Emergence of the Global Economy - The success of firms today and in future depends on their ability to operate globally. To become competitive participants in international markets, firms need powerful information and communication systems. Transformation of Industrial Economies - The US, Japan, Germany and other major industrial power are transformed from industrial economies to knowledge and information based service economies, whereas manufacturing has been moving to low-wage countries.
Knowledge and information intense products such as computer games require a great deal of knowledge to produce. Transformation of Business Enterprise -The traditional business firm was and still is a hierarchical, centralized, structured arrangement of specialist that typically relied on a fixed set of standard operating procedures to deliver a product or services. The new style of business firm is a flattened less hierarchical , decentralized, flexible arrangements of generalist ho rely on nearly instant information to deliver specific markets or customers.
The new manager relies on information commitments and networks to establish goals rather than formal planning, a flexible arrangement of teams and individuals working in task forces, and a customer orientation to achieve co- ordination among employees. The new manager appeals to the knowledge, learning and decision making of individual employees to ensure proper operation of the firm. Information technology makes this type of management possible.
The digital firm can be defined along several dimensions. Core business processes are accomplished through digital network spanning entire organization or linking multiple organizations. Business processes refers to the unique manner in which work is organized, coordinated and focused to produce a valuable product or services. Developing a new product, generating and fulfilling an order or hiring an employee are examples of business processes and the way organizations accomplish their business processes can be a source of competitive strength.
In a digital firm any piece of information required to support key business decisions is available at anytime and anywhere in the firm. Digital firms sense and respond to their environment far more rapidly than traditional firms. Digital firms offer extraordinary opportunities for more global organization and management.
For managers of digital firms, IT is not simply a useful hand but rather it is the core of business and a primary management tool. There are four major system that help define the digital firm:- i. Supply Chain Management System ii. Customer Relationship Management system iii.
Enterprise System iv. Knowledge Management System These four systems represent the areas where corporations are digitally integrating their information flows and making major information system investment. A few firms such as Cisco Systems or Dell Computer Corporation are close to becoming fully digital firms using the internet to drive every aspect of their business. Supply Chain Management System Information system that automate the relationship between a supplier and customer and its supplies in order to optimize the planning, sourcing, manufacturing and delivery of products and services.
Customer Relationship Management system Information systems for creating a coherent integrated view of all of the relationships a firm maintains with its customers. Enterprise System Integrated enterprises-wide information systems that coordinate key internal processes of the firms, integrated data from manufacturing and distribution finance, sales, and human resource.
Knowledge Management System System that supports the creation, capture, storage of knowledge in the firm and use by the firm expertise. An information system contains information about an organization and its surrounding environment. Three basic activities — input, processing, and output produce the information organization needs. Feedback is output returned to appropriate people or activities in the organization to evaluate and refine the input environment factors such as customers, suppliers, competitors, stock holders and regulatory agencies interact with the organization and its information.
Fig: Function of an Information System An information system contents information about an organization and its surrounding environment. A business Perspective on Information System Fig.
From a business perspective Information System are part of a value adding activities for acquiring, transforming and distributing information that managers can use to improve decision making, enhance organizational performance and ultimately increase firm profitability and strategic position. Integrating text with technology: New opportunities for learning See: www.
All information systems can be described as organizational and management solutions to challenges posed by the environment that will help create value for the firm. Technical Approach - It emphasis mathematically based models to study Information System, as well as the physical technology and formal capabilities of these systems.
Behavioral Approach - It is concern with behavioral issues that arise in the development and long term maintenance of information system. Indeed information system technology is often the stimulus for a behavioral problem or issues. Instead, it concentrates on attitudes, management and organizational policy and behavioral.
The Challenges of Information System 1. The Strategic Business Challenge 2. The Globalization Challenge 3. The Information Architecture and Infrastructure Challenge 4. The Information System Investment Challenge 5. The Responsibility and Control Challenge 1. The Strategic Business Challenge - Realizing the digital firm:- how can business use IT to become competitive, effective and digitally enabled?
The Globalization Challenge - How can firms understand the business and system requirements of global economic environment? The Information Architecture and Infrastructure Challenge - How can organizations develop an information architecture and information technology infrastructure that can support their goals when business conditions and technologies are changing so rapidly?
