CHAPTER ONE MANAGEMENT INFORMATION SYSTEMS BUSINESS DRIVEN MIS Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

CHAPTER ONE OVERVIEW SECTION 1.1 – BUSINESS DRIVEN MIS Competing in the Information Age The Challenge: Departmental Companies The Solution: Management Information Systems SECTION 1.2 – BUSINESS STRATEGY Identifying Competitive Advantages The Five Forces Model – Evaluating Industry Attractiveness The Three Generic Strategies – Choosing a Business Focus Value Chain Analysis – Executing Business Strategies

SECTION 1.1 BUSINESS DRIVEN MIS 1-3

LEARNING OUTCOMES Describe the information age and the differences between data, information, business intelligence, and knowledge Identify the different departments in a company and why they must work together to achieve success Explain systems thinking and how management information systems enable business communications

COMPETING IN THE INFORMATION AGE Did you know . . . Avatar, the movie, took over 4 yrs to make and cost $450 million Lady Gaga’s real name is Joanne Angelina Germanotta It costs $2.6 million for a 30- second advertising time slot during the Super Bowl

COMPETING IN THE INFORMATION AGE Fact - The confirmation or validation of an event or object Information age - The present time, during which infinite quantities of facts are widely available to anyone who can use a computer

COMPETING IN THE INFORMATION AGE Examples of the power of business and technology Amazon – Not a technology company; primary business focus is selling books Netflix – Not a technology company; primary business focus is renting videos Zappos – Not a technology company; primary business focus is selling shoes

COMPETING IN THE INFORMATION AGE The core drivers of the information age Data Information Business intelligence Knowledge

Data Data - Raw facts that describe the characteristics of an event or object

Information Information - Data converted into a meaningful and useful context

Business Intelligence Business intelligence - Information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making

Knowledge Knowledge - Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources Knowledge worker – Individual valued for their ability to interpret and analyze information

THE CHALLENGE: DEPARTMENTAL COMPANIES Common Departments Working Independently

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS Common Departments Working Interdependently

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS Systems thinking – A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part

THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS Management Information Systems (MIS) – A business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving

MIS Department Roles and Responsibilities Chief information officer (CIO) – Oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives Chief knowledge officer (CKO) - Responsible for collecting, maintaining, and distributing the organization’s knowledge Chief privacy officer (CPO) – Responsible for ensuring the ethical and legal use of information

MIS Department Roles and Responsibilities Chief security officer (CSO) – Responsible for ensuring the security of IT systems Chief technology officer (CTO) – Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT

SECTION 1.2 Business Strategy 1-21

LEARNING OUTCOMES Explain why competitive advantages are temporary Describe Porter’s Five Forces Model and explain each of the five forces Compare Porter’s three generic strategies Demonstrate how a company can add value by using Porter’s value chain analysis

IDENTIFYING COMPETITIVE ADVANTAGES Business strategy – A leadership plan that achieves a specific set of goals or objectives such as Developing new products or services Entering new markets Increasing customer loyalty Attracting new customers Increasing sales

IDENTIFYING COMPETITIVE ADVANTAGES

IDENTIFYING COMPETITIVE ADVANTAGES Competitive advantage – A product or service that an organization’s customers place a greater value on than similar offerings from a competitor First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

IDENTIFYING COMPETITIVE ADVANTAGES Competitive intelligence –The process of gathering information about the competitive environment to improve the company’s ability to succeed Competitive intelligence tools Porter’s Five Forces Model Porter’s Three Generic Strategies Porter’s Value Chain Analysis

THE FIVE FORCES MODEL – EVALUATING INDUSTRY ATTRACTIVENESS Porter’s Five Forces Model

Buyer Power Buyer power – The ability of buyers to affect the price of an item Switching cost – Manipulating costs that make customers reluctant to switch to another product Loyalty program – Rewards customers based on the amount of business they do with a particular organization

Supplier Power Supplier power – The suppliers’ ability to influence the prices they charge for supplies Supply chain – Consists of all parties involved in the procurement of a product or raw material

Threat of Substitute Products or Services Threat of substitute products or services – High when there are many alternatives to a product or service and low when there are few alternatives

Threat of New Entrants Threat of new entrants – High when it is easy for new competitors to enter a market and low when there are significant entry barriers Entry barrier – A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival

Rivalry Among Existing Competitors Rivalry among existing competitors – High when competition is fierce in a market and low when competitors are more complacent Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand

Analyzing the Airline Industry Perform a Porter’s Five Forces analysis of each of the following for a company entering the commercial airline industry Buyer power Supplier power Threat of substitute products/services Threat of new entrants Rivalry among competitors

THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS FOCUS Porter’s Three Generic Strategies

THE THREE GENERIC STRATEGIES CHOOSING A BUSINESS FOCUS Porter’s Three Generic Strategies

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Business process – A standardized set of activities that accomplish a specific task, such as a specific process Value chain analysis – Views a firm as a series of business processes that each add value to the product or service

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Primary value activities Inbound logistics - Acquires raw materials and resources, and distributes Operations - Transforms raw materials or inputs into goods and services Outbound logistics - Distributes goods and services to customers Marketing and sales - Promotes, prices, and sells products to customers Service - Provides customer support

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Support value activities Firm infrastructure – Includes the company format or departmental structures, environment, and systems Human resource management – Provides employee training, hiring, and compensation Technology development – Applies MIS to processes to add value Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Porter’s Value Chain

VALUE CHAIN ANALYSIS – EXECUTING BUSINESS STRATEGIES Value Chain and Porter’s Five Forces Model

LEARNING OUTCOME REVIEW Now that you have finished the chapter please review the learning outcomes in your text