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Management Information Systems: Managing The Digital Firm

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Management Information Systems: Managing The Digital Firm

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1 2

Management Information Systems:

Managing the Digital Firm
Sixteenth Edition

Lecture 1
Information Systems in
Global Business Today

Framework of general IS (Page 38, textbook)

Learning Objectives
1.1 How are information systems transforming business, and
why are they so essential for running and managing a
business today?
1.1 How are information
1.2 What is an information system? How does it work? What
systems transforming business,
are its management, organization, and technology
components? Why are complementary assets essential
DISCUSSION and why are they essential for
for ensuring that information systems provide genuine running and managing a
value for organizations? business today?
1.3 What academic disciplines are used to study information
systems, and how does each contribute to an
understanding of information systems?

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5

How Information Systems Are Software/Platforms to

support business
Transforming Business
• Omni Chanel software
• Social networking tools being used by businesses to • Data analysis software
• E-commerce platforms
connect employees, customers, and managers
• Social networks
• Internet advertising continues to grow at more than 20 • Etc.,

percent per year

• New laws require businesses to store more data for
longer periods
• Changes in business result in changes in jobs and
careers

7 8

What’s New in Management What’s New in Management

Information Systems (1 of 2) Information Systems (2 of 2)
• IT Innovations • Management Changes
– Cloud computing, big data, Internet of Things – Managers use social networks, collaboration tools
– Mobile digital platform – Business intelligence applications accelerate
– AI and machine learning – Virtual meetings proliferate
• New Business Models • Firms and Organizations Change
– Online streaming music and video – More collaborative, less emphasis on hierarchy and
– On-demand e-commerce services structure
– Higher-speed/more accurate decision making based on
• E-commerce expanding data and analysis
– More willingness to interact with consumers (social
media)
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9 10

The Emerging Digital Firm Strategic Business Objectives of

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

11 12

Figure 1.2 The Interdependence Strategic Business Objectives of

Between Organizations and Information Systems (2 of 2)
Information Systems • 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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13 14

Operational Excellence New Products, Services, and

• Improved efficiency results in higher profits Business Models
• Information systems and technologies help improve • Information systems and technologies enable firms to
efficiency and productivity create new products, services, and business models
• Example: Walmart • Business model: how a company produces, delivers, and
– Most efficient retail store in world as result of digital sells its products and services
links between suppliers and stores • Example: Apple
– Transformed old model of music distribution with
iTunes
– Constant innovations—iPod, iPhone, iPad, etc.

15 16

Customer and Supplier Intimacy Improved Decision Making (1 of 2)

• Customers who are served well become repeat customers • Without accurate information:
who purchase more – Managers must use forecasts, best guesses, luck
– Uses IT to foster an intimate relationship with its – Results in:
customers, keeping track of preferences, etc.  Overproduction, underproduction
• Close relationships with suppliers result in lower costs  Misallocation of resources
 Poor response times

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17 18

Improved Decision Making (2 of 2) Competitive Advantage

• Poor outcomes raise costs, lose customers • Often results from achieving previous business objectives
• Real-time data improves ability of managers to make • Advantages over competitors
decisions.
• Charging less for superior products, better performance,
• Example: Verizon’s web-based digital dashboard to and better response to suppliers and customers
provide managers with real-time data on customer
• Examples: Apple, Walmart, UPS are industry leaders
complaints, network performance, etc.
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
• Federal and state regulations and reporting requirements DISCUSSION
1.2 What is an information
system? How does it work?

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21 22

Figure 1.3 Data and Information

What Is an Information System?
• 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

23 24

Figure 1.4 Functions of an

Information System What Is an Information System?
• Activities in an information system that produce
information:
– Input
– Processing
– Output
– Feedback
• Sharp distinction between computer or computer program
versus information system

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25

What is an Information System?

• Feedback
– Output is returned to appropriate members of 1.2 What are its management,
organization to help evaluate or correct input stage organization, and technology
components and why are
• Computer/computer program vs. information system DISCUSSION complementary assets essential
– Computers and software are technical foundation and for ensuring that information
tools, similar to the material and tools used to build a systems provide genuine value
house for organizations?

27 28

Dimensions of Information Systems Figure 1.5 Information Systems Are

• Organizations More Than Computers
• Management
• Technology

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29 30

Dimensions of Information Systems: Figure 1.6 Levels in a Firm

Organizations (1 of 2)
• Hierarchy of authority, responsibility
– Senior management
– Middle management
– Operational management
– Knowledge workers
– Data workers
– Production or service workers

31 32

Dimensions of Information Systems: Dimensions of Information Systems:

Organizations (2 of 2) Management
• Separation of business functions • Managers set organizational strategy for responding to
– Sales and marketing business challenges
– Human resources • In addition, managers must act creatively
– Finance and accounting – Creation of new products and services
– Manufacturing and production – Occasionally re-creating the organization
• Unique business processes
• Unique business culture
• Organizational politics

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33 34

Dimensions of Information Systems: It Isn’t Just Technology: A Business

Technology Perspective on Information Systems
(1 of 3)
• Computer hardware and software
• Data management technology • Information system is instrument for creating value
• Networking and telecommunications technology • Investments in information technology will result in superior
– Networks, the Internet, intranets and extranets, World returns
Wide Web – Productivity increases
• IT infrastructure: provides platform that system is built on – Revenue increases
– Superior long-term strategic positioning

35 36

It Isn’t Just Technology: A Business It Isn’t Just Technology: A Business

Perspective on Information Systems Perspective on Information Systems
(2 of 3) (3 of 3)

• Business information value chain • Investing in information technology does not guarantee
– Raw data acquired and transformed through stages good returns
that add value to that information • There is considerable variation in the returns firms receive
– Value of information system determined in part by from systems investments
extent to which it leads to better decisions, greater
efficiency, and higher profits • Factors
– Adopting the right business model
• Business perspective
– Investing in complementary assets (organizational and
– Calls attention to organizational and managerial nature management capital)
of information systems

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37 38

Figure 1.7 The Business Information Figure 1.8 Variation in Returns on

Value Chain Information Technology

39 40

Complementary Assets: Complementary Assets:

Organizational Capital and the Right Organizational Capital and the Right
Business Model (1 of 2) Business Model (2 of 2)
• Assets required to derive value from a primary investment • Complementary assets
– Examples of organizational assets
• Firms supporting technology investments with investment
in complementary assets receive superior returns  Appropriate business model
 Efficient business processes
• Example: Invest in technology and the people to make it – Examples of managerial assets
work properly
 Incentives for management innovation
 Teamwork and collaborative work environments
– Examples of social assets
 The Internet and telecommunications infrastructure
 Technology standards
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42

Figure 1.9 Contemporary Approaches

to Information Systems

1.3 WHAT ACADEMIC DISCIPLINES ARE

USED TO STUDY INFORMATION
DISCUSSION SYSTEMS AND HOW DOES EACH
CONTRIBUTE TO AN UNDERSTANDING
OF INFORMATION SYSTEMS?

Figure 1.9 Contemporary Approaches to Information 43 44

Systems Technical Approach

• Computer science -> theories of computability, methods
of computation, and efficient data storage. • Emphasizes mathematically based models
• Management science -> the development of models for • Computer science, management science, operations
decision-making and management practices. research
• Operations research -> mathematical techniques for
optimizing selected parameters of organizations,
• Sociologists -> how information systems affect
individuals, groups, and organizations.
• Psychologists -> how human decision makers perceive
and use formal information from IS.
• Economists -> how new information systems change the
control and cost structures within the firm.

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45 46

Behavioral Approach Approach of This Text:

• Behavioral issues (strategic business integration, Sociotechnical Systems (1 of 2)
implementation, etc.)
• Management information systems
• Psychology, economics, sociology – Combine computer science, management science,
operations research, and practical orientation with
behavioral issues
• Four main actors -> MIS
– Suppliers of hardware and software
– Business firms -> to obtain value from technology
– Managers and employees -> to achieve business value
– Firm’s environment (legal, social, cultural context)

47 48

Approach of This Text: Figure 1.10 A Sociotechnical

Sociotechnical Systems (2 of 2) Perspective on Information 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: Learning Objectives
Managing the Digital Firm 2.1 What are business processes? How are they related to
Sixteenth Edition information systems?
2.2 How do systems serve the different management groups in
a business, and how do systems that link the enterprise
improve organizational performance?
Chapter 2 2.3 Why are systems for collaboration and social business so
Global E-Business and important, and what technologies do they use?
Collaboration
2.4 What is the role of the information systems function in a
business?

DISCUSSION 2.1 Business Processes

• Business processes
– Logically related set of tasks that define how specific
business tasks are performed
BUSINESS INFORMATION – May be tied to functional area or be cross-functional
PROCESS SYSTEM • Businesses: Can be seen as collection of business processes
• Business processes may be assets or liabilities

Why is business process important for organization?

Workflows->Tasks

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2.1 Business Processes 2.1 Business Processes
The Order Fulfillment Process
Swim Lane Flowchart

Business Processes - Swim Lane Flowchart 2.1 Business Processes

 Microsoft Visio • 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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2.1 Business Processes 2.1 Business Processes
How Information Technology/IS 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

2.1 Business Processes Business Processes

 Bottom Line: Business processes help an organization

organize, coordinate, and focus its workflow to produce products
or services. The success or failure of a business may depend on
how well its business processes are designed and coordinated.
Information systems can automate many steps in business
processes and even change the flow of information.

