Chapter 18

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Using Advanced Information
Technology to Increase
Performance

McGraw
-
Hill/Irwin

Contemporary Management, 5/e

Copyright © 2008 The McGraw
-
Hill Companies, Inc. All rights reserved.

chapter eighteen

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-
3

Learning Objectives


Differentiate between data and information,
and list the attributes of useful information


Describe three reasons why managers must
have access to information to perform their
tasks and roles effectively.


Describe the computer hardware and software
innovations that have created the IT
revolution.

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4

Learning Objectives


Differentiate among seven different kinds of
management information systems.


Explain why managers are using IT to build
strategic alliances and network structures to
increase efficiency and effectiveness


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Information and the Manager’s Job


Data


Raw, unsummarized, and unanalyzed facts.


Information


Data that are organized in a meaningful
fashion

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6

Attributes of Useful Information

Attributes

Quality

The accuracy and reliability of available
information affects the quality of decisions that
managers make using the information.

Timelessness

The availability of real
-
time information that
reflects current conditions allows managers to

maximize the effectiveness of their decisions.

Completeness

Complete information allows managers to
consider all relevant factors when making
decisions.

Relevance

Having information specific to a situation assists
managers in making better decisions.


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Discussion Question

Which factor is most important in affecting
the usefulness of information?

A.
Quality

B.
Timeliness

C.
Relevance

D.
Completeness

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8

Factors Affecting the Usefulness of
Information

Figure 18.1

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9

What is Information Technology?


Information Technology



set of
methods or techniques for acquiring,

organizing, storing,

manipulating, and

transmitting

information


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10

Question?

What is the specific form of IT that
managers utilize to generate the
detailed information they need to
perform their roles effectively?

A.
Management information system

B.
Decision support system

C.
Decision information system

D.
Management support system

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11

What is Information Technology?

Management Information System



specific form of IT that managers utilize
to generate the specific, detailed
information they need to perform their
roles effectively

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12

What is Information Technology?

Managers need information for three
reasons:

1.
To make effective decisions

2.
To control the activities of the organization

3.
To coordinate the activities of the
organization

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13

Information and Decisions


Most of management is about making
decisions


To make effective decisions, managers
need information, both from inside and
outside the organization

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14

Information and Control

Managers achieve control by:

1.
Establishing measurable goals

2.
Measuring actual performance

3.
Comparing actual performance with
goals

4.
Taking any corrective action

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15

Information and Coordination


Coordination problems that managers
face in managing global supply chains
are increasing


Managers have adopted sophisticated IT
that helps them coordinate the flow of
materials, semifinished goods, and
finished goods throughout the world

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16

The Effects of Advancing IT


IT revolution began with the
development of the first computers


Modern computers can read, process,
and store billions of instructions per
second


This power forms the foundation of the
ongoing IT revolution

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17

The Effects of Advancing IT


Products resulting from advancing IT


Powerful microprocessors and PCs, high
-
bandwidth wireless smart phones,
sophisticated word
-
processing software,
expanding computer networks, inexpensive
digital cameras, useful online information
and retailing services

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The Effects of Advancing IT


IT helps create new product
opportunities that managers and their
organizations can take advantage of


IT creates new and improved products
that reduce or destroy demand for older,
established products

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IT and the Product Life Cycle


Product Life Cycle


Refers to the way in which the demand for a
product changes in a predictable way over
time

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A Product Life Cycle

Figure 18.2

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A Product Life Cycle


Embryonic stage


Product has yet to gain widespread
acceptance


Customers are unsure what a product has
to offer


Growth stage


Many consumers are buying the product for
the first time


Demand increases rapidly

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A Product Life Cycle


Mature stage


Market peaks because most customers
have already bought the product


Demand is typically replacement demand


Decline stage


Advancing IT leads to the development of a
more advanced product making the old one
obsolete

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A Product Life Cycle


Advances in IT are one of the most
important determinants of the length of a
product’s life cycle


The shorter the length of a product’s life
cycle because of advancing IT the more
important it is to innovate products
quickly and continuously

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Types of Management Information
Systems


Computer Networks


Networking


The exchange of information through a group or
network of interlinked computers


Servers are powerful computers that relay
information to client computers connected on a
Local Area Network (LAN).


Mainframes are large computers processing vast
amounts of information .


The Internet is a world wide network of
computers.

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Figure 18.3

A Typical
Four
-
Tier
Information
System

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Types of Management Information
Systems


Operating system software



software that tells computer hardware how
to run


Applications software



software designed for a specific task or use

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Six Computer
-
Based Management
Information Systems

Figure 18.4

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The Organizational Hierarchy

Traditionally, managers have used the
organizational hierarchy

as the main
system for gathering information
necessary to make decisions and
coordinate and control activities

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The Organizational Hierarchy

Drawbacks


Can reduce timeliness of information


Reduces quality of information


Tall structure can make for an expensive
information system

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Types of Information Systems


Transaction Processing Systems



Systems designed to handle large volumes
of routine transactions.


