Management information system

Overview of Information
Technology Concepts
Instructor: Prof. Ilyoo B. Hong
Contents
 Business environment and IT
 Data Vs. information
 Roles of IT in business corporations
 What is MIS?
Business environment & IT
Innovations
Obscelence
EC
Info. overload
Global
Competitive
Changing workforce
Powerful consumers
Social responsib.
Gov’t regulations
Deregulations
Ethics
Organizations
Information Technology
Technological
Market Society
Data Vs. Information
 Data
– raw as collected
– eg) ages or heights of students in class
 Information
– extracted from data

– readily useful for decision-making or problem-
solving
– eg) mean or median of students’ ages or heights
Roles of IT in business firms
 Improvement of operational efficiency
– automates routine operations
 Improvement of responsiveness
– reduces ‘time to market’ by shortening the product
development cycle
– reduces manufacturing costs
 Support of supply chain
– improves inventory management
– provides information of strategic value
What is MIS?
 the computer and communications
technology that supports business
operations and management of a firm
 an integrated, computer-based, interactive
system that provides information to support
operations and decision-making
 can collect, process, store, analyze, and
disseminate information for a specific
purpose
Strategic
Planning
Tactical
Control
Operational
Control
Top

Management
Middle
Management
Low-level
Mgmt
Sales/
Mkt.
Mfg.
Financial
Mgmt.
Acct.
Personnel
Mgmt.
Business Functions &
Management Levels
 TPS (Transaction Processing Systems): process transaction data
 IRS (Information Reporting Systems): provide information for mgmt.
 DSS (Decision Supporting Systems): supports mgmt decision making
 ES (Expert Systems): solve problems by mimicking experts
 EIS (Executive Information Systems): provide info for executives
 OAS (Office Automation Systems): support knowledge workers
 SIS (Strategic Information Systems): create a competitive edge
 GDSS (Group Decision Support Systems): support electronic meetings
How IS Have Evolved
Unit 2. Strategic Use of IT
Instructor: Prof. Ilyoo B. Hong
No. 1
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 Contents
● Business Environment and Competitive Strategy
- Competitive forces model as an industry analysis framework
- Generic strategies
- Value chain analysis model
● What is a Strategic Information System(SIS)?
- The SIS concept
- Using IT to create a competitive edge
● SIS and Generic Strategies
- Implementing the cost leadership strategy
- Implementing the differentiation strategy
- Implementing the focus strategy
● SIS and Value Chain Analysis (VCA)
No. 2
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
Competitive Forces Model
● Michael Porter proposes the Competitive Forces Model as a tool to analyze
a given industry
● It presumes that a business firm competes with five competitive forces
● If these competitive forces turn out to be strong, then the overall intensity
of the industry is high, and thus, the profit potential for the firm is slim.

● The Competitive Forces Model can be used to weaken one or more
competitive forces.
No. 3
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 Competitive Forces Model
● The five competitive forces affect the intensity of competition within an industry
● The more intense the competition, the slimmer the profit potential a firm expects.
Threat of New
Potential Entrant
Threat of Substitute
Products/Services
Bargaining
Power of Buyers
Bargaining Power
of Suppliers
Competition among
Existing Rivals
No. 4
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 Traditional Vs. Strategic Information Systems
● Traditional Information Systems
- Focuses on improving operational efficiency
- e.g., transaction processing systems
● Strategic Information systems
- Uses information systems as a competitive weapon, beyond the efficiency focus
- Centers on creating a competitive edge by weakening competitive forces
- Ultimately aims at increasing sales or expanding market shares
No. 5
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 Classical SIS Example #1
● American Hospital Supply’s ASAP
- Online order entry and processing system
- Based on the telecomm. network linking AHS with its customers (hospitals)
- Receives an online order directly from the purchasing dept. of a hospital
- Value for customer: streamlining the hospital purchasing process for efficiency
and convenience
- Value for AHS: Speeding the order processing; expanding the market share
No. 6
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 Classical SIS Example #2
● United Air’s Apollo
- Computer-based airline reservation system
- Uses leased lines between UA and travel agencies
- A travel agent can use a terminal to access seat reservation and flight
information
- UA manipulated the way travel agents access information such that information
on their flights will be more visible than information on their competitors
- Value for customer: convenient access to reservation and flight information
- Value for UA: increased sales
No. 7
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경쟁사
예약시스템
APOLLO
Tr. agent
Tr. agent
Tr. agent
Tr. agent
Tr. agent
Tr. agent
flight, reservation,
seat layout info.
Competitors’

