Chapter 1 Information Systems In Global Business Today

Chapter 1Information Systems in Global Business TodayIntroductionComputers and Information technology (IT) are changing every aspect ofour lives from entertainment to shopping, from the work we do and wherewe do it, to how we communicate with friends and relatives. Manycompanies are remodeling their businesses and information systems withthe Internet in mind. IT is dramatically changing the business landscapeand significantly affecting strategic options and creating opportunities andissues that managers need to address in many aspects of their business.Some of the key impacts of technology and the implications formanagement are: Business Strategy - collapsing time and distance, enabling electroniccommerce Organization Culture - encouraging the free flow of information OrganizationStructuresmaking networking and virtualcorporations a reality Management Processes - providing support for complex decisionmaking processes The workplace - allowing work from home and on the moveThe Role of Information Systems in Today’s BusinessInformation systems are essential for conducting day-to-day business aswell as achieving strategic business objectives. Some firms, such asAmazon and ETrade, would be nonexistent without informationsystems. It is difficult to imagine some service industries, such as finance,insurance, and real estate industries, could not operate withoutinformation systems. The ability of a firm to use IT is becomingintertwined with the firm's ability to implement corporate strategy.1

As electronic business and electronic commerce grow in popularity andmore firms digitize their operations, having useful information isbecoming even more important to the global business community.Business firms invest heavily in information systems to achieve sixstrategic business objectives: operational efficiency, new products, services& business models, customer and supplier intimacy, better decisionmaking, competitive advantage, and survival.How Information Systems Are Transforming BusinessWireless communications, including computers and mobile hand-heldcomputing devices, are keeping managers, employees, customers,suppliers, and business partners connected in every way possible. Email,online conferencing, the Web, and the Internet, are providing new anddiverse lines of communication for all businesses, large and small. Throughincreased communication channels and decreased costs of thecommunications, customers are demanding more of businesses in terms ofservice and product, at lower costs. E-commerce is changing the waybusinesses must attract and respond to customers.What’s New in Management Information Systems?The use of technology now extends far beyond the simple desktopcomputer, especially in the business world. There are three interrelatedchanges that are affecting companies worldwide: The emerging mobile digital platform: More and more businesscomputing is moving from PCs and desktop machines to mobiledevices like IPhones, iPads, Smart Phones etc. Managers areincreasingly using these devices to coordinate work, communicatewith employees, and provide information for decision making. Growth of businesses use of big data: The use of Big Data — largepools of data that can be brought together and analyzed to discernpatterns and make better decisions — will become the basis ofcompetition and growth for individual firms, enhancing productivityand creating significant value for the world economy by increasing thequality of products and services.2

All companies need to take Big Data and its potential to create valueseriously if they want to compete. For example, some retailersembracing big data see the potential to increase their operatingmargins. Growth of cloud computing: Cloud computing is a type of computingthat relies on sharing computing resources rather than having localservers or personal devices to handle applications. Main objective is toprovide different services — such as servers, storage andapplications —to an organization's computers and devices throughthe Internet. The cloud has changed the fundamental nature ofcomputing and how business gets done. According to the researchdone by Global Industry Analysts Inc, cloud computing came as aboon for companies during tough economic and financial climate,given that the technology can potentially slash IT costs by over 35%Globalization Challenges and Opportunities: A Flattened WorldCustomers no longer need to rely on local businesses for products andservices. They can shop at any time and any day of a week for virtuallyanything and have it delivered to their door or desktop. Companies canoperate at any time from any geographic location around the world. Jobscan just as easily move across the state or across the ocean. The emergenceof the Internet into a full blown international communications system hasdrastically reduced the costs of operating and transacting business on aglobal scale.The move to a global economy has been facilitated by advancedtelecommunications networks and particularly by the Internet. At the sametime globalization adds challenges to businesses. In a global market cost oflabor, varies widely among countries. In general, labor costs are higher indeveloped countries than in developing countries. Also, developedcountries usually pay high fringe benefits to employees, which make thecost of doing business even higher. Therefore, many labor-intensiveindustries have moved their operations to countries with low labor costs.These moves are greatly facilitated with IT.3

