MBA 8473 Session Two Information Systems and Their Strategic Use. Cognitive objectives

Transcription

1 MBA 8473 Session Two Information Systems and Their Strategic Use GSU 1 Cognitive objectives 1. Explain what is an Information System. 2. Identify the organizational context of an IS. 3. Give examples of four levels of an organization and their purposes. 4. Explain four types of information systems based on which organizational level users they serve. 5. Give examples of each of the four ISs. 6. Compare and contrast types of input used by each of the four ISs. 7. Compare and contrast types of processing done by each of the four ISs. 8. Compare and contrast types of output provided by each of this four ISs. 9. Provide examples of any inter-relationship(s) that might exist between any two or more of the four ISs. 10. Explain three possible strategy levels for an organization. 11. Explain three strategies and what Information Technology can be used for each at the business level. 12. Explain two strategies and what Information Technology can be used for each at the firm level. 13. Explain four strategies and what Information Technology can be used for each at the industry level. 2

2 What is an Information System? (C.O. 1) Interrelated components working together to collect, process, store, and disseminate information to support analysis and decision making, co-ordination, control in an organization. IS components can include: data, hardware devices & software, people, telecommunication and other infrastructure. 3 Four levels of a typical organization: Users served and Appropriate IS for each (C.O. 2 and 3) Types of Info Sys Users served STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & DATA WORKERS OPERATIONAL LEVEL OPERATIONAL MANAGERS SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING RESOURCES 4

3 Four types of Information Systems (C.O. 4) 1. EXECUTIVE SUPPORT SYSTEMS (ESS) 2. MANAGEMENT INFORMATION SYSTEMS (MIS) 3. DECISION SUPPORT SYSTEMS (DSS) 4. TRANSACTION PROCESSING SYSTEMS(TPS) 5 EXECUTIVE SUPPORT SYSTEMS (ESS) (C.O.s 4 through 8) TOP LEVEL MANAGEMENT/ UNSTRUCTURED DECISIONS DESIGNED TO THE INDIVIDUAL TIES CEO TO ALL LEVELS VERY EXPENSIVE TO KEEP UP EXTENSIVE SUPPORT STAFF STRATEGIC LEVEL INPUTS: AGGREGATE DATA PROCESSING: INTERACTIVE OUTPUTS: PROJECTIONS USERS: SENIOR MANAGERS EXAMPLE: 5 YEAR OPERATING PLAN (see more examples in Fig. 2-2) 6

4 MANAGEMENT INFORMATION SYSTEMS (MIS) (C.O.s 4 through 8) MORE STRUCTURED & LESS SEMI-STRUCTURED DECISIONS REPORT CONTROL ORIENTED PAST & PRESENT DATA INTERNAL ORIENTATION LENGTHY DESIGN PROCESS MANAGEMENT LEVEL INPUTS: HIGH VOLUME DATA PROCESSING: SIMPLE MODELS OUTPUTS: SUMMARY REPORTS USERS: MIDDLE MANAGERS EXAMPLE: ANNUAL BUDGETING (see more examples in Fig. 2-2) 7 DECISION SUPPORT SYSTEMS (DSS) (C.O.s 4 through 8) SOME UNSTRUCTURED & SOME SEMI-STRUCTURED DECISIONS FLEXIBLE, ADAPTABLE, QUICK USER CONTROLS INPUTS/OUTPUTS NO PROFESSIONAL PROGRAMMING SUPPORTS DECISION PROCESS SOPHISTICATED MODELING TOOLS MANAGEMENT LEVEL INPUTS: LOW VOLUME DATA PROCESSING: INTERACTIVE OUTPUTS: DECISION ANALYSIS USERS: PROFESSIONALS, STAFF EXAMPLE: CONTRACT COST ANALYSIS (see more examples in Fig. 2-2) 8

5 TRANSACTION PROCESSING SYSTEMS (TPS) (C.O.s 4 through 8) No Decisions. Mostly Data OPERATIONAL LEVEL INPUTS: TRANSACTIONS, EVENTS PROCESSING: UPDATING OUTPUTS: DETAILED REPORTS USERS: OPERATIONS PERSONNEL EXAMPLE: ACCOUNTS PAYABLE; ORDER TRACKING (see more examples in Fig. 2-2) 9 TPS DATA FOR MIS APPLICATIONS (C.O. 9) (Also see Fig. 2-9 and read up section 2.2 on Systems from a Functional Perspectives) TPS ORDER PROCESSING SALES DATA MIS ORDER FILE MATERIALS RESOURCE PLANNING PRODUCTION MASTER FILE GENERAL LEDGER UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS REPORTS MANAGERS ACCOUNTING FILES MIS FILES 10

