Lesson 1 Information Systems in Global Business Today PDF

Lesson Materials LESSON 1: Information Systems in Global Business Today Why This Lesson In this lesson, you will first appreciate the significant roles that IT has played in business, before distinguishing between data and information. You will also learn to break down businesses using the system...

Lesson Materials LESSON 1: Information Systems in Global Business Today Why This Lesson In this lesson, you will first appreciate the significant roles that IT has played in business, before distinguishing between data and information. You will also learn to break down businesses using the system approach, which will allow you to better understand how things work once you identify their components, namely input, process, output, feedback and environmental factors. You will then be introduced to the different types of information systems based on their use in the organization. Finally, you will be exposed to the strategic roles that information systems play in fulfilling organizational strategic business objectives. Topic 1 - Introduction to Information Systems Figure 1: Information technology capital investment, defined as hardware, software, and communications equipment, grew from 14 percent to 33 percent of all invested capital between 1999 and 2013. Total capital investment is more than one trillion dollars in 2012, and that more than 540 billion dollars of that was invested in information technology. Why it is that the percentage of total investment devoted to IT has increased so much since 1980? Other kinds of capital investment are machinery and buildings. Why would firms increase IT investment faster than machinery and buildings? The answer is capital substitution: the price of IT capital has been falling exponentially, whereas the price of machine and buildings has been growing at slightly more than the rate of inflation. Given such scenario, wherever possible, firms would much rather invest in more IT than machinery or buildings because the returns on the investment are greater. Globalization has also led to time shifting and space shifting. Without the necessary IT infrastructure, businesses cannot be conducted at any time (time shifting) and any place (space shifting). Organizations need to understand the importance of having the appropriate IT insfrastructural components such as hardware, software, network, data management, storage, experts, and policies. Hence, IT investments are inevitable to form digital firms that are ideally suited for global operations, which take place in remote locations and very different time zones. Topic 2 – Data and Information Information system is a set of interrelated components that collect, process, store, and distribute information. It supports decision making, coordination, and control in a business. Information systems capture data (streams of raw facts and figures) and shape data into meaningful form called information. The point of an information system is to make sense out of all the confusing data in the environment, and put the data into some kind of order. Information is an ordered set of data that you can understand and act on. To get a sense of raw data and information, refer to the illustration below: Page 1 of 4 Lesson Materials LESSON 1: Information Systems in Global Business Today Figure 2: Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Topic 3 - The System View An organization can be seen as a system that consists of a collection of parts (or sub-systems), which is integrated to accomplish an overall goal of the organization. A system is an arrangement of activities designed to get something done. The systems approach studies the entire arrangement rather than a single sub-set of organizational activities, which helps present a clearer picture of how the organization functions. When applied to an information system, you will see that it contains three basic activities—input, processing, and output—producing the information the organization needs from data that come from the organization and its surrounding environment.. 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. Figure 3: Viewing an information system using the system approach The point of this diagram is first of all to highlight the three basic activities of information systems, so that you can understand what an information system is doing at its most fundamental level. But the diagram also puts information systems into the context of organizations (firms), and then puts the firm into its respective environment composed of shareholders, higher level authorities (government), competitors, suppliers, and customers. Suddenly, you should see that information systems play a central role mediating and interacting with all these players. Hence, systems play a key role in the operations and survival of the firm. Page 2 of 4 Lesson Materials LESSON 1: Information Systems in Global Business Today Topic 4 - Key system applications in the organization Business processes are at the heart of every business. You should try to give any example of business processes that you come in contact with everyday. This could include anything from ordering a hamburger at McDonalds, to applying for a driver's license at the JPJ. It should be emphasized that studying a firm's business processes is an excellent way to learn a great deal about how that business actually works. How could a business process be a liability? You should also think of some dysfunctional business processes or try to come up with some really poor business process. Business processes consist of flows of material, information, and knowledge. They may also compose of sets of activities, steps, most of which may be tied to a functional area or be cross-functional. A businesses can be seen as collection of business processes, and in an effort to automate these business processes an information system is configured to replicate the same business processes. Figure 4: Internal Information systems and enterprise systems The types of information systems utilized in most business organizations are normally tied to their users, who normally occupy different levels of management in the organization. You should be able to differentiate them based on their functions: Transaction processing systems (TPS) Management information systems (MIS) Decision support systems (DSS) Executive support systems (ESS) Besides those internal systems, there are also enterprise systems that either integrate disparate systems or are extended to selected outsiders. You should learn to appreciate them based on their business values, while also identifying the challenges faced in implementing them. These enterprise systems include: Enterprise resource planning (ERP) system Customer relationship management (CRM) system Supply chain management (SCM) system Topic 5 - The Strategic Business Objectives In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do. In order to achieve its business objectives, a firm will need a significant investment in IT. Businesses rely on information systems to help them achieve their goals; a business without adequate information systems will inevitably fall short. But information systems are also products of the businesses that use them. Businesses shape their information systems and information systems shape businesses. Page 3 of 4 Lesson Materials LESSON 1: Information Systems in Global Business Today In general, organizations invest in IT to help them achieve the 6 startegic business objectives (SBOs): Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival Technology has been one of the most important influences on the growth and development of business organizations. Applications in design and manufacturing as well as the use of information technology in services have provided the ability to develop innovative products and more effectively manage and control extremely complex operations. As technology continues to evolve, digital businesses need to find ways to leverage and exploit it. - end of lesson content Page 4 of 4