 Swim Lane Flowchart

 Microsoft Visio

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2.2 Systems for the different management groups 2.2 Systems for the different management groups

How do systems serve the different management

groups in a business and how do systems that link the Organizational Hierarchy
enterprise improve organization performance?
- Transaction processing systems Planning
- Business intelligence systems
Executives
- Enterprise applications
Control Middle-Level
Notes: The four major types of systems typically are used to make an Managers
organization successful.

Operation
Operational
Employees
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2.2 Systems for the different management groups 2.2 Systems for Different Management Groups

2.2.1 Transaction processing systems (TPS)

– 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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Airline online transaction processing reservation systems A Payroll TPS

2.2 Systems for Different Management Groups 2.2 Systems for Different Management Groups

 Bottom Line:
The transaction processing system (TPS) records the data
from everyday operations throughout every division or
department in the organization. Each division/department is
tied together through the TPS to provide useful information
to management levels throughout the company.

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2.2 Systems for Different Management Groups 2.2 Systems for Different Management Groups

 Business intelligence 2.2.1 Management Information Systems

– Data and software tools for organizing and analyzing data • Serve middle management
– Used to help managers and users make improved • Provide reports on firm’s current performance, based on
decisions data from TPS
 Business intelligence systems • Provide answers to routine questions with predefined
 Management information systems procedure for answering them
 Decision support systems
• Typically have little analytic capability
 Executive support systems

2.2 Systems for Different Management Groups 2.2 Systems for Different Management Groups

How Management Information Systems Obtain Their Sample MIS Report

Data from the Organization’s TPS
Consolidated Consumer Products Corporation Sales by
Product and Sales Region: 2019
Product Product Sales Actual Planned Actual
Code Description Region Sales Versus
Planned
4469 Carpet Cleaner Northeast 4,066,700 4,800,000 0.85
South 3,778,112 3,750,000 1.01
Midwest 4,867,001 4,600,000 1.06
West 4,003,440 4,400,000 0.91
Blank Total Blank 16,715,253 17,550,000 0.95
5674 Room Northeast 3,676,700 3,900,000 0.94
Freshener South 5,608,112 4,700,000 1.19
Midwest 4,711,001 4,200,000 1.12
West 4,563,440 4,900,000 0.93
Blank Total Blank 18,559,253 17,700,000 1.05

2.2.2 Management Information Systems 2.2.3 Decision Support Systems

Bottom Line: A management information system is used by managers • Serve middle management
throughout the organization to help them in directing, planning, • Support nonroutine decision making
coordinating, communicating, and decision making. The MIS will help – Example: What is the impact on production schedule if
answer structured questions on a periodic basis. December sales doubled?
• May use external information as well TPS / MIS data
• Model driven DSS
– Voyage-estimating systems
• Data driven DSS
– Intrawest’s marketing analysis systems

2.2 Systems for Different Management Groups 2.2 Systems for Different Management Groups

Voyage-Estimating Decision-Support System

Bottom line: 2.2.4 Executive Support Systems

Decision-support systems are used for complex “what-if” • Support senior management
questions that require internal and external data. Decisions at
• Address nonroutine decisions
this management level are mostly semistructured so the
information system must respond to the unique requirements of – Requiring judgment, evaluation, and insight
the executives. • Incorporate data about external events (e.g., new tax laws or
competitors) as well as summarized information from
internal MIS and DSS
• Example: Digital dashboard with real-time view of firm’s
financial performance

2.2 Systems for Different Management Groups 2.2 Systems for Different Management Groups

2.2.4 Executive Support Systems 2.2.4 Executive Support Systems

Bottom line:
Bottom Line: An executive support system helps
managers make strategic decisions affecting the entire
company. The decisions use internal and external data to
give executives the information they need to determine
the proper course of action in unstructured situations.
[Digital dashboard]

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2.3 Enterprise Application 2.3 Enterprise Application
• Systems for linking the enterprise
• Span functional areas
• Execute business processes across the firm
• Include all levels of management
• Four major applications
– Enterprise systems
– Supply chain management systems
– Customer relationship management systems
– Knowledge management systems

2.3 Enterprise Application 2.3 Enterprise Application

2.3.1 Enterprise Systems 2.3.2 Supply Chain Management (SCM) Systems

• Also called enterprise resource planning (ERP) systems • Manage relationships with suppliers, purchasing firms,
• Integrate data from key business processes into single system. distributors, and logistics companies.

• Speed communication of information throughout firm. • Manage shared information about orders, production,
inventory levels, and so on.
• Enable greater flexibility in responding to customer requests,
greater accuracy in order fulfillment. • Goal is to move correct amount of product from source to point
of consumption as quickly as possible and at lowest cost
• Enable managers to assemble overall view of operations.
• Type of interorganizational system: Automating flow of
information across organizational boundaries

2.3.3 Customer Relationship Management (CRM) Systems 2.3.4 Knowledge Management Systems (KMS)
• Help manage relationship with customers. • Manage processes for capturing and applying knowledge and
• Coordinate business processes that deal with customers in expertise
sales, marketing, and customer service • Collect relevant knowledge and make it available wherever
• Goals: needed in the enterprise to improve business processes and
management decisions.
– Optimize revenue
– Improve customer satisfaction • Link firm to external sources of knowledge
– Increase customer retention
– Identify and retain most profitable customers
– Increase sales

2.3 Enterprise Application 2.4 Other terms

2.3.4 Knowledge Management Systems (KMS)  Intranets and Extranets
Bottom line: • Technology platforms that increase integration and expedite
A knowledge management system as an integral part of the overall the flow of information
information system of an organization. Most of the other systems have
• Intranets:
been recognized for many years, but this one may be thought of as
relatively new. Knowledge management systems (KMS) enable – Internal networks based on Internet standards
organizations to better manage processes for capturing and applying – Often are private access area in company’s Web site
knowledge and expertise. • Extranets:
– Company Web sites accessible only to authorized
vendors and suppliers
– Facilitate collaboration

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2.4 Other terms 2.4 Other terms

 E-Business, E-Commerce, and E-Government

Discussion:
• E-business
 What is collaboration? What is benefits of collaboration?
– Use of digital technology and Internet to drive major
business processes  What is social business?
• E-commerce  Tools and Technologies for collaboration
– Subset of e-business  Collaborative culture
– Buying and selling goods and services through Internet
• E-government
– Using Internet technology to deliver information and
services to citizens, employees, and businesses

2.4 Other terms 2.4 Other terms

What is Collaboration?  Business Benefits of Collaboration and Teamwork
 Let’s first determine exactly what the term collaboration • Investment in collaboration technology can return large
means to business and to you: rewards, especially in sales and marketing, research and
– Working with others to achieve shared and explicit goals development
– Focusing on a particular task or mission • Productivity: Sharing knowledge and resolving problems
– Ocurring in a business and/or between businesses
• Quality: Faster resolution of quality issues
 Collaboration can be:
• Innovation: More ideas for products and services
‒ Short or long term
‒ One-to one or many-to-many • Customer service: Complaints handled more rapidly
‒ Informal or structured teams • Financial performance: Generated by improvements in
factors above

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2.4 Other terms 2.4 Other terms
What is Social Business?  Requirements for Collaboration
• Social business
– Use of social networking platforms (internal and external)
to engage employees, customers, and suppliers
• Aims to deepen interactions and expedite information
sharing
• “Conversations” to strengthen bonds with customers
• Requires information transparency
• Seen as way to drive operational efficiency, spur innovation,
accelerate decision making

2.4 Other terms 2.4 Other terms

 Building a Collaborative Culture and Business Processes Tools and Technologies for Collaboration and Social Business
• “Command and control” organizations • E-mail and instant messaging (IM)
– No value placed on teamwork or lower-level participation • Wikis
in decisions
• Virtual worlds
• Collaborative business culture
• Collaboration and social business platforms
– Senior managers rely on teams of employees
– Virtual meeting systems (telepresence)
– Policies, products, designs, processes, and systems rely
– Cloud collaboration services (Google Drive, Google
on teams
Docs, etc.)
– The managers purpose is to build teams
– Microsoft SharePoint and IBM Notes
– Enterprise social networking tools

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2.4 Other terms 2.4 Other terms
The Time/Space Collaboration and Social Tool Matrix The Information Systems Department
• Often headed by chief information officer (CIO)
– Other senior positions include chief security officer
(CSO), chief knowledge officer (CKO), chief privacy
officer (CPO), chief data officer (CDO)
• Programmers
• Systems analysts
• Information systems managers
• End users

2.4 Other terms DISCUSSION QUESTIONS

Organizing the Information Systems Function 1. How can a transaction processing system help an organization’s
management information system and decision-support system?
• IT governance
– Strategies and policies for using IT in the organization 2. Which of the four major types of information systems do you
think is the most valuable to an organization?
– Decision rights
3. Discuss the benefits and challenges of enterprise systems and
– Accountability
explain why a firm would want to build one.
– Organization of information systems function
4. Discuss why a typical hierarchical management structure is not
 Centralized, decentralized, and so on conducive to a collaborative business culture.
5. Discuss the tools and technologies for collaboration and social
business that are available and how they provide value to an
organization.

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Management Information Systems:
1 2

Managing the Digital Firm Learning Objectives

Sixteenth Edition
 What are the problems of managing data resources in a
traditional file environment?
 Database -> Managing a firm’s data and providing the
foundation for business intelligence.
Lecture 3  Why are E-R diagrams assurance essential for managing the
Foundations of Business firm’s data resources?
Intelligence: Databases and  What are the major capabilities of database management
Information Management systems (DBMS), and why is a relational DBMS so powerful?