The Information System Investment Challenge - How can organization determine the business value of information system? The Responsibility and Control Challenge - How can organizations ensure that their information systems are used in as ethically and socially and responsible manner? Chapter 2 Management Information System Fig: Types of Information System Organizations can be divided into strategic, management, knowledge and operational levels and into five major functional areas- sales and marketing, manufacturing, finance, accounting, and human resource.
Information system serves each of these levels and functions. Relationship of systems to one another Fig: Interrelationships among systems The various types of systems in the organization have interdependencies. TPS are a major producer of information that is required by the other systems which, in turn, produce information for other systems. These different types of systems are only loosely coupled in most organizations.
Types of Information system 1. A TPS is a computerized system that performs and records the daily routine transactions necessary to conduct business.
Examples are sales order entry, hotel reservation system, payroll, employee record keeping, etc. TPS are also measure producers of information for the other type of system. Knowledge work system aid knowledge workers whereas office systems primarily aid data workers. Knowledge workers are people who hold formal university degrees and who are often members of Santosh Dhungana MIS Version 1. Their jobs consist primarily of creating new information and knowledge.
Data workers typically have less formal advanced educational degrees and tend to process rather than create information. They consist primarily of secretaries, book-keepers, filing clerks or managers whose jobs are principally to use and manipulate information. MIS It is the Information system at the management level of an organization that serve the functions of planning, controlling and decision making by providing routine summary and exception reports.
Typically they are oriented almost exclusively to internal, not environmental or external events. MIS usually serve managers interest in weekly, monthly and yearly results not day to day activities. DSS Decision Support System It is the information system at the organizations management level that combines data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision making.
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. DSS have more analytical power then other systems. It is an interactive system in which user can change assumptions, ask new questions and include new data. ESS Executive Support System It is the information system at the organizations strategic level designed to address unstructured decision making through advanced graphic and communication.
ESS is designed to incorporate data about external events such as new tan laws and competitors. They filter, compares and track critical data, emphasizing the reduction of time and effort required to obtain information useful to executive. Sales are concerned with contacting customers, selling the products and services, taking orders and following up on sales. Sales and marketing information systems support these activities example System Description Organization level Order processing Enter, process and track orders.
Management level Sales trend forecasting Prepare 5-year sales forecast Strategic level 2. Manufacturing and production activities deal with the planning, development, and maintenance of production facilities; the establishment of production goals; the acquisition, storage, and availability of production materials; and the scheduling of equipment, facilities, materials, and labor required to fashion finished products. The finance function is also in charge of managing the capitalization of the firm.
In order to determine whether the firm is getting the best return on its investments, the finance function must obtain a considerable amount of information from sources external to the firm. System Description Organization level Account receivable Track money owned the firm Operational Level Portfolio Analysis Design the firms portfolio of investments Knowledge level Budgeting Prepare short term budgets Management level Profit planning Plan long term profits Strategic level 4.
Management level Human resource planning Plan the long term labor force needs of the organization. Enterprise Application System See book Fig traditional view of system In most organizations, separate systems built over a long period of time support discrete processes and discrete business function. Generating and fulfilling an order is a multistep process involving activities performed by the sales, manufacturing and production, and accounting functions.
Fig: Enterprise systems Enterprise systems can integrate the key business processes of an entire firm into a single software system that allows information to flow seamlessly throughout the organization. These systems may include transactions with customers and vendors. These systems focus primarily on the internal processes but may include transactions with customers and vendors.
Enterprise system provides a technology platforms where organization can integrated and coordinate their major internal business processes. They address the problem of organizational inefficiencies created by isolated islands of information, business processes and technology.
A large organization typically has many different kind of information systems that support different functions, organizational levels and business processes.
Most of these systems are built around different functions; business units and business processes that do not talk to each other. Managers might have a hard time assembling the data they need for a comprehensive, overall picture of the organizations operations. Enterprise systems, also known as Enterprise Resource Planning ERP systems solve the above mentioned problem by providing a single information system for organization- wide coordination of key business processes.
The enterprise system collects data from various key business and stores the data in a a single comprehensive data repository where they can be used by other parts of business. Managers emerge with more precise and timely information for coordinating the daily operations of the business and firm-wide view of business processes and information flows.
