Chapter 1 – Information Systems in Business and Business Strategy
Describe the functional areas of a business and why they must work together for the business to be successful.
· Accounting - provides quantitative information about the finances of the business including recording, measuring, and describing financial information.
· Finance - deals with the strategic financial issues associated with increasing the value of the business, while observing applicable laws and social responsibilities.
· Human resources - includes the policies, plans, and procedures for the effective management of employees (human resources).
· Sales - the function of selling a good or service and focuses on increasing customer sales, which increases company revenues.
· Marketing - the process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company’s products.
· Operations management (also called production management) - includes the methods, tasks, and techniques organizations use to produce goods and services. Transportation (also called logistics) is part of operations management.
· Management information systems (MIS) – a general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems.
Functional areas are anything but independent in a business. In fact, functional areas are interdependent. Sales must rely on information from operations to understand inventory, place orders, calculate transportation costs, and gain insight into product availability based on production schedules. For an organization to succeed, every department or functional area must work together sharing common information and not be a “silo.” Information technology can enable departments to more efficiently and effectively perform their business operations.
Explain information technology’s role in business and how you measure success.
Information technology is everywhere in business. Information technology is an important enabler of business success and innovation. This is not to say that IT equals business success and innovation or that IT represents business success and innovation. Information technology is most useful when it leverages the talents of people. Information technology in and of itself is not useful unless the right people know how to use and manage it effectively.
Efficiency and effectiveness metrics help an organization measure the success of its IT initiatives. Efficiency IT metrics measures the performance of the IT system itself, such as throughput, speed, and availability. Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases.
Compare management information systems (MIS) and information technology (IT) and define the relationships among people, information technology, and information.
MIS is not IT. MIS is a business function. IT is a computer-based tool. Most organizations have an IT Department that is responsible for performing the MIS function. This is similar to an organization having an Accounting Department that is responsible for performing the accounts payable and accounts receivable functions. IT in and of itself is not useful unless the right people know how to use and manage it efficiently and effectively. People, information, and information technology (in that order of priority) are inextricably linked. If one fails, they all fail.
Compare the responsibilities of a CIO, CTO, CSO, CPO, and CKO.
· Chief Information Officer (CIO) oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives.
· Chief Technology Officer (CTO) is responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT.
· Chief Security Officer (CSO) is responsible for ensuring the security of IT system.
· Chief Privacy Officer (CPO) is responsible for ensuring the ethical and legal use of information.
· Chief Knowledge Office (CKO) is responsible for collecting, maintaining, and distributing the organization’s knowledge.
Explain the gap between IT and the business, along with the primary reason this gap exists.
Business personnel possess expertise in functional areas such as marketing, accounting, and sales. IT personnel have the technological expertise. This causes a communications gap between the two. IT personnel have their own vocabularies consisting of acronyms and technical terms. Business personnel have their own vocabularies based on their experience and expertise. For both sides to have effective communications, the business personnel must seek to achieve an increased level of understanding of IT, and the IT personnel must seek to achieve an increased level of understanding of the business.
Explain why competitive advantages are typically temporary.
Competitive advantages are typically temporary because competitors often seek ways to duplicate the competitive advantage. In turn, organizations must develop a strategy based on a new competitive advantage. Ways that companies duplicate competitive advantages include acquiring the new technology, copying business processes, and hiring away employees.
List and describe each of the five forces in Porter’s Five Forces Model.
· Buyer power – high when buyers have many choices of whom to buy from and low when their choices are few
· Supplier power – high when buyers have few choices of whom to buy from and low when their choices are many
· 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
· 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
· Rivalry among existing competitors – high when competition is fierce in a market and low when competition is more complacent
Compare Porter’s three generic strategies.
Organizations typically follow one of Porter’s three generic strategies when entering a new market. (1) Broad cost leadership, (2) broad differentiation, (3) focused strategy. Broad strategies reach a large market segment. Focused strategies target a niche market. Focused strategies concentrate on either cost leadership or differentiation.
Describe the relationship between business processes and value chain analysis.
A business process is a standardized set of activities that accomplish a specific task, such as processing a customer’s order. The value chain approach views an organization as a chain, or series, of processes, each of which adds value to the product or service for each customer. The value chain helps an organization determine the “value” of its business processes for its customers.
Chapter 2 Strategic Business Decisions
Explain the difference between transactional information and analytical information. Be sure to provide an example of each.
Transactional information encompasses all of the information contained within a single business process or unit of work, and its primary purpose is to support the performing of daily operational tasks. Examples of transactional information include withdrawing cash from an ATM or making an airline reservation. Analytical information encompasses all organizational information, and its primary purpose is to support the performing of managerial analysis tasks. Examples of analytical information include trends, sales, and product statistics.
Define TPS, DSS, and EIS and explain how an organization can use these systems to make decisions and gain competitive advantages.
