Laudon Ess16e ch01

Management Information Systems:
Managing the Digital Firm

Fifteenth edition
Chapter 1
Information Systems in
Business Today
Learning Objectives
1.1 How are information systems transforming business, and why are
they so essential for running and managing a business today?
1.2 What is an information system? How does it work? What are its
management, organization, and technology components? Why are
complementary assets essential for ensuring that information
systems provide genuine value for organizations?
1.3 What academic disciplines are used to study information systems,
and how does each contribute to an understanding of information
systems?
1.4 How will MIS help my career?
Copyright © 2022, 2020, 2018 Pearson Education, Inc. All Rights Reserved
How Information Systems are Transforming
Business
• Global spending on information technology (IT) and IT
services: nearly $3.8 trillion in 2019; $160 billion spent on
management consulting and services
• In 2018, more than 150 million businesses had dot-com

addresses registered.
• 230 million adult Americans shopped online; 190 million
purchased online.
• Internet advertising continues to grow at around 15 percent
per year.
• New laws require businesses to store more data for
longer periods.
• Changes in business result in changes in jobs and careers.
Copyright © 2020 Pearson Education, Ltd. All Rights Reserved
Figure 1.1 Information Technology Capital
Investment
1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

What’s New in Management
Information Systems (1 of 3)
• I T Innovations
– Cloud computing, big data, Internet of Things
– Mobile digital platform
– AI and machine learning
– Use of social networks for business objectives
• New Business Models
– Online streaming and downloadable video
● Examples: Netflix, Apple TV Channels, Amazon
• E-commerce Expansion
– E-commerce worldwide expands to nearly $3.6 trillion in 2019
– Growth in social commerce spurred by growth of mobile platform
– Mobile retail e-commerce growing more than 20 percent a year,
reaching almost $300 billion in 2020
• Management Changes
– Managers becoming more mobile
– Managers use social networks, collaboration tools
– Business intelligence applications accelerate
• Firms and Organizations Change
– More collaborative, less emphasis on hierarchy and
structure
– Greater emphasis on competencies and skills
– Higher-speed/more accurate decision making based on
data and analysis
– More willingness to interact with consumers (social media)
– Better understanding of the importance of I T
Interactive Session: Management:
The Mobile Pocket Office (1 of 2)
• Class Discussion
– What kinds of applications are described here? What
business functions do they support? How do they
improve operational efficiency and decision making?
– Identify the problems that businesses in this case study
solved by using mobile digital devices.
Interactive Session: Management:
The Mobile Pocket Office (2 of 2)
• Class Discussion (cont.)
– What kinds of businesses are most likely to benefit
from equipping their employees with mobile digital
devices such as iPhones and iPads?
– One company deploying iPhones has said, “The
iPhone is not a game changer, it's an industry changer.
It changes the way that you can interact with your
customers” and “with your suppliers.” Discuss the
implications of this statement.
Strategic Business Objectives of
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
Essentials of Management Information Systems
Chapter 1 Business Information Systems in Your Career
Operational Excellence/Intelligence:
Operational Excellence/Intelligence:
• Information systems and technologies help
improve efficiency and productivity, results in
higher profits.
• Enhancing Productivity: Automating manual tasks and
streamlining processes through MIS can increase
efficiency and productivity.
• Example: Walmart
• Power of combining information systems and best business practices to achieve operational
efficiency—and more than $514 billion in sales in 2019
• Walmart annual revenue for 2019 was $514.405B, a 2.81% increase

from 2018.Walmart annual revenue for 2018 was $500.343B, a 2.98% increase from
2017.Walmart annual revenue for 2017 was $485.873B, a 0.78% increase from 2016.
• Most efficient retail store in world as result of digital links between suppliers and stores

New Products, Services, and
Business Models
• Business model: describes how company
produces, delivers, and sells product or service
to create wealth
• Information systems and technology a major
enabling tool for new products, services,
business models
– Examples: Apple’s iPad, Netflix, distance learning

Customer and Supplier Intimacy

Improved Decision Making
Improved Decision Making:
• Improving Decision Making: MIS provides real-time data and analytics to

support informed and effective decision making.
• Without accurate information:
• Managers uses best guesses, luck, etc. This results in:
• Overproduction, underproduction
• Misallocation of resources
• Poor response times
• Real-time data improves ability of managers to make decisions.
• Verizon/ZAIN: Web-based digital dashboard to update
managers with real-time data on customer complaints, network
performance, and line outages

Competitive Advantage
• Delivering better performance

• Charging less for superior products
• Responding to customers and suppliers in real
time
– Examples: Apple, Walmart, and U P S are
industry leaders because they know how to use
information systems for this purpose

Survival
Survival:
• Businesses may need to invest in information systems to survive in this

business –
• online news paper,
• e-commerce, delivery, etc.
• Keeping up with competitors
• Comply to federal and state regulations and reporting requirements
Example: The Sarbanes-Oxley Act requires that public firms keep all data,
including e-mail, for five years

How Information Systems are
Transforming Business – Additional
• Enhancing Collaboration: MIS supports collaboration among
employees, departments and with external partners, leading to
better outcomes.
• Reducing Costs: Automating processes and improving
operational efficiency through MIS can reduce costs and
improve profitability.
• Facilitating Data Management: MIS provides a centralized
system for storing, managing and accessing data, reducing the
risk of data loss or error.

