Information Technology and Business Interdependence

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Questions and Answers

What role do information systems play in organizations?

They create value by serving as an organizational and management solution. (correct)

They primarily facilitate communication between employees.

They eliminate the need for traditional management roles.

They are mainly used for storing large amounts of data.

Who typically works with middle management within a firm?

Senior managers only

Production workers exclusively

Scientists and knowledge workers (correct)

Operational workers and clerical staff

Which of the following correctly identifies the three principal levels of business organizations?

Executive, Sales, Production

Board Members, Managers, Employees

Management, Staff, Clients

Senior management, Middle management, Operational management (correct)

Why is understanding the organization, management, and information technology important for using information systems?

It enables effective and valuable use of information systems. Signup and view all the answers

Which dimension of information systems is concerned with hierarchy and responsibility?

Organizational dimension Signup and view all the answers

What is a significant benefit of operational excellence in businesses?

Higher profitability through efficiency Signup and view all the answers

Which of the following best describes a business model?

A description of how a company creates wealth Signup and view all the answers

How does using information systems impact customer intimacy?

It increases customer satisfaction and repeat business. Signup and view all the answers

Which of the following is an example of how information systems support new business models?

Enabling streaming services like Netflix Signup and view all the answers

What role do information systems play in relationships with suppliers?

They enable real-time communication that lowers costs. Signup and view all the answers

What is the relationship between business capabilities and information systems?

Changes in business strategies often drive changes in information systems. Signup and view all the answers

Which of the following statements about Walmart’s Retail Link system is true?

It enhances supply chain efficiency between suppliers and stores. Signup and view all the answers

Why is customer intimacy important for businesses?

It drives revenue through personalized services. Signup and view all the answers

What is one key benefit of emerging mobile digital platforms in business?

Enhanced digital communication. Signup and view all the answers

Which factor has notably reduced the costs of operating on a global scale?

Advancements in information technology. Signup and view all the answers

What is indicated by the growth of information technology capital investment from 1980 to 2009?

Growing importance of hardware and software. Signup and view all the answers

What is a strategic objective for investing in information systems?

Operational excellence. Signup and view all the answers

What is a characteristic of a fully digital firm?

Digital enablement of business relationships. Signup and view all the answers

Which of the following challenges does globalization present to businesses?

Increased competitive pressures. Signup and view all the answers

What does time shifting in a digital organization refer to?

Flexible scheduling of work hours. Signup and view all the answers

Which of the following represents a significant trend in information systems today?

Growing utilization of artificial intelligence. Signup and view all the answers

What are the three basic activities of an information system?

Input, processing, output Signup and view all the answers

What is the role of feedback in an information system?

To return output to correct input stage Signup and view all the answers

How does processing function in an information system?

It converts raw data into a meaningful form Signup and view all the answers

Which of the following best describes input in the context of information systems?

The capturing of raw data from the organization or environment Signup and view all the answers

What distinguishes computers and software from information systems?

They are tools similar to materials used in construction Signup and view all the answers

Which of the following elements does not interact with an organization and its information systems?

Internal employees Signup and view all the answers

What is the final output of an information system meant to achieve?

To support decision-making and operations Signup and view all the answers

What kind of information can be derived from raw data at a supermarket checkout?

Total sales revenue from specific items Signup and view all the answers

What can be a consequence of not having accurate information for decision-making in business?

Poor outcomes that raise costs Signup and view all the answers

Which of the following is an example of how information systems can provide a competitive advantage?

By delivering better performance and real-time responses Signup and view all the answers

Why are information technologies considered necessary for business survival?

They adapt businesses to industry-level changes Signup and view all the answers

What is the primary difference between data and information?

Data are streams of raw facts, while information is data shaped into meaningful form Signup and view all the answers

What does Verizon's web-based digital dashboard exemplify in the context of business information systems?

Real-time data provision for enhanced decision-making Signup and view all the answers

Which of the following statements about the Sarbanes-Oxley Act is true?

It enhances the quality of financial reporting and requires accurate record-keeping Signup and view all the answers

What effect does poor decision-making due to inaccurate information typically have on a business?

Overproduction and lost customers Signup and view all the answers

Which of the following capabilities is a primary function of an information system?

Collecting and processing information Signup and view all the answers

Study Notes

Interdependence of Organizations and Information Technology

Contemporary systems have growing interdependence between a firm’s information systems and its business capabilities.
Changes in strategy, rules, and business processes require changes in hardware, software, databases, and telecommunications.
What an organization wants to do is often determined by what its systems will permit it to do.

