Management Information Systems

Chapter 1: Information Systems

Learning Objectives
By the end of this chapter the learner shall be able to;
i. Explain why information systems are so important today for business and management.
ii. Evaluate the role of information systems in today's competitive business environment.
iii. Define an information system from both a technical and business perspective.

1.1 Definition of a system

A system can be broadly defined as an integrated set of elements that accomplish a defined objective. People from
different engineering disciplines have different perspectives of what a "system" is. For example, software engineers
often refer to an integrated set of computer programs as a "system." Electrical engineers might refer to complex
integrated circuits or an integrated set of electrical units as a "system." As can be seen, "system" depends on one‘s
perspective, and the .integrated set of elements that accomplish a defined objective is an appropriate definition.

Information System
An information system can be defined as a set of interrelated components that collect (or retrieve), process, store
and distribute information to support decision making and control in an organization. In addition to supporting
decision making, coordination and control, an information system also help managers and workers analyze
problems and visualization in an organization.

Information systems contain information about significant people, places and things within the organization or in
the environment surrounding it.

Information is data that has been shaped into a form that is meaningful and useful to human beings.

Data, are streams of raw facts representing events occurring in organizations or the physical environment before
they have been organized and arranged into a form that people can understand and use. E.g. supermarket checkout
data Three activities in an information system produce the information that organizations need to make decisions,
control operations, analyze problems, visualize complex subjects and create new products or services. These
activities are input, processing, and output.
Input: the capture or collection of raw data from within the organization or from its external environment for
processing in an organization.
Processing: the conversion, manipulation and analysis of raw input into a form that is more meaningful to
humans.
Output: The distribution of processed information to the people who will use it or to the activities for which it
will be used.

Information systems also require feedback, which is output that is returned to appropriate members of the
organization to help them evaluate or correct the input stage

Types of information systems

Informal information systems example office gossip.
Formal information systems which could be manual or computer -based

Dimensions of 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. Thus an information systems can
be described as organizational and management solutions to challenges posed by the environment.

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 Organization: Information systems are an integral part of the organizations. The key elements of an
organization includes; its people, structure, business processes, politics and culture. Information systems helps
automate business processes and in some cases the organization’s culture is embedded in its information
systems.

Management: Information systems can help managers in design and delivery of new products and services, and
redirecting and redesigning the organizations.

Technology: The internet has created a new ‘Universal” technology platform on which to build new products,
services, strategies and business models.

1.2 Why information systems

We are in the midst of a swiftly moving river of technology and business innovations that is transforming the global
business landscape. An entirely new Internet business culture is emerging with profound implications for the
conduct of business. You can see this every day by observing how businesspeople work using high-speed Internet
connections for e-mail and information gathering, portable computers connected to wireless networks, cellular
telephones connected to the Internet, and hybrid handheld devices delivering phone, Internet, and computing
power to an increasingly mobile and global workforce.

The emerging Internet business culture is a set of expectations that we all share. We have all come to expect online
services for purchasing goods and services, we expect our business colleagues to be available by e-mail and cell
phone, and we expect to be able to communicate with our vendors, customers, and employees any time of day or
night over the Internet. We even expect our business partners around the world to be fully connected. Internet
culture is global.

Information systems are the foundation for conducting business today. In many industries, survival and the ability
to achieve strategic business goals are difficulty without extensive use of information technology. Business today
use information systems to achieve six major objectives:
Operational excellence: business continuously seek to improve the efficiency of their operations in order to
achieve higher profitability;
New products, services and business models; Information systems and technologies are a major enabling tools
for organizations to create new products and services as well as entirely new business models. A business
model describes how an organization produces, delivers and sells a product or service to create wealth.
Customer/supplier intimacy: Information systems are used to improve on customer’s relationship management
(CRM) and customer profiling.
Improved decision making: Information systems and technology have made it possible for managers to use
real-time data from the marketplace when making decisions.
Competitive advantage: By improving the operations, facilitating the creation of new products, services and
business models, improving on Customers relationship management and improving on decision making,
information systems helps an organizations achieve competitive advantage.
Day-to-day survival: organizations invest in information systems and technologies because they are necessities
of doing business.

A business perspective on information system

Managers and business firms invest in information technology and information systems because they provide real
economic value to the business. In a business perspective an information system creates value to the firm through
increasing revenue by providing information that help managers make better decisions or improving the execution
of business processes.. Every business has an information value chain in which raw information is systematically
acquired and then transformed through various stages that add value to that information. The value of an
information system to a business, as well as the decision to invest in any new information systems is in part
determined by the extent to which the system will lead to better management decisions, more efficient business
processes and higher firm profitability.

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Value Chain: primary and supporting activities that add value to an organization’s products and services to achieve
competitive advantage

1.3 Why information systems matter

While many managers are familiar with the reasons why managing their typical resources such as equipment and
people are important, it is worthwhile to take a moment to examine four reasons why managing information
systems and technology are just as important.

Capital Management
As the text states, "Investment in information technology has doubled as a percentage of total business investment
since 1980, and now accounts for more than one-third of all capital invested in the United States…" That's a lot of
money that businesses are spending on a relatively new component of many organizations. The business world has
come a long way very rapidly in the last twenty years in terms of the amount of dollars spent on technology.
Unfortunately, many companies haven't made the same advances in learning how to properly manage all these new
corporate assets.

