Management Information Systems: Managing

the Digital Firm

Sixteenth Edition

Chapter 1
Information
Systems in Global
Business Today

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 Learning Objectives

1. Describe the characteristics of digital age and valuable information.

2. Define an information system and present its components.

3. Describe how information systems are transforming business

4. Understand the benefits of information systems to firms

5. Explain the different types of information systems

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 Characteristics of Digital Age

 Transition from Industrial to Information Society

 Explosion of data: 90% of data has been created in the last 2 years

 Information is the primary driver of the economy: firms integrate

digital technologies into their operations, processes, and customer

interactions

 Internet and technology innovations: Cloud, Big Data, IoT, AI, VR,

Quantum Computers, Blockchain, etc.

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 Information Concepts
• DATA: Raw facts with no precise context or meaning

• INFORMATION: refined, organized, meaningful, and useful data.

To become an information, data is processed by summing,
ordering, averaging, grouping, comparing, etc.

• KNOWLEDGE: A contextual information based on expert insight

and experience-based intuition. It originates in the minds of
people and their ability to compare situations, problems, and
solutions. It allows predictions, unlike information which simply
gives us the facts.

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 Types of Data

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Figure 1.3 Data and Information

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 The Characteristics of Valuable Information
• Relevant: directly related to the subject, addresses specific questions.

• Complete: provides all the necessary details and context.

• Accurate: error free, provides a true representation of the facts or reality.

• Timely: up-to-date, delivered when needed.

• Reliable: can be trusted, obtained from credible sources.

• Accessible: we can retrieve it easily and in the right format when needed

• Useful: practical and serves a purpose (decision-making, problem-

solving)

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Characteristics of Valuable Information

• If an organization’s information is not accurate or

complete: People can make poor decisions, costing
thousands, or even millions, of dollars

• Depending on the type of data you need: Some

characteristics become more important than others

• Valuable information: – Can help people and their

organizations perform tasks more efficiently and effectively

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 What Is an Information System?

Components that work together to process data and produce

information.

Collects, stores, and disseminates information.

Transform raw data into useful Information through three

basic activities: Input, Processing and Output

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 Activities of an Information System

• Input: captures or collects raw data

• Processing: converting raw input into a meaningful form
• Output: transfers the processed information to people or activities that
use it.
• Feedback: Output is returned to appropriate users to help evaluate or
correct input stage.
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The components of an Information
System

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 The components of an IS
• Hardware: computer equipment used to manage information

• Software: computer programs that govern the hardware

• Database: with a database, the collected data is stored and

organized. Examples of databases include employee records and
product catalogues.

• Telecommunications, networks, and the Internet

• People: The most important element in an IS

• Procedures: strategies, policies, methods, and rules for using the

IS
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 How are IS transforming business ?

– New businesses and industries appear, old ones decline

– Sources of business value are shifting from products to solutions

– Firms are increasingly using social media

– Firms are increasingly using online platforms and applications.

– Firms are evolving into digital firms

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Why firms invest in Information systems ?

• Firms investing in IS to achieve the following benefits:

1. Automating Repetitive Tasks
2. Creating New Business Models
3. Improving Customer Satisfaction
4. Improving Internal Communication
5. Improving Decision Making
6. Optimizing workflows

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 1. Automating Repetitive Tasks

• IS reduce the need for human intervention in repetitive or

routine tasks, which decreases errors, minimizes waste,
speeds up processes, and frees up time for higher-value
activities.

• Example: using an ERP system to automate administrative

tasks like data entry, invoicing, ordering, inventory
management, etc.

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 2. Creating New Business Models

• IS enable the creation of entirely new business models.

• The shift from the “brick and mortar” model to the online marketplace
model (Uber, Lyft…) or to the online retailer model (Alibaba, Amazon).

• The shift from the purchase model to the transaction/rental model. New
business models include Netflix, Airbnb, Cloud computing, Car-as-a-
Service (CaaS) platforms.