Operational Excellence

Improvement of efficiency to attain higher profitability
Information systems and technology is a key tool to achieve greater efficiency and productivity
Walmart’s Retail Link system links suppliers to stores for superior replenishment system

New Products, Services, and Business Models

Business model: describes how company produces, delivers, and sells product or service to create wealth
Information systems and technology is a major enabling tool for new products, services, business models
Examples: Apple’s iPad, Google’s Android OS, and Netflix

Customer and Supplier Intimacy

Serving customers well leads to customers returning, which raises revenues and profits.
Examples include using computers to track customer preferences and to monitor and customize the environment for high-end hotels.
Intimacy with suppliers allows them to provide vital inputs, which lowers costs.

How Information Systems Are Transforming Business

Emerging mobile digital platform is a major catalyst for change.
"Big Data" is being widely used for data analysis.
Cloud computing is growing rapidly.
The internet drastically reduced the cost of operating on a global scale.
Increases in foreign trade and outsourcing.
There are both challenges and opportunities presented.

Information Technology Capital Investment

Capital investment defined as hardware, software, and communications equipment, grew from 32 percent to 52 percent of all invested capital between 1980 and 2009.

The Emerging, Fully Digital Firm

Significant business relationships are digitally enabled and mediated.
Core business processes are accomplished through digital networks.
Key corporate assets are managed digitally.
Digital firms offer greater flexibility in organization and management.
Time shifting, space shifting are possible

Growing Interdependence Between Information Technology and Corporate Goals

Growing interdependence between a firm’s ability to use information technology and its ability to implement corporate strategies and achieve corporate goals.
Business firms heavily invest in information systems to achieve six strategic business objectives:
- Operational excellence
- New products, services, and business models
- Customer and supplier intimacy
- Improved decision making
- Competitive advantage
- Survival

Improved Decision Making

Without accurate information:
- Managers must use forecasts, best guesses, and luck.
Results in:
- Overproduction, underproduction
- Misallocation of resources
- Poor response times
These poor outcomes raise costs and lose customers
Example: Verizon’s Web-based digital dashboard provides managers with real-time data on customer complaints, network performance, line outages, and so on.

Competitive Advantage

Delivering better performance
Charging less for superior products
Responding to customers and suppliers in real time
Examples: Apple, Walmart, UPS

Survival

Information technologies are necessary to survive as a business.
Industry-level changes may force companies to adapt to remain competitive (e.g., the introduction of ATMs by Citibank).
Government regulations requiring record-keeping (e.g., Toxic Substances Control Act and the Sarbanes-Oxley Act).

Perspectives on Information Systems

An information system is a set of interrelated components that collect, process, store, and distribute information to support decision making, coordination, and control.
Data are streams of raw facts.
Information is data shaped into meaningful form.

Data and Information

Raw data is processed and organized to produce meaningful information.
Example: Raw data from a supermarket checkout counter can be processed and organized to produce information such as, the total unit sales of dish detergent or total sales revenue from dish detergent for a specific store or sales territory.

Three Activities of Information Systems

Input: Captures raw data from an organization or external environment.
Processing: Converts raw data into meaningful form.
Output: Transfers processed information to people or activities that use it.

Feedback

Output is returned to appropriate members of the organization to help evaluate or correct the input stage.

Computer/Computer Program versus Information System

Computers and software are the technical foundation and tools used to build an information system.

Functions of an Information System

It contains information about an organization and its surrounding environment.
It has three basic activities—input, processing, and output—to produce the information organizations need.
Feedback is output returned to appropriate people or activities in the organization to evaluate and refine the input.
Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory agencies, interact with the organization and its information systems.

Information Systems Are More Than Computers

Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems.
An information system creates organizational and management solutions to challenges posed by the environment – this is how it creates value for a firm.

Organizational Dimension of Information Systems

There is a hierarchy of authority and responsibility:
- Senior management
- Middle management
- Operational management
- Knowledge workers
- Data workers
- Production or service workers

Levels in a Firm

Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management.
Information systems serve each of these levels.
Scientists and knowledge workers often work with middle management.

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Description

Explore the crucial relationship between information technology and organizational success. This quiz examines how changes in strategy and processes impact the technological tools a company uses, with examples from major companies such as Walmart and Apple. Test your knowledge on operational excellence and the role of information systems in creating innovative business models.