Chapter One

Information Systems in Global Business Today

By Kasahun A.
Addis Ababa University
Software Engineering Track
Kasabd97@gmail.com and kassahun.abdisa@aau.edu.et or
 Agenda
THE ROLE OF INFORMATION SYSTEMS IN
BUSINESS TODAY
 Business Transformation Vs Information Systems
 Challenges and Opportunities in Globalization
PERSPECTIVES ON INFORMATION SYSTEMS
 Information systems and its components
 Dimensions of Information Systems

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 Learning Objectives
 Explain why information systems are so essential
in business today
 Define an information system from both a
technical and a business perspective
 Identify and describe the three dimensions of
information systems
 Assess the complementary assets required for
information technology to provide value to a
business

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 1.1 THE ROLE OF INFORMATION SYSTEMS IN
BUSINESS TODAY
Business is not as usual anymore in the globe
Ex : In USA (2010)
 Over $562 b for the acquisition of HW, SW and Telecom
equipments
 Over $800 b for business and management consultancy service

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 1.1 THE ROLE OF INFORMATION SYSTEMS IN
BUSINESS TODAY …
Discussion Points
As A Business Manager
How much did you invest for IT in your firm?
Do you believe you did a wise decision on such
investment?
Why an IS the major tools to Business Managers

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 1.1 THE ROLE OF INFORMATION SYSTEMS IN
BUSINESS TODAY …

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 Economic Value of IT:
Example: Giant digital companies
In the past few years digital economy businesses have erupted
because of the rise of mobile Internet, creating global titans
 Google ($891.3bn, USA),
 Facebook ($554.2bn, USA),
Amazon ($893.3bn, USA),
Tencent ($405.4bn, China),
Alibaba ($473.8bn, China),
Baidu ($37.7bn, China),
 Uber ($46bn, USA),
Grab (est $14bn, Singapore).
These companies have a combined market capitalization of about
$3.7tn, compared to the world’s 10 largest oil companies ($1.8tn)
and the top 10 mining companies ($576bn).
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 Looked at in a different way, the market cap of the top
10 “digital economy” companies ($3.7tn) is more than
the GDP’s of Africa ($2.3tn), India ($2.6tn), and
Russia ($1.6tn).

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 Reading Assignment
Read How the Technology revolutionized the revenues
of these Tech Companies

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 Information System?
What components it has?

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Information system:
Set of interrelated components
Collect, process, store, and distribute information
Support decision making, coordination, and control
Information vs. data?
Knowledge Vs. Wisdom?

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 Information Hierarchy

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Role and Value of Information
Neo-classical economists had for long time
considered raw materials, human labor and capital
as the determinant economic resources.
As of the second half of the 20th century,
information has acquired two utilitarian functions:
Information is now considered as an economic
resource at par with the traditional economic
resources, such as human labor, capital, raw materials
and physical facilities.
Secondly, it is considered as a commodity.
Information is bought and sold, traded.
 Evolution of Information

Information age/information society/information economy

 The ‘information age’ takes over from the ‘industrial age’
 The increasing importance of information through time both to society
and economies has been used to suggest that we are now in the
‘information age’
 information and knowledge are critical to organizational success and
information becomes a key strategic resource also
In information age Information is used
 to understand the needs of markets, support the development of products and
govern and control the direction of businesses.
Furthermore, in the information age, information is a
commodity
 individuals and organizations pay for pure information services,
 E.g. for online newspaper subscriptions, analysts’ reports, alerts about
particular industries, to promote products to potential customers.
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 Evolution…
Terms like information society and information economy have
been widely used to refer to the relevance of information
Information society
 A society with widespread access to and transfer of digital information
within business and the community
“With an interrupted flow for this vital resource, society as we know it
would quickly run into difficulties, with business and industry, education,
leisure, travel and communications, national and international affairs all
vulnerable to disruption. In more advanced societies, this vulnerability is
heightened by an increasing dependence on the enabling powers of
information and communications technologies”
Information economy
 An economy that is highly dependent upon the collection, storage and
exchange of information

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 A framework for Information Systems
An information system Framework depends on the resources of
people (end users and IS specialists),
hardware (machines and media),
software (programs and procedures),
 data (data and knowledge bases), and
networks (communications media and network
support)
Information system framework uses these components
to perform input, processing, output, storage, and control activities that

transform data resources into information products .

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Functions of an Information System

An information system contains information about an organization and its surrounding environment. Three basic activities—input,
processing, and output—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.

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

The Interdependence Between Organizations and Information Technology

NB :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.

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

• How information systems are transforming

business
• Increased technology investments
• Increased responsiveness to customer demands.
• Shifts in media and advertising

• Globalization opportunities
• Internet has drastically reduced costs of operating on global scale

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 Growing interdependence between ability to use
information technology and ability to implement
corporate strategies and achieve corporate goals

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

In the emerging, fully digital firm

Core business processes are accomplished through
digital networks
Digital firms offer greater flexibility in
organization and management
Time shifting, space shifting

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 Discussion

What makes information systems so essential

today?