3 4

1. Project Conceptualization:
Manage business functions
Three stages of Database Development

2. Data Collection
1. Requirements
2. Component 3. Implementation
analysis state ->
design state -> Data state -> Physical
understanding the
model (ERD) database (DBMS)
3. Data Storage and data problem
management: ERD

4. Data Analysis: Visualization

and other methods

5. Data Interpretation and

reporting -> decision making

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5 6
File Organization Terms and Concepts

• Database: Group of related files

Function
al model
Understand ERD (theory) • File: Group of records of same type
• Record: Group of related fields
Draw ERD (erdplus.com, • Field: Group of characters as word(s) or number(s)
Data draw.io, Ms visio,…)
MIS
model
• Entity: Person, place, thing on which we store information
Organize ERD in software
(Excel, SQL server,…) • Attribute: Each characteristic, or quality, describing entity

Analyse data (Pivot table

in Excel, Tableau,…)

7 8

Problems with the Traditional File Environment

Figure 6.1 The Data Hierarchy
• Files maintained separately by different departments
• Data redundancy
• Data inconsistency
• Program-data dependence
• Lack of flexibility
• Poor security
• Lack of data sharing and availability

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9 10

Database Management Systems

Figure 6.2 Traditional File Processing • Database
– Serves many applications by centralizing data and
controlling redundant data
• Database management system (DBMS)
– Interfaces between applications and physical data files
– Separates logical and physical views of data
– Solves problems of traditional file environment
 Controls redundancy
 Eliminates inconsistency
 Uncouples programs and data
 Enables organization to centrally manage data and data
security

11 12

Figure 6.3 Human Resources Database with Relational DBMS

Multiple Views • Represent data as two-dimensional tables
• Each table contains data on entity and attributes
• Table: grid of columns and rows
– Rows (tuples): Records for different entities
MS Access, My SQL, – Fields (columns): Represents attribute for entity
Oracle, MS SQL – Key field: Field used to uniquely identify each record
Server,…
– Primary key: Field in table used for key fields
– Foreign key: Primary key used in second table as look-
up field to identify records from original table

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13 14

Capabilities of Database Management Systems

Figure 6.4 Relational Database Tables
• Data definition capability
• Data dictionary
• Querying and reporting
– Data manipulation language
 Structured Query Language (SQL)
• Many DBMS have report generation capabilities for
creating polished reports (Microsoft Access)

15 16

Designing Databases E-R Diagram

• Conceptual design vs. physical design  Define terms such as entity, relationship, attributes
• Normalization  Understand importance of data modeling
– Streamlining complex groupings of data to minimize redundant
data elements and awkward many-to-many relationships  Write good names and definitions for entities, relationships,

• Referential integrity and attributes

– Rules used by RDBMS to ensure relationships between tables  Distinguish unary, binary, and ternary relationships
remain consistent
 Model different types of attributes, entities, relationships, and
• Entity-relationship diagram
cardinalities
• A correct data model is essential for a system serving the
business well
 Draw E-R diagrams for common business situations
 Convert many-to-many relationships to associative entities

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17 18

E-R Model Constructs E-R Model Constructs

 Entities: Sample E-R Diagram
 Entity instance–person, place, object, event, concept
(often corresponds to a row in a table)
 Entity Type–collection of entities (often corresponds to a
table)
 Relationships:
 Relationship instance–link between entities (corresponds
to primary key-foreign key equivalencies in related tables)
 Relationship type–category of relationship…link between
entity types
 Attributes:
 Properties or characteristics of an entity or relationship
type (often corresponds to a field in a table)
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19 20

E-R Model Notations E-R Model Constructs

Cardinality of Relationships
One-to-One
 Each entity in the relationship will have exactly one related
entity
One-to-Many
 An entity on one side of the relationship can have many related
entities, but an entity on the other side will have a maximum of
one related entity
Many-to-Many
 Entities on both sides of the relationship can have many related
entities on the other side

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21 22

E-R Model Constructs E-R Model Constructs

Binary relationships Associative Entities

 An entity–has attributes
 A relationship–links entities together
 When should a relationship with attributes instead be an
associative entity?
 All relationships for the associative entity should be many
 The associative entity could have meaning independent
of the other entities
 The associative entity preferably has a unique identifier,
and should also have other attributes

23 24

E-R Model Constructs E-R Model Constructs

A binary relationship with an attribute An associative entity (CERTIFICATE)

Here, the date completed attribute pertains specifically to the

employee’s completion of a course…it is an attribute of the
relationship.

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25 26

Discussion for E-R Diagram Transforming E-R diagrams into relations (table)

Mapping Binary Relationships

 One-to-Many–Primary key on the one side becomes a
foreign key on the many side
 Many-to-Many–Create a new relation with the primary
keys of the two entities as its primary key
- Entities  One-to-One–Primary key on mandatory side becomes a
- Relationships
(unary, binary, foreign key on optional side
ternary)
- Attributes
- Cardinality
- Primary key
- Foreign key

27 28
Transforming E-R diagrams into relations (table) Transforming E-R diagrams into relations (table)
a) Relationship between customers and orders a) Completes relationship (M:N)

b) Mapping the relationship

The Completes relationship will need to become a separate relation.

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29 30
Transforming E-R diagrams into relations (table) Transforming E-R diagrams into relations (table)

b) Three resulting relations a) In charge relationship (binary 1:1)

31 32
Transforming E-R diagrams into relations (table) Transforming E-R diagrams into relations (table)

b) Resulting relations Mapping Associative Entities

Identifier Not Assigned
 Default primary key for the association relation is
composed of the primary keys of the two entities
(as in M:N relationship)
Identifier Assigned
 It is natural and familiar to end-users
 Default identifier may not be unique

Foreign key goes in the relation on the optional side,

matching the primary key on the mandatory side

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33 34
Transforming E-R diagrams into relations (table) Transforming E-R diagrams into relations (table)

a) An associative entity b) Three resulting relations

Composite primary key formed from the two foreign keys

35 36
Transforming E-R diagrams into relations (table) Transforming E-R diagrams into relations (table)

a) SHIPMENT associative entity b) Three resulting relations

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37 38
Transforming E-R diagrams into relations (table) The Challenge of Big Data

• Big data
– Massive sets of unstructured/semi-structured data from
web traffic, social media, sensors, and so on
• Volumes too great for typical DBMS
– Petabytes, exabytes of data
• Can reveal more patterns, relationships and anomalies
• Requires new tools and technologies to manage and analyze

39 40
Business Intelligence Infrastructure
Figure 6.13 Contemporary Business
• Array of tools for obtaining information from separate
systems and from big data Intelligence Infrastructure
• Data warehouse
– Stores current and historical data from many core
operational transaction systems
– Consolidates and standardizes information for use across
enterprise, but data cannot be altered
– Provides analysis and reporting tools
• Data marts:
– Subset of data warehouse
– Typically focus on single subject or line of business

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41 42

Analytical Tools: Relationships, Online Analytical Processing (O L A P)

Patterns, Trends • Supports multidimensional data analysis
• Tools for consolidating, analyzing, and providing access to – Viewing data using multiple dimensions
vast amounts of data to help users make better business – Each aspect of information (product, pricing, cost,
decisions region, time period) is different dimension
– Multidimensional data analysis (OLAP) – Example: How many washers sold in the East in June
– Data mining compared with other regions?
– Text mining • OL AP enables rapid, online answers to ad hoc queries
– Web mining

Data Mining
• Finds hidden patterns, relationships in datasets
– Example: customer buying patterns
• Infers rules to predict future behavior
• Types of information obtainable from data mining: THE END
– Associations
– Classification
– Clustering
– Forecasting

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45
Transforming E-R diagrams into relations (table)

- Sales_rep(id-sales, name, mob,…)

- Customers(id-customer, name, mob,…, id-sales)
- Order(id-order, sale, quantity, price,…,id-customer)
- Product(id-product, name,…,id-order, id-warehouse)
- Warehouse(id-ware, address, capacity,…)

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Management Information Systems: Introduction
Managing the Digital Firm
Sixteenth Edition Problem: Legacy systems designed for old
business model; system needed to support
new consumer, products, business processes
Solution: SAP enterprise resource planning
Lecture 4 system
Achieving Operational Excellence Demonstrates use of technology to support
and Customer Intimacy: Enterprise
Applications new business models and efficiency, integrate
cross-enterprise data for single, consistent
view

Learning Objectives
6.1 How do enterprise systems help businesses achieve
operational excellence?
6.2 How do supply chain management systems coordinate
planning, production, and logistics with suppliers?
6.3 How do customer relationship management systems
help firms achieve customer intimacy?
6.4 What are the challenges that enterprise applications
pose, and how are enterprise applications taking
advantage of new technologies?