Foundation of Doing Business

Take a look around you and see if you can find a business that does not depend on information technology in one
form or another. The local restaurant probably manages their lunch-time crowds using hand-held devices that allow
the waiter or waitress to communicate menu orders directly to the kitchen. The rental car company uses information
technology to track not only customer orders but may also use global positioning systems that relay the exact
position of every car wherever it is. Your local drycleaners may also use information technology to keep track of all
their chemical processes to ensure regulatory compliance. In short, there are very few businesses and organizations
that do not currently use some form of information technology.

Productivity
Simply put, effectively managing your organization's information technology and resources will increase the
productivity and effectiveness of your company. With the right technology workers can increase the amount of
work they are able to accomplish in less time than ever before.

1.4 Strategic Opportunity and Advantage

Businesses and organizations simply can't stick their heads in the sand and ignore all of the improvements and
inventions that are available nowadays. If they choose to do so, chances are their competition won't. It's not just the
improvements in current processes that are available but the opportunities for new products or services that
businesses can take advantage of with information technology.

How Much Does IT Matter?

For many years computer technology was relegated to the back rooms or basements of a corporation. Only the
"techies" worried about it, and they were often the only ones who really knew how it all worked. Now computers
are all over the organization — there's one on every desk and, more times than not, in every pocket or purse. It's not
enough for you to know how to pound a keyboard or click a mouse. It's not even enough for you to know how to
surf the Web or send e-mail. Every employee, including you, must know how to take advantage of information
systems to improve your organization and to leverage the available information into a competitive advantage for
your company.

1.5 Why IT Now? Digital Convergence and the Changing Business Environment
The Internet and Technology Convergence
Even though the Internet as a whole has existed since 1969, the World Wide Web didn't exist until around 1993-
1994. That's fewer than 10 years ago. Now you can't pick up a magazine or a newspaper, turn on the television or
radio, even drive by a billboard, without some kind of reference to "dot-com." Businesses are rushing to the Internet
in an effort to keep up with the competition or to create whole new businesses. Now organizations struggle with
such issues as how to design and develop a Web site or how to determine a fair e-mail policy for employees.

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Electronic market systems are allowing businesses to take advantage of technology to create new methods of
buying and selling. For a while it seemed as though the middleman was going out of business because of the new
direct connections between customers and merchants. While this is true in some industries, new opportunities are
springing up for the middleman in other areas. We'll look at this issue in more detail later.

Transformation of the Business Enterprise

You can't help but know about all the job cuts occurring in our country. It seems like every week we hear about
thousands and thousands of people losing their jobs. Back in the 1980s most of the job losses were in the blue-collar
sector. In the 1990s it seems many of the cuts were made in the white-collar, management jobs. Why? Think about
it. Technology, to a large extent, has driven organizations to change the way they operate and that includes the way
they manage. We're going to take an in-depth look at how organizations work and how they've been transformed by
technology.

Globalization
Next time you purchase a product, any product, look at the fine print and see where it's made. It could be China, or
the Philippines, or a South American company, or even in the United States. You can disagree with the fact that
many manufacturing jobs are being moved from the U.S. to foreign countries. But look at the vast number of jobs
that are being created in this country. Maybe they aren't the traditional factory jobs we're used to. In fact, many of
our new jobs are in the information industry. Many of them service whole new markets that didn't exist just a few
years ago. There was no position called "Webmaster" in 1991. That's because the Web didn't exist. But now, that
particular job category is one of the fastest growing in the U.S. and overseas.

The global economy Laudon & Laudon talk about is being made possible by technology, and that's why it's so
important that you understand how to use information systems technology instead of just computer technology.

Rise of the Information Economy

In a knowledge- and information-based economy, knowledge and information are key ingredients in creating
wealth. Think back to the early 1900s when the horse and buggy were the main form of transportation. Along came
a guy named Ford who built a whole new industry around the automobile. Many jobs, such as horse groomers,
horse shoers, and buggy manufacturers, were lost forever. Now think about all the new jobs that were created — not
just in the factories, but all the other businesses associated with the car. The people in the horse and buggy industry
adapted, retrained for the new jobs, and the whole country changed. The same thing is happening now with the
information industry. Many of the new jobs that are being created have better working conditions, better pay, and
more advantages than the old jobs had. You just have to be equipped to take advantage of the situation. You have to
take advantage of retraining opportunities. You have to gain the skills necessary for the transformation of the
industries that have been a mainstay of this country. It's not that hard — it just takes a lot of hard work.

Chapter Review Questions?

1. Why are information systems so essential for running and managing a business today?
2. What exactly is an information system? How does it work? What are its management, organization and
technology components?
3. List and explain four reasons why information systems are so important for business today
4. Describe five technology and business trends that have enhanced the role of information systems in today‘s
competitive business environment.
5. What are some of the new roles information systems are playing in organizations?
6. Discuss the changes in the business environment brought about by technology in the last five years.

Reference
Laudon K, Laudon J, Management Information Systems, Managing the digital firm

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