Unit-1: Information Systems in Global Business Today

Definition of Information System

Information System is defined as a broad generic class of systems that create, process, store and
disseminate information. However, they are guided by sets of policies, principles, procedures, and
resources. Various social, technical and environmental factors influence the design and
development of information systems.

What is Information Technology?

Information Technology, on the other hand, is defined as tools and techniques that support the
design and development of information systems. It includes hardware, software, databases,
telecommunications, and networks. It has been evident that companies that can integrate these
various technologies to achieve business goals are often very successful.
Information system and information technology go hand in hand. We can't say buying the latest
technology means using technology effectively. Technologies are not complete in themselves. It's
only when technology is integrated with business goals and objectives, its full potential can be
achieved. Therefore, technology requirements and decisions should be based on business needs
and constraints.

Definition of Management Information System

Management Information System (MIS) is the study of information and its impact on the
individual, the organization, and the society. MIS is an interdisciplinary field, i.e. many fields of
study influence it. Some of the areas that continue to influence the field of MIS include Computer
Science, Political Science, Psychology, Linguistics, Operations Research, Sociology,
Organizational Theory and Behavior.
MIS is a broad class of systems that provide decision-makers with the information necessary to
make effective decisions in any organization. Such systems are competitive tools that allow
organizations to create innovative products and services quickly, effectively, and efficiently. As for
example, computers and information systems are playing vital role in the growth of Pioneer Hi-
Bred into one of the most successful agricultural companies in the world. They are helping the
company in many ways, such as reducing the time it takes to bring the goods to market and
improving the inventory management.
The primary goal of MIS is to support organizational decision-making. However, some other
secondary goals are like designing and developing new products, ensuring the quality of goods and
services, preventing theft and pilferage, and so many.
MIS can also be defined as a system that provides information to support managerial functions like
planning, organizing, staffing, directing, coordinating and controlling. MIS is computer-based
integrated system based on the database of the organization and designed for the purpose of
providing timely information to people in the organization.

Why should students study MIS?

Regardless of his/her area of specialization, every student must have a solid foundation in the
theory and principles of information systems. Followings are some of the major reasons:
In an organization-based world, the primary output of organizational workers consists of
information and knowledge.
As the complexity and sophistication of managing businesses increase, global and international
economic pressures mount, political forces reshape the world in which we live, and technology
becomes intricately woven into the fabric of business, likewise knowledge of computers and
information systems is becoming essential for most employees.
Computers and information systems are already an integral part of our everyday lives; we use
them in libraries, in banks and at home.
Office activities are not restricted to be done only in the office today; they are now carried out
from home as well as while travelling with the use of computers and information systems.
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 Unit-1: Information Systems in Global Business Today

Role of Information Systems in Business Today

Today, any business organization can hardly survive without computers and information systems.
Meeting global challenges: A company needs to compete globally and for that, it must effectively
coordinate and control products, people and procedures around the world. This requires a great
deal of timely, accurate and reliable information.
Capturing opportunities in the marketplace: A business can use information systems to cut costs,
improve productivity, create unique and innovative products/services, and better serve customers.
Linking departments: Information systems can bring different functioning units or departments
together by coordinating their tasks and functions to achieve the overall goals of the business.
Enhancing worker productivity: The use of computers and information systems in business has
made them essential tools in many tasks, such as managing the shop floor, evaluating the
performance of employees, tracking customers, reordering items, and generating the payroll.
Increasing the quality of goods and services: Quality-oriented efforts and decisions are highly
information-intensive. Computers help a company achieve its quality goals by providing the right
information to the right people at the right time. For this, coordination of the tasks and decisions of
many departments and functional units located all over the world is must.

Business Perspective of Information Systems

From a business perspective, information systems are part of a series of value-adding activities for
obtaining, transfiguring and distributing information that managers can use to improve decision-
making, amplify organizational performance, and ultimately increase its own profitability.
Information systems and technologies must support an organization's business strategies, business
processes, and organizational structures and culture to increase the business value of the enterprise
in a dynamic business environment.

Globalization Challenges and Opportunities

Information systems are transforming business, and the visible results of this include ― the
increased use of cell phones and wireless telecommunications devices, a massive shift toward
online news and information, booming e-commerce and Internet marketing, a new federal security
and accounting laws that address issues raised by the exponential growth of digital information.
The Internet has also drastically reduced the costs of business operating on a global scale.
Many companies are in the process of globalization; that is, they are becoming internetworked
global enterprises. For example, businesses are expanding into global markets for their products
and services ― using global production facilities to manufacture or assemble products, raising
money in global capital markets, forming alliances with global partners, and battling with global
competitors for customers from all over the globe. Managing and accomplishing these strategic
changes would be impossible without the Internet, intranets, and other global computing and
telecommunications networks that are the central nervous system of today's global companies.
IT supports globalization. Global companies operate in a competitive environment in which
internetworked computer systems make possible for global markets to instantly and cheaply
process business transactions. So companies can now operate globally, sometimes by forming
business alliances with other organizations, including customers, suppliers, former competitors,
consultants, and government agencies. Today's internetworked global enterprise can collectively
exploit many national market places that would be too small for any one national company to
service. They can also pool skills from many countries to work on projects that need workers with
a variety of skills that cannot be found in any one country.

