Management Information Systems

Chapter 1
Information Systems (IS): Computer based tools that people use to work with
information and that support the information and information-processing needs of
an organization.
Information Technology (IT): Is the acquisition, processing, storage, and
dissemination of vocal, pictorial, textual and numerical information by a
microelectronics based combination of computing and telecommunications.
Management Information Systems (MIS): The function that plans for, develops,
implements and maintains IT hardware, software, and the applications that people
use to support the goals on an organization.
Data: Raw facts that describe the characteristics of an object or event.
Characteristics for a sales event could include the date, item number, item
descriptions, quantity ordered, customer name, and shipping details.
Information: Is data converted into a meaningful and useful context.
Knowledge: Information that can be acted upon.
Chief Technology Officer (CTO) - responsible for ensuring the 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 Officer (CKO) - responsible for collecting, maintaining, and
distributing the organizations knowledge
Porters model helps determine the attractiveness of an industry by looking at the
5 forces that organizations within the industry must deal with
Buyer power - high when buyers have many choices of whom to buy from and low
when their choices are few
-

Use IS to reduce buyer power through loyalty programs

Loyalty programs reward customers based on the amount of business they do
with an organization (frequent flyer programs)
Some companies rely on switching costs to reduce buyer power manipulating costs to make customers reluctant to switch to another product

Supplier power - high when organizations have few choices of whom to buy (raw
materials, supplies, etc.) from and low when their choices are many
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

Use IS to create an entry barrier

Entry barrier - a product or service feature that customers have come to

expect from organizations in an industry and must be offered by an entering
organization to compete and survive

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
-

Use IS to create switching costs (monetary or otherwise) to make customers

reluctant to switch to another product or service

Rivalry among existing competitors - high when competition is fierce in a

market and low when competition is moderate
IS-enabled Competitive Advantage: when you use IS to obtain an edge over
competitors
- e.g., Citibank created ATMs in 1977
- first mover advantage
- Increased entry barriers and locked in a large market share
- But sustainable IS-enabled competitive advantage is hard to achieve competitors can duplicate it
- Organizations need to continuously perform environmental scanning (i.e.,
gather & analyze info from the organizations environment)
Chapter 2
TPS: support operational managers in keeping track of elementary activities and
transactions
IS answer questions such as: what is the inventory level?, where is my order?
DSS: serve the monitoring, controlling, decision-making, and administrative
activities of middle managers
- IS answer questions such as: is production running according to plan?,
what happens if we double our production?
EIS: help senior managers address strategic issues
IS answer questions such as: what will employment levels be in 5 years?, should
we outsource our manufacturing to China?
Transactional Data: Raw facts within a single business process or department
- Supports daily operational tasks
- Examples: Order size, managers salary, product price, stock price, shipping
date
Analytical Information
- Summarized transactional data
- Supports analysis and decision making
- Examples: market trends, forecasts, sales by region

TPS: basic IS that serves the operational level in an organization (for clerks and
analysts)
- Examples
o Payroll system (Tracking hourly employees)
o Accounts Payable system
o Human Resources systems (tracking vacation, sick days)
o Course Registration system (university)
o System running an ATM (bank)
o Online reservation system (hotel)
- Online Transaction Processing (OLTP)
o capturing, processing, storing, updating info in a TPS
- Online Analytical Processing (OLAP)
o manipulating information in support of decision making using a DSS or
EIS
o OLAP (along with data mining, etc.) is considered Business Intelligence
(BI) capability/tool
o The OLAP capabilities include the following:
Consolidation - e.g., aggregating multiple store sales together
to get a total for the company
Drill-down - digging into the numbers, such as revenues broken
down into individual product revenues for each store
Slice-and-dice - looking at information from different
perspectives (dimensions) - e.g., product/store; product/sales
rep; product/distribution channel, etc.
DSS: an IS that models data and information to support managers, analysts, and
other professionals during the decision-making process
-

Depending on the level of the analysis, a DSS is used on transactional data or

analytical information

What-if analysis: checks the impact of a change in a variable on the

outcome
o What would be the impact on the bottom line if we have a 20%
increase in sales
o in Excel, changing the value of a cell that is used in a formula to see
the result

Sensitivity analysis: interested in what variables have the most effect on

the outcome

Goal-seeking analysis: finds the inputs necessary to achieve an outcome

o how many customers are required to increase profits to $5 million

EIS: a specialized DSS that supports senior level executives

EIS may use a digital dashboard - integrates information from multiple

components and presents it in a unified display
o e.g., Verizon CIOs dashboard is updated every 15 seconds with info
such as:
o Sales numbers
o

Call center wait time

Repair jobs completed

Etc.

Efficiency: focuses on the extent to which an organization is using its resources

in an optimal way
Effectiveness: focuses on how well an organization is achieving its goals and
objectives

Efficiency IS metrics measure the performance of IS

Transaction speed (time it takes to perform a transaction)
System availability (number of hours the system is available for users)
Response time (time it takes to respond to an online user)
Effectiveness IS metrics measure the impact IS have on business processes
Customer satisfaction (retention rates, revenue per customer)
Conversion rates (customers converted from browsers to buyers)
Business Process manner in which work is organized and coordinated to
produce a product or service or a standardized set of activities to accomplish a
specific task
Examples of business processes
Manufacturing: assembling a product
Sales & Marketing: identifying customers
Finance & Accounting: creating financial statements
HR: hiring new employees

Customer facing processes (front-office processes) - result in a product or

service that is received by an organizations external customer (e.g., customer
service)
Business facing processes (back-office processes) - are invisible to the external
customer but are essential to the effective management of the business (e.g.,
budget planning)

Organization-wide processes: span 2 or more functional areas of an

organization (e.g., order processing)
Inter-organizational processes: span 2 or more organizations (e.g., supply
chain process)