Benefits of Enterprise system? See yourself consult book Challenges of enterprise system? See yourself consult book Supply Chain Management System SCM The above figure illustrates the major entities in the supply chain and the flow of the information upstream and downstream to coordinate the activities involved in buying, making and moving products.
Suppliers transform raw materials into intermediate products or components and then manufacturers turn them into finished products. The products are shipped to distribution centers and from there to retailers and customers.
The supply chain is a network of organizations and business processes for procuring materials, transforming raw materials into intermediate and finished products and distributing the finished products to customers. The supply chain includes reverse logistics in which returned items flow in the reverse direction from the buyers back to the seller. The upstream portion of supply chain includes the organizations suppliers and their suppliers and the processes for managing relationship with them.
The downstream portion consists of the organization and processes for distributing and delivering products to their final customers. Information systems must be aligned with the organization to provide information that important groups within the organization need. At the same time the organization must be aware of and be open influences of information systems in order to benefit from new technologies. The interaction between IT and organizations is very complex and is influence by a great many mediating factors including organizations structure, standard operating procedure, politics, culture, surrounding environment and management decisions.
What is an Organization????? Fig: technical Microeconomic definition of organization. An organization is a stable, formal, social structure that takes resources from the environment and processes them to produce outputs. 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 environment in …………….. An organization is more stable then an informal group in terms of longevity and routines.
Organizations are formal legal entities with internal rules and procedures that must abide by laws. Organizations are also social structures because they are a collection of social elements. Fig: The behavioral view of organization A more realistic behavioral definition of an organization is that is a collection of rights, privilege, obligations and responsibilities that are delicately balanced over a period of time through conflict resolution.
In this behavioral view of firm, people who work in organizations develop ways of working; they gain attachments to existing relationship; and they make arrangements and subordinates and superior about how work will be done, how much work will be done and under what condition. How does these definitions of organization relate to Information System Technology??? The firm is seen as infinitely malleable with capital and labor substituting for each other quite easily.
But the more realistic behavioral definition of an organization suggest that building new information systems or building old ones involves more than a technical rearrangement of machines or workers- that some information system that change the organizational balance of rights, privilege, obligations, responsibilities and feelings that have been established over a long period of time.
Organizations arrange specialist in a hierarchy of authority in which everyone is accountable to someone and authority in which everyone is accountable to someone and authority is limited to specific actions.
Authority and actions are further limited by abstract rules and procedures Standard Operating Procedures SOPs that are interpreted and applied to specific cases. These rules create a system of impartial and universal decision making; everyone is treated equally.
Organizations try to hire and promote employees on the basis of technical qualifications and professionalism not personal connection. The organization is devoted to the principle of efficiency: maximizing output using limited inputs. Organizations have different shapes or structure for many other reasons. They differ in their ultimate goals and the types of power used to achieve them some organizations have utilitarian goals business , others have normative goods universities, religious groups.
Organizations also serve different groups or have different constituencies, some primarily benefiting their members, others benefiting clients, stock holders or the public. The nature of leadership differs greatly from one to another organization.
Some organizations may more democratic than other. Another way organization differs is by task they perform and the technology they use. Some organization perform primarily routine task that could be reduced to formal use that require little judgment. IT should result in a decline in the number of middle managers and clerical workers as IT substitutes for their labor. IT also helps firms contract in size because it can reduce transaction cost. According to transaction cost theory, firms and individuals seek to economize on transaction cost, much as they do on Santosh Dhungana MIS Version 1.
Using markets is expensive because of costs such as locating and communicating with distance suppliers, buying insurance, obtaining information on products and so on. IT especially by the use of networks can help firms lower the cost of market participation transaction cost. Information systems make it possible for companies such as CISCO systems and Dell Computer to outsource their production to contract manufacturers such as Flextronics instead of making their product themselves.
In the above fig1 transaction cost decreases by the help of IT enable organization then traditional organization. Information technology also can reduce internal management cost. IT by reducing the cost of acquiring and analyzing information, permits organizations to reduce agency cost because it becomes easier for manager to observe a greater number of employees.
IT also expand the power and space of small organizations by allowing them to perform coordinating activities such as processing orders or keep track of inventory with very few clerks and managers. More firms may operate as virtual organizations where work no longer is tied to geographical location. Virtual organization use networks to link people, assets, and ideas. Another behavioral approach views information systems as the outcome of political competition between organizational groups for influence over the organizations policies, procedures, and resources.
