Chapter 2

Purpose of Information Systems

 Agenda

• Information Systems Purposes

• Information Systems and Competitive
Advantage
• Information Systems and Problem
Solving
• Information Systems and Decision
Making
• Discussion and Case Study
 Information Systems Purposes

• Gain competitive advantage

• Solve problems
• Assist in decision making
 Competitive Advantage - I
• Products
– Create a new product or service
– Enhance new products or services
– Differentiate products or services
• creation of barriers
– Lock in customers or buyers
– Lock in suppliers
– Raises barriers to market entry
 Competitive Advantage - II

• Establishing alliances
– Establish standards
– Promote product awareness and needs
– Develop market size
– Reduce purchasing costs
• Reducing costs
– Reduce prices
– Increase profitability
 Information System and Competitive Advantage

• ABC information system features:

– Store customer data, shipping identity, and location
– Print shipping label and bar code (package delivery system)
– Reduce paper work and error
– Provide email to sender, receiver, and other (information
delivery system)
• Competitive Advantages
– Enhances an existing product
– Differentiates the ABC package delivery product from
competitors
– Lock’s customers into the ABC system (switching cost)
– Raises the barrier to market entry
– Reduces costs
 Problem Definition

• A perceived difference between what is and

what is not
• The differences between what is and what
ought to be by describing both the current
and desired situations
• Different information systems for different
problem definitions
• A complete, accurate, and agreed-upon
problem definition by every user for the
development of a good and useful information
system
 Information Systems and Problem Solving

• Three different information systems for

solving computer lap top problem
– Customer relationship management (CRM)
system
– Knowledge management system (KMS)
– Manufacturing Quality-Control Information
System
Customer Relationship Management System

• Maintain data about customers and all of their

interactions with the system
– Sales activity
– Purchase
– Return
– Training
– Support call
– Service
– Repair
• Vary in the size and complexity
 Knowledge Management System

• Store and retrieve organizational knowledge

in the form of data, documents, or employee
know-how
• Make the organization knowledge available to
– Employees
– Vendors
– Customers
– Investors
– Press
– Other individual needs the knowledge
 Manufacturing Quality-Control System

• The optimal way to provide customer service

is to eliminate the need for it
• Improve customer service is to improve
manufacturing quality, planning, and
scheduling
 Decision Making Dimension - Level

• Operational decisions concern day-to-

day activities
– Transaction processing systems (TPS)
• Managerial decisions concern the
allocation and utilization of resources
– Management information systems (MIS)
• Strategic decision making concern
broader-scope organizational issues
– Executive information systems (EIS)
 Decision Making Dimension - Process

• Structured decision process: an

understood and accepted method for
making the decision
• Unstructured process: no agreed on
decision making process
• Structured and unstructured refers to
the decision process-not the underlying
subject.
Decision-Making Dimension
 Information Systems Type

• Automated information systems: the

computer hardware and program
components do most of the work
– Humans start the programs and use the
results
• Augmentation information systems:
humans do the bulk of the work
– To aid the management decision process
(email, instant messaging, video-
conferencing, etc.)
Automated vs. Augmentation IS
 Information Systems and Decision Making

• Intelligence gathering
• Alternative formulation
• Choice
• Implementation
• Review
 Discussion
• Security (27a-b)
– Name the competitive advantages for a financial institution by
implementing a security system
– The cost of no security for a financial institute
• Ethics (29a-b)
– Social impact of the digital divide
– Social responsibility of the business and government to improve
the situation
• Opposing forces (31a-b)
– Can a business survive without any IS today?
• Egocentric vs. empathetic thinking (33a-b)
– How to apply this concept in developing and using IS?
 Case Study
• Case study 2-1(41-42)
– Questions 1, 2, 7, 8, 10, and 11
 Points to Remember

• Information Systems Purposes

• Information Systems and Competitive
Advantage
• Information Systems and Problem
Solving
• Information Systems and Decision
Making
• Discussion and Case Study