Mis ch1

Management Information Systems:
Managing the Digital Firm

Sixteenth Edition
Chapter 1
Information Systems in Global
Business Today
Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
Learning Outcomes
1.1 How are information systems transforming business, and
why are they so essential for running and managing a
business today?
1.2 What is an information system? How does it work? What
are its management, organization, and technology
components? Why are complementary assets essential
for ensuring that information systems provide genuine
value for organizations?
1.3 What academic disciplines are used to study information
systems, and how does each contribute to an
understanding of information systems?
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
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
Figure 1.1 Information Technology
Capital Investment
What’s New in Management
Information Systems (1 of 3)
• IT Innovations
– Cloud computing, big data, Internet of Things
– Mobile digital platform
• New Business Models

– Online streaming music and video
– On-demand e-commerce services
What’s New in Management
• 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
– Virtual meetings proliferate
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
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
Strategic Business Objectives of
• 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
Figure 1.2 The Interdependence
Between Organizations and
Information Systems
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
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.
Customer and Supplier Intimacy
• Customers who are served well become repeat customers
who purchase more
– Example: Hilton 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
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
• Poor outcomes raise costs, lose customers
• Real-time data improves ability of managers to make
decisions.
• Example: web-based digital dashboard to provide
managers with real-time data.
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.
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, U P S are industry leaders
because they know how to use information systems for this
purpose
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
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
Figure 1.3 Data and Information
What Is an Information System?
(2 of 3)
• Activities in an information system that produce information:

– Input
– Processing
– Output
– Feedback
• Sharp distinction between computer or computer program
versus information system
What is an Information System?
(3 of 3)
• Feedback
– Output is returned to appropriate members of
organization to help evaluate or correct input stage
• Computer/computer program vs. information system
– Computers and software are technical foundation and
tools, similar to the material and tools used to build a
house
Figure 1.4 Functions of an
Information System
Dimensions of Information Systems
• Organizations
• Management
• Technology
Figure 1.5 Information Systems Are
More Than Computers
Dimensions of Information Systems:
Organizations (1 of 2)
• Hierarchy of authority, responsibility
• Separation of business functions

– Sales and marketing
– Human resources
– Finance and accounting
– Manufacturing and production
Figure 1.6 Levels in a Firm
Figure 1.9 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
Approach of This Text:
Sociotechnical Systems (2 of 2)
• 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

• New Business Models

– Virtual meetings proliferate

• Internet and global communications have greatly

• Information technology: the hardware and software a

• Activities in an information system that produce information:

• Separation of business functions

This work is protected by United States copyright laws and is

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