Info Systems

Porter's 5 Forces

*Rivalry among competitors; *Threat of new entrants; *Threat of substitute products; *Bargaining power of buyers; *Bargaining power of suppliers;

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, All modern organizations share certain characteristics. They are bureaucracies with clear-cut divisions of labor and specialization. Organizations arrange specialists in a hierarchy of authority in which everyone is accountable to someone and authority is limited to specific actions governed by abstract rules or procedures. These rules create a system of impartial and universal decision making. Organizations try to hire and promote employees on the basis of technical qualifications and professionalism (not personal connections). The organization is devoted to the principle of efficiency: maximizing output using limited inputs. Other features of organizations include their business processes, organizational culture, organizational politics, surrounding environments, structure, goals, constituencies, and leadership styles. All of these features affect the kinds of information systems used by organizations.

Data vs. Information Example

A brief example contrasting information and data may prove useful. Supermarket checkout counters scan millions of pieces of data from bar codes, which describe each product. Such pieces of data can be totaled and analyzed to provide meaningful information, such as the total number of bottles of dish detergent sold at a particular store, which brands of dish detergent were selling the most rapidly at that store or sales territory, or the total amount spent on that brand of dish detergent at that store or sales region

Organizational culture

All organizations have bedrock, unassailable, unquestioned (by the members) assumptions that define their goals and products. Organizational culture encompasses this set of assumptions about what products the organization should produce, how it should produce them, where, and for whom. Generally, these cultural assumptions are taken totally for granted and are rarely publicly announced or discussed. Business processes—the actual way business firms produce value—are usually ensconced in the organization's culture. You can see organizational culture at work by looking around your university or college. Some bedrock assumptions of university life are that professors know more than students, the reason students attend college is to learn, and classes follow a regular schedule. Organizational culture is a powerful unifying force that restrains political conflict and promotes common understanding, agreement on procedures, and common practices. If we all share the same basic cultural assumptions, agreement on other matters is more likely. At the same time, organizational culture is a powerful restraint on change, especially technological change. Most organizations will do almost anything to avoid making changes in basic assumptions. Any technological change that threatens commonly held cultural assumptions usually meets a great deal of resistance. However, there are times when the only sensible way for a firm to move forward is to employ a new technology that directly opposes an existing organizational culture. When this occurs, the technology is often stalled while the culture slowly adjusts.

Routines and Business Processes

All organizations, including business firms, become very efficient over time because individuals in the firm develop routines for producing goods and services. Routines—sometimes called standard operating procedures—are precise rules, procedures, and practices that have been developed to cope with virtually all expected situations. As employees learn these routines, they become highly productive and efficient, and the firm is able to reduce its costs over time as efficiency increases. For instance, when you visit a doctor's office, receptionists have a well-developed set of routines for gathering basic information from you, nurses have a different set of routines for preparing you for an interview with a doctor, and the doctor has a well-developed set of routines for diagnosing you. Business processes, which we introduced in Chapters 1 and 2, are collections of such routines. A business firm, in turn, is a collection of business processes

The technical view of an organization

An organization is a stable, formal social structure that takes resources from the environment and processes them to produce outputs. This technical definition focuses on three elements of an organization. Capital and labor are primary production factors provided by the environment. The organization (the firm) transforms these inputs into products and services in a production function. The products and services are consumed by environments in return for supply inputs (see Figure 3.2). An organization is more stable than an informal group (such as a group of friends that meets every Friday for lunch) in terms of longevity and routineness. Organizations are formal legal entities with internal rules and procedures that must abide by laws. Organizations are also social structures because they are collections of social elements, much as a machine has a structure—a particular arrangement of valves, cams, shafts, and other parts. This definition of organizations is powerful and simple, but it is not very descriptive or even predictive of real-world organizations. A more realistic behavioral definition of an organization is a collection of rights, privileges, obligations, and responsibilities delicately balanced over a period of time through conflict and conflict resolution

Transaction Processing System (TPS)

Basic business system that serves the operational level and assists in making structured decisions, Transaction Processing Systems Operational managers need systems that keep track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory. Transaction processing systems (TPS) provide this kind of information. A transaction processing system is a computerized system that performs and records the daily routine transactions necessary to conduct business, such as sales order entry, hotel reservations, payroll, employee record keeping, and shipping. The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through the organization. How many parts are in inventory? What happened to Mr. Smith's payment? To answer these kinds of questions, information generally must be easily available, current, and accurate.

