Management Information Systems by Jane P.

Laudon

Chapter 1
Information Systems in Global Business Today

Management
Management is a process of planning, decision making, organizing,
leading, motivation and controlling the human resources, financial,
physical, and information resources of an organization to reach its
goals efficiently and effectively.

POLCA
Planning
Planning is a management function that involves the process of defining goals,
establishing strategies for achieving those goals and developing plans to integrate
and coordinate activities.
Organizing
Organizing is a management function that involves the process of determining
what tasks are to be done. How the tasks are to be grouped, who reports to
whom, and where decisions are to be made.
Leading
Leading is a management function that involves motivating subordinates,
influencing individuals or teams as they work, selecting the most effective
communication channels, and dealing in any way with employee behavior issues.
Controlling
Controlling is a management function that involves monitoring actual
performance, comparing actual to standard and taking corrective action, if
necessary.
Assurance
Assurance is a quality function which demands from every manager that he/she
ensures that prior management support and management processes are in place
before POLC management functions are executed.

Management Information System (MIS)

MIS is the use of information technology, people, and business processes to
record, store and process data to produce information that decision makers can
use to make day to day decisions.

Strategic Business Objectives of Information Systems

Business firms invest heavily in information systems to achieve six strategic
business objectives:

1. Operational Excellence
2. New Products, Services, and Business Models
3. Customer and Supplier Intimacy
4. Improved Decision Making
5. Competitive Advantage
6. Survival

Detail on Book Page 13 – 16

Information System
A set of interrelated components that collect (or retrieve), process, store, and
distribute information to support decision making and control in an organization
is called information system.

Detail on Book Page 16 – 18

Dimensions of Information Systems

Following are the three dimensions of information systems:

1. Organizations
2. Management
3. Information Technology

1. Organizations
Information systems are an integral part of organizations. Organizations have a
structure that is composed of three different levels and specialties:

i. Senior Management
Senior management makes long-range strategic decisions about products
and services as well as ensures financial performance of the firm.

ii. Middle Management

Middle management carries out the programs and plans of senior
management.

iii. Operational Management

 Operational management is responsible for monitoring the daily activities
of the business.

2. Management
Management’s job is to make sense out of the many situations faced by
organizations, make decisions, and formulate action plans to solve
organizational problems.
Managers perceive business challenges in the environment, they set the
organizational strategy for responding to those challenges, and they allocate
the human and financial resources to coordinate the work and achieve
success.

3. Information Technology
Information technology is one of many tools that managers use to cope with
change.
The Internet has created a new “universal” technology platform on which to
build new products, services, strategies, and business models. This same
technology platform has internal uses, providing the connectivity to link
different systems and networks within the firm.

Detail on Book Page 18 – 24

Contemporary Approaches to Information Systems
Following are the two contemporary approaches to information systems:

1. Technical Approach
2. Behavioral Approach

1. Technical Approach
The technical approach to information systems emphasizes mathematically
based models to study information systems as well as the physical technology
and formal capabilities of these systems.
The disciplines that contribute to the technical approach are:
  Computer Science
Computer science is concerned with establishing theories of computability,
methods of computation, and methods of efficient data storage and access.

 Management Science
Management science emphasizes the development of models for decision-
making and management practices.

 Operations Research
Operations research focuses on mathematical techniques for optimizing
selected parameters of organizations, such as transportation, inventory
control, and transaction costs.

2. Behavioral Approach
An important part of the information systems field is concerned with behavioral
issues that arise in the development and long-term maintenance of information
systems.
The behavioral approach does not ignore technology. Indeed, information
systems technology is often the stimulus for a behavioral problem or issue. But
the focus of this approach is generally not on technical solutions. Instead, it
concentrates on changes in attitudes, management and organizational policy, and
behavior.
The disciplines that contribute to the behavioral approach are:

 Sociology
Sociologists study information systems with an eye toward how groups and
organizations shape the development of systems and also how systems
affect individuals, groups, and organizations.

 Psychology
Psychologists study information systems with an interest in how human
decision makers perceive and use formal information.
 Economics
Economists study information systems with an interest in understanding the
production of digital goods, the dynamics of digital markets, and how new
information systems change the control and cost structures within the firm.

