Transcript Slide 1

CHAPTER 1
INFORMATION
SYSTEMS IN
BUSINESS
Opening Case
Apple – Merging
Technology, Business,
and Entertainment
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
1-2
Chapter One Overview
• SECTION 1.1 – INFORMATION SYSTEMS IN BUSINESS
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Information Technology’s Role in Business
Information Technology Basics
Roles and Responsibilities in Information Technology
Measuring Information Technology’s Success
• SECTION 1.2 – BUSINESS STRATEGY
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Identifying Competitive Advantages
The Five Forces Model – Evaluating Business Segments
The Three Generic Strategies – Creating a Business Focus
Value Chain Analysis – Targeting Business Processes
SECTION 1.1
INFORMATION
SYSTEMS IN
BUSINESS
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
1-4
LEARNING OUTCOMES
1. Describe the functional areas of a business
and why they must work together for the
business to be successful
2. Explain information technology’s role in
business and how you measure success
3. Compare management information systems
(MIS) and information technology (IT) and
define the relationships among people,
information technology, and information
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LEARNING OUTCOMES
4. Compare the responsibilities of a chief
information officer (CIO), chief
technology officer (CTO), chief security
officer (CSO), chief privacy officer
(CPO), and chief knowledge officer
(CKO)
5. Explain the gap between IT and the
business, along with the primary reason
this gap exists
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INFORMATION TECHNOLOGY’S
ROLE IN BUSINESS
• Information technology is everywhere in business
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Information Technology’s Impact on
Business Operations
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Information Technology’s Impact on
Business Operations
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Information Technology’s Impact on
Business Operations
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Information Technology’s Impact on
Business Operations
• Organizations
typically operate by
functional areas or
functional silos
• Functional areas
are interdependent
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INFORMATION TECHNOLOGY BASICS
• Information technology (IT) – any
computer-based tool that people use to
work with information and support the
information and information-processing
needs of an organization
• Information technology is an important
enabler of business success and
innovation
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INFORMATION TECHNOLOGY BASICS
• Management information systems (MIS) – the
function that plans for, develops, implements,
and maintains IT hardware, software, and
applications that people use to support the
goals of an organization
• MIS is a business function, similar to
Accounting, Finance, Operations, and Human
Resources
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INFORMATION TECHNOLOGY BASICS
• When beginning to learn about
information technology it is important to
understand the following:
– Information
– IT resources
– IT cultures
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Information
• Data - raw facts that describe the
characteristic of an event
• Information - data converted into a
meaningful and useful context
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IT Resources
• People use
• Information
technology to
work with
• Information
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IT Cultures
• Organizational information cultures
include:
– Information-functional culture
– Information-sharing culture
– Information-inquiring culture
– Information-discovery culture
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ROLES AND RESPONSIBILITIES IN IT
• Information technology is a relatively new
functional area, having only been around
formally for around 40 years
• Recent IT strategic positions include:
– Chief Information Officer (CIO)
– Chief Technology Officer (CTO)
– Chief Security Officer (CSO)
– Chief Privacy Officer (CPO)
– Chief Knowledge Office (CKO)
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ROLES AND RESPONSIBILITIES IN IT
• Chief Information Officer (CIO) – oversees all
uses of IT and ensures the strategic alignment of
IT with business goals and objectives
• Broad CIO functions include:
– Manager – ensuring the delivery of all IT projects, on
time and within budget
– Leader – ensuring the strategic vision of IT is in line
with the strategic vision of the organization
– Communicator – building and maintaining strong
executive relationships
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ROLES AND RESPONSIBILITIES IN IT
• Average CIO compensation by industry
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ROLES AND RESPONSIBILITIES IN IT
• What concerns CIOs the most
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ROLES AND RESPONSIBILITIES IN IT
• Chief Technology Officer (CTO) – responsible for
ensuring the throughput, speed, accuracy, availability, and
reliability of IT
• Chief Security Officer (CSO) – responsible for ensuring
the security of IT systems
• Chief Privacy Officer (CPO) – responsible for ensuring
the ethical and legal use of information
• Chief Knowledge Office (CKO) - responsible for
collecting, maintaining, and distributing the organization’s
knowledge
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ROLES AND RESPONSIBILITIES IN IT
• Skills pivotal for success in executive IT roles
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The Gap Between Business