• CaaS: Users can utilize an app on their smartphone, input their location
and their destination, then an autonomous vehicle will arrive to transport
them.

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 3. Increasing Customer Satisfaction
• Mobile apps enhance the shopping experience: customers can tailor
product displays, check reviews and FAQs, pay online, initiate returns or
modify purchases, track delivery status, have real-time inventory visibility.
Zara uses Virtual fitting rooms and AR-powered shopping platforms to
allow customers to try on clothing virtually.

• Chatbots analyze customer behavior and preferences to suggest tailored

products, offer 24/7 assistance (answering questions, resolving issues).

• CRM systems store important customer data (contact details, purchase

history, communication records…) to enable personalized offers via email,
SMS, or apps.

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 4. Improving Internal Communication

• Communication tools (such as intranets, collaborative

platforms, or messaging tools) facilitate real time
communication between different departments regardless
of geographical location, thereby improving coordination.

• Example: Firms use Microsoft Teams to centralize project-

related communication. Real-time updates, notifications
and alerts can be sent, ensuring teams are always
informed.
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 5. Improving Decision Making
• IS provides accurate, up-to-date information to make the
correct choice.

• Interactive dashboards allow decision-makers to view live

data, such as sales performance or customer feedback.

• Machine learning algorithms predict future outcomes based

on historical and real-time data. Managers can use IS to run
different scenarios to determine which alternative gives the
most beneficial result.

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 6. Optimizing Workflows
• Many IS track and monitor production activities in real-time to ensure
optimal workflow.

• Firms use ERP systems to predict and avoid bottlenecks by optimizing

machine utilization and workforce allocation. ERP systems automate
inventory replenishment when stock drops below a threshold.

• Firms use IoT sensors to track machinery health, and schedule

maintenance to prevent downtime.

• Amazon's use GPS and route optimization software to track drivers in real
time and suggests the fastest delivery routes.

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 Types of Information Systems
• IS come in various types, each designed to serve specific organizational
needs. Here's an overview:
1. Transaction Processing Systems (TPS)
2. Decision Support Systems (DSS)
3. Enterprise Resource Planning (ERP) Systems
4. Customer Relationship Management (CRM) Systems
5. Knowledge Management Systems (KMS)

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 1. Transaction Processing Systems (TPS)
• Purpose: Automate and record routine business transactions.

• Key Features:

– Process large volumes of repetitive tasks.

– Ensure accuracy and speed.

– Examples: ATM, ordeing, billing, payroll, inventory…

• Example: A POS (point of sale) system records transactions and updates

inventory in real-time.

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 2. Decision Support Systems (DSS)

• Purpose: Assist managers in complex decision-making by

analyzing large datasets.

• Key Features:

– Includes tools for simulations, what-if analysis, and

modeling.

• Example Use Case: A DSS helps a logistics manager

optimize delivery routes based on cost and time.

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 3. Enterprise Resource Planning (ERP)
Systems
• Purpose: Integrate core business processes like procurement,
inventory, production planning and sales into a unified system.

• Key Features:

– Centralized database for functions like finance, HR, and

manufacturing.
– Real-time information sharing across departments.

• Example: An ERP system consolidates data from production

and sales to forecast demand
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 4. Customer Relationship Management
(CRM) Systems
• Purpose: Manage interactions with customers.

• Key Features:

– Tracks customer data (purchase history, preferences, etc.)

– Automates marketing, sales, and customer service tasks.

• Example: A CRM system helps a sales team track potential

customers and manage follow-ups effectively.

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 5. Knowledge Management Systems
(KMS)
• Purpose: Facilitate the creation, sharing, and management
of organizational knowledge.

• Key Features:

– Supports collaboration and document sharing.

– Captures best practices and lessons learned.

• Example: A consulting firm uses a KMS to store case studies

and internal expertise.

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