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 Unit-1: Information Systems in Global Business Today

The Emerging Digital Firm

Intensive use of IT in business firms since mid 1990s, coupled with equally significant
organizational redesign, have created the conditions for a new phenomena in industrial society ―
what we call is fully digital firm. We can say, globalization has led to the emergence of the digital
firm. A digital firm is one where nearly all the organization's significant business relationships
with customers, suppliers, and employees are digitally enabled and mediated.
Core business processes (or logically related business tasks) are accomplished through digital
network spanning entire organization or linking multiple organizations. Business processes refer to
the unique manner in which work is organized, coordinated and focused to produce a valuable
product or services. Developing a new product, generating and fulfilling an order, or hiring an
employee are all examples of business processes; and the way organizations accomplish their
business processes can be a great source of competitive strength.
The general features of digital firm are as given under:
- In a digital firm, any piece of information required to support key business decisions is
available at anytime and anywhere in the firm.
- Digital firms sense and respond to their environment far more rapidly than traditional firms.
- Digital firms offer extraordinary opportunities for more global organization and management.
- In digital firms, both time shifting and space shifting are the norms. Time shifting refers to
business being conducted continuously 24×7. Space shifting means that work takes place in a
global workshop, i.e. beyond the national boundaries.
For managers of digital firms, IT is not simply a useful hand, but rather it is the core of business
and a primary management tool. There are four major systems that help define the digital firm.
• Supply Chain Management System: Information system that automates the relationships between
a supplier and a customer and its supplies in order to optimize the planning, sourcing,
manufacturing and delivery of products and services.
• Customer Relationship Management System: Information system that creates relationships
between a firm and its customers.
• Enterprise System: Information system that coordinates key processes of the firm to its
employees, and information system that integrate data from manufacturing, distribution, finance,
sales and human resource departments.
• Knowledge Management System: Information system that supports the creation, capture, storage
of knowledge in the firm, and use them by the firm expertise for better decision-making purpose.
These four systems represent the areas where corporations are digitally integrating their
information flows and making major information systems investment.
A few firms such as CISCO Systems or Dell Computer Corporation are close to becoming fully
digitally firms using the Internet to drive every aspect of their businesses. Information systems are
essential for conducting day-to-day business in the US and most other advanced countries, as well
as achieving strategic business objectives. Some firms, such as Amazon and E*Trade, would be
nonexistent without information systems. Some service industries, such as finance, insurance, and
real estate, could not operate without information systems. The ability of a firm to use IT is
becoming intertwined with the firm's ability to implement corporate strategy.

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 Unit-1: Information Systems in Global Business Today

Strategic Business Objectives of Information Systems

Although many managers are familiar with the reasons why managing their typical resources such
as equipments and people are important, it is worthwhile to take a moment to examine the growing
interdependence between a firm’s ability to use information technology and its ability to
implement corporate strategies and achieve corporate goals. Specifically, business firms invest
heavily in information to achieve six strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
1. Operational Excellence: Businesses continuously seek to improve the efficiency of their
operations in order to achieve higher profitability. Information systems and technologies are some
of the most important tools available to managers for achieving higher levels of efficiency and
productivity in business operations, especially when coupled with changes in business practices
and management behavior.
2. New Products, Services, and Business Models: Information systems and technologies are a
major enabling tool for firms to create new products and services, as well as entirely new business
models.
A business model describes how a company produces, delivers, and sells a product or service to
create wealth. As successful as Apple Inc., NetFlix, and Wal-Mart were in their traditional brick-
and-mortar existence, they have all introduced new products, services, and business models that
have made them both competitive and profitable.
3. Customer and Supplier Intimacy: When a business really knows its customers, and serves
them well in the way they want to be served, the customers generally respond by returning and
purchasing more. This raises revenues and profits. Likewise with suppliers: the more a business
engages its suppliers, the better the suppliers can provide vital inputs.
Wal-Mart is an excellent example of how the use of information systems and technologies are
extensively used to better serve their suppliers and retail customers. The RealLink system that they
use digitally links their suppliers to every one of Wal-Mart’s 5,289 stores worldwide. Suppliers are
able to ensure the continuous flow of products to the stores in order to satisfy customer demands.
4. Improved Decision Making: Information systems and technologies have made it possible for
managers to use real-time data from the marketplace when making decisions.
Previously, managers did not have access to accurate and current data and as such relied on
forecasts, best guesses, and luck. The inability to make informed decision resulted in raising costs
and lost customers.
5. Competitive Advantage: Doing things better than your competitors, charging less for superior
products, and responding to customers and suppliers in real time all add up to higher sales and
higher profits that your competitors cannot match.
Dell Computers and Wal-Mart are prime examples of how these companies used information
systems and technologies to separate themselves from their competition. Dell remains the most
efficient producer of PCs in the world. Wal-Mart is the most efficient retail store in the industry.
6. Survival: Firms also invest in information systems and technologies because they are
necessities of doing business. Information system is not a luxury. In most businesses, information
systems and technology is the core to survival.
Citibank was the first banking firm to introduce ATMs. In doing so, they had a major competitive
advantage over their competitors. In order to remain and survive in the retail banking industry,
other banks had no choice but to provide ATM services to banking customers.

Compilation: Ajay K Shah (Associate Professor, PU) 4