Survival

Business firms also invest in information systems and technologies because they are necessities of doing business. Sometimes these "necessities" are driven by industry-level changes. For instance, after Citibank introduced the first automated teller machines (ATMs) in the New York region in 1977 to attract customers through higher service levels, its competitors rushed to provide ATMs to their customers to keep up with Citibank. Today, virtually all banks in the United States have regional ATMs and link to national and international ATM networks, such as CIRRUS. Providing ATM services to retail banking customers is simply a requirement of being in and surviving in the retail banking business.

Operational Excellence

Businesses continuously seek to improve the efficiency of their operations in order to achieve higher profitability. Information systems and technologies are some of the most important tools available to managers for achieving higher levels of efficiency and productivity in business operations, especially when coupled with changes in business practices and management behavior

Data vs. Information

Data are raw facts; information is data converted into a meaningful & useful context for decision making

Output

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

New Products, services, and business models

Information systems and technologies are a major enabling tool for firms to create new products and services as well as entirely new business models. A business model describes how a company produces, delivers, and sells a product or service to create wealth.

Executive Support Systems (ESS)

Information systems at the organization's strategic level designed to address unstructured decision making through advanced graphics and communications.Executive support systems (ESS) help senior management make these decisions. They address nonroutine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. ESS present graphs and data from many sources through an interface that is easy for senior managers to use. Often the information is delivered to senior executives through a portal, which uses a web interface to present integrated personalized business content. ESS are designed to incorporate data about external events, such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS. They filter, compress, and track critical data, displaying the data of greatest importance to senior managers. Increasingly, such systems include business intelligence analytics for analyzing trends, forecasting, and "drilling down" to data at greater levels of detail. For example, the chief operating officer (COO) and plant managers at Valero, the world's largest independent petroleum refiner, use a Refining Dashboard to display real-time data related to plant and equipment reliability, inventory management, safety, and energy consumption. With the displayed information, the COO and his team can review the performance of each Valero refinery in the United States and Canada in terms of how each plant is performing compared to the production plan of the firm. The headquarters group can drill down from executive level to refinery level and individual system-operator level displays of performance. Valero's Refining Dashboard is an example of a digital dashboard, which displays on a single screen graphs and charts of key performance indicators for managing a company. Digital dashboards are

ways information systems improve business processes and examples.

Information systems automate many steps in business processes that were formerly performed manually, such as checking a client's credit or generating an invoice and shipping order. But today, information technology can do much more. New technology can actually change the flow of information, making it possible for many more people to access and share information, replacing sequential steps with tasks that can be performed simultaneously, and eliminating delays in decision making. New information technology frequently changes the way a business works and supports entirely new business models. Downloading a Kindle e-book from Amazon, buying a computer online at Best Buy, and downloading a music track from iTunes are entirely new business processes based on new business models that would be inconceivable without today's information technology.

How IT flattens the hierarchy of an organization

Information systems have become integral, online, interactive tools deeply involved in the minute-to-minute operations and decision making of large organizations. Over the past decade, information systems have fundamentally altered the economics of organizations and greatly increased the possibilities for organizing work. Theories and concepts from economics and sociology help us understand the changes brought about by IT. Economic Impacts From the point of view of economics, IT changes both the relative costs of capital and the costs of information. Information systems technology can be viewed as a factor of production that can be substituted for traditional capital and labor. As the cost of information technology decreases, it is substituted for labor, which historically has been a rising cost. Hence, information technology should result in a decline in the number of middle managers and clerical workers as information technology substitutes for their labor. As the cost of information technology decreases, it also substitutes for other forms of capital such as buildings and machinery, which remain relatively expensive. Hence, over time we should expect managers to increase their investments in IT because of its declining cost relative to other capital investments. IT also affects the cost and quality of information and changes the economics of information. Information technology helps firms contract in size because it can reduce transaction costs—the costs incurred when a firm buys on the marketplace what it cannot make itself. According to transaction cost theory, firms and individuals seek to economize on transaction costs, much as they do on production costs. Using markets is expensive because of costs such as locating and communicating with distant suppliers, monitoring contract compliance, buying insurance, obtaining information on products, and so forth

Input

Input captures or collects raw data from within the organization or from its external environment.

