MBSZ02 Lecture 2 Business Information Systems

MBSZ02 Enterprise Information Management
Lecture 2
Information Systems in Business
MUST Dr. Fei HUANG 1

MIS – Week 2
 Last week – Introduction
» Plans for the semester
» Brief of the workload
» What is “M+I+S”
 This week – Overview of Information Systems

» What is an Information System?
» Why use Information Systems?
» Case Studies

Information systems in Business
 Many occupations concerned with the handling
processing, provision or transmission of information
» The business IS information management
» Examples found in insurance, banks, health, police,
government, defence, agriculture
 Most organizations need information systems to
prosper and to survive in the market place
» need to manage risk
» handle defensive society
» cut costs
» gain competitive advantage

Relentless Pressure on Business
 Three powerful influences:
» Emergence of the Global Economy
» Transformation of industrial Economies
» Transformation of the Business Environment
 Strong drive to reduce business costs

» Inventory, labour, transaction cost
» One way is through IT
» Use IT to cut out the middle men
without losing the competitiveness they enforced
Emergence of the Global Economy
 Communicating with distributors and suppliers
 Operating 24 hours a day
 Servicing local and international needs
» Example: amazon.com
 Threat to domestic business firms –
customers can now
» shop in a worldwide marketplace
» obtain price and information reliably 24 hours a day
» demand better quality of service
 Ever increasing supply capabilities
» Don’t carry large stocks; buy “just in time”
Global Competition
 markets - foreign markets now within reach
 labor - cheaper off-shore manufacturing means
extended business premises
 24 hours/ 7 days a week
» real-time information operations -- “information float”
 internet - new business opportunities
» requires information management

Customer Demand
 more detailed information about products
 instant gratification - speedy transactions
 hassle-free - easy transactions
 if the product does not need to be physically inspected
by the customer prior to purchase: e-commerce
candidate

Strategic Information Systems
 provide organizations with strategic advantage:
» to meet org. objectives
» to increase market share
» to increase leverage with suppliers
» to prevent competitors entering market

Marketing
 customer focus
 assessing what the market wants
 and - providing it

In Business Context
 new frontiers of activity/ behavior
 standards and values for judging whether particular
 conduct/ behavior is right or wrong
 view beyond the current time
 view beyond the immediate place

Easy to know/Hard to do
 Information management in organizations remains
hardest today.
 Unfortunately, it does often cause common problems

or errors in any business.

Transformation of economies
 In traditional industrial economy
» Many people worked in manual or unskilled jobs
» Raw materials were key input
 But now:
» Manufacturing has been moving to low wage countries
– GM, Philips, Rover, Sony
» Falling employment in manufacturing
» Increase in professional & management jobs
» Trend in West is towards knowledge and information based
service economies
» Information and creativity are key inputs
– Google, Apple, Microsoft, Time-Warner-AOL
Transformation of Industrial Economies
 Time-based competition
 Shorter product life
 Turbulent environment
 Limited employee knowledge base
 Knowledge- and information-based economies
 Productivity
 New products and services
 Knowledge: a central productive and strategic asset

Knowledge Businesses
 Sales
 Education
 Healthcare
 Banks All concerned with
 Insurance firms creating, processing &
 Publishers
distributing information
 Broadcasters
 Software houses
 Games developers

Transformation of the Enterprise
 Third major change in the business environment is the very
nature of organization and management
» Enterprises used to have deep hierarchies
» Many layers of management
 The new style of business is:

» flattened (less hierarchical) Why?
» decentralized
» a flexible arrangement of generalists
» who rely on nearly instant information to deliver
mass customized products and services
geared to specific markets and customers

Transformation of the Enterprise
 Digitally-enabled relationships with customers,
suppliers, and employees
 Core business processes accomplished via digital
networks
 Digital management of key corporate assets
 Rapid sensing and responding to environmental
changes

Flattening Organizations

Re-organize Workflows

The New Style
 Is still evolving
 Direction is clear – customer orientation

» Must shorten time to market
» Production has to follow demand
(Toyato vs Fords & G-Motors)
 Teams and individuals need to network