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 Enterprise Systems Enterprise Systems
 Enterprise Software
 Business value of Enterprise software Firms
 Supply chain management systems
related to coordinate planning,
production, and logistics with
Sales & Finance & Manufacturing Human
suppliers.
Marketing Accounting & Production resources
 upstream supply chain (Software) (Software) (Software) (Software)
DISCUSSION  internal supply chain
 downstream supply chain
 Bullwhip effect
 just-in-time strategies
 Safety stock ERP (software)
 push-based model
 pull-based model
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Odoo platform
Enterprise Systems
• Enterprise resource planning (ERP) systems
• Suite of integrated software modules and a common
central database
• Collects data from many divisions of firm for use in nearly
all of firm’s internal business activities
• Information entered in one process is immediately
available for other processes

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Figure 9.1 How Enterprise Systems Enterprise Software
Work • Built around thousands of predefined business processes
that reflect best practices
– Finance and accounting
– Human resources
– Manufacturing and production
– Sales and marketing
• To implement, firms:
– Select functions of system they wish to use
– Map business processes to software processes
 Use software’s configuration tables for customizing

Business Value of Enterprise Nike’s Supply Chain Management

Systems
• Increase operational efficiency
• Provide firm-wide information to support decision making
• Enable rapid responses to customer requests for
information or products
• Include analytical tools to evaluate overall organizational
performance and improve decision-making

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Odoo platform - SCM
The Supply Chain
• Network of organizations and processes for:
– Procuring materials
– Transforming materials into products
– Distributing the products
• Upstream supply chain
• Downstream supply chain
• Internal supply chain

Figure 9.2 Nike’s Supply Chain Supply Chain Management

• Inefficiencies cut into a company’s operating costs
– Can waste up to 25 percent of operating expenses
• Just-in-time strategy
– Components arrive as they are needed <- Perfect inf
– Finished goods shipped after leaving assembly line
• Safety stock: buffer for lack of flexibility in supply chain
• Bullwhip effect <- Uncertainties
– Information about product demand gets distorted as it
passes from one entity to next across supply chain

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The Bullwhip Effect – Rủi ro tiềm ẩn của chuỗi cung ứng
Figure 9.3 The Bullwhip Effect

Supply Chain Management Software Global Supply Chains and the

• Supply chain planning systems Internet
– Model existing supply chain • Global supply chain issues
– Enable demand planning – Greater geographical distances, time differences
– Optimize sourcing, manufacturing plans – Participants from different countries
– Establish inventory levels  Different performance standards
– Identify transportation modes  Different legal requirements
• Supply chain execution systems • Internet helps manage global complexities
– Manage flow of products through distribution centers – Warehouse management
and warehouses
– Transportation management
– Logistics
– Outsourcing
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Demand-Driven Supply Chains: From Figure 9.4 Push- Versus Pull-Based
Push to Pull Manufacturing and Supply Chain Models
Efficient Customer Response
• Push-based model (build-to-stock)
– Earlier SCM systems
– Schedules based on best guesses of demand
• Pull-based model (demand-driven)
– Web-based
– Customer orders trigger events in supply chain
• Internet enables move from sequential supply chains to
concurrent supply chains
– Complex networks of suppliers can adjust immediately
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Figure 9.5 The Emerging Internet- Business Value of Supply Chain

Driven Supply Chain Management Systems
immediately adjust • Match supply to demand
inventories, orders,
and capacities • Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
– Total supply chain costs can be 75 percent of operating
budget
• Increase sales

Source: Siddiqi, J., Akhgar, B., Wise, T., Hallam, S.: A Framework for the Implementation
of a CRM Strategy in Retail Sector. In proceeding of the 2006 International Conference
on Information & Knowledge Engineering, CSREA Press 2006, ISBN 1-60132-003-5
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Customer Relationship Management Customer Relationship Management

Source: Le Dien Tuan and Duong Quang Danh.: Áp dụng mô hình RFM trong phân
khúc khách hàng nhằm phát triển chiến lược marketing. In proceeding of 2022 CITA.

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Customer Relationship Management Figure 9.6 Customer Relationship
• Knowing the customer (profitable, loyal customers) Management (CRM)
• In large businesses, too many customers and too many
ways customers interact with firm
• CRM systems
– Capture and integrate customer data from all over the
organization
– Consolidate and analyze customer data
– Distribute customer information to various systems and
customer touch points across enterprise
– Provide single enterprise view of customers

Customer Relationship Management Customer Relationship Management

Software (1 of 2) Software (2 of 2)
• Packages range from niche tools to large-scale enterprise • CRM packages typically include tools for:
applications – Sales force automation (SFA)
• More comprehensive packages have modules for:  Sales prospect and contact information
– Partner relationship management (PRM)  Sales quote generation capabilities
 Integrating lead generation, pricing, promotions, order – Customer service
configurations, and availability  Assigning and managing customer service requests
 Tools to assess partners’ performances  Web-based self-service capabilities
– Employee relationship management (ERM) – Marketing
 Setting objectives, employee performance management,  Capturing prospect and customer data, scheduling and
performance-based compensation, employee training tracking direct-marketing mailings or e-mail
 Cross-selling
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Figure 9.8 CRM Software Capabilities Figure 9.9 Customer Loyalty
Management Process Map

Operational and Analytical CRM Figure 9.10 Analytical CRM Data

• Operational CRM Warehouse
– Customer-facing applications
– Sales force automation call center and customer
service support
– Marketing automation
• Analytical CRM
– Based on data warehouses populated by operational
CRM systems and customer touch points
– Analyzes customer data (OLAP, data mining, etc.)
 Customer lifetime value (CLTV)

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Business Value of Customer Enterprise Application Challenges
Relationship Management Systems • Expensive to purchase and implement enterprise
• Business value of CRM systems applications
– Increased customer satisfaction – Multi-million dollar projects in 2018
– Reduced direct-marketing costs – Long development times
– More effective marketing • Technology changes
– Lower costs for customer acquisition/retention • Business process changes
– Increased sales revenue
• Organizational learning, changes
• Churn rate
• Switching costs, dependence on software vendors
– Number of customers who stop using or purchasing
products or services from a company • Data standardization, management, cleansing
– Indicator of growth or decline of firm’s customer base
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Next-Generation Enterprise Next-Generation Enterprise

Applications (1 of 2) Applications (2 of 2)
• Enterprise solutions/suites • Social CRM
– Make applications more flexible, web-enabled, – Incorporating social networking technologies
integrated with other systems – Company social networks
• SOA standards (service-oriented architecture) – Monitor social media activity; social media analytics
• Open-source applications – Manage social and web-based campaigns

• On-demand solutions • Business intelligence

– Inclusion of BI with enterprise applications
• Cloud-based versions
– Flexible reporting, ad hoc analysis, “what-if” scenarios,
• Functionality for mobile platform digital dashboards, data visualization

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Discussion question
1. How does enterprise software enable a business to use Copyright
industry-proven best practices?
2. Explain the bull-whip effect on a supply chain and how it
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courses and assessing student learning. Dissemination or sale of
3. Describe the difference between push-based supply any part of this work (including on the World Wide Web) will
destroy the integrity of the work and is not permitted. The work
models and pull-based supply models. and materials from it should never be made available to students
except by instructors using the accompanying text in their
4. Describe the difference between operational customer classes. All recipients of this work are expected to abide by these
restrictions and to honor the intended pedagogical purposes and
relationship management systems and analytical customer the needs of other instructors who rely on these materials.
relationship management systems.

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Management Information Systems:
 Problem: Extreme competition; opportunities from
Managing the Digital Firm new technology
Sixteenth Edition  Solutions: Use analysis methods of business
intelligence to improve organization and team
performance.

Chapter 8
Enhancing Decision Making

Introduction

Data/Big data
Decision making

 Statistics
 Data mining
Business  Artificial
Intelligence/Bus Intelligence
iness Analytics  Data analysis
Demo toolset

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Learning Objectives What Are the Different Types of
8.1 What are the different types of decisions, and how does Decisions, and How Does the
the decision making process work? Decision Making Process Work?
8.2 How do information systems support the activities of (1 of 2)
managers and management decision making?
• Business value of improved decision making
8.3 How do business intelligence and business analytics – Improving hundreds of thousands of “small” decisions adds up to
support decision making? large annual value for the business

8.4 How do different decision-making constituencies/systems • Types of decisions

in an organization use business intelligence, and what is – Unstructured: Decision maker must provide judgment, evaluation,
and insight to solve problem
the role of information systems in helping people
– Structured: Repetitive and routine; involve definite procedure for
working in a group make decisions more efficiently?
handling so they do not have to be treated each time as new
– Semistructured: Only part of problem has clear-cut answer
provided by accepted procedure
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What Are the Different Types of Figure 12.1 Information Requirements

Decisions, and How Does the Decision of Key Decision-Making Groups in a
Making Process Work? (2 of 2) Firm
• Senior managers
– Make many unstructured decisions
• Middle managers
– Make more structured decisions but these may include
unstructured components
• Operational managers and rank and file employees
– Make more structured decisions

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Figure 12.2 Stages in Decision The Decision Making Process
Making • Intelligence
– Discovering, identifying, and understanding the
problems occurring in the organization
• Design
– Identifying and exploring solutions to the problem
• Choice
– Choosing among solution alternatives
• Implementation
– Making chosen alternative work and continuing to
monitor how well solution is working

Managerial Roles Real-World Decision Making

• Information systems can only assist in some of the roles • Three main reasons why investments in IT do not always
played by managers produce positive results
• Classical model of management: five functions – Information quality
– Planning, organizing, coordinating, deciding, and  High-quality decisions require high-quality information
controlling – Management filters
• More contemporary behavioral models  Managers have selective attention and have variety of
biases that reject information that does not conform to
– Actual behavior of managers appears to be less prior conceptions
systematic, more informal, less reflective, more
reactive, and less well organized than in classical – Organizational inertia and politics
model  Strong forces within organizations resist making
decisions calling for major change

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High-Velocity Automated Decision What is Business Intelligence?
Making • Business intelligence
• Made possible through computer algorithms precisely – Infrastructure for collecting, storing, analyzing data
defining steps for a highly structured decision produced by business
– Humans taken out of decision – Databases, data warehouses, data marts

• For example: High-speed computer trading programs • Business analytics

– Trades executed in 30 milliseconds – Tools and techniques for analyzing data
– OLAP, statistics, models, data mining
• Require safeguards to ensure proper operation and
regulation • Business intelligence vendors
– Create business intelligence and analytics purchased
by firms

