About the Authors

Kenneth C. Laudon is a Professor of Information Systems at New York University’s Stern

School of Business. He holds a B.A. in Economics from Stanford and a Ph.D. from Columbia
University. He has authored twelve books dealing with electronic commerce, information
systems, organizations, and society. Professor Laudon has also written over forty articles
concerned with the social, organizational, and management impacts of information systems,
privacy, ethics, and multimedia technology.
Professor Laudon’s current research is on the planning and management of large-scale
information systems and multimedia information technology. He has received grants from
the National Science Foundation to study the evolution of national information systems at
the Social Security Administration, the IRS, and the FBI. Ken’s research focuses on enter-
prise system implementation, computer-related organizational and occupational changes in
large organizations, changes in management ideology, changes in public policy, and under-
standing productivity change in the knowledge sector.
Ken Laudon has testified as an expert before the United States Congress. He has been a
researcher and consultant to the Office of Technology Assessment (United States Congress),
Department of Homeland Security, and to the Office of the President, several executive
branch agencies, and Congressional Committees. Professor Laudon also acts as an in-house
educator for several consulting firms and as a consultant on systems planning and strategy
to several Fortune 500 firms.
At NYU’s Stern School of Business, Ken Laudon teaches courses on Managing the Digital
Firm, Information Technology and Corporate Strategy, Professional Responsibility (Ethics),
and Electronic Commerce and Digital Markets. Ken Laudon’s hobby is sailing.

Jane Price Laudon is a management consultant in the information systems area and the
author of seven books. Her special interests include systems analysis, data management,
MIS auditing, software evaluation, and teaching business professionals how to design and
use information systems.
Jane received her Ph.D. from Columbia University, her M.A. from Harvard University,
and her B.A. from Barnard College. She has taught at Columbia University and the New
York University Graduate School of Business. She maintains a lifelong interest in Oriental
languages and civilizations.
The Laudons have two daughters, Erica and Elisabeth, to whom this book is dedicated.

3
62 Part One Organizations, Management, and the Networked Enterprise

Review Summary
1. How are information systems transforming business, and what is their relationship to globalization?
E-mail, online conferencing, smartphones, and tablet computers have become essential tools for
conducting business. Information systems are the foundation of fast-paced supply chains. The Internet
allows many businesses to buy, sell, advertise, and solicit customer feedback online. Organizations are
trying to become more competitive and efficient by digitally enabling their core business processes
and evolving into digital firms. The Internet has stimulated globalization by dramatically reducing the
costs of producing, buying, and selling goods on a global scale. New information system trends include
the emerging mobile digital platform, online software as a service, and cloud computing.

2. Why are information systems so essential for running and managing a business today?
Information systems are a foundation for conducting business today. In many industries, survival
and the ability to achieve strategic business goals are difficult without extensive use of information
technology. Businesses today use information systems to achieve six major objectives: operational
excellence; new products, services, and business models; customer/supplier intimacy; improved
decision making; competitive advantage; and day-to-day survival.

3. What exactly is an information system? How does it work? What are its management, organization,
and technology components?
From a technical perspective, an information system collects, stores, and disseminates information
from an organization’s environment and internal operations to support organizational functions and
decision making, communication, coordination, control, analysis, and visualization. Information
systems transform raw data into useful information through three basic activities: input, processing,
and output.
From a business perspective, an information system provides a solution to a problem or challenge
facing a firm and represents a combination of management, organization, and technology elements.
The management dimension of information systems involves issues such as leadership, strategy, and
management behavior. The technology dimension consists of computer hardware, software, data
management technology, and networking/telecommunications technology (including the Internet).
The organization dimension of information systems involves issues such as the organization’s
hierarchy, functional specialties, business processes, culture, and political interest groups.

4. What are complementary assets? Why are complementary assets essential for ensuring that information
systems provide genuine value for an organization?
In order to obtain meaningful value from information systems, organizations must support their
technology investments with appropriate complementary investments in organizations and manage-
ment. These complementary assets include new business models and business processes, supportive
organizational culture and management behavior, appropriate technology standards, regulations, and
laws. New information technology investments are unlikely to produce high returns unless businesses
make the appropriate managerial and organizational changes to support the technology.