Were the first computer
-
based
information systems handling billing,
payroll, and supplier payments.

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31

Types of Information Systems


Operations Information Systems


Systems that gather, organize, and
summarize comprehensive data in a form of
value to managers.


Can help managers with non
-
routine
decisions such as customer service and
productivity.


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Types of Information Systems


Decision Support Systems



Provides computer
-
built models that help
managers make better nonprogrammed
decisions.


New productive capacity, new product
development, launch a new promotional
campaign, enter a new market or expand
internationally

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33

Types of Information Systems


Executive Support System



Sophisticated version of a decision support
system designed to meet the needs of top
managers


Group Decision Support System


An executive support system that links top
managers so that they can function as a
team.


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Expert Systems and

Artificial Intelligence


Artificial Intelligence


Behavior by a machine that, if performed by
a human being, would be called “intelligent”


Already possible to write programs that can
solve problems and perform simple tasks

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Expert Systems and

Artificial Intelligence


Expert Systems


Most advanced management information
systems available


System that employs human knowledge,
embedded in computer software, to solve
problems that ordinarily require human
expertise

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Enterprise Resource Planning
Systems


Enterprise Resource Planning
Systems


multi
-
module application software packages
that allow a company to link and coordinate
the entire set of functional activities and
operations necessary to move products
from the initial product design stage to the
final customer stage

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37

Enterprise Resource Planning
Systems

1.
Help each individual function improve
its functional
-
level skills

2.
Improve integration among all functions
so that they work together to build a
competitive advantage for the company

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Types of Information Systems


E
-
Commerce Systems



Trade that takes place between companies,
and between companies and individual
customers, using IT and

the Internet

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Types of E
-
Commerce

Figure 18.5

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40

E
-
Commerce Systems


Business
-
to
-
business (B2B)



trade that takes place between companies
using IT and the Internet to link and
coordinate the value chains of different
companies

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E
-
Commerce Systems


B2B marketplace



Internet
-
based trading platform set up to
connect buyers and sellers in an industry


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42

Types of E
-
Commerce


Business
-
to
-
customer (B2C)



trade that takes
place between a
company and
individual
customers using
IT and the Internet

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43

Strategic Alliances, B2B Network
Structures, and IT


Strategic Alliances



formal agreement that commits two or more
companies to exchange or share their
resources in order to produce and market a
product

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44

Strategic Alliances, B2B Network
Structures, and IT


B2B network structure



formal series of global strategic alliances
that one or several organizations create with
suppliers, manufacturers, and/or distributors
to produce and market a product

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How Computer
-
Based Information Systems

Affect the Organizational Hierarchy

Figure 18.6

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The Impact and Limitations


of Information Systems


Horizontal Information Flows


Information networks can bridge functional
departments which allows information to
flow horizontally between departments,
leading to much higher productivity, quality,
and innovation.

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47

Communication Flows at

Tel Co. and Soft Co.

Figure 18.7

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48

Question?

What is composed of people linked by IT
who rarely see one another face
-
to
-
face?

A.
Knowledge workers

B.
Boundaryless organization

C.
Limitless firm

D.
Web 2.0 organization

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49

Boundaryless Organization


Boundaryless Organization



composed of people linked by IT who rarely
see one another face
-
to
-
face


functional experts who form an alliance with
an organization

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50

Boundaryless Organization


Knowledge management system



company
-
specific virtual information system
that systematizes the knowledge of its
employees and facilitates the sharing and
integrating of expertise within and between
functions and divisions through real
-
time,
interconnected IT

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51

Limitations of Information Systems


Loss of the Human Element


Information systems cannot present all
kinds of information accurately.


Thick information, which is rich in
meaning and not quantifiable, is best
suited to human analysis.


Information systems should support face
-
to
-
face communication, and not be
expected to replace it

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Limitations of Information Systems


Causes of Difficult Implementations


Information systems can be hard to develop
and put into service.


Consistent standards for systems do not
exist.


Makers of hardware use different
standards which makes it hard to share
information between systems.


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Limitations of Information Systems


To avoid problems:



List major organization goals and the
information types require measure those goals.


Audit the current system to verify that
information collected is accurate, reliable,
timely, and relevant.


Investigate other sources of information


Build support for the system with workers.


Create formal training programs.


Emphasize that face
-
to
-
face contact is
important.

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Movie Example: Las Vegas

When is it necessary to
change technology that is
functional?