Detail on Book Page 28 – 29

 Chapter 2
Global E-business and Collaboration

Business Processes
Business processes refer to the manner in which work is organized, coordinated,
and focused to produce a valuable product or service. Business processes are the
collection of activities required to produce a product or service.
These activities are supported by flows of material, information, and knowledge
among the participants in business processes.
e.g.
In manufacturing and production, the business processes include assembling the
product, checking for quality, and producing bills of materials.

Detail on Book Page 43 – 45

How Information Technology Improves Business Processes

Information systems automate many steps in business processes that were
formerly performed manually, such as checking a client’s credit or generating an
invoice and shipping order.
But today, information technology can do much more. New technology can
actually change the flow of information, making it possible for many more
people to access and share information, replacing sequential steps with tasks
that can be performed simultaneously, and eliminating delays in decision
making.

Detail on Book Page 45 – 46

Types of Information Systems / Systems for Different Management

Groups
A business firm has systems to support different groups or levels of management.
These systems include:

1. Transaction Processing Systems (TPS)

2. Systems for Business Intelligence
i. Management Information System (MIS)
ii. Decision Support System (DSS)
iii. Executive Support System (ESS)

1. Transaction Processing Systems (TPS)

A transaction processing system (TPS) is a computerized system that performs
and records the daily routine transactions necessary to conduct business, such
as sales order entry, hotel reservations, payroll, employee record keeping, and
shipping.
The principal purpose of systems at this level is to answer routine questions and
to track the flow of transactions through the organization. How many parts are in
inventory? What happened to Mr. Smith’s payment? To answer these kinds of
questions, information generally must be easily available, current, and accurate.
e.g.
Payroll system illustrated in Figure below is an example of TPS:
2. Systems for Business Intelligence
Business intelligence is a contemporary term for data and software tools for
organizing, analyzing, and providing access to data to help managers and other
enterprise users make more informed decisions.
There are three types of systems for business intelligence:

i. Management Information System (MIS)

MIS is the use of information technology, people, and business processes
to record, store and process data to produce information that decision
makers can use to make day to day decisions.
 The term management information systems (MIS) designates a specific
category of information systems serving middle management. MIS
provide middle managers with reports on the organization’s current
performance. This information is used to monitor and control the
business and predict future performance.
MIS summarize and report on the company’s basic operations using data
supplied by TPS.
e.g.
Figure below is a typical example of MIS:

ii. Decision Support System (DSS)

Decision-support systems (DSS) focus on problems that are unique and
rapidly changing, for which the procedure for arriving at a solution may
not be fully predefined in advance.
They try to answer questions such as these: What would be the impact on
production schedules if we were to double sales in the month of
December? What would happen to our return on investment if a factory
schedule were delayed for six months?
Although DSS use internal information from TPS and MIS, they often
bring in information from external sources, such as current stock prices
or product prices of competitors.
e.g.
Figure below is an example of DSS:
iii. Executive Support System (ESS)
Executive support systems (ESS) help senior management make these
decisions. They address nonroutine decisions requiring judgment,
evaluation, and insight because there is no agreed-on procedure for
arriving at a solution. ESS present graphs and data from many sources
through an interface that is easy for senior managers to use. Often the
information is delivered to senior executives through a portal, which uses
a web interface to present integrated personalized business content.
ESS are designed to incorporate data about external events, such as new
tax laws or competitors, but they also draw summarized information
from internal MIS and DSS. They filter, compress, and track critical
data, displaying the data of greatest importance to senior managers.
e.g.
Figure below is an example of ESS:

Detail on Book Page 46 – 51

Systems for Linking the Enterprise
Enterprise applications are used as systems for linking the enterprise.

Enterprise Applications
Enterprise applications are systems that span functional areas, focus on executing
business processes across the firm, and include all levels of management.
Enterprise applications help businesses become more flexible and productive by
coordinating their business processes more closely and integrating groups of
processes so they focus on efficient management of resources and customer
service.