· Transaction processing system (TPS) - A transaction processing system (TPS) is the basic business system that serves the operational level (analysts) in an organization. The most common example of a TPS is an operational accounting system such as a payroll system or an order-entry system.
· Decision support system (DSS) – models information to support managers and business professionals during the decision-making process
· Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
Being able to sort, calculate, analyze, and slice-and-dice information is critical to an organization’s success. Without knowing what is occurring throughout the organization there is no way that managers and executives can make solid decisions to support the business.
Describe the three quantitative models typically used by decision support systems.
1. Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model
2. What-if analysis – checks the impact of a change in an assumption on the proposed solution
3. Goal-seeking analysis – finds the inputs necessary to achieve a goal
Describe the relationship between digital dashboards and executive information systems.
An executive information system (EIS) is a specialized DSS that supports senior level executives within the organization. A digital dashboard integrates information from multiple components and present it in a unified display. A digital dashboard is a form of EIS.
Identify the four types of artificial intelligence systems.
The four most common categories of AI include:
1. Expert systems – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems
2. Neural Networks – attempts to emulate the way the human brain works
3. Genetic algorithm - system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem
4. Intelligent agents – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users
Describe business processes and their importance to an organization.
A business process is a standardized set of activities that accomplish a specific task, such as processing a customer’s order. Business processes transform a set of inputs into a set of outputs (goods or services) for another person or process by using people and tools. Without processes organizations would not be able to complete activities.
Differentiate between customer facing processes and business facing processes.
Customer facing processes result in a product or service that is received by an organization’s external customer. Business facing processes are invisible to the external customer but essential to the effective management of the business and include goal setting, day-to-day planning, performance feedback, rewards, and resource allocation.
Compare business process improvement and business process reengineering.
Many organizations began business process improvement with a continuous improvement model. Business process improvement attempts to understand and measure the current process, and make performance improvements accordingly. Business process reengineering (BPR) is the analysis and redesign of workflow within and between enterprises. BPR relies on a different school of thought than business process improvement. In the extreme, BPR assumes the current process is irrelevant, does not work, or is broken and must be overhauled from scratch. Such a clean slate enables business process designers to disassociate themselves from today’s process and focus on a new process. It is like the designers projecting themselves into the future and asking: What should the process look like? What do customers want it to look like? What do other employees want it to look like? How do best-in-class companies do it? How can new technology facilitate the process?
Describe the importance of business process modeling (or mapping) and business process models.
Business process modeling (or mapping) is the activity of creating a detailed flow chart or process map of a work process showing its inputs, tasks, and activities, in a structured sequence. A business process model is a graphic description of a process, showing the sequence of process tasks, which is developed for a specific purpose and from a selected viewpoint. A set of one or more process models details the many functions of a system or subject area with graphics and text and its purpose is to:
· Expose process detail gradually and in a controlled manner
· Encourage conciseness and accuracy in describing the process model
· Focus attention on the process model interfaces
· Provide a powerful process analysis and consistent design vocabulary
Explain business process management along with the reason for its importance to an organization.
The latest area to discover the power of technology in automating and reengineering business process is business process management. Business process management (BPM) integrates all of an organization’s business process to make individual processes more efficient. BPM can be used to solve a single glitch or to create one unifying system to consolidate a myriad of processes. Many organizations are unhappy with their current mix of software applications and dealing with business processes that are subject to constant change. These organizations are turning to BPM systems that can flexibly automate their processes and glue their enterprise applications together.
Chapter 3 Ebusiness
Compare disruptive and sustaining technologies.
Disruptive technology – a new way of doing things that initially does not meet the needs of existing customers
· Disruptive technologies redefine the competitive playing fields of their respective markets.
· Disruptive technologies tend to open new markets and destroy old ones.
· Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies
Sustaining technology – produces an improved product customers are eager to buy, such as a faster car or larger hard drive
· Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets
· Sustaining technologies virtually never lead in markets opened by new and disruptive technologies
Explain how the Internet caused disruption among businesses.
The Internet has completely disrupted the way businesses operate, employees communicate, and products are developed and sold. Here are a few examples:
· Travel site Expedia.com is now the biggest leisure-travel agency, with higher profit margins then even American Express.
· $35 billion in annual online music downloads are wrecking the traditional music business.
· Dell increases profit margins while cutting prices by using the Internet to link suppliers and customers.
· eBay is one of the nation’s top 15 retailers.
Define the relationship between the Internet and the World Wide Web
The Internet is a global public network of computer networks that pass information from one to another using common computer protocols. The World Wide Web is a global hypertext system that uses the Internet as its transport mechanism. The World Wide Web operates on the Internet.
Describe the different methods an organization can use to access information.
An organization can use four common tools to access Internet information.
1. Intranet – an internalized portion of the Internet, protected from outside access that allows an organization to provide access to information and application software to only its employees.