ARS
 United Air’s APOLLO
APOLLO’s role
Limiting information access by competitors
Controlling information access by travel agents
Analyzing routes/fares of competitors
Impacts on firms/industry
 Creating a competitive edge for SIS innovator
 Causing some competitors to bankrupt
 Increasing competition within an industry
No. 8
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 Using IT to create a competitive advantage
● Creating switching costs
- Weakens the bargaining power of buyers
- e.g., branchless virtual bank in France (Bank customers get locked in)
● Shift in balance of power via information monitoring
- Weakens the bargaining power of suppliers
- e.g., the dept. store that uses a computer network to monitor prices and stock levels and make
purchase decisions
● Building entry barriers
- Weakens the threat of potential entrants
- e.g., a stock price analysis DSS which is too difficult or expensive to implement
● Generating secondary products/services
- e.g., American Airlines’s Sabre (extra revenues from travel agents for info. use)

No. 9
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 Generic Strategies & IT
● Cost Leadership Strategy
- Focuses on increasing profits by dramatically saving costs
- e.g., CAD/CAM, JIT, online order entry & processing system
● Differentiation Strategy
- Focuses on creating a unique image to customers by differentiating products or
services
- e.g., virtual banking, online stock trading
● Focus Strategy
- Targets a specific market segment to generate revenues (region, age group,
product line, etc.)
- e.g., datawarehousing
No. 10
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Inbound
logistics
Operations
Outbound

logistics
Marketing
& sales
After-sale
service
Corporate infrastructure(acct/fin, planning, etc.)
Manpower resource management
Technology development
Materials procurement
Compe-
titive
Edge
(profit)
Support
activities
Primary
activities
A business firm’s individual’s individual value activity incrementally contributes value
to the firm, and these values gather to become a competitive advantage for the firm.
 Value Chain Analysis
No. 11
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

A Firm’s Value Activities

● Primary Activities
- Inbound Logistics: Receives, stores in the warehouse, and moves to the point of
manufacture the raw materials ordered
- Operations/Production: Transforms the raw materials into finished products
- Outbound Logistics: Stores in the warehouse and transports to the point of sale
the finished products
- Marketing & Sales: Promoting, advertising, and selling the finished goods
- After-sale Service: Providing service to enhance or maintain product value
● Support Activities
- Corporate Infrastructure: Providing administrative support for primary activities
- HRD: Recruiting, employing, training, and developing human resources
- Technology Development: Improving products or manufacturing process
- Materials procurement: Purchasing the raw materials for production
No. 12
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Inb. Log.
(JIT,
EDI,
email)
Oper.
(CAD/
CAM,
CIM)
Outb. Log.
(EDI)

Marketing
and sales
(DSS)
Service
(wireless DB
tracking)
Corp. Infra (groupware, email, OA system)
HRD (performance DB; distance learning)
Technology Development (CAD)
Procurement (JIT, EDI)
Profit
Support
activitie
s
Primary
activities
Use of an information technology to support a certain value
activity can help maximize the value created by that activity.
 Exploring opportunities to use IT via VCA
No. 0
Business Process Innovation through IT
● The Concept of Business Process Innovation
● What is Reengineering?
● Principles of Reengineering
● Examples of Reengineering
● Stages of Reengineering
● Factors Leading to a Failure in Reengineering
No. 1
Attribute Process Improvement Process Innovation
Level of Change Incremental Radical

Starting Point Existing process Clean slate
Frequency of Change One-time/continuous One-time
Time Required Short Long
Participation Bottom-up Top-down
Typical Scope Narrow, within functions Broad, cross-functional
Risk Moderate High
Primary Enabler Statistical control Information technology
Type of Change Cultural Cultural/structural
[Source: Davenport, Thomas H. Process Innovation: Reengineering Work through Information
Technology, Boston, MA: Harvard Business School, 1993]
 What is Business Process Innovation?
● Business process innovation refers to a means or process through which
a firm can increase competitiveness by making big changes in the way
the firm conducts its business.
● Examples: reengineering, benchmarking, TQM(total quality management)
● Process innovation is different from process improvement.
No. 2
 What is Reengineering?
● Often referred to as BPR(Business Process Reengineering)
● a business process innovation technique that seeks cost reduction,
increase in market responsiveness, and improvement in product/service
quality for the purpose of increasing customer satisfaction and of creating
a competitive edge.
● Michael Hammer’s definition of BPR: ”the fundamental rethinking and
radical redesign of business processes to achieve dramatic improvements
in critical, contemporary measures of performance, such as cost, quality,
service, and speed.”
● Key words: fundamental, radical, zero-base, dramatic, processes
No. 3
 Principles of Reengineering

● Integrate related parts of work
- Tasks are integrated rather than divided, specialized, or fragmented
- Work integration makes it possible to respond to external changes more
rapidly
● Centralize resource management
- Centralized resource management can increase efficient utilization of
resources and reduce the costs of resource management
● Focus on concurrent processing of tasks
- Strengthen the ties among sequential functions, and process functions
concurrently if necessary (‘concurrent processing’)
- Concurrent processing of work can significantly reduce the cycle time of a
work process