that
accomplishes a specific task
Ordering processing
Sales transaction

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What is a Value Chain

Each competitive strategy requires a system whose benefits
outweigh the risks and provide value to the customer.
Value is defined as the amount of money a customer is willing to
spend on a product, service, or resource.
The difference between the value that an activity generates and the
cost of the activity is the margin.
A value chain is a network of value-creating activities and is
divided into primary activities and support activities.

Pearson Prentice Hall

2009

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TYPES OF FIRM ACTIVITIES

1. PRIMARY ACTIVITIES
- THOSE THAT ARE INVOLVED IN THE
CREATION, SALE AND TRANSFER OF
PRODUCTS (INCLUDING AFTER-SALES
SERVICE)

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Value Chain Primary Activities

Primary Activities in the value chain include:
Inbound logistics activities involve receiving and managing raw
materials.
Operations activities transform raw materials into final products
or create services.
Outbound logistic activities deliver finished products to customers.
Marketing and Sales activities create marketing strategies and sell
products or services to customers.
Services activities provide after-sale customer support for products
or services.

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TYPES OF FIRM ACTIVITIES

2. SUPPORT ACTIVITIES
- THOSE THAT MERELY SUPPORT THE
PRIMARY ACTIVITIES

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Value Chain Support Activities

Support Activities in the value chain indirectly enhance
production of products and services.
Firm infrastructure includes general management, finance,
accounting, legal, and government affairs (if necessary).
Human Resources recruits, compensates, evaluates and trains
employees.
Technology Development includes research and development for
new processes or techniques.
Procurement finds suppliers and vendors for raw materials,
creates contracts, and negotiates prices of raw materials.
Pearson Prentice Hall

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The Value Chain

pe
m
Co
tit
ive
Ad
va
n

tag

(Value)

Porters Value Chain Model

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VALUE CHAINS
Primary value processes (along bottom)
creates, delivers, markets, and sells products
and services
Support value processes (along top) support
primary value processes

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Identifying Processes that Add Value

Talbott premier necktie manufacturer
Value-added process information gathered
by surveying customers
Manufacturing high quality
Purchasing quality materials

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Identifying Processes that Add Value

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Identifying Processes that Reduce

Value
Value-reducing processes information
gathered from same customer surveys
Out of stock items (for Talbott)
Goal use IT to get timely information to
sales force

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Identifying Processes that Reduce

Value

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Value Chain Summary

Gathers quantifiable information from
customers
Identifies value-added and value-reducing
processes
Increases effectiveness of decision making

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