Introduction to Management Information Systems Chapter 2 Purpose of Information Systems HTM 304 Fall 07.

Introduction to Management Information

Systems

Chapter 2 Purpose of Information Systems

HTM 304

Fall 07

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Learning Objectives

Understand the three purposes of information

systems

Know the eight principles of competitive

advantage

Understand how information systems create

competitive advantage

Define problem

Recognize that different information systems

are needed to solve different problem

definitions

Know the characteristics of decision making

Understand how information systems facilitate

decision making

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Review

Definition of management information systems

Process of information system development

Focus of this chapter

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Three main purposes of information systems

To gain competitive advantage

To solve problems

To assist in decision making

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1. Competitive Advantage

There is an old African proverb …

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Every morning a gazelle wakes up and knows it will have to run faster than the fastest lion

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Every morning a lion wakes up and knows it will have to run faster than the slowest gazelle

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But lion or gazelle, one thing is sure: when the day begins, you’d better start running

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Competitive Advantages

Definition – An advantage over competitors

in some measure such as cost, quality, or

speed, leads to control of a market and to

larger- than average profits.

Definition – An advantage over competitors

in some measure such as cost, quality, or

speed, leads to control of a market and to

larger- than average profits.

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Market Competition: Porter’s Five Forces Model

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Internet has changed the five forces

Read the assignment and choose a verb for each blank: (try not to use the same words)

1. Internet __________ traditional barriers to entry.

3. Internet ______ the bargaining power of suppliers.

4. Internet ______ the bargaining power of customers.

5. Internet ______ the existence of substitute products and services.

2. Internet ______ the intensity of competition among existing competitors.

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Eight Principles of Competitive Advantage

Create & improveproducts

Raise barriers

Increase trust

& cut costs

Information System may help in all the eight areas.Information System may help in all the eight areas.

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Case: IS Creates & Enhances Amazon

MissionTo be Earth's most customer-centric company where people can find and discover anything they want to buy online

Technology innovation drives Amazon growthPersonalized shopping experience

Book discovery through Search Inside the Book

1-Click® Shopping

Gold Box New Deals

Community features like Listmania and Wish Lists

Shares storefront technology via Web services

Technologies used to manage logistics and reduce costs

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Personalized Shopping

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Personal Address Book Locks In

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1-click check out

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Gold Box New Deals

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Custom Book Recommendations

• Uses IS to compare your shopping preferences to

millions of others for recommendations

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Strategic Alliance

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Amazon’s Competitive Advantages

1. Create new product or service?

2. Enhance products or services?

3. Differentiate products or services?

4. Lock in customers and buyers?

5. Lock in suppliers?

6. Raise barriers to market entry?

7. Establish alliances?

8. Reduces costs

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Be Careful

Websites also provide product descriptions (+ Search inside the book) to

better inform shoppers. Will this become a competitive advantage for the

store?

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2. Problem Solving

Information Systems can be used for problem solving

A Laptop Problem (page 30)

Problem: a perceived difference between what is and what ought to be.

Problem definition: defines the difference by describing both the current

situation and the desired situation,

e.g. the customer support representative do not have data about the

prior call to best assist a customer

Solution:

1. A CRM System to store customer information and all the

interactions (Chapter 7)

2. Knowledge Management System to provide customer procedures

to fix the laptops (Chapter 9)

3. A Manufacturing Quality-Control Information System to eliminate

possible faulty laptops

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Other problems

MIS in use 2-1 (page 32)

Some other examples:Company directory updates.

Company A has personnel transfer between department frequently.

Jessie is the personnel in charge of publishing company phone books. Every 6 months, she send out a form to all the employees to see if they need to update their contact information. She then organize the changes into a new file and order new prints which will be available for distribution in 2 weeks

Problem: – Costly publishing

– phone books become obsolete quickly

how IS can help?

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3. Decision Making

Information System can facilitate decision making

Decision Levels

Operational: day-to-day activities

How many widgets should we order? e.g. Transaction

processing systems (TPS)

Managerial: allocation and utilization of resources.

How much should we budget for computer hardware and

software for department A? e.g. Management Information

Systems (MIS)

Strategic: broader-scope, organizational issues.

Should we acquire company A? or allied with company B? e.g.

Executive information systems (EIS)

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Decision Process

Structured Decision

Well understood and accepted methods for decision making

For example: Formula available to calculate when and how

many units of material to order.

Many formulae can be learnt from HTM 406.

Unstructured Decision

Implicit decisions. No agree-on decision making method.

For example, predicting of the future economy and effect of

strategic alliance.

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Relationship

Decision Type

DecisionProcess

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IS for Decision Making

Use formula to produce results. Computers do the work.

Computers help commu-nication among people. People do the job.

StructuredDecision Making

UnstructuredDecision Making

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Summary

Three main purposes of IS (interrelated)

Gain Competitive Advantages

Solve Problems

Facilitate Decision Marking

Eight Principles of competitive advantages

Explain what is a problem? Problem Definition

Decision Types and Processes

Relationships between decision types and processes

Explain the concept of automated information systems and

augmented information systems.

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Opposing Forces: I don’t need a computer to do business

G. Robinson Old Prints and Maps (Page 31a,b)

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Suggested Blogging Topic

Read the reflection guide and discuss:

“what is your personal competitive advantage?”

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Reading Assignment

Read the opening story of Chapter 7 “Universal Electronics” (page 194 & 195)

What do you think about the COOs answer? Are you satisfied with the answer? What do you learn from the answer?