Improved decision making

Many business managers operate in an information fog bank, never really having the right information at the right time to make an informed decision. Instead, managers rely on forecasts, best guesses, and luck. The result is over- or underproduction of goods and services, misallocation of resources, and poor response times. These poor outcomes raise costs and lose customers. In the past decade, information systems and technologies have made it possible for managers to use real-time data from the marketplace when making decisions.

Decision Support System (DSS)

Models information to support managers and business professionals during the decision-making process, Other types of business intelligence systems support more non-routine decision making. Decision-support systems (DSS) focus on problems that are unique and rapidly changing, for which the procedure for arriving at a solution may not be fully predefined in advance. They try to answer questions such as these: What would be the impact on production schedules if we were to double sales in the month of December? What would happen to our return on investment if a factory schedule were delayed for six months?Although DSS use internal information from TPS and MIS, they often bring in information from external sources, such as current stock prices or product prices of competitors. These systems are employed by "super-user" managers and business analysts who want to use sophisticated analytics and models to analyze data. An interesting, small, but powerful DSS is the voyage-estimating system of a large global shipping company that transports bulk cargoes of coal, oil, ores, and finished products. The firm owns some vessels, charters others, and bids for shipping contracts in the open market to carry general cargo. A voyage-estimating system calculates financial and technical voyage details. Financial calculations include ship/time costs (fuel, labor, capital), freight rates for various types of cargo, and port expenses. Technical details include myriad factors, such as ship cargo capacity, speed, port distances, fuel and water consumption, and loading patterns (location of cargo for different ports).

Dimensions of Information Systems expanded

Organizations - Information systems are an integral part of organizations. Indeed, for some companies, such as credit reporting firms, there would be no business without an information system. The key elements of an organization are its people, structure, business processes, politics, and culture. We introduce these components of organizations here and describe them in greater detail in Chapters 2 and 3. Organizations have a structure that is composed of different levels and specialties. Their structures reveal a clear-cut division of labor. Authority and responsibility in a business firm are organized as a hierarchy, or a pyramid structure. The upper levels of the hierarchy consist of managerial, professional, and technical employees, whereas the lower levels consist of operational personnel. Management - Management's job is to make sense out of the many situations faced by organizations, make decisions, and formulate action plans to solve organizational problems. Managers perceive business challenges in the environment, they set the organizational strategy for responding to those challenges, and they allocate the human and financial resources to coordinate the work and achieve success. Throughout, they must exercise responsible leadership. The business information systems described in this book reflect the hopes, dreams, and realities of real-world managers. But managers must do more than manage what already exists. They must also create new products and services and even re-create the organization from time to time. A substantial part of management responsibility is creative work driven by new knowledge and information. Information technology can play a powerful role in helping managers design and deliver new products and services and redirecting and redesigning their organizations. Chapter 12 treats management decision making in detail Information Technology - Information technology is one of many tools managers use to cope with change. Computer hardware is the physical equipment used for input, processing, and output activities in an information system. It consists of the following: computers of various sizes and shapes (including mobile handheld devices); various input, output, and storage devices; and telecommunications devices that link computers together. Computer software consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system. Chapter 5 describes the contemporary software and hardware platforms used by firms today in greater detail. Data management technology consists of the software governing the organization of data on physical storage media. More detail on data organization and access methods can be found in Chapter 6. Networking and telecommunications technology, consisting of both physical devices and software, links the various pieces of hardware and transfers data from one physical location to another. Computers and communications equipment can be connected in networks for sharing voice, data, images, sound, and video. A network links two or more computers to share data or resources, such as a printer. The world's largest and most widely used network is the Internet. The Internet is a global "network of networks" that uses universal standards (described in Chapter 7) to connect millions of networks in more than 230 countries around the world.

Organizational environments

Organizations reside in environments from which they draw resources and to which they supply goods and services. Organizations and environments have a reciprocal relationship. On the one hand, organizations are open to and dependent on the social and physical environment that surrounds them. Without financial and human resources—people willing to work reliably and consistently for a set wage or revenue from customers—organizations could not exist. Organizations must respond to legislative and other requirements imposed by government as well as the actions of customers and competitors. On the other hand, organizations can influence their environments. For example, business firms form alliances with other businesses to influence the political process; they advertise to influence customer acceptance of their products.

