CHAPTER 1 : CHAPTER 1 INFORMATION SYSTEMS IN BUSINESS
Opening Case
Apple – Merging Technology, Business, and Entertainment
Chapter One Overview : Chapter One Overview SECTION 1.1 – INFORMATION SYSTEMS IN BUSINESS
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
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 : SECTION 1.1 INFORMATION SYSTEMS IN BUSINESS
LEARNING OUTCOMES : LEARNING OUTCOMES Describe the functional areas of a business and why they must work together for the business to be successful
Explain information technology’s role in business and how you measure success
Compare management information systems (MIS) and information technology (IT) and define the relationships among people, information technology, and information
LEARNING OUTCOMES : LEARNING OUTCOMES 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)
Explain the gap between IT and the business, along with the primary reason this gap exists
INFORMATION TECHNOLOGY’S ROLE IN BUSINESS : INFORMATION TECHNOLOGY’S ROLE IN BUSINESS Information technology is everywhere in business
Information Technology’s Impact on Business Operations : Information Technology’s Impact on Business Operations
Information Technology’s Impact on Business Operations : Information Technology’s Impact on Business Operations
Information Technology’s Impact on Business Operations : Information Technology’s Impact on Business Operations
Information Technology’s Impact on Business Operations : Information Technology’s Impact on Business Operations Organizations typically operate by functional areas or functional silos
Functional areas are interdependent
INFORMATION TECHNOLOGY BASICS : 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
INFORMATION TECHNOLOGY BASICS : 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
INFORMATION TECHNOLOGY BASICS : INFORMATION TECHNOLOGY BASICS When beginning to learn about information technology it is important to understand the following:
Information
IT resources
IT cultures
Information : Information Data - raw facts that describe the characteristic of an event
Information - data converted into a meaningful and useful context
IT Resources : IT Resources People use
Information technology to work with
Information
IT Cultures : IT Cultures Organizational information cultures include:
Information-functional culture
Information-sharing culture
Information-inquiring culture
Information-discovery culture
ROLES AND RESPONSIBILITIES IN IT : 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)
ROLES AND RESPONSIBILITIES IN IT : 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
ROLES AND RESPONSIBILITIES IN IT : ROLES AND RESPONSIBILITIES IN IT Average CIO compensation by industry
ROLES AND RESPONSIBILITIES IN IT : ROLES AND RESPONSIBILITIES IN IT What concerns CIOs the most
ROLES AND RESPONSIBILITIES IN IT : 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
ROLES AND RESPONSIBILITIES IN IT : ROLES AND RESPONSIBILITIES IN IT Skills pivotal for success in executive IT roles
The Gap Between Business Personnel and IT Personnel : 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
Improving Communications : 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
MEASURING INFORMATION TECHNOLOGY’S SUCCESS : 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
Efficiency and Effectiveness Metrics : 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
Benchmarking – Baselining Metrics : 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
Benchmarking – Baselining Metrics : Benchmarking – Baselining Metrics E-governement benchmarks
The Interrelationships of Efficiency and Effectiveness IT Metrics : 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
The Interrelationships of Efficiency and Effectiveness IT Metrics : 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
The Interrelationships of Efficiency and Effectiveness IT Metrics : 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)
The Interrelationships of Efficiency and Effectiveness IT Metrics : The Interrelationships of Efficiency and Effectiveness IT Metrics
OPENING CASE QUESTIONS Apple - Merging Technology, Business and Entertainment : OPENING CASE QUESTIONS Apple - Merging Technology, Business and Entertainment What might have happened to Apple if its top executives had not supported investment in iPods?
Formulate a strategy for how Apple can use efficiency IT metrics to improve its business
Formulate a strategy for how Apple can use effectiveness IT metrics to improve its business
Why would it be unethical for Apple to sell its iTunes customer information to other businesses?
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 : SECTION 1.2 BUSINESS STRATEGY
LEARNING OUTCOMES : LEARNING OUTCOMES Explain why competitive advantages are typically temporary
List and describe each of the five forces in Porter’s Five Forces Model
Compare Porter’s three generic strategies
Describe the relationship between business processes and value chains
IDENTIFYING COMPETITIVE ADVANTAGES : 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
IDENTIFYING COMPETITIVE ADVANTAGES : 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
THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS : THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS Porter’s Five Forces Model determines the relative attractiveness of an industry
Buyer Power : 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
Supplier Power : 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
Supplier Power : 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
Supplier Power : 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
Threat of Substitute Products or Services : 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
Threat of New Entrants : 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
Rivalry Among Existing Competitors : 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
THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS : 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
THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS : THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS
Value Creation : 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
Value Creation : Value Creation Value Chain
Value Creation : Value Creation Value chains with Porter’s Five Forces
OPENING CASE QUESTIONS Apple - Merging Technology, Business and Entertainment : OPENING CASE QUESTIONS Apple - Merging Technology, Business and Entertainment Did Apple gain a competitive advantage from its decision to invest in an online music business?
How can Apple use environmental scanning to gain business intelligence?
Using Porter’s Five Force Model, analyze Apple’s buyer power and supplier power
Which of the three generic strategies is Apple following?
Which of Porter’s Five Forces did Apple address through its introduction of the iPod?
CLOSING CASE ONE Say “Charge It” with Your Cell Phone : CLOSING CASE ONE Say “Charge It” with Your Cell Phone 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?
Using Porter’s Five Forces describe the barriers to entry for this new technology
CLOSING CASE ONE Say “Charge It” with Your Cell Phone : CLOSING CASE ONE Say “Charge It” with Your Cell Phone Which of Porter’s three generic strategies is this new technology following?
Describe the value chain of using cell phones as a payment method
What types of regulatory issues might occur due to this type of technology?
CLOSING CASE TWO Innovative Business Managers : CLOSING CASE TWO Innovative Business Managers Choose one of the companies listed above and explain how it could use a CIO, CTO, and CPO to improve business
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
Why is information technology important to an organization like the Boston Red Sox? Every organization needs information to remain
CLOSING CASE TWO Innovative Business Managers : CLOSING CASE TWO Innovative Business Managers Which of Porter’s Five Forces is most important to Home Depot’s business?
Which of the three generic strategies is PepsiCo following?
Explain the value chain and how a company like GE can use it to improve operations
CLOSING CASE THREE The World is Flat – Thomas Friedman : CLOSING CASE THREE The World is Flat – Thomas Friedman Do you agree or disagree with Friedman’s assessment that the world is flat? Be sure to justify your answer
What are the potential impacts of a flat world for a student performing a job search?
What can students do to prepare themselves for competing in a flat world?
Identify a current flattener not mentioned on Friedman’s list