In the digital world, information systems are very important. These systems are used by many organizations to manage their activities in the digital world. One of the largest technology companies in the world is Apple. It is a very profitable company with many different popular products. Over the years Apple has become a very successful company and is not only a vendor of hardware but it also stores information of the people who are using the products. The personal information of the user is stored in the cloud and can be used to predict the future behavior of the user. This access to private information can be risky and one should be aware of it. Show
What are the information systems of today?The most important components of the information systems (IS) are computers. These can be laptops, cameras, smartphones etc. Information systems are used by many organizations to record purchases, to optimize the supply chain and many more. Because of the increased global competition, firms had to find a way to do things faster, better and at lower cost. This can be achieved by using information systems. Through these systems new markets were more easily accessed. Because of the changes in technology new ways of working and socializing have developed over the last few years. People are no longer bound to a stationary PC but can now do their work wherever there is a phone signal. Because of cloud computing, like Dropbox and Gmail, people can access their email, files pictures from any device. The technology changes also affect our social life. For socializing and communication people nowadays really need mobility and connectivity. In 1959 Peter Drucker argued that information technology (IT) would become more and more important. He defined a knowledge worker as a professional who is relatively well educated and who creates and modifies knowledge as a fundamental part of his/her job. These workers have great career opportunities and are paid more than other workers. According to Drucker, the number of knowledge workers would increase over time and this would lead to a knowledge society. Many call this knowledge society the digital world. Some argue that there is a digital divide. Meaning that people who have access to IT have an advantage over people who do not have access. According to Alvin Toffler there are three waves of change. The first is the wave of agriculture and handwork. The second wave is the industrial revolution. The information wave is the third wave. In developed societies people make use of IT. There are five trends in IT that have an effect on the shape of organizations and society:
If the value of a network increases as the number of users of the network increases then we speak of a network effect. The success of the five mega trends is largely due to this network effect. Many people know how to work with computers, this is called computer literacy. But as the use of computers increases it is not only important to know how to use computers but one must also be able to independently learn new technologies. This is called computer fluency. What is the effect of globalization?Globalization is the integration of economies over the world. Globalization leads to several changes, namely:
If an organization is moving its business processes or tasks to another company, either offshore or onshore (domestically), then we speak of outsourcing. Because China opened up their markets, organizations were able to outsource the manufacturing of their products. Often entire functions of a business, like accounting, are outsourced to another firm. This other firm can be located in the domestic country but it can also be located in a foreign country. Many firms set up factories in emerging countries because it enables them to mass-produce products at low cost. An organization can outsource for many more reasons, like to get access to certain capabilities or to increase efficiency. A reason for a company to offshore is to utilize talented workers. Some organizations seek for specific skills in their employees and may offshore if another country has more workers with the specific skills they need. Globalization has created many opportunities, like the reduction in transportation costs. Cultures have become closer to each other because of the increased use of television and social media. We can receive television programs from other countries on our TV. Markets opened up, enabling companies to enter new markets. As a result of lower communication costs, organizations are able to choose employees from a larger pool of skilled professionals. However, there are also challenges of operating in the digital world. The main challenges were governmental, geoeconomic and cultural. Examples of where such challenges come from are taxes, tariffs, political instability, internet censorship and working culture. What are information systems?To collect, distribute and create useful data, information systems use information technology. Information technology includes telecommunications networks, software and hardware. Physical computer equipment is defined as hardware and the program that tells the computer what to do is the software. If two or more computer systems are linked with communications equipment then we speak of a telecommunications network. It is important to make a distinction between data and information. Data are just symbols, like words or numbers, without meaning. If this data is transformed, organized, formatted or processed such that it is useful then we speak of information. Information is a representation of reality and can therefore be used solve problems. Knowledge is defined as the ability to understand information. Without knowledge, information is useless. Computer hardware is able to transform data into useful information and then software is used to tell the computer which tasks and processes it must perform. Finally, information can be shared and global communication is possible because of the telecommunications networks. The opportunities for people in the information system (IS) field are increasing as more and more companies need people with the skills to optimize business processes. The field of IS includes the people in organizations who design, build, use and manage information systems. Information systems are an important tool for the successes of the company. The importance of IS is expected to increase even further over the next 10 years. Furthermore, it is likely that the opportunities in the IS field can be found in several areas. The analysts, programmers, administrators, designers and managers in an organization are the people who develop the systems and manage them. The nature of the IS work has changed over the years. The IS departments in organizations no longer exist of male nerds but now also contain women and people who can speak fluently about technology and business. The IS people are highly-skilled and earn high wages. A good IS employee must possess skills in three different areas:
A good candidate for the IS field must thus have several skills. Organizations often have a hard time finding personnel with these skills. Therefore, we see that technology-based companies are often clustered in areas where such skilled people are located. An organization can offer benefits, like flextime or educational grants, to attract people. Understanding information systems is not only useful in an IS career but it is also useful in your personal life. In many fields that are related to business, information systems are used. So understanding and being able to use information systems gives you an advantage over the competition. Even in your private live it may be handy. For instance when you try to sync all your files across different computers of mobile devices. What types of information systems are there?Information systems can be used to improve customer service, to increase productivity or profitability, to reach more customers or to gain competitive advantage. There are several different information systems that organizations can use. These can be classified into different categories. Some of the main categories are:
Transaction processing systems are used by many different organizations to make customer transactions more efficient and to generate data that can be used to gather information about customers or changes in product trends. The data that is generated by TPS can be organized in order for managers to make decisions with a system. A common system that is used for this is a management information system. An organization can connect host computers, along with their network, together to create a larger network. One can also connect several information systems with each other. Microsoft office is an example of an office automation system. These systems enable workers to perform certain tasks. The electronic commerce system, like the Web, is also important since it enables consumers to search for information about products and buy them online. Business intelligence systems are used to analyze date in order to understand the business better. Nowadays, we see that in many organizations the builders and managers of a system work at the business unit to work together with the users of the system. We often see that these builders have an office in the building where the users work to help the users when necessary. IS personnel generally has to report to two groups, the central IS group and to the business function where they work. What is the dual nature of information systems?Information technology has a dual nature. It can effectively be used as a competitive weapon but it can also lead to negative outcomes. For instance, online shopping systems make it easier for people to shop but if there are problems with the system then this leads to dissatisfied customers and may even lead to a reduction in revenues. However, if the system works correctly this leads to great benefits. If a transport company improves the transport by making use of an information system then this could give the company a competitive advantage over other companies. The US transportation company FedEx is due to its information systems the global leader in the transportation industry. The systems that companies use are often very large and complicated and are critical for the success of the company. It is a strategic choice for a company to develop an information system. Companies make this choice because they hope that this will give them a competitive advantage. Such information systems to gain competitive advantage can be used by small firms as well as by large firms. Nowadays, almost every company has an information system, it has become a necessity. Information systems can thus be used to create efficiencies and to get a competitive advantage over rivals. What are the ethics of information systems?Computer ethics is defined as the moral issues and standards of conduct corresponding to the use of information systems. As the use of computers increased, several ethical issues have emerged. Especially concerns about privacy have emerged due to increased sharing of information and digitally duplicating. There are also issues related to intellectual property. We nowadays make more use of things like email, Facebook and the internet. If you visit a website or use Facebook you may see advertising that is directed towards you, using your name or showing your preferences. This can make you feel like you are being watched and that you're privacy is at risk. Information privacy is defined as the information that an individual should have to share with others in transactions, like online shopping, or in the workplace. The increased access to information also this means that other people might have access to information that you would like to keep to yourself, this is a downside of the increased access. This can be personal information like credit card numbers, medical information and social security numbers. Via the internet one can find almost anything that a person has posted on the internet. Many pages remain available on the internet for a very long time. There are several countries that want to protect their citizens and try to stop this. In 2014, there came a rule that stated that search engines had to remove links with personal information that is not accurate, relevant or adequate anymore. Companies can sell our personal information to other companies. Our email addresses are sold and therefore we get emails with magazines, advertising etc were we didn't subscribe for. If you buy a product from a company than the company has data about you that it legally owns and may sell to others. Data from surveys can be combined with data from credit card transactions and this gives even more information about the purchases preferences of a person. Almost everyone has an email address to communicate. It is one of the most popular software applications ever. Companies are not obligated to respect the privacy of people. Many governments put pressure on companies to put their privacy policies on their Web sites. Businesses often list the following information practices:
Unfortunately we see that the privacy of customers is often not protected. Some tips to maintain your privacy are:
Intellectual property is something that is created by the mind and which has commercial value. There are ethical issues related to this intellectual property, downloading and copying information, and distributing information. Years ago it was not possible to copy a music song without losing its quality, but nowadays this is easy done. There are also 3D printers, which create physical three-dimensional objects from a digital model. Some schools have a license to use a certain software. Most students who install this software will not uninstall the software when they graduated and will keep on using it or lend it to friends. You could also download a software illegally if you do not have a license. These cases are not only associated with legal issues but also with ethical issues. For instance if you illegally download a software, then the vendor of the program does not receive the money that you would have paid if you bought the software legally. There are megazines that use photoshop software to change photos. Some argue that this is also not ethical. So the internet also asks for some ethical conduct. In many businesses there are guidelines for the ethical use of computer systems and information. Also on universities and schools there are certain guidelines for the students how to use computers or software. Most organizations ask their people to act responsibly and legally. The Computer Ethics Institute is a study organization that studies the impact of information technology on ethics and public and corporate policy. This institute has several guidelines for how to use computers. These include things like do not use the computer to harm others, to steal, to look in someone's files. Bulletpoint
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Chapter 2. How to gain competitive advantage?How can information systems enhance strategy?Information systems can have strategic value to a company since much information is needed for an organization to support its business processes. Business processes are defined as the activities an organization performs to reach its business goals. These activities include the core activities to transform inputs into outputs as well as the supporting activities that make the core activities possible. Businesses can use several types of information systems for the different levels in the organization. Every level has different responsibilities and therefore needs different information systems. The operational level of the firm is the level where the day-to-day, routine processes and interactions with customers occur. Certain activities need to be automatically repeated and for that an information system is used. It can for instance be used to process the transactions of a company. A transaction is defined as something that needs to be recorded, that occurs every day at a firm. Operational planning is used to organize the structured day-to-day decisions. Structured decisions are decisions for which one can specify in advance what the procedures are for a particular situation. These decisions can be structured into operational information systems so that they can be made without much human intervention. At this operational level information systems are often used to increase the efficiency. Efficiency is reached by optimizing processes and better understanding problems related to performance. For this optimizing information systems are used. Another level in the firm is the managerial level. At this level functional managers are controlling and monitoring activities that are on operational levels and they provide information to higher levels of the firm. They focus on increasing the effectiveness by deploying resources to reach the goals of the firm. The managers at this level are called midlevel managers. The decisions at this level are less structured than the decisions at the operational level. These decisions are therefore called semistructured decisions. For these some procedures to follow in a particular situation can be specified in advance. But it is not possible to make a specific recommendation for the situation. To assess the performance of an organization one could make use of the key performance indicators (KPIs). The level where the managers focus on long-term strategic problems of the organization is called the executive level. These decisions include which products to produce and in which countries to operate. The president and the chief executive officer are active at this level. The decisions that are made at this level are unstructured decisions since one cannot specify certain procedures in advance. At this level information systems are used to obtain summaries of trends and predictions for the future. These IS provide the firms KPIs which are used balance the performance of the firm. In an organization we do not only have different decision making levels but we also have different functional areas. A functional area is a part of an organization that is focused on specific activities. Some examples of functional areas are human resources, marketing, production and finance. Each functional area uses different functional area information systems. These are designed to support the process of each different functional area. Information systems can be used for several reasons. Some reasons are:
Organizational learning is defined as the ability of an organization to use information and behavior from the past to improve the business processes. The information system provides information from the past which can help you tackling problems in the future. Combining automatic processes together with the learning part is better than just doing everything automatic. The organizational strategy of a firm is its plan to achieve its goals and mission or to gain competitive advantage over rivals. Senior managers can make a plan of where they see the organization heading in the future. This vision of the future can be converted into measurable objectives and targets. After this a strategy is made to achieve these desired goals. This process is called strategic planning. Organizations can use several strategies. For instance, it could use the low-cost leadership strategy. With this strategy a firm offers the best prices in its industry for its goods or services. Another strategy that an organization can pursue is the differentiation strategy. This strategy means that the firm will provide better products or services than its rivals. The differentiation can be focused on a particular segment of the consumers. An organization can also choose to provide products or services with reasonable good quality at competitive prices. Such a strategy is called the best-cost provider strategy. If a firm has an advantage over its rivals in the field of consumer attraction and defending against competitive forces then it is said to have a competitive advantage. There are several sources of competitive advantage. Some examples are:
When a competitive advantage is achieved the firm needs resources and capabilities to keep this advantage. The resources of a company are its specific assets and its capabilities are the abilities to bring these resources to the market. The resources and capabilities of the organization define what the distinctive competencies are (like quality or innovation). These competencies are used for the organizational strategy of an organization to make products valuable to customers. If an organization provides products at lower cost or with superior benefits relative to its competitors then we speak of superior value creation. Information systems can be used to gain or keep the sources that provide the firm a competitive advantage. The information systems can support the firm in adding value. Therefore, an IS is essential to survival in the long run for the firm. Organizations must define how they can best use their resources to execute their strategy. To define this a company analyzes the different competitive forces of the industry where it operates. Often the five forces of Porter are used for this analysis. These five forces are:
A company must also evaluate its value chain. To do this managers can use a value chain analysis. Value chain analysis is defined as a process where the activities of an organization are analyzed to identify where value is added to services or products and what the associated costs are. With this analysis managers can determine which opportunities they can have from using information systems to get a competitive advantage. The value chain of a company can thus be improved by using information systems. A company can for instance reach its customers via social media like Facebook or Twitter. A company wants that its information systems match with its strategy. They are trying to maximize the IT alignment of the business. Information systems are seen as competitive assets where one must invest in. Sometimes a company must make investments that are not in line with the strategy but need to be made in order for the company to survive. These investments are called a strategic necessity. Just implementing an information system is not what will give a company a competitive advantage. In order to have an effect, there must be significant organizational changes. The functioning of the entire company has to be changed and improved. It is very difficult to determine the value of the IS infrastructure of a company. There are several different methods that can be used to determine the value. Four approaches are:
Which business model are used in the digital world?A business model is defined as a summary of the strategic decision of the business which outlines how the business will achieve its objectives. In this business model are the value proposition and how a company will create value specified. Also customer segments, key resources and channels are specified in this summary. The business model reflects:
Each component must be assessed in the business model and each has a critical role in shaping the business. For any organization it is important to determine how it must generate revenue. This is done by using a revenue model in which is described how the firm will generate profits, earn revenue and produce a return on the invested capital. A company can advertise in the offline world but since the Internet companies are also able to advertise online. An example of an advertising-based business model is affiliate marketing. Companies use the web to reach a great amount of customers. This large group of customers enable companies to turn over their inventory quickly. Because of this companies can sell their products at low prices and still make profits. Freeconomics is defined as as business strategy using the digital technologies to provide customers free products and services. Companies can use this business strategy to gain a competitive advantage. Some examples are Google and Yahoo!. These two are free search engines, for which customers do not have to pay, which make millions of revenue. In a competitive market the price of products and services is determined by the marginals costs. Since the globalization, competition and processing power have increased. Because of this the prices of computer processing, bandwidth and storage are in a free fall. Any industry that uses digital economies has the ability to lower its costs to a very low level. This reduction of costs combined with increased efficiency will lead to a free price, where consumers do not have to pay anything. If consumers do not