Perspectives on Information Systems and Information Technology
What Is an Information System?
• Information system:
• Set of interrelated components
• Collect, process, store, and distribute
information
• Support decision making, coordination, and
control
• Information vs. data
• Data are streams of raw facts.
• Information is data shaped into meaningful
form.
• .
Dataand
Data andInformation
Information
Raw data from a supermarket checkout counter can be processed and organized to produce
meaningful information, such as the total unit sales of dish detergent or the total sales revenue
from dish detergent for a specific store or sales territory.
Figure 1-1
• activities of information systems produce

information organizations need
– Input: Captures raw data from organization or
external environment
– Processing: Converts raw data into meaningful
form
– Output: Transfers processed information to
people or activities that use it

• Feedback:
– Output is returned to appropriate members of
organization to help evaluate or correct input stage.

Functions of an Information System
An information system contains

information about an organization
and its surrounding environment.
Three basic activities—input,
processing, and output—produce the
information organizations need.
Feedback is output returned to
appropriate people or activities in the
organization to evaluate and refine
the input. Environmental actors,
such as customers, suppliers,
competitors, stockholders, and
regulatory agencies, interact with the
organization and its information
systems.

Information Systems Are More than Computers
Using information systems

effectively requires an
understanding of the
organization, people, and
information technology
shaping the systems. An
information system provides a
solution to important business
problems or challenges facing
the firm.
Figure 1-3

Dimensions of Information Systems


• People
• Information systems require skilled people to build, maintain, and use them.
• Note: Employee attitudes affect ability to use systems productively.
• Role of managers
• Understand organizational issues and challenges, and then use
technologies to solve the issues and meet the challenges.
• Allocate human and financial resources.
• Creative work: new products, services.


• Technology
• Information systems are based on technologies such as:
• Computer hardware
• Computer software
• Data management technology
• Networking and telecommunications technology
• Internet and Web, extranets, intranets
• Voice, video communications
These technologies are like the infrastructure of a building

Interactive Session: Organizations
UPS COMPETES GLOBALLY WITH I.T.

Read the Interactive Session and discuss the following questions
• What are the inputs, processing, and outputs of

UPS’s package tracking system?
• What technologies are used by UPS? How are
these technologies related to UPS’s business
strategy?
• What business objectives do UPS’s information
systems address?
• What would happen if these systems were not
1.0
available? Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Business perspective on information systems
Business perspective on information

systems:
– Investments in information technology will
result in superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning

A Model of the Problem-Solving Process
• Problem solving: five-step process

1. Problem identification/Analysis
2. Solution design
3. Implementation
4. Testing
5. Maintenance

1. Problem identification includes:

• Definition of problem and Causes
• Cost and Budget
• What can be done given resources of firm
• What the system suppose to do.
• Length of time needed to implement solution
• List of details Requirements/Specifications

• Typical technology problems

• Insufficient or aging hardware
• Outdated software
• Inadequate database capacity
• Insufficient telecommunications capacity
• Incompatibility of old systems with new technology
• Rapid technological change
• Manual process that need to be automated

1. Solution design
• How the system will work - physical and logical
• Often many possible solutions
• Consider as many as possible to understand range of solutions
• Feasibility given resources and skills


3. Implementation
• Building or purchasing solution
4. Testing
Testing solution, employee training
5. Maintenance
• Change management
• Measurement of outcomes
• Feedback, evaluation of solution
•Note: Problem solving is a continuous process, not a single event

• Sometimes chosen solution doesn't work or needs adjustment

Information Systems and Your Career
• Success in today’s job market requires a broad

set of skills.
• Job candidates must have problem-solving skills
as well as technical skills so that they can
complete specific tasks.
• The service sector will account for 95 percent of
the new jobs that are created or open up by 2020

How Information Systems Will Affect Business Careers
• Accounting:
• Accountants increasingly rely on information systems to

summarize transactions, create financial records, organize data,
and perform financial analysis.
• Skills:
• Knowledge of databases and networks
• Online financial transactions and reporting systems
• How systems are used to achieve accounting functions

• Finance:
• Skills:
• Use systems for financial reporting, direct investment

activities, implement cash management strategies
• Plan, organize, implement information systems strategies for

the firm

• Marketing:
• No field has undergone more technology-driven change in the past

five years than marketing and advertising.
• Skills:
• Work with databases for
• tracking and reporting on customer behavior,
• product performance,
• customer feedback, product development, etc.