Dimensions of Information Systems

Organizations, Management, Information Technology

Organizational politics

People in organizations occupy different positions with different specialties, concerns, and perspectives. As a result, they naturally have divergent viewpoints about how resources, rewards, and punishments should be distributed. These differences matter to both managers and employees, and they result in political struggles for resources, competition, and conflict within every organization. Political resistance is one of the great difficulties of bringing about organizational change—especially the development of new information systems. Virtually all large information systems investments by a firm that bring about significant changes in strategy, business objectives, business processes, and procedures become politically charged events. Managers who know how to work with the politics of an organization will be more successful than lessskilled managers in implementing new information systems. Throughout this book, you will find many examples where internal politics defeated the bestlaid plans for an information system.

How does Porter's competitive forces model help companies develop competitive strategies using information systems (pp. 95-99)

Porter's competitive forces model (understand each of the five competitive forces) Arguably, the most widely used model for understanding competitive advantage is Michael Porter's competitive forces model (see Figure 3.8). This model provides a general view of the firm, its competitors, and the firm's environment. Earlier in this chapter, we described the importance of a firm's environment and the dependence of firms on environments. Porter's model is all about the firm's general business environment. In this model, five competitive forces shape the fate of the firm.

Processing

Processing converts this raw input into a meaningful form. Output transfers the processed information to the people who will use it or to the activities for which it will be used.

The behavioral view of an organization

The behavioral view of organizations emphasizes group relationships, values, and structures

Focus on Market Niche

Use information systems to enable a specific market focus and serve this narrow target market better than competitors. Information systems support this strategy by producing and analyzing data for finely tuned sales and marketing techniques. Information systems enable companies to analyze customer buying patterns, tastes, and preferences closely so that they efficiently pitch advertising and marketing campaigns to smaller and smaller target markets

Low-Cost Leadership

Use information systems to achieve the lowest operational costs and the lowest prices. The classic example is Walmart. By keeping prices low and shelves well stocked using a legendary inventory replenishment system, Walmart became the leading retail business in the United States. Walmart's continuous replenishment system sends orders for new merchandise directly to suppliers as soon as consumers pay for their purchases at the cash register. Point-of-sale terminals record the bar code of each item passing the checkout counter and send a purchase transaction directly to a central computer at Walmart headquarters. The computer collects the orders from all Walmart stores and transmits them to suppliers. Suppliers can also access Walmart's sales and inventory data using web technology

Product Differentiation

Use information systems to enable new products and services or greatly change the customer convenience in using your existing products and services. Big Tech firms like Google, Facebook, Amazon, Apple, and others are pouring billions of dollars into research and deployment of new services, and enhancements to their most valuable services and products in order to differentiate them from potential competitors. For instance, in 2018 Google updated its Google Assistant to enable more natural continuous conversations and smart displays that can display the output of Assistant to screens. Google added Assistant support to its core Google Maps service to make interaction with Maps more natural, and released a Machine Language Kit for developers that supports text recognition, face detection, image labeling, and landmark recognition. The continual stream of innovations flowing from Big Tech companies ensures their products are unique, and difficult to copy.

Strengthen Customer and Supplier Intimacy

Use information systems to tighten linkages with suppliers and develop intimacy with customers. Toyota, Ford, and other automobile manufacturers use information systems to facilitate direct access by suppliers to production schedules and even permit suppliers to decide how and when to ship supplies to their factories. This allows suppliers more lead time in producing goods.

Customer and supplier intimacy

When a business really knows its customers and serves them well, the customers generally respond by returning and purchasing more. This raises revenues and profits. Likewise with suppliers, the more a business engages its suppliers, the better the suppliers can provide vital inputs. This lowers costs. How to really know your customers or suppliers is a central problem for businesses with millions of offline and online customers

Competitive advantage

When firms achieve one or more of these business objectives—operational excellence; new products, services, and business models; customer/supplier intimacy; and improved decision making—chances are they have already achieved a competitive advantage. Doing things better than your competitors, charging less for superior products, and responding to customers and suppliers in real time all add up to higher sales and higher profits that your competitors cannot match.

Operational Excellence

involves a firm's focus on efficient operations and excellent supply chain management