The Business Intelligence Figure 12.3 Business Intelligence and

Environment Analytics for Decision Support
• Six elements in the business intelligence environment
– Data from the business environment
– Business intelligence infrastructure
– Business analytics toolset
– Managerial users and methods
– Delivery platform—MIS, DSS, ESS
– User interface
 Data visualization tools

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Business Intelligence and Analytics Analytics Overview
Capabilities
• Goal is to deliver accurate real-time information to decision
makers
• Main analytic functionalities of BI systems
– Production reports
– Parameterized reports
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecasts, scenarios, models

Predictive Analytics Big Data Analytics

• Uses variety of data, techniques to predict future trends • Big data: Massive datasets collected from social media,
and behavior patterns online and in-store customer data, and so on
– Statistical analysis • Help create real-time, personalized shopping experiences
– Data mining for major online retailers
– Historical data • Smart cities
– Assumptions – Public records
• Incorporated into numerous BI applications for sales, – Sensors, location data from smartphones
marketing, finance, fraud detection, health care – Ability to evaluate effect of one service change on
– Credit scoring system
– Predicting responses to direct marketing campaigns

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Operational Intelligence and Location Analytics and Geographic
Analytics Information Systems
• Operational intelligence: Business activity monitoring • Location analytics
• Collection and use of data generated by sensors – Ability to gain business insight from the location
(geographic) component of data
• Internet of Things  Mobile phones
– Creating huge streams of data from web activities,  Sensors, scanning devices
sensors, and other monitoring devices
 Map data
• Software for operational intelligence and analytics enable
companies to analyze their big data • Geographic information systems (GIS)
– Ties location-related data to maps
– Example: For helping local governments calculate
response times to disasters
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Location Analytics Location Analytics

Google map: Công ty TNHH TMTH Tuấn Việt see location

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MIS

Describe how MIS, DSS, ESS

DSS
and GDSS provide decision
DISCUSSION
support for each of these
groups. ESS

GDSS

Support for Semistructured Regression Modeling for Inferential Statistics

Decisions  Regression
• A part of inferential statistics
• Decision-support systems • The most widely known and used analytics technique in
– Support for semistructured decisions statistics
• Used to characterize relationship between explanatory
• Use mathematical or analytical models (input) and response (output) variable
• Allow varied types of analysis  It can be used for
– “What-if” analysis • Hypothesis testing (explanation)
• Forecasting (prediction)
– Sensitivity analysis
– Multidimensional analysis / OLAP
 For example: pivot tables

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Regression Modeling Regression Modeling
• x: input, y: output
• Simple Linear Regression

y   0  1 x
• Multiple Linear Regression
y   0  1 x1   2 x2   3 x3  ...   n xn

• The meaning of Beta ( ) coefficients

Figure 12.6 A Pivot Table That Examines Customer

Figure 12.5 Sensitivity Analysis Regional Distribution and Advertising Source

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Decision Support for Senior Figure 12.7 The Balanced Scorecard
Management (1 of 2) Framework
• ESS: decision support for senior management
– Help executives focus on important performance information
• Balanced scorecard method
– Measures outcomes on four dimensions
 Financial
 Business process
 Customer
 Learning and growth
– Key performance indicators (KPIs) measure each dimension

Decision Support for Senior Group Decision-Support Systems

Management (2 of 2) (GDSS)
• Business performance management (BPM) • Interactive system to facilitate solution of unstructured
– Translates firm’s strategies (e.g., differentiation, low- problems by group
cost producer, scope of operation) into operational • Specialized tools
targets
– Virtual collaboration rooms
– KPIs developed to measure progress toward targets
– Software to collect, rank, edit participant ideas and
• Data for ESS responses
– Internal data from enterprise applications • Promotes collaborative atmosphere, anonymity
– External data such as financial market databases
• Cisco’s Collaboration Meeting Rooms Hybrid (CMR)
– Drill-down capabilities
• Skype for Business

E-commece presence
Lecture 6
Firms
E-commerce: Digital Markets, Digital
E-commerce E-logistics and e-
Goods payments
Marketing Online
Slide in this Presentation Contain Hyperlinks.
JAWS users should be able to get a list of links Data-based business
by using INSERT+F7
strategy (BI)

 Problem: How to derive profits from large and

Learning Objectives
desirable user base
6.1 What are the unique features of e-commerce, digital markets,
 Solution: and digital goods?
6.2 What are the principal e-commerce business and revenue
 Enable businesses to promote brand awareness and models?
refer back to retail sites for purchasing
6.3 How has e-commerce transformed marketing?
 “Promoted pins”: Paid advertising with fees charged if 6.4 How has e-commerce affected business-to-business
user clicks through to firm’s Web site transactions?

 Demonstrates use of social networking technologies in 6.5 What is the role of m-commerce in business, and what are the
most important m-commerce applications?
generating new business models
6.6 What issues must be addressed when building an e-commerce
presence?

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Introduction to E-commerce Major Trends in E-commerce
• Use of Internet to transact business • Business trends include:
– Includes Web, mobile browsers and apps – Covid-19 pandemic fuels surge in retail e-commerce,
m-commerce, and certain on-demand services
• More formally:
– Digitally enabled commercial transactions between and • Technology trends include:
among organizations and individuals – Mobile platform and cloud computing
– Big data and Internet of Things
• Societal trends include:
– Increased concern about impact of social networks
– Concerns about increasing market dominance of big
technology firms

Why E-Commerce is Different (1 of 2) Why E-Commerce is Different (2 of 2)

• Ubiquity • Interactivity
– Marketspace is virtual • Information density
– Transaction costs reduced – Greater price and cost transparency
• Global reach – Enables price discrimination
– Transactions cross cultural and national boundaries • Personalization/customization
• Universal standards – Technology permits modification of messages, goods
– One set of technology standards: Internet standards • Social technology
• Richness – Promotes user content generation and social
– Supports video, audio, and text messages networking

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Key Concepts in E-Commerce – Figure 10.2 The Benefits of
Digital Markets and Digital Goods in a Disintermediation to the Consumer
Global Marketplace
• Internet and digital markets have changed the way companies
conduct business
• Information asymmetry reduced
• Menu costs, search and transaction costs reduced
• Dynamic pricing enabled
• Switching costs
• Delayed gratification
• Disintermediation
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 Bottom line:
Digital Goods
E-commerce firms now have more opportunities to reach
• Goods that can be delivered over a digital network customers, suppliers, and partners through Internet channels.
• Cost of producing first unit is almost entire cost of product The Internet has also given digital firms the opportunity to
• Costs of delivery over the Internet very low create new business models or reshape their current model by
using one or more of the unique features of e-commerce:
• Marketing costs remain the same; pricing highly variable
ubiquity, global reach, universal standards, richness,
• Industries with digital goods are undergoing revolutionary
interactivity, information density, personalization/customization,
changes (publishers, record labels, etc.)
and social technology.

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Print-on-Demand Model

Print-on-Demand model

B2B, B2C and C2C

Types of E-Commerce E-Commerce Business Models

• Three major types • Portal
– Business-to-consumer (B2C) • E-tailer
 Example: Barnes and Noble.com
• Content provider
– Business-to-business (B2B)
 Example: ChemConnect • Transaction broker
– Consumer-to-consumer (C2C) • Market creator
 Example: e Bay • Service provider
• E-commerce can be categorized by platform • Community provider
– Mobile commerce (m-commerce)

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7.2 Nguyên lý KD TMĐT và mô hình thu nhập
E-Commerce Revenue Models
• Advertising
• Sales
• Subscription
• Free/Freemium
• Transaction fee
• Affiliate

Figure 10.4 Website Personalization

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Social E-Commerce and Social Social E-Commerce and Social
Network Marketing (1 of 2) Network Marketing (2 of 2)
• Social e-commerce based on digital social graph • Social network marketing
• Features of social e-commerce driving its growth – Seeks to leverage individuals’ influence over others
– Newsfeed – Targeting a social network of people sharing interests
– Timelines and advice
– Social sign-on – Facebook’s “Like” button
– Collaborative shopping – Social networks have huge audiences
– Network notification • Social shopping sites
– Social search (recommendations)
• Wisdom of crowds
• Social media
– Fastest growing media for branding and marketing • Crowdsourcing

How Has E-Commerce Affected Figure 10.6: Electronic Data

Business-To Business Transactions? Interchange (EDI)
• U.S. B2B trade in 2019 is $13.5 trillion
– U.S. B2B e-commerce in 2018 is $6.2 trillion
• Internet and networking helps automate procurement
• Variety of Internet-enabled technologies used in B2B
– Electronic data interchange (EDI)
– Private industrial networks (private exchanges)
– Net marketplaces
– Exchanges

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What is the Role of M-Commerce in Figure 10.9 Mobile Retail Commerce
Business, and What are the Most Revenues
Important M-Commerce Applications?
• M-commerce in 2017 is 35 percent of all e-commerce
• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, T V, etc.)
– In-app sales to mobile devices

Location-Based Services and Other Mobile Commerce Services

Applications • Financial account management apps
• Used by 74 percent of smartphone owners – Banks, credit card companies

• Based on GPS map services • Mobile advertising market

– Google and Facebook are largest markets
• Geosocial services
– Ads embedded in games, videos, and mobile apps
– Where friends are
• 55 percent of online retailers have m-commerce websites
• Geo advertising
– What shops are nearby
• Geo information services
– Price of house you are passing

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What Issues Must Be Addressed Figure 10.10 E-Commerce Presence
When Building an E-Commerce Map
Presence?
• Most important management challenges
– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve
those objectives
• Develop an e-commerce presence map
– Four areas: websites, e-mail, social media, offline
media
• Develop a timeline: milestones
– Breaking a project into discrete phases
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Management Information Systems:
Managing the Digital Firm Learning Objectives
Sixteenth Edition 7.1 What is IT infrastructure, and what are the stages and
drivers of IT infrastructure evolution?
7.2 What are the components of IT infrastructure?

