Purposes of Information Systems

Chapter 2

Learning Objectives
Know the principles of competitive advantage.
Know the characteristics of decision making and problem

solving.
Recognize that different information systems are needed to
solve different problem definitions.
Understand how information systems facilitate problem
solving.
Understand how information systems create competitive
advantage.

Why Firms Seek Competitive Advantage

(Porters Five-Force Model):
Rivalry among existing competitors
Threat of new entrants
Threat of substitute product and services
Bargaining power of buyers
Bargaining power of suppliers

Information Systems for Competitive

Advantage
Businesses continually seek to establish competitive
advantage in the marketplace.
There are eight principles:
The first three principles concern products.
The second three principles concern the creation of barriers.
The last two principles concern establishing alliances and reducing
costs.

Organizational Change
Organizational change deals with how organizations plan

for, implement and handle change. Overcoming resistance

to change can be the hardest part of bringing information
systems into a business. Too many computer systems and
new technologies have failed because managers and
employees were not prepared for change.
A change model identifies the phases of change and the
best way to implement it:
Unfreezing is the process of removing old habits and creating a
climate receptive to change
Moving is the process of learning new work methods, behaviors
and systems
Refreezing involves reinforcing changes to make the new process
second nature, accepted and part of the job

Information Systems for Problem Solving

Information systems can be used to solve problems.
Problem definition
A problem is a perceived difference between what is and what is
not.
A problem is a perception.
A good problem definition defines the differences between what is
and what ought to be by describing both the current and desired
situations.
Different problem definitions require the development of different
information systems.
All personnel in the organization must have a clear understanding
of which definition of the problem the information system will
address.

Decision Making and Problem Solving

Problem solving is the most critical activity a business organization

undertakes. Problem solving begins with decision making.

In the intelligence stage, potential problems and /or opportunities are
identified and defined
In the design stage, alternative solutions to the problem are developed
In the choice stage, a course of action is selected
In the implementation stage, action is taken to put the solution into
effect
In the monitoring stage, the implementation of the solution is
evaluated to determine if the anticipated results were achieved and
modify the process

The Decision Process

Two decision processes (method by which a decision is to

be made) are structured and unstructured.

Structured decision process is one for which there is an
understood and accepted method for making the decision.
Unstructured process is one for which there is no agreed
on decision making process.
The terms structured and unstructured refers to the
decision process-not the underlying subject.

Relationship of Decision Level and Decision

Type

Optimization, Satisficing, and Heuristic

Optimizing is finding the best solution and is usually best

fit for problems that can be modeled mathematically with a

low degree of estimation risk. For example, find how many
products an organization should produce to meet a profit
goal.
Satisficing is finding a good, but not necessarily the best,
solution. Satisficing does not look at all possible solutions,
but at those that are likely to give good results. Satisficing
is a good decision method because it is sometimes too
expensive to analyze every alternative to get the best
solution. A satisficing example is when you have to select
a location for a new plant.
Heuristics are guidelines or procedures that usually find a
good solution by using rules of thumb.

Different Types of Information Systems for

Different
of Decisions
AutomatedTypes
information
systems are those by which the
computer hardware and program components do most of
the work.
Humans start the programs and use the results.

Augmentation information systems are those in which

humans do the bulk of the work.

These systems augment, support, or supplement the work done by
People (email, instant messaging, video-conferencing, etc) to aid
in decision making.

How Decision Level, Decision Type and IS

Type Are Related

Information Systems for Decision Making

Decision making in organizations is varied and complex.
Decisions occur at three levels in organizations (decision

levels):
Operational decisions concern day-to-day activities.

Information systems that support operational decision making are

called transaction processing systems (TPS).

Managerial decisions concern the allocation and utilization

of resources.

Information systems that support managerial decision making are

called management information systems (MIS).

Strategic decision making concern broader-scope

organizational issues.

Information systems that support strategic decision making are

called executive information systems (EIS).

Knowledge Management System

A knowledge management system (KMS) is an

information system for storing and retrieving

organizational knowledge.
This knowledge can be in the form of data, documents, or
employee know-how.
KMS goal is to make the organization knowledge available
to

Employees
Vendors
Customers
Investors
Press and who else who needs the knowledge

Summary
Organizations develop and use information systems to gain competitive

advantage, to solve problems, and to assist in decision making

Eight principles of competitive advantage.
A problem is a perceived difference between what is and what ought to
be.
Decisions vary according to whether a structured or unstructured
process is used to make them.
Automated information systems are those in which the computer and
program side of the five components do most of the work.
Augmentation information systems are those in which humans do most
of the work.
Another way to consider information systems and decision making is
to consider the steps of the decision process.
Different types of information systems are used for different steps of
the decision process.
Decisions can be made at the operational (TPS), managerial (MIS), and
strategic (EIS) levels.

Video
Interview Question: According to your survey, you like

sociable environments, but will follow-through on tasks

that are important. How do you prioritize and keep on
track toward your objectives? How do you manage
procrastination and talkative co-workers?
How to evaluate the responses to this question?
PeopleKeys will compare the applicants response to a
benchmark set by the actual job description - then once the
interview process is complete - PeopleKeys will tell you
which applicant(s) are best suited for the position.
PeopleKeys is a tool for understanding the strengths and
weaknesses of individuals based on personality traits that
can be used for hiring, training, retention, and much more.

Guides
Ethics Guide:
Do you see evidence of a digital divide in your campus, hometown,
neighborhood? What solutions do you offer to reduce the digital divide?
Problem Solving Guide:
What is the difference between egocentric and empathetic thinking?
How does empathetic thinking relate to problem definition?
In business, is empathetic thinking smart?
Reflections Guide:
Summarize the efforts you have taken to build an employment record that
will lead to job offers after graduation.
Describe one way in which you have a competitive advantage over your
classmates.
How can you use student alliances to obtain a job?