Figure below shows that the architecture for these enterprise applications
encompasses processes spanning the entire organization and, in some cases,
extending beyond the organization to customers, suppliers, and other key
business partners.
There are four major enterprise applications:

1. Enterprise Systems
Firms use enterprise systems, also known as enterprise resource planning
(ERP) systems, to integrate business processes in manufacturing and
production, finance and accounting, sales and marketing, and human
resources into a single software system.
 Information that was previously fragmented in many different systems is
stored in a single comprehensive data repository where it can be used by
many different parts of the business.

2. Supply Chain Management Systems

Firms use supply chain management (SCM) systems to help manage
relationships with their suppliers.
These systems help suppliers, purchasing firms, distributors, and logistics
companies share information about orders, production, inventory levels,
and delivery of products and services so they can source, produce, and
deliver goods and services efficiently.

3. Customer Relationship Management Systems

Firms use customer relationship management (CRM) systems to help
manage their relationships with their customers.
CRM systems provide information to coordinate all of the business
processes that deal with customers in sales, marketing, and service to
optimize revenue, customer satisfaction, and customer retention.

4. Knowledge Management Systems

Knowledge management systems (KMS) enable organizations to better
manage processes for capturing and applying knowledge and expertise.
These systems collect all relevant knowledge and experience in the firm
and make it available wherever and whenever it is needed to improve
business processes and management decisions. They also link the firm to
external sources of knowledge.

Detail on Book Page 51 – 55

E-business, E-commerce, and E-government
 Electronic business, or e-business, refers to the use of digital technology
and the Internet to execute the major business processes in the enterprise.
E-business includes activities for the internal management of the firm and for
coordination with suppliers and other business partners.

 E-commerce is the part of e-business that deals with the buying and selling
of goods and services over the Internet.
It also encompasses activities supporting those market transactions, such as
advertising, marketing, customer support, security, delivery, and payment.

 E-government refers to the application of the Internet and networking

technologies to digitally enable government and public sector agencies’
relationships with citizens, businesses, and other arms of government.

Detail on Book Page 55

Collaboration / Team Work

Collaboration is working with others to achieve shared and explicit goals.
Collaboration focuses on task or mission accomplishment and usually takes place
in a business or other organization and between businesses.

Detail on Book Page 56 - 57

Business Benefits of Collaboration
Following are the benefits of collaboration/teamwork in business:

1. Productivity
2. Quality
3. Innovation
4. Customer Service
5. Financial Performance

1. Productivity
People interacting and working together can capture expert knowledge and solve
problems more rapidly than the same number of people working in isolation from
one another. There will be fewer errors.

2. Quality
People working collaboratively can communicate errors and corrective actions
faster than if they work in isolation. Collaborative and social technologies help
reduce time delays in design and production.

3. Innovation
People working collaboratively can come up with more innovative ideas for
products, services, and administration than the same number working in isolation
from one another. There are advantages to diversity and the “wisdom of crowds.”

4. Customer Service
People working together using collaboration and social tools can solve customer
complaints and issues faster and more effectively than if they were working in
isolation from one another.

5. Financial Performance (Profitability)

As a result of all of the above, collaborative firms have superior sales, sales
growth, and financial performance.

Detail on Book Page 58 - 59

Tools and Technologies for Collaboration / Team Work

Following are the tools and technologies for collaboration:

 E-mail and Instant Messaging (IM)

 Wikis
 Virtual Worlds
 Collaboration and Social Business Platforms
 Virtual Meeting Systems
 Cloud Collaboration Services
 Microsoft SharePoint and IBM Notes
 Enterprise Social Networking Tools

 E-mail and Instant Messaging (IM)

E-mail and instant messaging (including text messaging) have been major
communication and collaboration tools for interaction jobs. Their software
operates on computers, mobile phones, tablets, and other wireless devices and
includes features for sharing files as well as transmitting messages.

 Wikis
Wikis are a type of website that makes it easy for users to contribute and edit text
content and graphics without any knowledge of web page development or
programming techniques. The most well-known wiki is Wikipedia, the largest
collaboratively edited reference project in the world.
 Virtual Worlds
Virtual worlds, such as Second Life, are online 3-D environments populated by
“residents” who have built graphical representations of themselves known as
avatars. Companies like IBM, Cisco, and Intel Corporations use the online world
for meetings, interviews, guest speaker events, and employee training.