Lecture 7 7.3 What are the current trends in computer hardware

platforms?
IT Infrastructure and Emerging
Technologies 7.4 What are the current computer software platforms
and trends?
7.5 What are the challenges of managing IT infrastructure
Slide in this Presentation Contain Hyperlinks.
JAWS users should be able to get a list of links
and management solutions?
by using INSERT+F7

IT infrastructure strategies IT infrastructure strategies

Formula for Success (1 of 2) Formula for Success (1 of 2)
• Problem • Outsource IT infrastructure management and operations
– Loss of IT infrastructure from divestiture • Demonstrates the role of cloud computing in re-shaping a
– Limited time frame and resources firms infrastructure
– Inadequate in-house IT staff • Illustrates how firms can integrate their existing applications
• Solutions into a cloud platform
– Plan new IT Infrastructure
– Make IT infrastructure investments
– Shift from operational to strategic technology orientation
– IBM-managed cloud computing services
– SAP applications

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Defining IT Infrastructure Figure 5.1 Connection Between the
• Set of physical devices and software required to operate Firm, IT Infrastructure, and Business
an enterprise Capabilities
• Set of firm-wide services including:
– Computing platforms providing computing services
– Physical facilities management services
– IT management, education, and other services
• “Service platform” perspective
– More accurate view of value of investments

Figure 5.2 Stages in IT Infrastructure Evolution

Evolution of IT Infrastructure
• General-purpose mainframe and minicomputer era: 1959
to present
• Personal computer era: 1981 to present
• Client/server era: 1983 to present
• Enterprise computing era: 1992 to present
• Cloud and mobile computing: 2000 to present

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Figure 5.3 A Multitiered (N-Tier) Technology Drivers of Infrastructure
Client/Server Network Evolution (1 of 2)
• Moore’s law and microprocessing power
– Computing power doubles every 2 years
– Nanotechnology
• Law of Mass Digital Storage
– The amount of data being stored each year doubles
• Metcalfe’s Law and network economics
– Value or power of a network grows exponentially as a
function of the number of network members.

What Are the Components of IT Figure 5.8 The IT Infrastructure

Infrastructure? Ecosystem
1. Computer hardware platforms
2. Operating system platforms
3. Enterprise software applications
4. Data management and storage
5. Networking/telecommunications platforms
6. Internet platforms
7. Consulting system integration services

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Computer Hardware Platforms Operating System Platforms
• Client machines • Corporate servers
– Desktop PCs, laptops – Windows Server
– Mobile computing: smartphones, tablets – Unix
– Desktop chips vs. mobile chips – Linux
• Servers • Client level
• Mainframes – Microsoft Windows
– IBM mainframe – Android, iOS, Windows 10 (mobile/multitouch)
– Digital workhorse for banking and telecommunications – Google’s Chrome OS (cloud computing)
networks

Enterprise Software Applications Data Management and Storage

• In 2018, firms spend $389 billion on software for enterprise • Database software providers
applications – IBM (DB2)
• Largest providers: SAP and Oracle – Oracle
• Middleware providers: IBM, Oracle – Microsoft (SQL Server)
– Sybase (Adaptive Server Enterprise),
– My SQL
– Apache Hadoop
• Physical data storage for large-scale systems
– Dell EMC
– Hewlett Packard Enterprise (H3C)

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Networking/Telecommunications Internet Platforms
Platforms • Hardware, software, management services to support
company websites, intranets
• Network operating systems
– Web-hosting services
– Windows Server, Linux, Unix
– Routers
• Network hardware providers
– Cabling or wireless equipment
– Cisco, Juniper Networks
• Internet hardware server market
• Telecommunication services
– IBM, Dell, Oracle, HP
– Telecommunications, cable, telephone company
charges for voice lines and Internet access • Web development tools/suites
– AT&T, Verizon – Microsoft (Visual Studio and .NET), Oracle-Sun (Java),
Adobe

Consulting and System Integration What Are the Current Trends in

Services Computer Hardware Platforms? (1 of 5)
• Even large firms do not have resources for full range of • The mobile digital platform
support for new, complex infrastructure – Smartphones
• Leading consulting firms: Accenture, IBM Global Services, – Netbooks
HP, Infosys, Wipro Technologies – Tablet computers
• Software integration: ensuring new infrastructure works – Digital e-book readers and apps (Kindle)
with legacy systems – Wearable devices
• Legacy systems: older TPS created for mainframes that • Consumerization of IT and BYOD (bring your own device)
would be too costly to replace or redesign – Forces businesses and IT departments to rethink how
IT equipment and services are acquired and managed

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What Are the Current Trends in What Are the Current Trends in
Computer Hardware Platforms? (2 of 5) Computer Hardware Platforms? (3 of 5)
• Quantum computing • Cloud computing
– Uses quantum physics to represent and operate on – On-demand computing services obtained over network
data  Infrastructure as a service (IaaS)
– Dramatic increases in computing speed  Software as a service (SaaS)
• Virtualization  Platform as a service (PaaS)
– Allows single physical resource to act as multiple – Cloud can be public or private
resources (i.e., run multiple instances of OS) – Allows companies to minimize IT investments
– Reduces hardware and power expenditures – Drawbacks: Concerns of security, reliability
– Facilitates hardware centralization – Hybrid cloud computing model
– Software-defined storage (SDS)
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Figure 5.9 Cloud Computing Platform What Are the Current Trends in
Computer Hardware Platforms? (4 of 4)
• Green computing (Green IT)
– Practices and technologies for manufacturing, using,
disposing of computing and networking hardware
– Reducing power consumption a high priority
– Data centers
• High performance, power-saving processors
– Multicore processors
– Power-efficient microprocessors

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What Are the Current Computer
Software Platforms and Trends?
• Linux and open-source software
– Produced by community of programmers
What are the current
– Examples: Apache web server, Mozilla Firefox browser,
DISCUSSION computer software platforms OpenOffice
and trends? – Linux
• Software for the web: Java, HTML, and HTML5
– Java Virtual Machine
– Web browsers
– HTMLand HTML5
– Ruby and Python

What Are the Current Computer

Software Platforms and Trends?
• Software outsourcing and cloud services
– Software packages and enterprise software What are the challenges of
– Software outsourcing DISCUSSION managing IT infrastructure
– Cloud-based software services and tools and management solutions?
 Service Level Agreements (SLAs): formal agreement
with service providers
• Mashups and apps

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Dealing with Platform and Management and Governance
Infrastructure Change • Governance
• As firms shrink or grow, IT needs to be flexible and • Who controls IT infrastructure?
scalable
• How should IT department be organized?
• Scalability – Centralized
– Ability to expand to serve larger number of users  Central IT department makes decisions
• For mobile computing and cloud computing – Decentralized
– New policies and procedures for managing these new  Business unit IT departments make own decisions
platforms
• How are costs allocated between divisions, departments?
– Contractual agreements with firms running clouds and
distributing software required

Making Wise Infrastructure Total Cost of Ownership (TCO) Model

Investments • Analyzes direct and indirect costs
• Under-investment and over-investment can hamper firm • Hardware, software account for only about 20% of TCO
performance
• Other costs: Installation, training, support, maintenance,
• Rent-versus-buy infrastructure, downtime, space, and energy
• Cloud computing • TCO can be reduced
– Security requirements – Use of cloud services, greater centralization and
– Impact on business processes and workflow standardization of hardware and software resources
• Outsourcing

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Competitive Forces Model for IT Figure 5.13 Competitive Forces Model
Infrastructure Investment for IT Infrastructure
• Market demand for firm’s services
• Firm’s business strategy
• Firm’s IT strategy, infrastructure, and cost
• Information technology assessment
• Competitor firm services
• Competitor firm IT infrastructure investments

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Management Information Systems:
Managing the Digital Firm Learning Objectives
Sixteenth Edition 8.1 How does building new systems produce organizational
change?
8.2 What are the core activities in the systems development
process?
Lecture 8
8.3 What are the principal methodologies for modeling and
Building Information Systems designing systems?
8.4 What are alternative methods for building information
systems?
8.5 What are new approaches for system building in the
digital firm era?

Figure 13.1 Organizational Change

Carries Risks and Rewards

How does building new systems

DISCUSSION
produce organizational change?

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Systems Development and Systems Development and
Organizational Change (1 of 2) Organizational Change (2 of 2)
• IT-enabled organizational change • Business process redesign
• Automation – Analyze, simplify, and redesign business processes
– Increases efficiency – Reorganize workflow, combine steps, eliminate
repetition
– Replaces manual tasks
• Paradigm shifts
• Rationalization of procedures
– Rethink nature of business
– Streamlines standard operating procedures
– Define new business model
– Often found in programs for making continuous quality
improvements – Change nature of organization

Business Process Redesign Figure 13.2 As-is Business Process

• Business process management (BPM) for Purchasing a Book from a
– Variety of tools, methodologies to analyze, design, Physical Bookstore
optimize processes
– Used by firms to manage business process redesign
• Steps in BPM
1. Identify processes for change
2. Analyze existing processes
3. Design the new process
4. Implement the new process
5. Continuous measurement

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Figure 13.3 Redesigned Process for
Purchasing a Book Online

What are the core activities in

DISCUSSION the systems development
process?