The Emerging Digital FirmA digital firm is one in which nearly all of the organization‘s significantbusiness relationships with customers, suppliers, and employees aredigitally enabled, and key corporate assets are managed through digitalmeans.These digital networks are supported by enterprise classtechnology platforms that have been leveraged within an organization tosupport critical business functions and services. Some examples of thesetechnologyplatformsare CustomerRelationshipManagement (CRM), SupplyChainManagement (SCM), EnterpriseResource Planning (ERP), Knowledge Management (KMS), EnterpriseContentManagement (ECM),and WarehouseManagementSystem (WMS). Making a firm digital is not about just adding a computersystem to the mix. Throwing a computer system at outdated businessprocesses is exactly the wrong thing to do. A truly digital firm has severalcharacteristics that distinguish it from most of the firms claiming to bedigitized: Significant business relationships with customers, suppliers, andemployees are digitally enabled and mediated. Core business processes are accomplished through digital networksspanning the entire organization or linking multiple organizations. Key corporate assets – intellectual property, core competencies, andfinancial and human assets – are managed through digital means. They sense and respond to their environments far more rapidly thantraditional firms. They offer extraordinary opportunities for more flexible globalorganization and management, practicing time-shifting (businessbeing conducted 24 hrs x7 day) and space-shifting (business beingconducted globally or beyond traditional geographic boundaries).Strategic Business Objectives of Information SystemsStrategic planning for an organization involves long-term policy decisions,like location of a new plant, a new product, diversification etc. Informationtechnology has played an important part in the U.S. and global economies.Companies rely on IT for fast communications, data processing and market4

intelligence. Specifically, business firms invest heavily in information toachieve six strategic business objectives: Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage SurvivalOperational Excellence: This relates to achieving excellence in business inoperations to achieve higher profitability. For example, a consumer goodsmanufacturer may decide upon using a wide distribution network to getmaximum reach to the customers and exposure. A manufacturingcompany may pursue a strategy of aggressive marketing and massproduction.New Products, Services, and Business Models: This is part of growthstrategy of an organization. With the help of information technology, acompany might even opt for an entirely new business model, which willallow it to establish, consolidate and maintain a leadership in the existingmarket as well as provide a competitive edge in the industry. As successfulas Apple Inc., BestBuy, and Walmart were in their traditional brick-andmortar existence, they have all introduced new products, services, andbusiness models that have made them even more competitive andprofitable.5

Customer and Supplier Intimacy: When a business really knows itscustomers, and serves them well, the way they want to be served,customers generally respond by returning and purchasing more. The resultis increased revenues and profits. Likewise with suppliers: The more abusiness engages its suppliers, the better the suppliers can provide vitalinputs. The result is a lower cost of doing business. JC Penney is anexcellent example of how the use of information systems and technologiesare extensively used to better serve suppliers and retail customers. Itsinformation system digitally links the supplier to each of its storesworldwide. Suppliers are able to ensure the continuous flow of products tothe stores in order to satisfy customer demands.Improved Decision Making: A very important pre-requisite of strategicplanning is to provide the right information at the right time to the rightperson, for making an informed decision. Well planned InformationSystems and technologies make it possible for the decision makers to usereal-time data from the marketplace when making decisions. Previously,managers did not have access to accurate and current data and as suchrelied on forecasts, best guesses, and luck. The inability to make informeddecisions resulted in increased costs and lost customers.Competitive Advantage: Doing things better than your competitors,charging less for superior products, and responding to customers andsuppliers in real time all add up to higher sales and higher profits that yourcompetitors cannot match. Toyota and Walmart are prime examples ofhow companies use information systems and technologies to separatethemselves from their competition. Toyota worked its way to top of itsindustry with the help of its legendary information system. Walmart is themost efficient retail store in the industry based in large part on how well ituses its information resources.Survival: Firms also invest in information systems and technologiesbecause they are necessities for doing business. Information systems arenot a luxury. In doing so, they had a major competitive advantage overtheir competitors. In order to remain and survive in the retail bankingindustry, other banks had no choice but to provide ATM services tobanking customers.6