6 THREE STRATEGY LEVELS (c.o. 10 & 11) Level 1 - Business level or SBU s (creation of value) Three strategies: DIFFERENTIATE (Product and Focused) LINK CUSTOMERS & SUPPLIERS Value/Supply Chain Management; Reversal of value chain (HP, Procter & Gamble) LOW-COST PRODUCER IT Support (Try to write down some examples of IT support that will enable some of the above strategies): 11 THREE STRATEGY LEVELS (c.o. 10 & 12) Level 2 - Firm level (integrates SBU s) Two strategies: SYNERGY CORE COMPETENCY IT Support : (Try to write down some examples of IT support that will enable some of the above strategies): 12

7 THREE STRATEGY LEVELS (c.o. 10 & 13) Level 3 - Industry level (deals with oligopoly or better competitive forces) Four strategies: Fundamental transformation (discussed later with Encyclopedia Britannica /Encarta minicase, see Session 2 Appendix II at the end of this note.) Competitors/ complementor - Use or share product, process, knowledge - Form and leverage community buying and selling - B2B hubs Controlling industry standards - Lock-in/ switching costs - Establish industry standards Controlling license IT Support (Try to write down some examples of IT support that will enable some of the above strategies): 13 Focus on competitors and complementors (c.o. 13) Structure and dynamics of the Wintel alliance Microsoft and Intel, with Microsoft focusing on software and Intel on hardware Intel has entered new product spaces, such as chipsets and motherboards, thereby triggering demand for its core product - the microprocessor Contrast this with Apple s highly integrated strategy Relative lack of complementation made Apple products more expensive and, eventually, less desirable to populace 14

8 Controlling industry standards: Lock-in and Switching Costs (c.o. 13) Durable complementary assets Turntables and LPs (long-playing phonograph records) Considerable consumer switching costs when the CD was introduced by Sony and Phillips Users of IT notoriously subject to switching costs Investments in multiple complementary and durable assets Investments in wetware - the knowledge & human assets Illustrations A cellular provider who has invested in Qualcomm s technology for compressing and encoding calls An enterprise that has selected Cisco or 3Com for its networking needs 15 Establishing industry standards (c.o. 13) Network Externalaties and Positive feedback As the installed base of users grows, adoption becomes more worthwhile Diffusion slow at first and then rapidly accelerates Basic technology for fax m/c patented in 1843 by Alexander Bains First message sent in 1969; used at first by techies Netscape s strategy of free web browsers; designed to ignite positive feedback Manage customer expectations Product announcements and their timing IBM versus DEC in Mainframe markets in 60 s; Intel versus AMD chip speed race Co-opt suppliers of complements Sony & Phillips, along with Time Warner and Toshiba, promoting DVD 16

9 Summary and Review (A general comment : In order to complete your learning, prepare to explain your answers to all questions by using examples from class presentation, text, or from work experiences). What are various types of Information Systems? What are their comparisons and contrasts? What are the various strategy levels for an organization? What strategies are relevant in each of these levels? How can IT help in implementing these strategies? 17 Appendix I - Next five slides are examples for TPS TYPICAL TPS APPLICATIONS Sales & 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 18

10 TYPICAL TPS APPLICATIONS Manufacturing & 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 19 TYPICAL TPS APPLICATIONS Accounting Systems MAJOR FUNCTIONS OF SYSTEMS: Budgeting; General Ledger; Billing: Cost Accounting MAJOR APPLICATION SYSTEMS: General Ledger; Accounts Receivable / Payable; Budgeting; Funds Management Systems 20

11 TYPICAL TPS APPLICATIONS Human Resources 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 21 TYPICAL TPS APPLICATIONS Other Types (e.g., University) MAJOR FUNCTIONS OF SYSTEMS: Admissions; Grade Records; Course Records; Alumni MAJOR APPLICATION SYSTEMS: Registration System; Student Transcript System; Curriculum Class Control System; Alumni Benefactor System 22

12 Appendix II Britannica vs. Encarta (Used for Level 3 strategy discussion) 23 Britannica versus Encarta Encyclopedia Britannica, a classic reference work for 200 years A few years back it cost $ 1,600 for 32 volumes Sales of $ 650 million in 1990 Introduction of Encarta In 1992, Microsoft bought right to Funk and Wagnalls, a second-tier encyclopedia that had been Added multimedia bells and whistles and sold it for $ Sold it at even cheaper prices to OEM Britannica s response - $2,000 online access for libraries Dominantly large libraries purchased the Britannica. By 1996, sales had dropped to $ 325 million 24

13 Britannica versus Encarta Other responses by Britannica $120 per year online home subscription $CD version of $200 Radical surgery at Britannica In 1996, Jacob Safra, a Swiss financier bought the company disbanded the 110 sales agents and independent contractors, and started price cutting Yearly subscription reduced to $85 Recently..a CD sells for $ Now. Encarta allows online access to near real-time satellite images as illustrations of space and geography concepts. How can Britannica compete with Encarta? 25 Core Principle Information is costly to produce, but cheap to reproduce and distribute Marginal cost of each additional product is low (zero in many cases) Distribution costs very low and approaching zero in some cases Fundamental transformation of information industries relationship between information flows and physical flows 26