5. What academic disciplines are used to study information systems? How does each contribute to an
understanding of information systems? What is a sociotechnical systems perspective?
The study of information systems deals with issues and insights contributed from technical and
behavioral disciplines. The disciplines that contribute to the technical approach focusing on formal
models and capabilities of systems are computer science, management science, and operations
research. The disciplines contributing to the behavioral approach focusing on the design, implementa-
tion, management, and business impact of systems are psychology, sociology, and economics. A
sociotechnical view of systems considers both technical and social features of systems and solutions
that represent the best fit between them.
 Chapter 1 Information Systems in Global Business Today 63

Key Terms
Business functions, 49 Information technology (IT) infrastructure, 51
Business model, 43 Input, 46
Business processes, 41 Internet, 51
Complementary assets, 57 Intranets, 51
Computer hardware, 51 Knowledge workers, 49
Computer literacy, 48 Management information systems (MIS), 48
Computer software, 51 Middle management, 49
Culture, 50 Network, 51
Data, 45 Networking and telecommunications technology, 51
Data management technology, 51 Operational management, 49
Data workers, 49 Organizational and management capital, 57
Digital firm, 41 Output, 46
Extranets, 51 Processing, 46
Feedback, 46 Production or service workers, 49
Information, 45 Senior management, 49
Information system, 45 Sociotechnical view, 60
Information systems literacy, 48 World Wide Web, 51
Information technology (IT), 45

Review Questions
1. How are information systems transforming • Explain how the Internet and the World Wide
business, and what is their relationship to Web are related to the other technology
globalization? components of information systems.
• Describe how information systems have 4. What are complementary assets? Why are
changed the way businesses operate and their complementary assets essential for ensuring that
products and services. information systems provide genuine value for
• Identify three major new information system an organization?
trends. • Define complementary assets and describe
• Describe the characteristics of a digital firm. their relationship to information technology.
• Describe the challenges and opportunities of • Describe the complementary social, manage-
globalization in a “flattened” world. rial, and organizational assets required to
optimize returns from information technology
2. Why are information systems so essential for
investments.
running and managing a business today?
5. What academic disciplines are used to study
• List and describe six reasons why information
information systems? How does each contrib-
systems are so important for business today.
ute to an understanding of information
3. What exactly is an information system? How systems? What is a sociotechnical systems
does it work? What are its management, organi- perspective?
zation, and technology components?
• List and describe each discipline that contrib-
• Define an information system and describe utes to a technical approach to information
the activities it performs. systems.
• List and describe the organizational, manage- • List and describe each discipline that contrib-
ment, and technology dimensions of informa- utes to a behavioral approach to information
tion systems. systems.
• Distinguish between data and information and • Describe the sociotechnical perspective on
between information systems literacy and information systems.
computer literacy.
64 Part One Organizations, Management, and the Networked Enterprise

Discussion Questions
1. Information systems are too important to be left 3. What are some of the organizational, managerial,
to computer specialists. Do you agree? Why or and social complementary assets that help make
why not? UPS’s information systems so successful?
2. If you were setting up the Web site for Disney
World visitors, what management, organization,
and technology issues might you encounter?

Hands-On MIS Projects

The projects in this section give you hands-on experience in analyzing financial reporting and inventory
management problems, using data management software to improve management decision making about
increasing sales, and using Internet software for researching job requirements.

M a n a g e m e n t D e c i s i o n P r o bl e m s

1. Snyders of Hanover, which sells about 80 million bags of pretzels, snack chips, and organic snack items each
year, had its financial department use spreadsheets and manual processes for much of its data gathering and
reporting. Hanover’s financial analyst would spend the entire final week of every month collecting
spreadsheets from the heads of more than 50 departments worldwide. She would then consolidate and
re-enter all the data into another spreadsheet, which would serve as the company’s monthly profit-and-loss
statement. If a department needed to update its data after submitting the spreadsheet to the main office, the
analyst had to return the original spreadsheet, then wait for the department to re-submit its data before
finally submitting the updated data in the consolidated document. Assess the impact of this situation on
business performance and management decision making.
2. Dollar General Corporation operates deep-discount stores offering housewares, cleaning supplies, clothing,
health and beauty aids, and packaged food, with most items selling for $1. Its business model calls for
keeping costs as low as possible. The company has no automated method for keeping track of inventory at
each store. Managers know approximately how many cases of a particular product the store is supposed to
receive when a delivery truck arrives, but the stores lack technology for scanning the cases or verifying the
item count inside the cases. Merchandise losses from theft or other mishaps have been rising and now
represent over 3 percent of total sales. What decisions have to be made before investing in an information
system solution?

I m p r ov i n g D e c i s i o n M a k i n g : U s i n g D a t a b a s e s t o A n a l y z e S a l e s Tr e n d s
Software skills: Database querying and reporting
Business skills: Sales trend analysis
In this project, you will start out with raw transactional sales data and use Microsoft Access database
software to develop queries and reports that help managers make better decisions about product pricing,
sales promotions, and inventory replenishment. In MyMISLab, you can find a Store and Regional
Sales Database developed in Microsoft Access. The database contains raw data on weekly store sales
of computer equipment in various sales regions. The database includes fields for store identification
number, sales region, item number, item description, unit price, units sold, and the weekly sales period
when the sales were made. Use Access to develop some reports and queries to make this information
more useful for running the business. Sales and production managers want answers to the following
questions:
• Which products should be restocked?
• Which stores and sales regions would benefit from a promotional campaign and additional marketing?
• When (what time of year) should products be offered at full price, and when should discounts be used?