Information systems potentially change an organizations structure, culture, politics, and work. The Internet and Organizations -Internet WWW have an important impact on the relationships between firms and external entities and even on the organizational business process inside a firm. Interpersonal Roles 2. Informational Roles 3. What are the alternatives?
Which should you choose? Is this choice working? Models of Decision Making 1. Organizational Model Considers the structural and political characteristics of an organization. Bureaucratic Model Whatever organization do is the result of routines and existing business process developed over years of active use. Political Model What an organization does is a key result of political bargains struck among key leaders and interest groups. Strategic Information System SIS It change the goals, operations, products, services or environmental relationships of organizations to help them gain and edge over competitors.
Systems that have these effects may even change the business of organizations. Strategic information system can be used at all organizations. Strategic information system can be used at all organizational levels and it is not restricted to strategic level system. There are a number of information systems operating at different level of strategy the business, the firm and the industry level Santosh Dhungana MIS Version 1.
There are various forces that effect on organizations ability to compete and therefore greatly influence firms business strategy. There are threats from new market entrance and from substitute products and services.
Customers and suppliers develop bargaining power. Traditional competitors constantly adopt their strategies to maintain their market positioning. In fig 2 shows the new competitive force model. The digital firm era requires a more dynamic view of the boundaries between firms, customers and suppliers with competition occurring among industry sets.
Information Systems and Business strategies Business can use strategic information systems to gain an edge over competitors. Such systems change organizations goal, business processes, products, services or environmental relationships driving them into firms of behaviour. Information systems can be used to support strategy at the business, firm and industry level.
At the business level of strstegy, information systems can be used to help firms become the low cost procedures, differentiate products and services or serve new markets. Value chain analysis is useful at the business level to highlight specific activities in the business where information systems are most like to have a strategic impact.
At the firm level, information systems can be used to achieve new efficiencies or to enhance services can by trying together the operations of different business unit so that they can function as a whole or promoting the sharing of knowledge across business units.
At the industry level, systems can promote competitive advantage by facilitating cooperation with other firms in the industry, creating consortiums or communities for sharing information, exchanging transactions or coordinating activities.
The competitive force model, information partnership and network economies are useful concepts for identifying strategic opportunities for systems at industry level. Chapter 4 Electronic Business, Electronic commerce and The Emerging digital firms Internet technology and digital firm - The internet is rapidly becoming the infrastructure of choice for electronic commerce because it offers business an even easier way to link with other business and individual at a very low cost.
New business models and value propositions - The internet has introduced major changes in the way companies conduct business. The internet has changed that relationship. Some of the traditional channels for exchanging product information have become unnecessary or uneconomical and business models based on the coupling of information with products and services may no longer be necessary.
Such information can be found now abundance on the way, the investors can use financial websites to place their own trades directly for very small transaction fee. The changing economics of Information Richness Reach Fig: The changing economics of Information The internet and the web have vastly increased the total amount and quality of information available to all market participants, consumers and merchants alike.
It also reduces the search cost, the time and money spent locating a suitable product and determining the best price for that product. Information Asymmetry It is the situation where the relative bargaining power of two parties in a transaction is determined by one party in the transaction then other party. The web has reduced the information asymmetry surrounding in the business. Before the internet business had to make trade-off between the richness and reach of their information.
Richness It is the measurement of the depth and details of information that a business can supply to the customer as well as information the business collects about the customer. Rich It is the measurement of how many people a business can connect with and how many products it can offer to those people.
In the above figure, it shows the changing economics of information. In the past, companies had to trade-off between the richness and reach of their information. Internet connectivity and universal standards for information to large number of people reduce tradeoff. Internet Business Models 1.
Virtual Storefront: Sells physical products directly to consumers or to individual business. Eg: amazon. Information broker: Provides product, pricing and availability information to individuals and business. Raychaudhuri Prof. Shunmugaraj Prof. Shobha Madan Prof. Swagato K. Santhanam Prof. Raghavendra Prof. Lal Prof. Kadalbajoo Prof. Rathish Kumar Prof. Sankararaman Prof. Muraleedharan Prof.
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