» Sharing information without delays
 Information Systems make this possible

Strategic Pattern
 Amazon.com
» Virtual bookstore solely internet based
» Started making a profit as late as 2006 but has long
had high utilization and good customer relationship
» growing steadily – and diversifying
 Good in one area– then moved into other areas

» CDs – Popular music, then classical
» Videos and DVDs; Computer software
» Second-hand book-selling and auctions
» Alliances to move into Computer hardware, Toys, Audio‑Visual…

Where should Amazon go next?
 “Amazon to sell cars online” said NY Times in 2000
» Amazon is investing in good customer relationship
» In practice, decided to go into electronics instead
» Recent survey showed big increase in online book purchases
 New model is not without its risks

but information is all important
» One of the biggest risks is dependence on systems
» If the site is down, the 24-hour bookstore is closed
and I can’t even read the catalogue
» We need to think about robustness and scalability

Information Systems in business activities
 Marketing, sales, sales promotion, pre-sales, supply
 Commercial transactions:
» ordering
» delivery
» payment
 Product service and maintenance
 Transport
 Accounting
 Human Resources
 In Finance and Insurance, the business is IS

Overview of Business
Information Systems The
pro linkin
ces g
Mana
g
SIS s Enterprise
Supp ement
ort S
ystem DSS Collaboration
s
MIS Systems
Platforms:
•Internet
TPS •Intranets
ce
Operation •Extranets
ff i
s
tO
and Servi Human •Other networks
ce
on
s
Fr
Resource
ERP s
Marketin CRM
g
Accoun
t in g
f ice and Fin
O f ance
Ba ck Customers
Management – Levels
 Senior managers: make long-range strategic
decisions about products and services
 Middle managers: Carry out the programs and plans

of senior management
 Operational managers: monitor the firm’s daily

activities

Purposes of Information Systems

Types of Operations Support Systems
 Transaction Processing Systems
» Record and process business transactions
» Examples: sales processing, inventory systems, accounting
systems
 Process Control Systems
» Monitor and control physical processes
» Example: using sensors to monitor chemical processes in a
petroleum refinery
 Enterprise Collaboration Systems
» Enhance team and workgroup communication
» Examples: email, video conferencing

Transaction Processing Systems
 Cross-functional information systems that process
data resulting from the occurrence of business
transactions
» Transactions include sales, purchases, deposits,
withdrawals, refunds, and payments
» Online transaction processing (OLTP) is a real-
time system that captures transactions immediately
MUST Dr. Fei HUANG 27 7-27

Transaction Processing Systems (TPS)
Management level
 Inputs: High-volume data
 Processing: fixed/repetitive models
 Outputs: records
 Users: operational managers
Example: P.O.S or Payroll

Types of Management Support Systems
 Management Information Systems (MIS)
» Reports and displays
» Example: daily sales analysis reports
 Decision Support Systems (DSS)
» Interactive and ad hoc support
» Example: a what-if analysis to determine where to spend
advertising dollars
 Executive Information Systems (EIS)
» Critical information for executives and managers
» Example: easy access to actions of competitors

Management Information Systems (MIS)
Management level
 Inputs: High-volume data
 Processing: Simple models
 Outputs: Summary reports
 Users: Middle managers
Example: Annual budgeting

Management Information Systems (MIS)
 Structured and semi-structured decisions
 Report control oriented
 Past and present data
 Internal orientation
 Lengthy design process

Decision Support System (DSS)
Management level
 Inputs: Low-volume data
 Processing: Interactive
 Outputs: Decision analysis
 Users: Professionals, staff
Example: Contract cost analysis

Executive Support System (ESS)
Strategic level
 Inputs: Aggregate data
 Processing: Interactive
 Outputs: Projections
 Users: Senior managers
Example: 5-year operating plan

Enterprise Collaboration Systems (ECS)
 EC systems are cross-functional information systems that enhance team
and workgroup
» Communication
» Coordination
» Collaboration
 Systems may include
» Networked PC workstations
» Servers
» Databases
» Groupware and application packages

