1 I CONTENT

1. Introduction to management and organisations

Content
2. Models of management

3. Organisational culture and environment

4. Managing in a global environment

5. Corporate responsibility

6. Planning

7. Decision making

8. Strategic management

9. Organisational structure and design

10. Information systems and e-business

11. Creativity, innovation and change

2 I INFORMATION SYSTEMS AND E-BUSINESS

10. Information systems and e-business

Principles of Management
2017

Prof. Dr. Maud H. Schmiedeknecht

3 I INFORMATION SYSTEMS AND E-BUSINESS

Learning Objective

1. Distinguish between operations information systems and management information

systems

2. Illustrate how organisations use the internet to add value by using three types of
information system – enterprise, knowledge management and customer relations

3. Understand the relationship between IS, organization and strategy

 4 I INFORMATION SYSTEMS AND E-BUSINESS

Established organisations typically go through successive

stages in the way they use the internet
Stages in using the Internet
Business value

Transformation

Integration

Transaction

Interaction

Information

Time

Transformation refers to the situation where a company links internal and external
systems, encourages customers to take part in product design, and engages actively with
online customer communities.
CP. BODDY (2014), P.368
5 I INFORMATION SYSTEMS AND E-BUSINESS

Any IS includes people, processes, hard- & software: Adding

value depends on managing technology and organisation
The elements of a computer-based IS
External environment

Organisation

Processes People

Data
Input data transformation Output
processes information

Software Hardware

Feedback

CP. BODDY (2014), P. 367

 6 I INFORMATION SYSTEMS AND E-BUSINESS

The value of IS investment will be enhanced if companies

associate this with decentralised decision making
The extroverted firm – complementarities model

Information Product innovation

technology
• faster product cycles
• shorter development
time

Decentralization External focus

• self-managed teams • benchmarking Higher productivity
• cross-training • project teams levels
• recruiting

The logic is that this will enable the firm to respond quickly to the information,
through product innovation.
CP. BODDY (2014), P. 371
7 I INFORMATION SYSTEMS AND E-BUSINESS

There are two broad types of IS that are very widely used:
management IS and operational IS
Types of information systems (IS)

Generic categories of Specific types of information

Management levels
information systems systems

Senior managers –
managing the business  Executive information
Management information
 Decision support
systems (MIS)
Middle managers –  Information reporting
managing the managers

Line managers –
supervising people doing the  Office automation
work Operational information systems  Process control
 Transaction processing
People doing the work

CP. BODDY (2014), P. 373

 8 I INFORMATION SYSTEMS AND E-BUSINESS

Enterprise Resource Planning (ERP) systems give

management direct access to current operating information
Enterprise resource planning (ERP)

Examples of business processes supported by enterprise systems

Accounts receivable and payable, cash management and forecasting,
Financial management information, cost accounting, profitability analysis, profit-
centre accounting, financial reporting
Payroll, personnel planning, travel expenses, benefits accounting,
Human resources applicant tracking
Inventory management, maintenance, production planning, purchasing,
Operations and logistics quality management, vendor evaluation, shipping

Sales and marketing Order management, pricing, sales management, sales planning, billing

Enterprise resource planning is an integrated process of planning and managing all

resources and their use in the enterprise.
CP. BODDY (2014), P. 379
9 I INFORMATION SYSTEMS AND E-BUSINESS

Managers can implement modules separately, but gain

benefits when they are linked through central database
Anatomy of an enterprise system
Managers and
stakeholder

Financial Reporting Sales and delivery

applications applications applications

Manufacturing
Suppliers Central database Customers
applications

Inventory and Human resource

Service
supply management
applications
applications applications

Employees

CP. BODDY (2014), P. 378

10 I INFORMATION SYSTEMS AND E-BUSINESS

KM tools can exploit explicit knowledge about previous

project, technical discoveries or useful techniques
Knowledge management (KM) systems

Knowledge management systems

• Are a type of IS intended to support people as they create, store, transfer and apply
knowledge

Knowledge management portal

• Provides a single point through which employees can access the many sources of
information and knowledge within an organisation

While computer-based systems are effective at dealing with (structured) data and
information, they are much less effective at dealing with (unstructured) knowledge.
11 I INFORMATION SYSTEMS AND E-BUSINESS

The internet can change the relationship between a

company and its customers and suppliers
The internet and e-business
E-commerce E-business
• activity of selling goods or service over the • integration, through the internet, of all an organisation‘s
internet processes from its suppliers through to its customers