Systems Development Figure 13.4 The Systems

• Activities that go into producing an information system Development Process
solution to an organizational problem or opportunity
– Systems analysis
– Systems design
– Programming
– Testing
– Conversion
– Production and maintenance

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Systems Analysis Systems Design
• Analysis of problem to be solved by new system • Describes system specifications that will deliver functions
– Defining the problem identified during systems analysis
– Identifying causes • Should address all managerial, organizational, and
– Specifying solutions technological components of system solution
– Identifying information requirements • Role of end users
• Feasibility study – User information requirements drive system building
• Systems proposal report – Users must have sufficient control over design process
to ensure system reflects their business priorities and
• Information requirements information needs
– Faulty requirements analysis is a leading cause of – Insufficient user involvement in design effort is major
systems failure and high systems development costs cause of system failure

Completing the Systems Completing the Systems

Development Process (1 of 3) Development Process (2 of 3)
• Programming • Conversion
– System specifications from design stage are translated – Process of changing from old system to new system
into software program code – Four main strategies
• Testing  Parallel strategy
– Ensures system produces right results  Direct cutover
– Unit testing: Tests each program in system separately  Pilot study
– System testing: Test functioning of system as a whole  Phased approach
– Acceptance testing: Makes sure system is ready to be – Requires end-user training
used in production setting – Finalization of detailed documentation showing how
– Test plan: All preparations for series of tests system works from technical and end-user standpoint
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 Conversion strategies  Conversion strategies
Direct Parallel Pilot Phased
conversion conversion conversion conversion
 Turn off old  New and old  Convert to  Incremental
system systems run new system approach to
 Turn on new simultaneousl in single conversion
system y location  Bring in new
 Direct is  Until end  Once system as a
least users are complete in series of
expensive satisfied. pilot location, functional
method  Low risk new system components
 Riskiest  Highest cost in installed in  Lower risk
method method multiple  Takes the most
locations time

Completing the Systems

Development Process (3 of 3)
• Production and maintenance
– System reviewed to determine if revisions needed
What are the principal
– May include post-implementation audit document
methodologies for modeling
– Maintenance and designing systems?
 Changes in hardware, software, documentation, or procedures DISCUSSION
to a production system to correct errors, meet new - Structured Methodologies
requirements, or improve processing efficiency
- Object-Oriented
Methodologies

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Structured Methodologies (1 of 2)
• Structured: Techniques are step-by-step, progressive
• Process-oriented: Focusing on modeling processes or
actions that manipulate data
• Separate data from processes
• Data flow diagram (DFD)
– Represents system’s component processes and flow of
data between them
– Logical graphic model of information flow

Sơ đồ dòng chảy dữ liệu (DFD_Data Flow Diagram)

Data-Flow Diagramming Definitions Business flow Diagram Hệ thống

DFD ở mức ngữ cảnh
(BFD) A

• Context Diagram
– A data-flow diagram (DFD) of the scope of an
organizational system that shows the system Chức năng Chức năng DFD ở mức 0
boundaries, external entities that interact with the 0.B 0.C

system and the major information flows between the

entities and the system
Hoạt động Hoạt động
B.1 B.2 DFD ở mức 1
• Level-O Diagram
– A data-flow diagram (DFD) that represents a system’s
major processes, data flows, and data stores at a Hoạt động Hoạt động Hoạt động
C.1 C.2 C.3
higher level

5.23
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Business Flow Diagram (BFD)
Sơ đồ ngữ cảnh (Context Diagram)

Ví dụ: Sơ đồ BFD

Quản lý thuê băng đĩa

Cấp thẻ Cho Nhận Tạo báo Gửi thư

thuê thuê trả băng cáo khuyến
băng đĩa đĩa mãi
Bộ phận
quản lý

Sơ đồ dòng chảy dữ liệu (DFD_Data Flow Diagram)

Figure 13.6 Data Flow Diagram for
Mail-in University Registration
System

DFD ở mức nào?

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Object-Oriented Development (1 of 2) Figure 13.8 Class and Inheritance
• Object
– Basic unit of systems analysis and design
– Combines data and the processes that operate on those
data
– Data in object can be accessed only by operations
associated with that object
• Object-oriented modeling
– Based on concepts of class and inheritance
– Objects belong to a certain class and have features of that
class
– May inherit structures and behaviors of a more general,
ancestor class

Object-Oriented Development (2 of 2) Computer-Aided Software Engineering

• More iterative and incremental than traditional structured • Software tools to automate development and reduce
development repetitive work, including:
– Systems analysis: Interactions between system and – Graphics facilities for producing charts and diagrams
users analyzed to identify objects – Screen and report generators, reporting facilities
– Design phase: Describes how objects will behave and – Analysis and checking tools
interact; grouped into classes, subclasses, and – Data dictionaries
hierarchies – Code and documentation generators
– Implementation: Some classes may be reused from
existing library of classes, others created or inherited • Support iterative design by automating revisions and
changes and providing prototyping facilities
• Objects are reusable
• Require organizational discipline to be used effectively
– Object-oriented development can potentially reduce
time and cost of development
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Some methods for building information systems
• Traditional Systems Life Cycle
• Prototyping
• End-user development

What are the alternative • Application Software Packages

DISCUSSION methods for building • Outsourcing
information systems

Traditional Systems Life Cycle Figure 13.9 The Traditional Systems

• Oldest method for building information systems Development Life Cycle
• Phased approach
– Development divided into formal stages
– “Waterfall” approach: One stage finishes before next
stage begins
• Formal division of labor between end users and
information systems specialists
• Emphasizes formal specifications and paperwork
• Still used for building large complex systems
• Can be costly, time-consuming, and inflexible
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Prototyping (1 of 2) Figure 13.10 The Prototyping Process
• Building experimental system rapidly and inexpensively for
end users to evaluate
• Prototype: Working but preliminary version of information
system
– Approved prototype serves as template for final system
• Steps in prototyping
– Identify user requirements
– Develop initial prototype
– Use prototype
– Revise and enhance prototype

Prototyping (2 of 2) End-User Development (1 of 2)

• Advantages of prototyping • Allows end users to develop simple information systems
– Useful if some uncertainty in requirements or design with little or no help from technical specialists
solutions • Reduces time and steps required to produce finished
– Often used for end-user interface design application
– More likely to fulfill end-user requirements • Tools include
• Disadvantages – User friendly query languages and reporting
– May gloss over essential steps – PC software tools
– May not accommodate large quantities of data or large
number of users
 May not undergo full testing or documentation

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End-User Development (2 of 2) Application Software Packages and
• Advantages Cloud Software Services
– More rapid completion of projects • Application software packages and cloud software services
– High level of user involvement and satisfaction – Save time and money
– Many packages offer customization features
• Disadvantages
• Evaluation criteria for systems analysis include:
– Not designed for processing-intensive applications
– Functions provided, flexibility, user friendliness, required
– Inadequate management and control, testing, resources, database requirements, installation and maintenance
documentation efforts, documentation, vendor quality, and cost
– Loss of control over data • Request for Proposal (RFP)
• Managing end-user development – Detailed list of questions submitted to packaged-software vendors
– Used to evaluate alternative software packages
– Require cost-justification of end-user system projects
– Establish hardware, software, and quality standards
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Outsourcing (1 of 2) Outsourcing (2 of 2)
• Several types • Advantages
– Cloud and SaaS providers – Allows organization flexibility in IT needs
 Subscribing companies use software and computer • Disadvantages
hardware provided by vendors
– Hidden costs, for example:
– External vendors
 Identifying and selecting vendor
 Hired to design, create software
 Transitioning to vendor
 Domestic outsourcing
– Opening up proprietary business processes to third
– Driven by firm’s need for additional skills, party
resources, assets
 Offshore outsourcing
– Driven by cost-savings

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Rapid Application Development (RAD),
Agile Development, and DevOps
• Rapid application development (RAD)
– Process of creating workable systems in a very short period of
time
What are new approaches for • Joint application design (JAD)
DISCUSSION system-building in the digital – Used to accelerate generation of information requirements and to
firm era? develop initial systems design
• Agile development
– Focuses on rapid delivery of working software by breaking large
project into several small subprojects
• DevOps
– Builds on Agile development principles as an organizational
strategy
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Management Information Systems:
Managing the Digital Firm Learning Objectives
Sixteenth Edition 9.1 Which features of organizations do managers need to know
about to build and use information systems successfully?
9.2 What is the impact of information systems on organizations?
9.3 How do Porter’s competitive forces model, the value chain
Lecture 9 model, synergies, core competencies, and network
Information Systems, Organizations, economics help companies develop competitive strategies using
and Strategy information systems?
9.4 What are the challenges posed by strategic information
systems, and how should they be addressed?

Problem description Problem description of organization

The Two-Way Relationship Between Organizations and Information

Technology/Information system

Which features of organizations

do managers need to know about
DISCUSSION
to build and use information
systems successfully?

3.1 Organization and Information System 3.1 Organization and Information System

The Relationship Between Organizations and Information What Is an Organization?