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

 …to achieve six strategic business objectives:

 Operational excellence
 New products, services, and business
models
 Customer and supplier intimacy
 Improved decision making
 Competitive advantage
 Survival

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

Operational excellence:
E.g. Wal-Mart’s RetailLink system links
suppliers to stores for superior replenishment
system

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

New products, services, and business models:

Information systems and technology a major enabling
tool for new products, services, business models

 E.g. online stores

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

Improved decision-making
Without accurate information:
Managers must use forecasts, best guesses, luck
Leads to:
 Overproduction, underproduction of goods and services
 Misallocation of resources
 Poor response times
Poor outcomes raise costs, lose customers
Example: Verizon’s Web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

Competitive advantage
Delivering better performance
Charging less for superior products
Responding to customers and suppliers in real time
Often achieved when firm achieves one of first four
advantages
E.g. Dell: Consistent profitability over 25 years; Dell
remains one of the most efficient producer of PCs in
world.

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

The Role of Information Systems in Business Today

Survival
Information technologies as necessity of business
May be:
 Industry-level changes, e.g. bank’s introduction of ATMs
 Governmental regulations requiring record-keeping

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on 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 value for the firm
as an organizational and
management solution to
Figure 1-5 challenges posed by the
environment.

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Organizational dimension of IS
structure: different levels and specialties
 hierarchy of authority, responsibility: Senior Middle
Operational management, Knowledge service Data workers
business process: Organization coordinate its work
through its hierarchy and business process
Culture : ways of doing things, part is embedded in
IS

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Organizational dimension of information

systems (cont.)
Separation of business functions
Unique business processes
Unique business culture
Organizational politics

Discussion
“Every business is different.” Does this mean every business
will have different information systems? Every business has
its unique culture, and politics. Systems reflect these business
cultures
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Organizational dimension (cont.)

Experts are employed and trained for different
business functions (tasks):
 Sales and marketing
 Human resources
 Finance and accounting
 Production and manufacturing

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

How information systems would factor into the day-to-day jobs of each of the
three types of workers in the pyramid.

Business organizations are hierarchies consisting of three principal levels: senior

management, middle management, and operational management. Information
systems serve each of these levels.
Figure 1-6
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

 Management dimension
 Make decisions, formulate action plan and solve
organizational problem
 Managers set organizational strategy for responding
to business challenges
 In addition, managers must act creatively:
 Creation of new products and services
 Occasionally re-creating the organization
 What is meant by re-creating the organization?
 Why do organizations need to be continually re-
created? NB: they quickly become obsolete unless they
continue to change
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Technology dimension
Computer hardware
Software: instructions that control H/W
Data management technology: S/W governing data
Networking and telecommunications technology
 H/W and S/W link pieces of H/W and transfer data:
Network, Internet, intranets and extranets, WWW
 IT infrastructure: platform that the firm can built on
its IS

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Business perspective on IS:

IS instrument for creating value to firms
Investments in IS result in superior returns:
 Increases productivity and revenue
IS provides information that helps managers
making better decisions and improve the execution
of business process
Customer satisfaction
Customer management
Customer outreach

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Business information value chain

Raw data acquired and transformed through stages that
add value to that information
Value of information
 determined by its ability to result in better decisions, greater
efficiency of business process, and higher profits
Starting from Customer need data to processing their need
Supplier---design---production--promotion

Business perspective: Calls attention to

organizational and managerial nature of information
systems
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Business perspective on information

systems:
Investments in information technology will result in
superior returns:
 Productivity increases
 Revenue increases
 Superior long-term strategic positioning

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 Perspectives on Information Systems

The Business Information Value Chain: The information value chain is one way
to visualize the relationship between information activities, business processes,
and management activities

From a business perspective, information systems are part of a series of value-adding activities for
acquiring, transforming, and distributing information that managers can use to improve decision
making, enhance organizational performance, and, ultimately, increase firm profitability.
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Variation in Returns on
Information Technology Investment

Although, on average, investments in information technology produce returns far above

those returned by other investments, there is considerable variation across firms.

Figure 1-
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 Quadrant 1 represents firms that invest much less
in IT but still receive strong returns.
Quadrant 2 represents firms that invest a great
deal in IT and receive a great deal in returns.
Quadrant 3 represents firms that invest much less
in IT and receive poor returns.
Quadrant 4 represents firms that invest a great
deal in IT but receive poor returns.
Ask students where they want their firms to show
up?
The goal of IS investment is to show how to end
up in top quadrant (2).
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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Investing in information technology does not

guarantee good returns
Considerable variation in the returns firms
receive from systems investments
Why?
 What are the factors?
Factors:
Adopting right business model according (suite)
to new technology
Investing in complementary assets(business
processes, models, management behavior and culture)

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today

Perspectives on Information Systems

Complementary assets:
Assets required to derive value from a primary
investment
Firms supporting their technology investments with
investment in complementary assets receive
superior returns
E.g.: invest in technology and the people to make it
work properly
complementary assets should be a part of any firms
broader view of how to create and implement their
information systems.

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 Management Information Systems
Chapter 1 Information Systems in Global Business Today
Perspectives on Information Systems

Complementary assets include:

Organizational investments, e.g.
Appropriate business model
Efficient business processes
Managerial investments, e.g.
Incentives for management innovation
Teamwork and collaborative work environments
Social investments, e.g.
The Internet and telecommunications infrastructure
Technology standards

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