Management And Business Information Systems Fundamentals Of Information Systems

Management and Business Information Systems Fundamentals of Information Systems

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1. Information Systems Concepts

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What Is an Information System? An information system includes the Computers, People, Procedures, and Software required to store, organize and deliver information Examples: airline reservation systems; point of sales (POS) systems

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Functions of an Information System

Figure 1-6

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Discussion • What input does a supermarket POS system need to produce a receipt? • When will the POS system provide you a feedback? • What information can be obtained from the data captured by the POS system that is useful to a store manager? 5

Data vs. Information • Data: raw facts • Information: collection of facts organized in such a way that they have value beyond the facts themselves (meaningful and useful to human beings in the processes such as making decisions)

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Data and Information

Figure 1-5

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Characteristics of Valuable Information • • • • • • • •

Accurate Complete Economical (cost to obtain should not be too high) Reliable and Verifiable (source?) Simple and Relevant (vs. information overload) Timely Accessible Secure (can only be viewed by authorized parties)

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2. Information Systems in the Enterprise

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Ways to Organize Information Systems • By the groups they serve – Operational level – Management level – Strategic level • By functional area – Sales and marketing – Manufacturing and production – Finance and accounting – Human resources

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Types of Information Systems by the Groups They Serve and Functional Area

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Transaction Processing Systems (TPS) • Basic business systems that serve the operational level • A computerized system that facilitates daily routine transactions necessary to the conduct of the business and captures and stores data associated with the transaction • Example: record sales and process payments 12

Management Information System (MIS) MIS serves the management level of the organization, providing managers with reports and online access to the organization’s current performance and historical records. Example: generate summarized sales report

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Management Information Systems (MIS) (continued) A sample MIS report

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Decision Support System (DSS) DSS serves the management level and helps managers make decision that are unique, rapidly changing, and not easily specified in advance (use of mathematical models) Example: Profitability Analysis, Break-even Analysis

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Executive Support System (ESS) ESS support strategic level managers to help make decisions that are non-routine requiring judgment, evaluation, and insight. Example: 5-year sales trend forecast

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Interrelationships Among Systems • In contemporary digital firms, the different types of systems are closely linked to one another. – TPS are typically a major source of data for other systems – MIS are sources for DSS and ESS – DSS is a source for ESS – Sometimes a single system serves many purposes

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Relationship of Systems to One Another Interrelationships among systems

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Organizing Systems by Functional Area • Sales and marketing • Manufacturing and production • Finance and accounting • Human resources

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Sales and Marketing Systems Major functions of systems: • Sales management, market research, promotion, pricing, new products Major application systems: • Sales order info system, market research system, pricing system

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Manufacturing and Production Systems Major functions of systems: • Scheduling, purchasing, shipping, receiving, engineering, operations Major application systems: • Materials resource planning systems, purchase order control systems, engineering systems, quality control systems 21

Financing and Accounting Systems Major functions of systems: • Budgeting, general ledger, billing, cost accounting Major application systems: • General ledger, accounts receivable, accounts payable, budgeting, funds management systems

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Human Resource Systems

Major functions of systems: • Personnel records, benefits, compensation, labor relations, training Major application systems: • Payroll, employee records, benefit systems, career path systems, personnel training systems

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3. Strategic Role of Information Systems in Organizations

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A General Model of an Organization (Manufacturing Company)

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The Value Chain of a Manufacturing Company

This is a value creation process of a manufacturing company 26

Discussion • Ultimate goal of a company: Make P_____ • P_____ = R______ - C___ (or E______) • To maximize P_____, you have to maximize R______, and/or minimize C___. • R______ = P____ x Demand • To maximize R______, you may set a high price (if demand is inelastic), find ways to increase demand, and/or find new sources of R______. • From the previous slide, can you identify some types of cost associated with the value chain operation? • Another way to maximize profit is to speed up the profit generation cycle (cash conversion cycle) by making the value chain operation more efficient! 27

What factors affect Long-term Profitability? • Michael Porter’s Five Forces Model – Rivalry among Existing Competitors

 affects revenue – Threat of New Entrants

 affects revenue, cost – Threat of Substitute Products

 affects revenue – Bargaining Power of Suppliers

 affects cost – Bargaining Power of Customers

 affects revenue

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What factors affect Long-term Profitability? Rivalry among Existing Competitors – Market growth, no. of firms in the market, relative strength, basis of competition, difficulty to exit Threat of New Entrants – Entry barrier (licensing, setup cost, economy of scale and scope, input barriers, brand loyalty) Threat of Substitute Products – Close substitutes, indirect substitutes Bargaining Power of Customers – no. of potential customers, reliance on customers (portion of sales vs. portion of purchase) Bargaining Power of Suppliers – no. of qualified suppliers, reliance on suppliers (portion of purchase vs. portion of sales) 29

Common Strategies Seeking to Secure Profitability Rivalry among Existing Competitors – Reach out to new markets, extend distribution network – Intensify promotion – Change basis of competition (e.g. value-added feature, service and support, convenience, speed, customization, personalization, experience) – Lower cost and price by simplifying and automating operations (e.g. direct selling, e-commerce) Threat of New Entrants – Expand production capacity and operation scale – Increase customer penetration (increase usage, up/crossselling) – Raise switching cost and build loyalty Threat of Substitute Products – Become first mover – Track changes of customer needs/preference, develop new products/improve products, shorten time to market

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Common Strategies Seeking to Secure Profitability Bargaining Power of Customers – Broaden customer base – Lock in customers for mutual reliance and benefit (efficient customer response, lower inventory carrying cost and/or transportation cost, shorten cash-to-cash cycle) Bargaining Power of Suppliers – Broaden choice of suppliers – Lock in suppliers for mutual reliance and benefit (just-in-time supply, lower inventory carrying cost, shorten cash-to-cash cycle) •

How can information systems and the Internet support these strategies?

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Most of these strategies require a seamless flow of information across internal departments, external vendors, customers and business partners. Information systems can support the flow and the processing of information. 31