Chapter 2

Purpose of Information Systems

Agenda

• Information Systems Purposes

• Information Systems and Competitive Advantage

• Information Systems and Problem Solving

• Information Systems and Decision Making

• Discussion and Case Study

Information Systems Purposes

• Gain competitive advantage

• Solve problems

• Assist in decision making

Competitive Advantage - I

• Products– Create a new product or service– Enhance new products or services– Differentiate products or services

• creation of barriers– Lock in customers or buyers– Lock in suppliers– Raises barriers to market entry

Competitive Advantage - II

• Establishing alliances– Establish standards– Promote product awareness and needs– Develop market size– Reduce purchasing costs

• Reducing costs– Reduce prices– Increase profitability

Information System and Competitive Advantage

• ABC information system features:– Store customer data, shipping identity, and location– Print shipping label and bar code (package delivery system)– Reduce paper work and error– Provide email to sender, receiver, and other (information

delivery system)• Competitive Advantages

– Enhances an existing product– Differentiates the ABC package delivery product from

competitors– Lock’s customers into the ABC system (switching cost)– Raises the barrier to market entry– Reduces costs

Problem Definition

• A perceived difference between what is and what is not

• The differences between what is and what ought to be by describing both the current and desired situations

• Different information systems for different problem definitions

• A complete, accurate, and agreed-upon problem definition by every user for the development of a good and useful information system

Information Systems and Problem Solving

• Three different information systems for solving computer lap top problem– Customer relationship management (CRM)

system – Knowledge management system (KMS)– Manufacturing Quality-Control Information

System

Customer Relationship Management System

• Maintain data about customers and all of their interactions with the system– Sales activity– Purchase– Return– Training– Support call– Service– Repair

• Vary in the size and complexity

Knowledge Management System

• Store and retrieve organizational knowledge in the form of data, documents, or employee know-how

• Make the organization knowledge available to– Employees– Vendors– Customers– Investors– Press– Other individual needs the knowledge

Manufacturing Quality-Control System

• The optimal way to provide customer service is to eliminate the need for it

• Improve customer service is to improve manufacturing quality, planning, and scheduling

Decision Making Dimension - Level

• Operational decisions concern day-to-day activities– Transaction processing systems (TPS)

• Managerial decisions concern the allocation and utilization of resources– Management information systems (MIS)

• Strategic decision making concern broader-scope organizational issues– Executive information systems (EIS)

Decision Making Dimension - Process

• Structured decision process: an understood and accepted method for making the decision

• Unstructured process: no agreed on decision making process

• Structured and unstructured refers to the decision process-not the underlying subject.

Decision-Making Dimension

Information Systems Type

• Automated information systems: the computer hardware and program components do most of the work– Humans start the programs and use the

results

• Augmentation information systems: humans do the bulk of the work– To aid the management decision process

(email, instant messaging, video-conferencing, etc.)

Automated vs. Augmentation IS

Information Systems and Decision Making

• Intelligence gathering

• Alternative formulation

• Choice

• Implementation

• Review

Discussion

• Security (27a-b)– Name the competitive advantages for a financial institution by

implementing a security system– The cost of no security for a financial institute

• Ethics (29a-b)– Social impact of the digital divide– Social responsibility of the business and government to improve

the situation

• Opposing forces (31a-b)– Can a business survive without any IS today?

• Egocentric vs. empathetic thinking (33a-b)– How to apply this concept in developing and using IS?

Case Study

• Case study 2-1(41-42)– Questions 1, 2, 7, 8, 10, and 11

Points to Remember

• Information Systems Purposes

• Information Systems and Competitive Advantage

• Information Systems and Problem Solving

• Information Systems and Decision Making

• Discussion and Case Study