have to pay anything this does not mean that nobody is paying. For example, Google receives money from companies if someone clicks on the link of the company on Google. With such systems there are many parties involved, not just sellers and buyers. Another example of such a system is the radio; customers pay nothing for listening to the radio but the radio stations earn money with things like advertising. Freeconomics can be used by many different industries. There are online photo-sharing applications where you can store and share pictures. Such applications, like Flickr, can use the freemium approach in which users can pay to upgrade their account to receive additional features. They can for instance offer unlimited storage. Before the period of globalization most firms operated just in their domestic country. Most of the domestic companies benefited from the globalization because this gave them more access to resources. However, there are also domestic companies that encountered negative effects. The number of exclusively domestic companies has decreased over the years and continues to decrease. Furthermore most of these domestic companies are small, like local groceries or restaurants. Almost all the large companies have an international business strategy to determine how they will compete in the global market. If we look at the degree of global integration and local responsiveness we can distinguish four different strategies:
How to value innovations?Companies have to innovate in order to differentiate themselves. If a company upgrades its old systems to a new system this will only give him a short competitive advantage over its rivals. To sustain a competitive advantage the firm must keep investing in new technologies. However, it is impossible to keep track of all the new technologies. You have to focus on the ones that will make or break your success. The information systems are often not designed by people of the organization but by a vendor or outsourcing partner. Therefore, the company does not own the technology. Advantages of innovation have a short duration and developing innovations can also be risky. Microsoft and other companies used the HD DVD while Sony used the Blue-ray. Consumers had to choose which one of the two they wanted to use and this led to a war between the two formats. This war was eventually won by Blue-ray after which became the primary format. For both customers and organizations it is difficult to choose between different technologies. Especially for organizations it is very difficult since technology innovations require substantial investments. In a market where there is strong competition it is important for companies to stay at the cutting edge of the information systems. The environment of the company can put high pressure on the company. It feels pressure to do things better and faster than its competitors. If an organization wants to deploy a new information system then the processes, resources etc. of the firm need to be ready to adapt to the new system. The organization needs the following:
If one company uses an innovation it does not take long for the competitors to copy the new information system. Then the company loses its competitive advantage and the new information system has become a necessity for the rest of the industry. To keep a long competitive advantage companies can try to offer very unique products and to make sure that switching costs are high. Disruptive technologies are defined as new technologies, services or products that eventually will replace the existing dominant technology in the market. Such innovations lead to a lot of changes in the market. The innovation will be adapted in the industry and this will lead to improvements. Over the last year we have seen different disruptive technologies in different industries. An example of such a technology is the replacement of the wire-line phone by the mobile phone. The innovator's dilemma is referred to the situation where disruptive innovations are ignored by the market leaders, which leads to a loss of market dominance and often to failure. An organization must decide which innovations it will embrace. Christensen and Raynor described a process of four steps that organizations can use to determine which innovations to pursue. The steps are as follows:
When an innovation is embraced it must be implemented in the organization. The process of choosing disruptive technologies is defined as the disruptive innovation cycle. The cycle consist of four stages:
As a result of this disruptive innovation cycle, three new ways of thinking about investments in disruptive innovations have developed:
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Which of the following can be cited as an example of digital divide?Causes and Examples of the Digital Divide
Factors such as low literacy and income levels, geographical restrictions, lack of motivation to use technology, lack of physical access to technology, and digital illiteracy contribute to the digital divide.
Which is personnel is responsible for managing disaster recovery within an organization?Disaster Recovery Coordinator
Also known as a crisis management coordinator, this person should be a business leader within your organization who will oversee the execution of your disaster recovery (this is primarily IT-focused) plan as a whole.
Which of the following types of information systems creates Stores analyzes and manages spatial data?A geographic information system (GIS) is a system that creates, manages, analyzes, and maps all types of data. GIS connects data to a map, integrating location data (where things are) with all types of descriptive information (what things are like there).
What is to support and integrate all facets of the business including planning manufacturing sales marketing and so on?ERP is a software-driven business management system that integrates all facets of the business, including planning, manufacturing, sales, and marketing [1].
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Which of the following is a geoeconomic challenge of operating in the digital world?
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