Technology
• Technical definition
• Information technology and organizations influence each – Formal social structure that processes resources
other from environment to produce outputs
– Relationship influenced by organization’s – A formal legal entity with internal rules and
 Structure procedures, as well as a social structure
 Business processes
• Behavioral definition
 Politics
– A collection of rights, privileges, obligations, and
 Culture responsibilities that is delicately balanced over a
 Environment period of time through conflict and conflict resolution
 Management decisions

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3.1 Organization and Information System 3.1 Organization and Information System

The Technical Microeconomic Definition of the Organization Features of Organizations

• Use of hierarchical structure
• Accountability, authority in system of impartial decision
making
• Adherence to principle of efficiency
• Routines and business processes
• Organizational politics, culture, environments, and
structures

3.1 Organization and Information System 3.1 Organization and Information System

Routines and Business Processes Routines, Business Processes, and Firms

• Routines (standard operating procedures)
– Precise rules, procedures, and practices developed to
cope with virtually all expected situations
• Business processes: Collections of routines
• Business firm: Collection of business processes

Organizational Politics Organizational Culture

• Encompasses set of assumptions that define goal and
• Divergent/different viewpoints lead to political struggle, product
competition, and conflict – What products the organization should produce
• Political resistance greatly hampers organizational change – How and where it should be produced
– For whom the products should be produced
• May be powerful unifying force as well as restraint on
change

3.1 Organization and Information System 3.1 Organization and Information System

Organizational Environments Environments and Organizations Have a Reciprocal

Relationship
• Organizations and environments have a reciprocal
relationship
• Organizations are open to, and dependent on, the social and
physical environment
• Organizations can influence their environments
• Environments generally change faster than organizations
• Information systems can be instrument of environmental
scanning, act as a lens

Disruptive Technologies
• Substitute products that perform as well as or better than
existing product
• Technology that brings sweeping change to businesses,
industries, markets
• Examples: personal computers, smartphones, Big Data, Which is the impact of information
DISCUSSION
artificial intelligence, the Internet systems on organization?
• First movers and fast followers
– First movers—inventors of disruptive technologies
– Fast followers—firms with the size and resources to
capitalize on that technology

3.2 The impacts of information system on organization

Economic Impacts
• IT changes relative costs of capital and the costs of
 Economic Impacts
information
DISCUSSION  Organizational and Behavioural impacts
 Understanding organizational resistance
• Information systems technology is a factor of production,
Question:
like capital and labor
to change
Describe the difference between the
economic theory and the behavioral theory  The Internet and Organizations
• IT affects the cost and quality of information and changes
of how information systems affect  Implications for the design and economics of information
organizations.
understanding of information systems – Information technology helps firms contract in size
because it can reduce transaction costs (the cost of
participating in markets)
 Outsourcing

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3.2 The impacts of information system on organization 3.2 The impacts of information system on organization

Transaction Cost Theory Transaction Cost Theory

• Firms seek to economize on transaction costs (the costs
of participating in markets)
– Vertical integration, hiring more employees, buying
suppliers and distributors
• IT lowers market transaction costs, making it worthwhile
for firms to transact with other firms rather than grow the
number of employees

3.2 The impacts of information system on organization 3.2 The impacts of information system on organization
Agency Theory
Organizational and Behavioral Impacts
• Firm is nexus of contracts among self-interested parties
requiring supervision • IT flattens organizations
– Decision making is pushed to lower levels
• Firms experience agency costs (the cost of managing and
supervising) which rise as firm grows – Fewer managers are needed (IT enables faster decision
making and increases span of control)
• IT can reduce agency costs, making it possible for firms
to grow without adding to the costs of supervising, and • Postindustrial organizations
without adding employees – Organizations flatten because in postindustrial societies,
authority increasingly relies on knowledge and
Bottom line: IS reduces both agency and transaction
competence rather than formal positions
costs for firms, we should expect firm size to shrink over
time as more capital is invested in IT. Firms should have
fewer managers, and we expect to see revenue per
employee increase over time.

Flattening Organizations Understanding Organizational Resistance to Change

• Information systems become bound up in organizational
politics because they influence access to a key resource—
information
• Information systems potentially change an organization’s
structure, culture, politics, and work
• Four factors
– Nature of the innovation
– Structure of organization
– Culture of organization
– Tasks affected by innovation

3.2 The impacts of information system on organization 3.2 The impacts of information system on organization

Organizational Resistance to Information System Innovations Implications for the Design and Understanding of IS
• Organizational factors in planning a new system:
– Environment
– Structure
 Hierarchy, specialization, routines, business processes
– Culture and politics
– Type of organization and style of leadership
– Main interest groups affected by system; attitudes of end
users
– Tasks, decisions, and business processes the system will
assist

Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
3.3 Developing competitive strategies using information systems

Porter’s Competitive Forces Model

• Why do some firms become leaders in their industry?
• Michael Porter’s competitive forces model
How do Porter’s competitive
forces model, the value chain – Provides general view of firm, its competitors, and
model, synergies, core environment
DISCUSSION competencies, and network • Five competitive forces shape fate of firm:
economics help companies
– Traditional competitors
develop competitive strategies
using information systems? – New market entrants
– Substitute products and services
– Customers
– Suppliers

3.3 Developing competitive strategies using information systems 3.3 Developing competitive strategies using information systems

Porter’s Competitive Forces Model Porter’s Competitive Forces Model

• Traditional competitors
– All firms share market space with competitors who are
continuously devising new products, services,
efficiencies, and switching costs
• New market entrants
– Some industries have high barriers to entry, for
example, computer chip business
– New companies have new equipment, younger
workers, but little brand recognition
Business model; Mission statement; Domain name;
Key product features; Product pricing strategy.
Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
3.3 Developing competitive strategies using information systems 3.3 Developing competitive strategies using information systems

Porter’s Competitive Forces Model Information System Strategies for Dealing with Competitive
Forces
• Substitute products and services
– Substitutes customers might use if your prices become • Four generic strategies for dealing with competitive
too high, for example, iTunes substitutes for CD s forces, enabled by using IT:
– Low-cost leadership
• Customers
– Product differentiation
– Can customers easily switch to competitor's products?
– Focus on market niche
Can they force businesses to compete on price alone
in transparent marketplace? – Strengthen customer and supplier intimacy

• Suppliers
– Market power of suppliers when firm cannot raise
prices as fast as suppliers

3.3 Developing competitive strategies using information systems 3.3 Developing competitive strategies using information systems

Information System Strategies for Dealing with Competitive Information System Strategies for Dealing with Competitive
Forces Forces
• Low-cost leadership • Focus on market niche
– Produce products and services at a lower price than – Use information systems to enable a focused strategy
competitors on a single market niche; specialize
– Example: Walmart’s efficient customer response – Example: Hilton Hotels’ OnQ system
system
• Strengthen customer and supplier intimacy
• Product differentiation – Use information systems to develop strong ties and
– Enable new products or services, greatly change loyalty with customers and suppliers
customer convenience and experience – Increase switching costs
– Example: Google, Nike, Apple – Examples: Chrysler, Amazon, Starbucks
– Mass customization

The Business Value Chain Model The Value Chain Model

• Firm as series of activities that add value to products or
services
• Highlights activities where competitive strategies can
best be applied
– Primary activities vs. support activities
• At each stage, determine how information systems can
improve operational efficiency and improve customer and
supplier intimacy
• Utilize benchmarking, industry best practices

3.3 Developing competitive strategies using information systems 3.3 Developing competitive strategies using information systems

Extending the Value Chain: The Value Web The Value Web
• Firm’s value chain is linked to value chains of suppliers,
distributors, customers
• Industry value chain
• Value web
– Collection of independent firms using highly
synchronized IT to coordinate value chains to produce
product or service collectively
– More customer driven, less linear operation than
traditional value chain

Synergies Network-Based Strategies

• When output of some units are used as inputs to others, or • Take advantage of firm’s abilities to network with one
organizations pool markets and expertise another

Core Competencies • Include use of:

– Network economics
• Activity for which firm is world-class leader – Virtual company model
• Relies on knowledge, experience, and sharing this across – Business ecosystems
business units

3.3 Developing competitive strategies using information systems 3.3 Developing competitive strategies using information systems

Network Economics Virtual Company Model

• Marginal cost of adding new participant almost zero, with • Virtual company
much greater marginal gain – Uses networks to ally with other companies
• Value of community grows with size – Creates and distributes products without being limited
by traditional organizational boundaries or physical
• Value of software grows as installed customer base grows
locations
• Example: Li & Fung
– Manages production, shipment of garments for major
fashion companies
– Outsources all work to thousands of suppliers

Business Ecosystems and Platforms An Ecosystem Strategic Model

• Industry sets of firms providing related services and
products
• Platforms
– Microsoft, Facebook
• Keystone firms
• Niche firms
• Individual firms can consider how IT will help them become
profitable niche players in larger ecosystems

Challenges Posed by Strategic Information Systems

• Sustaining competitive advantage -> changing processes and methods

Copyright
– Competitors can retaliate and copy strategic systems
– Systems may become tools for survival
This work is protected by United States copyright laws and is
• Aligning IT/MIS with business objectives provided solely for the use of instructors in teaching their
– Performing strategic systems analysis courses and assessing student learning. Dissemination or sale of
any part of this work (including on the World Wide Web) will
 Structure of industry destroy the integrity of the work and is not permitted. The work
and materials from it should never be made available to students
 Firm value chains except by instructors using the accompanying text in their
classes. All recipients of this work are expected to abide by these
• Managing strategic transitions restrictions and to honor the intended pedagogical purposes and
– Adopting strategic systems requires changes in business goals, the needs of other instructors who rely on these materials.
relationships with customers and suppliers, and business processes
Bottom line: A well-developed strategic information system that is integrated
throughout the company can be used to lower overall costs and provide
greater value to the company, the supplier, and the customer.

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