• Operations management in services and manufacturing:

• Production managers, administrative service managers, and
operations analysts
• Skills:
• Hardware and software platforms for operations management
• Use database and analytical software for coordinating and
optimizing resources required for producing goods and
services

• Management:
• Impossible to manage business today without information systems.
• Skills:
• Use of information systems for each function of job, from
desktop productivity tools to applications coordinating the
entire enterprise

• Information systems:
• Fast changing and dynamic profession because information
technologies are among most important tools for achieving
business firms’ key objectives
• Skills:
• Uses of new and emerging hardware and software to achieve
six business objectives
• An ability to take a leadership role in the design and
implementation of new information systems

End of Chapter 1

Key Components of a Computer
Hardware Software
• Physical or tangible components of a • Non physical or non tangible
computer are called Hardware. components of a computer are called
Software.
• Internal hardware is located inside
the main box (system unit) of the • Software consists of programs or
computer. instructions which control the
hardware.
• External hardware is located outside
the system unit. It is connected to the • System Software is used to operate the
computer through wired or wireless system (computer).
connections.
• Application Software allows users to
• All five operations of a computer are perform specific tasks like writing
performed using hardware. reports, watching movies etc.
0
Hardware Examples Software Examples
• Input • System Software
› Keyboard, Mouse, Microphone › Microsoft Windows 10
› iOS
• Processing
› Andriod
› CPU, GPU
• Output • Application Software

› Microsoft Office 2016
› Screen, Printer, Speakers
› Adobe Photoshop
• Storage
› Real Player
› Flash Disk, Hard Disk, DVD Drive
› WhatsApp
• Communication
› Router, Modem
0
0
Major Types of Computers
Computers are classified as one of the following:
• Embedded computers
• Mobile devices
• Personal computers
• Servers
• Mainframe computers
• Supercomputers
0
• Embedded Computers perform
specific tasks or functions for the
device or product in which they are
embedded.
• Embedded computers are used in:
› Household appliances
› Thermostats
› Treadmills
› Answering machines
› Cars
› Many other devices
0
• Mobile Devices are very small hand
held or wearable devices with some
built-in computing and/or Internet
connectivity.
• Examples include:
› Smartphones
› Handheld gaming devices
› Mini tablets
› Smart watches
0
• Personal Computers (PCs) are small
computers designed to be used by one
person at a time.
• Also known as Microcomputers, they
are available in different shapes and
sizes.
• Examples include:
› Desktop Computers
› Laptops / Notebooks
› Hybrid Notebooks /Tablets
0
• Servers are midrange computers designed to provide services to a
group of users.
• Services include data storage and programs which can be accessed
simultaneously by a group of users.
• Users connect to servers using their own computers.
• Servers are used by almost all organizations.
0
• Mainframe Computers are powerful computers used by many
large organizations to manage large amounts of centralized data.
• Also called high-end servers or enterprise-class servers.
0
• Super Computers are the fastest, most expensive and the most
powerful type of computers.
• Generally run one program at a time, as fast as possible.
• TITAN, one of the fastest super computers, contains more than
300,000 processors and has a peak speed of 17000000000000000
quadrillion calculations per second.

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Management Information Systems:

Managing the Digital Firm

1.4 How will MIS help my career?

• In 2018, more than 150 million businesses had dot-com

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

• Walmart annual revenue for 2019 was $514.405B, a 2.81% increase

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Improved Decision Making

Improved Decision Making:

• Improving Decision Making: MIS provides real-time data and analytics to

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

• Delivering better performance

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

• Businesses may need to invest in information systems to survive in this

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

What Is an Information System?

Perspectives on Information Systems and Information Technology

• activities of information systems produce

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

Functions of an Information System

An information system contains

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

Information Systems Are More than Computers

Using information systems

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

Dimensions of Information Systems

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

Dimensions of Information Systems

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Perspectives on Information Systems and Information Technology

Dimensions of Information Systems

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Interactive Session: Organizations

UPS COMPETES GLOBALLY WITH I.T.

• What are the inputs, processing, and outputs of

Business perspective on information systems

Business perspective on information

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

A Model of the Problem-Solving Process

A Model of the Problem-Solving Process

• Problem solving: five-step process

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

A Model of the Problem-Solving Process

1. Problem identification includes:

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

A Model of the Problem-Solving Process

• Typical technology problems

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

A Model of the Problem-Solving Process

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

A Model of the Problem-Solving Process

•Note: Problem solving is a continuous process, not a single event

1.0 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Information Systems and Your Career