ECS Tools

Other Information Systems
 Expert Systems
» Provide expert advice
» Example: credit application advisor
 Knowledge Management Systems
» Support creation, organization, and dissemination of
business knowledge throughout company
» Example: intranet access to best business practices

Functional Business Systems
 A variety of types of information systems
that support the business functions of
» Accounting
» Finance
» Marketing
» Operations management
» Human resource management

Marketing Systems
 Marketing systems are concerned with
» Planning, promotion, and sale of existing products in
existing markets
» Development of new products and new markets
» Better attracting and serving present and
potential customers

Interactive Marketing
 Interactive Marketing
» A customer-focused marketing process
» Uses the Internet, intranets, and extranets
» Establishes two-way transactions between a business
and its customers or potential customers
 Goal
» Profitably use networks to attract and keep customers
» Get customers to help create, purchase, and improve
products and services

Targeted Marketing
 An advertising and promotion management concept
with five targeting components

Targeted Marketing Components
 Community: customized ads to appeal to specific virtual communities
 Content: ads placed on a variety of selected websites, aimed at a specific
audience
 Context: ads placed on web pages that are relevant to a product or service
 Demographic/Psychographic: web marketing aimed at specific types or
classes of people
 Online behavior: promotions tailored to each visit to a site by an individual

Sales Force Automation
 Outfit sales force with notebook computers,
web browsers, and sales contact software
» Connect them to marketing websites and the company
intranet
 Goals
» Increase personal productivity
» Speed up capture and analysis of sales data
» Gain strategic advantage

Manufacturing Information Systems
 Supports the production/operations functions
» Includes all activities concerned with planning and
control of the processes producing goods
or services

CIM Objectives
 Simplify production processes, product designs, and factory
organization
 Automate production processes and the
business functions that support them
 Integrate all production and support
processes using
» Networks
» Cross-functional business software
» Other information technologies

CIM Systems
 Computer-aided manufacturing (CAM)
» Automate the production process
 Manufacturing execution systems (MES)
» Performance monitoring information systems
for factory floor operations
 Process control
» Control ongoing physical processes
 Machine control
» Controls the actions of machines

Human Resource Management (HRM)
 Information systems designed to support
» Planning to meet personnel needs
» Development of employees to their full potential
» Control of all personnel policies and programs

HRM and the Internet
 Recruiting employees using the corporate website and
commercial recruiting services
 Posting messages in selected Internet newsgroups
 Communicating with job applicants via e-mail

HRM and Corporate Intranets
 Corporate intranet uses
» Process common HRM transactions
» Allow around-the-clock HRM services
» Disseminate information faster than through previous company
channels
» Collect information from employees online
» Allow HRM tasks to be performed with little HRM department
intervention
» Training

Employee Self-Service
 Intranet applications can allow employees to
» View benefits
» Enter travel and expense reports
» Verify employment and salary information
» Access and update personal information
» Enter time-sensitive data

Accounting Information Systems
 The oldest and most widely used information system
in business
» Records and reports business transactions and
economic events
» Produces financial statements
» Forecasts future conditions

 Typically consists of
» Order processing
» Inventory control
» Accounts receivable
» Accounts payable
» Payroll
» General ledger systems


Financial Management Systems
 Supports business managers and professionals
making decisions concerning
» The financing of a business
» The allocation and control of financial
resources within a business

Financial Management System Example

Enterprise Business Systems
 E-business means using the Internet, other networks, and IT to
support
» Electronic commerce
» Enterprise communications and collaboration
» Web-enabled business processes

Toward Digital Firm
 What we can do on the Internet
» Communicate and collaborate
» Access information
» Participate in discussions
» Supply information
» Find entertainment
» Exchange business transactions

Cross-Functional Systems
 Cross the boundaries of traditional business
functions
» Used to reengineer and improve vital business
processes all across the enterprise

Enterprise Application Architecture

 Provides a conceptual framework
» Helps visualize the basic components, processes, and interfaces
of major e-business applications
 Focuses on accomplishing fundamental
business processes in concert with
» Customers
» Suppliers
» Partners
» Employees