Personnel and IT Personnel
• Business personnel possess expertise in
functional areas such as marketing,
accounting, and sales
• IT personnel have the technological
expertise
• This typically causes a communications
gap between the business personnel and
IT personnel
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Improving Communications
• Business personnel must seek to increase
their understanding of IT
• IT personnel must seek to increase their
understanding of the business
• It is the responsibility of the CIO to ensure
effective communication between
business personnel and IT personnel
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MEASURING INFORMATION
TECHNOLOGY’S SUCCESS
• Key performance indicator (KPI) – measures
that are tied to business drivers
• Metrics are detailed measures that feed KPIs
• Performance metrics fall into the nebulous area
of business intelligence that is neither
technology, nor business centered, but requires
input from both IT and business professionals
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Efficiency and Effectiveness
Metrics
• Efficiency IT metric – measures the
performance of the IT system itself including
throughput, speed, and availability
• Effectiveness IT metric – measures the impact
IT has on business processes and activities
including customer satisfaction, conversion
rates, and sell-through increases
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Benchmarking – Baselining
Metrics
• Regardless of what is measured, how it is
measured, and whether it is for the sake of
efficiency or effectiveness, there must be
benchmarks – baseline values the system seeks
to attain
• Benchmarking – a process of continuously
measuring system results, comparing those
results to optimal system performance
(benchmark values), and identifying steps and
procedures to improve system performance
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Benchmarking – Baselining
Metrics
• E-governement benchmarks
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Efficiency IT metrics focus on technology
and include:
– Throughput
– Transaction speed
– System availability
– Information accuracy
– Web traffic
– Response time
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Effectiveness IT metrics focus on an
organization’s goals, strategies, and
objectives and include:
– Usability
– Customer satisfaction
– Conversion rates
– Financial
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
• Security is an issue for any organization offering
products or services over the Internet
• It is inefficient for an organization to implement
Internet security, since it slows down processing
– However, to be effective it must implement Internet
security
– Secure Internet connections must offer encryption
and Secure Sockets Layers (SSL denoted by the lock
symbol in the lower right corner of a browser)
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The Interrelationships of Efficiency
and Effectiveness IT Metrics
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OPENING CASE QUESTIONS
Apple - Merging Technology, Business and Entertainment
1.
What might have happened to Apple if its top executives
had not supported investment in iPods?
2.
Formulate a strategy for how Apple can use efficiency IT
metrics to improve its business
3.
Formulate a strategy for how Apple can use effectiveness
IT metrics to improve its business
4.
Why would it be unethical for Apple to sell its iTunes
customer information to other businesses?
5.
Evaluate the effects on Apple’s business if it failed to
secure its customer’s information and it was accidentally
posted to an anonymous Web site
SECTION 1.2
BUSINESS
STRATEGY
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
1-35
LEARNING OUTCOMES
6. Explain why competitive advantages are
typically temporary
7. List and describe each of the five forces in
Porter’s Five Forces Model
8. Compare Porter’s three generic strategies
9. Describe the relationship between business
processes and value chains
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IDENTIFYING COMPETITIVE
ADVANTAGES
• To survive and thrive an organization must
create a competitive advantage
– Competitive advantage – a product or
service that an organization’s customers
place a greater value on than similar offerings
from a competitor
– First-mover advantage – occurs when an
organization can significantly impact its
market share by being first to market with a
competitive advantage
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IDENTIFYING COMPETITIVE
ADVANTAGES
• Organizations watch their competition through
environmental scanning
– Environmental scanning – the acquisition and
analysis of events and trends in the environment
external to an organization
• Three common tools used in industry to analyze
and develop competitive advantages include:
– Porter’s Five Forces Model
– Porter’s three generic strategies
– Value chains
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THE FIVE FORCES MODEL –
EVALUATING BUSINESS SEGMENTS
• Porter’s Five Forces Model determines the
relative attractiveness of an industry
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Buyer Power
• Buyer power – high when buyers have
many choices of whom to buy from and
low when their choices are few
• One way to reduce buyer power is
through loyalty programs
– Loyalty program – rewards customers
based on the amount of business they do
with a particular organization
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Supplier Power
• Supplier power – high when buyers have
few choices of whom to buy from and low
when their choices are many
