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Lecture 1: Introduction to Management Information Systems

Topic 1: Information & People & IT

STUDENT LEARNING OUTCOMES

1. Define management information systems (MIS) and describe the three important organizational

resources within it – people, information, and information technology.

2. Describe how to use Porter’s Five Forces Model to evaluate the relative attractiveness of and

competitive pressures in an industry.

3. Compare and contrast Porter’s three generic strategies, top line and bottom line, and the run-

grow-transform framework as approaches to the development of business strategy.

4. Describe the role of value-chain analysis in identifying value-added and value-reducing processes.

1. Management Information Systems (MIS)?

This course is about the “good” use of technology for individuals and in business

how to use technology to increase your personal productivity

Example: using word processing and spreadsheet software.

how businesses use technology to Increase market share and profits, and eliminate time and

location boundaries

Example: using various information systems such as “supply chain management”,

“customer relationship management”, “knowledge management” to increase firm

productivity or support decision making.

Definition of MIS

MIS deals with the planning for, development, management, and use of IT tools to help people

perform all tasks related to information processing and management.

So, MIS deals with the coordination of use of three very important organizational resources

Information

People -- the most important!

Information technology

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2. Key Resources in MIS

2.1. Information

1) Intellectual asset hierarchy – data, information, knowledge

Terms Definition Example

Data raw facts that describe a

particular phenomenon

the current temperature, the price of movie rental,

or your age

Information data that have a particular

meaning within a specific

context

average age, youngest and oldest customer, and a

histogram of customer ages

Knowledge capacity to use information

knowing what information is

required

knowing what the information

means

A sales manager knows that requesting a report of

profitability by product line is useful when she

has to decide whether to employ a new product

manager.

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Note:

Data are the foundation of information, which is the bedrock of knowledge

2) Business Intelligence

- Relatively a new term to describe collective information about customers, competitors, business

partners, and competitive environment.

- Often the results of data mining

- Help you make important, strategic decisions

- Example:

Later, we will learn how to use pivot table to create some business intelligences.

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2.2. People

Keep in mind that “IT” is simply a set of tools that helps people work with and process information.

Nonetheless, technology can help you be more efficient and can help you dissect and better

understand problems and opportunities. So, it is important for you to be

Technology-literate knowledge worker – knows how and when to apply technology

Information-literate knowledge worker

o Can define information needs

o Knows how and where to obtain information

o Understands information

o Acts appropriately based on information

Further, you must also consider your social responsibilities: This is where Ethics – principles and

standards that guide our behavior toward other people become important. Clearly, technology has

further increased the complexity of ethics in our society because of the speed and casual ease with

which people can access, distribute, and use information.

Example: http://tajinyo.org

2.3. Information Technology

Computer-based tools that people use to work with information

Hardware – physical devices that make up a computer

Software – set of instructions that your hardware executes to carry out a specific task for you

2. Business Strategies, processes, and IT

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Business must drive technology. You must start with bigger view of your industry and continually

refine your analysis until you arrive at the technologies you should use. The steps as follows

1) Assess state of competition and industry pressures affecting your organization

Porter’s Five Forces Model

2) Determine business strategies to address competitive and industry pressures

Porter’s three generic strategies

Above the line vs. Below the line

Run-grow-transform framework

3) Identify business processes to support your chosen business strategies

Value chain analysis

4) Align technology tools with those business processes

Information systems analysis, design, and implementation

Note:

Your organization must follow the above steps in this order! Do not let technology drive the processes

and strategies.

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3. Assess state of competition and industry pressures

3.1. Porter’s Five Force Model

The Five Forces Model helps business people understand the relative attractiveness of an industry and

the industry’s competitive pressures in terms of

1) Buyer Power

- High when buyers have many choices and low when their choices are few

- Competitive advantages are created to get buyers to stay with a given company by providing a

product or service in a way that customers value more than what the competition is able to do

(lowering the buyer power).

- First-mover advantage – significant impact on gaining market share by being the first to

market with a competitive advantage

- Examples

o NetFlix – set up and maintain your movie list

o United Airlines – frequent flyer program

o Apple iTunes – buy/manage your music

o Dell – customize a computer purchase

Note:

- Competitors may respond by creating similar programs (e.g., all airlines now have frequent

flyer programs).