Reinventing the supply chain

Manufacturer Removing
intermediaries such as
Portals distributors or brokers
Infomediaries that formerly linked a
Search engines Wholesaler
company to its
Auctions
customers
e-retailer or e-hub
Reintermediation Disintermediation
Portal
creating intermediaries between
customers and suppliers, providing
services such as supplier search and Consumer
product evaluation

CP. BODDY (2014), P. 373

12 I INFORMATION SYSTEMS AND E-BUSINESS

The internet can change the relationship between a

company and its customers and suppliers
The internet and e-business
Customer Relationship Management (CRM)
• Process of maximising the value delivered to the customer through all interactions,
both online and traditional. Effective CRM aims to develop one-to-one.

Communication methods and messages CRM

• gather customer data

One-to-many broadcast
Same message to all • identify and capture valuable customers
while discouraging less valuable ones
• increase customer loyalty and retention by
providing customised products
Direct targeting • reduce costs of serving customers
One direction,
different messages • make it easier to acquire similar customers

One-to-one interactive
Unique messages to individuals

CP. BODDY (2014), P. 373

13 I INFORMATION SYSTEMS AND E-BUSINESS

How can managers take a strategic perspective on IS, and

on the major organisational changes this requires?
How information systems can change competitive forces: Porter’s model
Threats from • IS as a means to raise
potential barriers to entry
entrants • IS as a means to enter
• IS to change the balance of markets more easily
power in markets

Power of
suppliers Rivalry among Power of
existing firms buyers

• IS to reduce costs • IS to change the

balance of power in
• IS for more effective markets
management
Threats from
substitutes • IS to create new products
• IS to differentiate products and
services
CP. BODDY (2014), P. 383
14 I INFORMATION SYSTEMS AND E-BUSINESS

IS can become a source of competitive advantage

Using information systems to affect the Five Forces (I)

Porter’s Five Forces Examples of information systems support
Electronic links with customers make it more costly for them to
move to competitors. Supermarkets use electronic links to
Raise entry barriers banks and suppliers, and so gain a cost advantage over small
Threat of retailers
potential entrants
Bertelsmann, a German media group, entered book retailing
Entering markets more
by setting up an online store. Virgin offers financial services by
easily using online systems
Online banking has only been possible with modern
Creating new products information systems
Threat of
substitutes Using database technology and CRM systems to identify
Differentiating their
precise customer needs and then create unique offers and
products incentives
Airlines use yield management systems to track actual
Increasing power of
reservations against capacity on each flight, and then adjust
suppliers prices for the remaining seats to maximize revenue
Bargaining power
of suppliers Online recruitment through a website reduces the need to
Decreasing power of
advertise vacancies in newspapers, reducing their power to
suppliers earn advertising revenue
CP. BODDY (2014), P. 383
15 I INFORMATION SYSTEMS AND E-BUSINESS

Companies can use technology to strengthen one or more

of the forces
Using information systems to affect the Five Forces (II)
Porter’s Five Forces Examples of information systems support
Bargaining power Buyers can use the internet to access more suppliers, and to
of buyers compare prices for standard commodities
Enterprice Resource Planning systems make it possible to
Using IS to reduce
make radical changes in manufacturing systems, leading to
Intensity of cost greater consistency in planning and lower costs
rivalry
More effective Information systems provide more detailed information on
management trading patterns

CP. BODDY (2014), P. 383

16 I INFORMATION SYSTEMS AND E-BUSINESS

Managers also use IS to support their chosen strategy –

such as a differentiation or cost leadership
IS can support strategies (examples) Competitive advantage
Lower cost Differentiation
Cost leadership strategy:
Cost
leader- Differen-
• computer-aided manufacturing to replace manual Broad target tiation
ship
labour Competitive
scope
• stock control systems to cut expensive inventories Narrow target Cost Differen-
focus tiation
• online order entry to cut order processing costs focus

Differentiation strategy:
• computer-aided manufacturing to offer flexible delivery
• stock control systems to extend the range of goods on offer at any time
• using online order systems to remember customer preferences, and suggest pruchases

Focus strategy:
• computer-aided manufacturing to meet unique, non-standard requirements
• online ordering to allow customers to create a unique product by selecting its features
17 I INFORMATION SYSTEMS AND E-BUSINESS

Key terms

 internet  e-commerce
 co-creation  e-business
 information systems management  disintermediation
 data  reintermediation
 transaction processing system  customer relationship management
 management information systems  enterprise resource planning
 operational information systems  knowledge management