 Enterprise Resource Planning (ERP)
» Concentrates on the efficiency of internal production,
distribution, and financial processes
 Customer Relationship Management (CRM)
» Focuses on acquiring and retaining profitable customers via
marketing, sales, and services
 Partner Relationship Management (PRM)
» Aims at acquiring and retaining partners who
can enhance the selling and distribution of products and
services

 Supply Chain Management (SCM)
» Focuses on developing the most efficient and effective
sourcing and procurement processes
 Knowledge Management (KM)
» Focuses on facilitating internal group collaboration and
decision support

Enterprise Application Integration
 EAI software connects cross-functional systems
 Serves as middleware to provide
» Data conversion
» Communication between systems
» Access to system interfaces

How EAI Works

Specific business benefits from IS
 Lower advertising costs
» Better focus on potential customers
» New media
 Reduced delivery costs
 Design and manufacturing costs reduced
» Faster progress from design to market
» Inventory costs slashed by JIT (just in time) supplies
 Improved marketing and planning
 Access to new markets
 Customer involvement
» Potential for mass customization (see BBC programme)

Some Reservations for the Medium Term
 Use of computers becoming more extensive
» Spending more time, Longer hours
» e-mail overload
 Impact on the family
 May be inducing health problems
» Risk to employers if staff don't have enough breaks
» RSI, eye strain, tension
 Threats to systems
» Computer virus (examples?) Denial-of-Service attacks
» Serious if system is business-critical
 Threat to privacy
Summary
 Information Systems have transformed business
» Cutting communication costs and delays
» Eliminating distance as a factor in information flow
» Changing management structures
» Fostering globalization
 Also created new industries
» Typically information rich
» Mainly light on natural resource consumption
» Mobile phones are computers and depend on computers
 Downside
» IT-enabled pursuit of cost-cutting can be dehumanizing

Homework of Week
 Individual work – Find two articles authored by
Michael E. Porter
» “How information gives competitive advantage”

» “Strategy and the Internet”

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MBSZ02 Enterprise Information Management

Information Systems in Business

MUST Dr. Fei HUANG 1

 This week – Overview of Information Systems

MUST Dr. Fei HUANG 2

MUST Dr. Fei HUANG 3

 Strong drive to reduce business costs

» requires information management

MUST Dr. Fei HUANG 6

» requires information management

MUST Dr. Fei HUANG 7

» requires information management

MUST Dr. Fei HUANG 8

 assessing what the market wants

» requires information management

MUST Dr. Fei HUANG 9

» requires information management

MUST Dr. Fei HUANG 10

 Unfortunately, it does often cause common problems

MUST Dr. Fei HUANG 11

MUST Dr. Fei HUANG 13

MUST Dr. Fei HUANG 14

 The new style of business is:

MUST Dr. Fei HUANG 15

MUST Dr. Fei HUANG 16

MUST Dr. Fei HUANG 17

MUST Dr. Fei HUANG 18

 Direction is clear – customer orientation

 Teams and individuals need to network

 Information Systems make this possible

MUST Dr. Fei HUANG 19

 Good in one area– then moved into other areas

MUST Dr. Fei HUANG 20

 New model is not without its risks

MUST Dr. Fei HUANG 21

MUST Dr. Fei HUANG 22

 Middle managers: Carry out the programs and plans

 Operational managers: monitor the firm’s daily

MUST Dr. Fei HUANG 24

MUST Dr. Fei HUANG 25

MUST Dr. Fei HUANG 26

MUST Dr. Fei HUANG 27 7-27

Example: P.O.S or Payroll

MUST Dr. Fei HUANG 28

MUST Dr. Fei HUANG 30

Example: Annual budgeting

MUST Dr. Fei HUANG 31

 Report control oriented

 Past and present data

 Lengthy design process

MUST Dr. Fei HUANG 33

Example: Contract cost analysis

MUST Dr. Fei HUANG 35

Example: 5-year operating plan

MUST Dr. Fei HUANG 37

MUST Dr. Fei HUANG 39 7-39

MUST Dr. Fei HUANG 40 7-40