Introduction to Functional Areas of Management Unit 8

Paradigm Shifts

• Humanity experienced two major paradigm shifts before the 20th century: the agricultural revolution and the industrial revolution.
• These shifts resulted in new ways of seeing the world and transformed human society.

The Agricultural Economy

• The transformation to an agricultural economy took place over several centuries around 10,000 years ago.
• This shift resulted in a society where most people lived and worked on farms, exchanging goods and services in nearby towns.
• The agricultural age lasted until about a century ago, when technological advances triggered the industrial revolution.

The Industrial Economy

• By the end of the 19th century, the world was dominated by an industrial economy in which more people worked in urban factories than on farms.
• Increasingly, more wealth was in the hands of fewer people.
• Crime, pollution, and other urban problems grew with the growth of towns into cities.

The Information Economy

• Twentieth-century information technology produced what's been called a second industrial revolution, as people turned from factory work to information-related work.
• In today's information economy (sometimes called a post-industrial economy), clerical workers outnumber factory workers, and most people earn their living working with words, numbers, and ideas.
• Approximately 70% of workers in the U.S. economy are information workers whose jobs require them to create, process, use, or distribute information.
• There are two types of information workers: knowledge workers and data workers.

Sectors in which computers are used

• Computers have changed many jobs in various sectors, including:
  • Entertainment
  • Publishing
  • Medicine
  • Airlines
  • Science

Systems and Organizations

• A system is a set of interrelated parts that work together to accomplish a purpose.
• A system performs three basic functions: input, processing, and output, and has two additional functions: feedback and control.
• A system has a boundary that defines its limits, and anything outside the system's boundary is part of the system's environment.
• A business organization is a system designed for the purpose of creating products and services for the consumer.

The Value Chain Model of a Business Organization

• The value chain model consists of five primary activities:
  • Inbound logistics
  • Operations
  • Outbound logistics
  • Marketing and sales
  • Service
• The value chain model also includes four support activities:
  • Management and other administrative services
  • Human resources
  • Research and technology development
  • Procurement

Information Systems

• An information system is a set of interrelated parts that work together to produce, distribute, and use information products and services.
• An information system uses people, hardware, and data resources for input, processing, output, storage, and control activities to produce valuable information for users.
• Information systems can be categorized into four areas:
  • Communication among people in the organization
  • Making decisions within the organization
  • Operations of the organization
  • Strategic management of the organization

Tasks and Information

• Tasks can be categorized into four areas (mentioned above).
• Information refers to facts, statistics, or other data that are valuable or useful to a person for accomplishing a task.
• Information is organized and represented in some physical or digital form.

Benefits of Information Systems

• A firm can reap the following benefits from information systems:
  • High-quality information
  • Access to information
  • Utilization of information
  • Perform organizational work efficiently
  • Better communication and decision-making
  • Better products and services for customers

Information Systems for Business Transactions

• A transaction is an event that occurs in any of the primary activities of the company.
• A transaction processing system (TPS) is a firm's basic accounting and record-keeping system that keeps track of routine daily transactions necessary to conduct business.
• The transaction processing cycle consists of five steps:
  1. Entering the data
  2. Processing the data
  3. Storing and updating the data
  4. Document and report preparation
  5. User inquiry

Enterprise Resource Planning

• Transaction processing systems exist in all functional areas of a business.
• Each subsystem is itself a transaction processing system.
• Many managers in organizations look for ways to create cross-functional information systems by reengineering, or combining and integrating, two or more transaction processing systems.

Automated Information Systems for Design and Manufacturing

• Computer-Aided Design (CAD) is used in a wide variety of industries to draw product or process designs on the screen.
• Computer-Aided Manufacturing (CAM) is used to automate the manufacturing process.
• Computer-Integrated Manufacturing (CIM) is a concept, or management philosophy, emphasizing the coordination of CAD and CAM systems along with other information systems in the company.

Social Responsibility in the Information Age

• Social responsibility refers to both legal and ethical behavior.
• Laws define a society's proper, or legal, behavior and outline the actions a government can take in response to improper behavior.
• Ethics are sets of principles or moral standards that help guide behavior, actions, and choices.
• Social responsibility applies to a company as a whole as well as to individuals.
• Some guidelines for computer ethics include:
  • Informed consent
  • The "higher ethic"
  • Most restrictive action
  • Universality rule
  • "Change in" rule
  • Owner's conservative rule
  • User's conservative rule

Learn about the major paradigm shifts in human history, from the agricultural revolution to the industrial revolution and into the information age.