Management Information Systems:

Managing the Digital Firm

Sixteenth Edition

Chapter 1
Information Systems in Global
Business Today

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How Information Systems Are
Transforming Business (1 of 2)
• In 2017, more than 140 million businesses had dot-com
addresses registered
• 273 million adult Americans online; 190 million purchased
online
• 269 million Americans have mobile phones
• 200 million use social networks

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How Information Systems Are
Transforming Business (2 of 2)
• Social networking tools being used by businesses to
connect employees, customers, and managers
• Internet advertising continues to grow at more than 20
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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Figure 1.1 Information Technology
Capital Investment

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What’s New in Management
Information Systems (1 of 3)
• IT Innovations
– Cloud computing, big data, Internet of Things
– Mobile digital platform
– AI and machine learning
• New Business Models
– Online streaming music and video
– On-demand e-commerce services

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What’s New in Management
Information Systems (2 of 3)
• E-commerce Expansion
– E-commerce expands to nearly $1 trillion in 2018
– Netflix now has more than 125 million US subscribers
– Online services now approach online retail in revenue
– Online mobile advertising now larger than desktop
• Management Changes
– Managers use social networks, collaboration tools
– Business intelligence applications accelerate
– Virtual meetings proliferate
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What’s New in Management
Information Systems (3 of 3)
• Firms and Organizations Change
– More collaborative, less emphasis on hierarchy and
structure
– Greater emphasis on competencies and skills
– Higher-speed/more accurate decision making based on data
and analysis
– More willingness to interact with consumers (social media)
– Better understanding of the importance of IT

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SUT – IE – Information Technology - Turban

Digital Transformation
• “Application of digital capabilities to processes, products, and assets to
improve efficiency, enhance customer value, manage risk, and uncover
new monetization opportunities.” Bill Schmarzo, CIO.com

• “The use of technology to radically improve the performance or reach of an

organization. In a digitally transformed business, digital technologies
enable improved processes, engaged talent, and new business models.”
Deloitte

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SUT – IE – Information Technology - Turban

Industry 4.0
• AKA fourth industrial revolution

• Industry 4.0 refers to a new phase in the Industrial Revolution that focuses
heavily on interconnectivity, automation, machine learning, and real-time
data. Industry 4.0, which encompasses IIoT and smart manufacturing,
marries physical production and operations with smart digital technology,
machine learning, and big data to create a more holistic and better
connected ecosystem for companies that focus on manufacturing
and supply chain management. Epicor.com

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 SUT – IE – Information Technology - Turban

Industry 4.0

10
Globalization Challenges and
Opportunities: A Flattened World
(1 of 2)
• Internet and global communications have greatly
changed how and where business is done
– Drastic reduction of costs of operating and transacting
on global scale
– Competition for jobs, markets, resources, ideas
– Growing interdependence of global economies

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Globalization Challenges and
Opportunities: A Flattened World
(2 of 2)
– Requires new understandings of skills, markets,
opportunities
– Challenges yes, but opportunities as well
– Over half of the revenue of S&P 500 US firms is
generated off shore
– Information systems enable globalization of commerce

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The Emerging Digital Firm
• In a fully digital firm:
– Significant business relationships are digitally enabled
and mediated
– Core business processes are accomplished through
digital networks
– Key corporate assets are managed digitally
• Digital firms offer greater flexibility in organization and
management
– Time shifting, space shifting
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Strategic Business Objectives of
Information Systems (1 of 2)
• Growing interdependence between:
– Ability to use information technology
– Ability to implement corporate strategies and achieve
corporate goals

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Strategic Business Objectives of
Information Systems (2 of 2)
• Firms invest heavily in information systems to achieve six
strategic 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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Figure 1.2 The Interdependence Between
Organizations and Information Systems

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Operational Excellence
• Improved efficiency results in higher profits
• Information systems and technologies help improve
efficiency and productivity
• Example: Walmart
– Power of combining information systems and best
business practices to achieve operational efficiency—
and over $485 billion in sales in 2017
– Most efficient retail 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
• Example: Apple
– Transformed old model of music distribution with iTunes
– Constant innovations—iPod, iPhone, iPad, etc.

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Customer and Supplier Intimacy
• Customers who are served well become repeat customers who
purchase more
– Example: 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
– Examples: Mandarin Oriental Hotel and JC Penney (in text)
– JC Penney uses IT to enhance relationship with supplier in
Hong Kong

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Improved Decision Making (1 of 2)
• Without accurate information:
– Managers must use forecasts, best guesses, luck
– Results in:
▪ Overproduction, underproduction
▪ Misallocation of resources
▪ Poor response times

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Improved Decision Making (2 of 2)
• Poor outcomes raise costs, lose customers
• Real-time data improves ability of managers to make
decisions.
• Example: Verizon’s web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.

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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
• Examples: Apple, Walmart, UPS are industry leaders
because they know how to use information systems for this
purpose

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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
– Citibank’s introduction of ATMs
• Federal and state regulations and reporting requirements
– Toxic Substances Control Act and the Sarbanes-Oxley
Act

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What Is an Information System?
(1 of 3)
• Information technology: the hardware and software a
business uses to achieve objectives
• Information system: interrelated components that manage
information to:
– Support decision making and control
– Help with analysis, visualization, and product creation
• Data: streams of raw facts
• Information: data shaped into meaningful, useful form
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Figure 1.3 Data and Information

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Figure 1.4 Functions of an
Information System

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Figure 1.5 Information Systems Are
More Than Computers

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Approach of This Text:
Sociotechnical Systems
• Sociotechnical view
– Optimal organizational performance achieved by jointly
optimizing both social and technical systems used in
production
– Helps avoid purely technological approach

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Management Information Systems:
Managing the Digital Firm
Sixteenth Edition

Chapter 2
Global E-Business and
Collaboration

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Business Processes (1 of 2)
• Business processes
– Flows of material, information, knowledge
– Logically related set of tasks that define how specific
business tasks are performed
– May be tied to functional area or be cross-functional
• Businesses: Can be seen as collection of business
processes
• Business processes may be assets or liabilities

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Business Processes (2 of 2)
• Examples of functional business processes
– Manufacturing and production
▪ Assembling the product
– Sales and marketing
▪ Identifying customers
– Finance and accounting
▪ Creating financial statements
– Human resources
▪ Hiring employees
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Figure 2.1 The Order Fulfillment Process

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How Information Technology Improves
Business Processes
• Increasing efficiency of existing processes
– Automating steps that were manual
• Enabling entirely new processes
– Changing flow of information
– Replacing sequential steps with parallel steps
– Eliminating delays in decision making
– Supporting new business models

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Different Types of Information
Systems for Different Management
Levels ESS

DSS

MIS

TPS

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Systems for Different Management
Groups (1 of 2)
• Transaction processing systems
– Serve operational managers and staff
– Perform and record daily routine transactions necessary to
conduct business
▪ Examples: sales order entry, payroll, shipping
– Allow managers to monitor status of operations and
relations with external environment
– Serve predefined, structured goals and decision making

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Figure 2.2 A Payroll TPS

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Systems for Different Management
Groups (2 of 2)
• Systems for business intelligence
– Data and software tools for organizing and analyzing
data
– Used to help managers and users make improved
decisions
• Management information systems
• Decision support systems
• Executive support systems
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