– Supply chain – consists of all parties involved in
the procurement of a product or raw material
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Supplier Power
• Organizations that are buying goods and
services in the supply chain can create a
competitive advantage by locating
alternative supply sources (decreasing
supplier power) through B2B marketplaces
– Business-to-Business (B2B) marketplace –
an Internet-based service that brings together
many buyers and sellers
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Supplier Power
• Two types of business-to-business (B2B)
marketplaces
– Private exchange – a single buyer posts its
needs and then opens the bidding to any
supplier who would care to bid
– Reverse auction – an auction format in
which increasingly lower bids are solicited
from organizations willing to supply the
desired product or service at an increasingly
lower price
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Threat of Substitute Products or
Services
• Threat of substitute products or
services – high when there are many
alternatives to a product or service and
low when there are few alternatives from
which to choose
– Switching cost – costs that can make
customers reluctant to switch to another
product or service
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Threat of New Entrants
• Threat of new entrants – high when it is
easy for new competitors to enter a
market and low when there are significant
entry barriers to entering a market
– Entry barrier – a product or service feature
that customers have come to expect from
organizations in a particular industry and
must be offered by an entering organization
to compete and survive
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Rivalry Among Existing
Competitors
• Rivalry among existing competitors –
high when competition is fierce in a
market and low when competition is more
complacent
• Although competition is always more
intense in some industries than in others,
the overall trend is toward increased
competition in just about every industry
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THE THREE GENERIC STRATEGIES –
CREATING A BUSINESS FOCUS
• Organizations typically follow one of
Porter’s three generic strategies when
entering a new market
– Broad cost leadership
– Broad differentiation
– Focused strategy
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THE THREE GENERIC STRATEGIES –
CREATING A BUSINESS FOCUS
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Value Creation
• Once an organization chooses its
strategy, it can use tools such as the value
chain to determine the success or failure
of its chosen strategy
– Business process – a standardized set of
activities that accomplish a specific task, such
as processing a customer’s order
– Value chain – views an organization as a
series of processes, each of which adds
value to the product or service for each
customer
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Value Creation
Value Chain
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Value Creation
• Value chains with Porter’s Five Forces
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OPENING CASE QUESTIONS
Apple - Merging Technology, Business and Entertainment
6.
Did Apple gain a competitive advantage from its decision
to invest in an online music business?
7.
How can Apple use environmental scanning to gain
business intelligence?
8.
Using Porter’s Five Force Model, analyze Apple’s buyer
power and supplier power
9.
Which of the three generic strategies is Apple following?
10. Which of Porter’s Five Forces did Apple address through
its introduction of the iPod?
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CLOSING CASE ONE
Say “Charge It” with Your Cell Phone
1. Do you view this technology as a
potential threat to traditional telephone
companies? If so, what
counterstrategies could traditional
telephone companies adopt to prepare
for this technology?
2. Using Porter’s Five Forces describe the
barriers to entry for this new technology
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CLOSING CASE ONE
Say “Charge It” with Your Cell Phone
3. Which of Porter’s three generic
strategies is this new technology
following?
4. Describe the value chain of using cell
phones as a payment method
5. What types of regulatory issues might
occur due to this type of technology?
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CLOSING CASE TWO
Innovative Business Managers
1. Choose one of the companies listed above and
explain how it could use a CIO, CTO, and CPO
to improve business
2. Why is it important for all of DreamWorks’
functional business areas to work together?
Provide an example of what might happen if the
DreamWorks marketing department failed to
work with its sales department
3. Why is information technology important to an
organization like the Boston Red Sox? Every
organization needs information to remain
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CLOSING CASE TWO
Innovative Business Managers
4. Which of Porter’s Five Forces is most
important to Home Depot’s business?
5. Which of the three generic strategies is
PepsiCo following?
6. Explain the value chain and how a
company like GE can use it to improve
operations
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CLOSING CASE THREE
The World is Flat – Thomas Friedman
1. Do you agree or disagree with Friedman’s
assessment that the world is flat? Be sure to
justify your answer
2. What are the potential impacts of a flat world for
a student performing a job search?
3. What can students do to prepare themselves for
competing in a flat world?
4. Identify a current flattener not mentioned on
Friedman’s list