MANAGEMENT INFORMATION

SYSTEM

Strategic business use of IS

Module -1
 Interdependence between Organization
and IS
 Organizations and information systems have a mutual influence
on each other.

 The information needs of an organization affect the design of

information systems and an organization must be open itself to
the influences of information systems in order to more fully
benefit from new technologies.

 The organization's environment, culture, structure, standard

operating procedures, politics and management decisions are
mediating factors that influence the interaction between
information technology and organizations.
THE TWO-WAY RELATIONSHIP BETWEEN ORGANIZATIONS AND INFORMATION
TECHNOLOGY

 This complex two-way relationship is mediated by many factors, not the

least of which are the decisions made—or not made—by managers.
Other factors mediating the relationship include the organizational
culture, structure, politics, business processes, and environment
 An information system provides procedures to record make
available information, concerning part of the organization, to assist
organization related activities. Information systems are more then
the computers.
 Effective usage of information system requires a thorough
understanding of the organization, its management and the
information technology it implies.
 Three activities; Input, Processing, and Output in the information
system produce the information that are needed to make decision
making, Analyzing the problems, controlling operation, and in
launching new products.
 Input collects the raw data, which is manifested into meaning form
by the Processor and Output transfers the processed data to the
relevant person.
 Every level within the organization is interdependent. The
managers often depend on information system to make
decisions because it helps to communicate and
distribute information. Interdependence between the
business strategy and the information system is becoming more
and more complicated.
 E.G - Super market check-out is one of the most common
examples of uses of information system used by the retail industry.
It holds loads of valued information. It keeps millions of data, such
as product cost and the details, product identification number and
number of product sold out. On the basis of the information
collected, companies analyze the total number of the items sold
out, items left in the stock, items that sell most, the stuff that need
to ordered, and the most analyze its sales.
 E.G - The information system supports the main business functions.
For example, sales and marketing information system helps the firm
to explore markets for its products or services, develop products
and services that meet customers’ need and promote and sell those
products and services.

 E.G - The manufacturing and production information system is

responsible for planning, development and production of goods and
services and control the production flow. Likewise, finance and
accounting information system helps to set up long-term investment
goals and provide long-range forecasts of financial performance of
the firm.
 Managers and the Organization cannot ignore information
system due to its critical nature. The influence and the
importance of information system are evident in decision
making, planning, and management of its employee and in
management of the products.

 One of the most important roles of a manager is to make

effective decisions which is very challenging job of the manager.
The managers often depend on information system to make
decisions because it helps to communicate and distribute
information. Interdependence between the business strategy and
the information system is becoming more and more
complicated.
Approaches to Information system
 It is divided into two different approaches, i.e, technical approach
and behavioral approach.
 Technical approach includes computer science, management
science and operations research where computer science purely
deals with the computer system such as computation methods and
efficient data storage and access method.
 The management science is responsible for developing models for
decision-making and management practices. Similarly, operations
research emphasizes mathematical techniques that help
organization to optimize selected parameters such as
transportation, cost of transaction and inventory control.
 Behavioral approach focuses on the changes including
management and organizational policy, attitudes and behavior.
Although it does not normally focus on technical solutions, it does
not ignore technology.
 The models used in this approach help to explore different issues
which can not be explored through technical approach. Important
concepts and methods are generated from other behavioral
disciplines.
 For example, sociologists study information system in order to get
knowledge about how development of system is shaped by groups
and organizations.
 IS Strategies for competitive advantage
 PORTER’S FIVE FORCES :- Porter developed the “five forces”
model as a framework for industry analysis. This model can be used
to help understand just how competitive an industry is and to
analyze its strengths and weaknesses. The model consists of five
elements, each of which plays a role in determining the average
profitability of an industry.
 Threat of substitute products or services: How easily can a
product or service be replaced with something else? The more types
of products or services there are that can meet a particular need, the
less profitability there will be in an industry. For example, the
advent of the mobile phone has replaced the need for pagers. The
Internet has made people more aware of substitute products, driving
down industry profits in those industries being substituted.
 Bargaining power of suppliers:When a company has several
suppliers to choose from, it can demand a lower price. When a sole
supplier exists, then the company is at the mercy of the supplier. For
example, if only one company makes the controller chip for a car
engine, that company can control the price, at least to some
extent.The Internet has given companies access to more suppliers,
driving down prices. On the other hand, suppliers now also have the
ability to sell directly to customers.
 Bargaining power of customers: A company that is the sole
provider of a unique product has the ability to control pricing. But
the Internet has given customers many more options to choose
from.
 Barriers to entry:The easier it is to enter an industry, the tougher
it will be to make a profit in that industry. The Internet has an
overall effect of making it easier to enter industries. It is also very
easy to copy technology, so new innovations will not last that long.
 Rivalry among existing competitors: The more competitors
there are in an industry, the bigger a factor price becomes. The
advent of the Internet has increased competition by widening the
geographic market and lowering the costs of doing business. For
example, a manufacturer in Southern California may now have to
compete against a manufacturer in the South, where wages are
lower.
Value Chain Model

 Rather than looking at departments or accounting cost types, Porter's Value

Chain focuses on systems, and how inputs are changed into the outputs
purchased by consumers. Using this viewpoint, Porter described a chain of
activities common to all businesses, and he divided them into primary and
support activities, as shown below
 The primary activities are the functions that directly impact the
creation of a product or service. The goal of the primary activities
is to add more value than they cost. The primary activities are:
 Inbound logistics: These are the functions performed to bring
in raw materials and other needed inputs. Information technology
can be used here to make these processes more efficient, such as
with supply-chain management systems, which allow the suppliers
to manage their own inventory.
 Operations: Any part of a business that is involved in
converting the raw materials into the final products or services is
part of operations. From manufacturing to business process
management, information technology can be used to provide more
efficient processes and increase innovation through flows of
information.
 Outbound logistics: These are the functions required to get the
product out to the customer. As with inbound logistics, IT can be
used here to improve processes, such as allowing for real-time
inventory checks. IT can also be a delivery mechanism itself.
 Sales/Marketing: The functions that will entice buyers to
purchase the products are part of sales and marketing. Information
technology is used in almost all aspects of this activity. From online
advertising to online surveys, IT can be used to innovate product
design and reach customers like never before. The company website
can be a sales channel itself.
 Service: The functions a business performs after the product has
been purchased to maintain and enhance the product’s value are part
of the service activity. Service can be enhanced via technology as
well, including support services through websites and knowledge
bases.
 The support activities are the functions in an organization that
support, and cut across, all of the primary activities. The support
activities are:
 Firm infrastructure: This includes organizational functions such as
finance, accounting, and quality control, all of which depend on
information technology; the use of ERP systems (to be covered in
chapter 9) is a good example of the impact that IT can have on these
functions.
 Human resource management: This activity consists of
recruiting, hiring, and other services needed to attract and retain
employees. Using the Internet, HR departments can increase their
reach when looking for candidates. There is also the possibility of
allowing employees to use technology for a more flexible work
environment.
 Technology development: Here we have the technological
advances and innovations that support the primary activities. These
advances are then integrated across the firm or within one of the
primary activities to add value. Information technology would fall
specifically under this activity.
 Procurement: The activities involved in acquiring the raw
materials used in the creation of products and services are called
procurement. Business-to-business e-commerce can be used to
improve the acquisition of materials.