- Often, intellectual property rights and patens are used to minimize the extent to which

products and services can be duplicated and offered by other organizations.

- Not permanent competitive advantage and firms must constantly innovate to find new

competitive advantages

2) Supplier Power

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- High when buyers have few choices and low when choices are many

- Examples

o Implementing supply chain management systems to manage multiple suppliers –

reduce the supplier power

3) Threat of Substitute Products or Services

- High when there are many alternatives for buyers and low when there are few alternatives

- Switching costs -- a cost that makes buyers reluctant to switch to another product/service --

can reduce this threat

- Examples

o Brick & mortar store vs. online store

4) Threat of New Entrants

- High when it is easy for competitors to enter the market and low when entry barriers are

significant

- Examples

o New bank must provide IT-enabled services such as ATMs, online bill pay, etc for

free – entry barrier.

o Cell phone number portability will lower the entry barrier.

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5) Rivalry among Existing Competitors

- High when competition is fierce and low when competition is more complacent

- IT has certainly intensified competition in all sectors of business

- Examples

o Beat or match the competition of price

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4. Determine business strategies

4.1. Porter’s Three Generic Strategies

1) Overall Cost Leadership

- offering the same or better quality product or service at a price that is less than what any of

the competition is able to do

- Example

o Wal-Mart (Always Low Prices, Every Day Low Prices)

Note:

- IT can be a particularly effective tool if your organization chooses an overall cost leadership

strategy. IT can tighten supply chain systems (i.e., using supply chain management systems),

help you capture and assimilate customer information to better understand buying patterns

(i.e., using customer relationship management systems) in an effort to better predict product

inventory and shelf placement, and make it easy for customers to order your products through

Web-enabled e-commerce system.

2) Differentiation

- offering a product or service that is perceived as being “unique” in the marketplace

- Example

o Apple Computer (non-textual information processing)

o Amazon’s personalized recommendation system

3) Focus

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- focusing on offering products or services to a particular segment or buyer group, or within a

segment of a product line, or to a specific geographic market

- Example

o Datamining and datawarehousing

4.2. Above-the-Line vs. Below-the-Line framework

Strategy Focus

Above-the-line (increase revenue)

- Reach new customers

- Offer new products

- Cross-selling

- Offering complimentary products

Below-the-line (minimize

expenses)

- Optimizing manufacturing processes

- Decreasing transportation costs

- Minimizing errors in a process

Note:

- Above-the-line strategy is analogous to either or both differentiation and focus as defined by

Porter

- Below-the-line strategy is similar to Porter’s strategy of overall cost leadership

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4.3. Run-Grow-Transform framework

How will you allocate IT dollars to

- Run – optimizing execution of existing processes

- Grow – increasing market share, products, and service offerings

- Transform – innovating business processes, products, and/or services

Example: New venture vs. mature organization

Note: Comparison of different strategy frameworks

Porter’s Above/Below the line Run-Grow-Transform

overall cost leadership below the line Run

focus and differentiation above the line Grow

(new) differentiation above the line (when the focus

is innovation)

Transform

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5. Identifying Important Business Processes

5.1. Porter’s Value-chain analysis

: Systematic approach to assessing and improving the value of business processes

- Value chain – chain or series of business processes, each of which adds value to your

organization’s products or services

- Business process – standardized set of activities that accomplishes a specific task

- Two types of processes: Primary and Support

- Primary value process – takes in raw materials and makes, delivers, markets and sells, and

services your products and services

- Support value process – supports the primary value processes

5.2. How to use value-chain-analysis

Ask customers which processes add value and which processes reduce value

- Gather and analyze quantifiable information from your customers

- Identify the processes that would benefit from IT support

- Focus IT appropriately not “flying by the seat of your pants”

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Example: Talbot, Necktie Manufacturer

- Identifying Processes that Add Value

o CAD system to reduce the time it takes to create and manufacture new ties:

Operations

o Quality Control System: ensure that the procurement of raw materials results in the

highest quality of silks and other fabrics

- Identifying Processes that Reduce Value

Sales were lost because salespeople were promising neckties that were out of stock. Customers were

beginning to lose faith in Talbot’s ability to deliver high-quality ties.

o New IT system to get timely product information to the sales force that carries laptop

computers on the road – real time inventory update.