 Collaboration and Social Business Platforms

There are now suites of software products providing multifunction platforms for
collaboration and social business among teams of employees who work together
from many different locations.
The most widely used are Internet-based audio conferencing and video
conferencing systems, cloud collaboration services such as Google’s online
services and tools, corporate collaboration systems such as Microsoft SharePoint
and IBM Notes, and enterprise social networking tools such as Salesforce
Chatter, Microsoft Yammer, Jive, Facebook Workplace, and IBM Connections.

 Virtual Meeting Systems

In an effort to reduce travel expenses and enable people in different
locations to meet and collaborate, many companies, both large and
small, are adopting videoconferencing and web conferencing
technologies.
Companies such as Heinz, GE, and PepsiCo are using virtual meeting
systems for product briefings, training courses, and strategy sessions.

 Cloud Collaboration Services

Google offers many online tools and services, and some are suitable
for collaboration. They include Google Drive, Google Docs, G Suites,
and Google Sites. Most are free of charge.
Google Drive is a file storage and synchronization service for cloud
storage, file sharing, and collaborative editing.
  Microsoft SharePoint and IBM Notes
Microsoft SharePoint is a browser-based collaboration and document
management platform, combined with a powerful search engine, that
is installed on corporate servers. SharePoint has a web-based interface
and close integration with productivity tools such as Microsoft Office.

IBM Notes (formerly Lotus Notes) is a collaborative software system

with capabilities for sharing calendars, e-mail, messaging, collective
writing and editing, shared database access, and online meetings.
Notes software installed on desktop or laptop computers obtains
applications stored on an IBM Domino server. Notes is web-enabled
and offers an application development environment so that users can
build custom applications to suit their unique needs.

 Enterprise Social Networking Tools

The tools we have just described include capabilities for supporting
social business, but there are also more specialized social tools for
this purpose, such as Salesforce Chatter, Microsoft Yammer, Jive,
Facebook Workplace, and IBM Connections. Enterprise social
networking tools create business value by connecting the members of
an organization through profiles, updates, and notifications similar to
Facebook features but tailored to internal corporate uses.

Detail on Book Page 60 - 65

Information Systems Department

The information systems department is the formal organizational unit responsible
for information technology services. The information systems department is
responsible for maintaining the hardware, software, data storage, and networks
that comprise the firm’s IT infrastructure.

The information systems department consists of specialists, such as:

1. Programmers
2. Systems Analysts
3. Project Leaders
4. Information Systems Managers

1. Programmers
Programmers are highly trained technical specialists who write the software
instructions for computers.

2. Systems Analysts
Systems analysts constitute the principal liaisons between the information
systems groups and the rest of the organization. It is the systems analyst’s job to
translate business problems and requirements into information requirements and
systems.

3. Project Leaders
A project leader is a professional who leads people and makes sure a project is
carried through. The project leader engages the team, motivating them, taking
care of their needs and maintaining a friendly and productive work environment.

4. Information Systems Managers

Information systems managers are leaders of teams of programmers and analysts,
project managers, physical facility managers, telecommunications managers, or
database specialists. They are also managers of computer operations and data
entry staff.
 Detail on Book Page 66 – 68

Chapter 3
Information Systems, Organizations, and Strategy

Organization
An organization is a stable, formal social structure that takes resources from the
environment and processes them to produce outputs.

Two-Way Relationship between Organization and Information

Technology
Information systems and organizations influence one another. Information
systems are built by managers to serve the interests of the business firm. At the
same time, the organization must be aware of and open to the influences of
information systems to benefit from new technologies.

The interaction between information technology and organizations is complex

and is influenced by many mediating factors (See Figure below), including:

 Organization’s Structure
 Business Processes
 Politics
 Culture
 Surrounding Environment
 Management Decisions
 Detail on Book Page 81 - 84

Features of Organizations
Organizational Structure
Organizational structure is the way in which an organization arranges its
employees. This enables tasks and targets to be met.
There are two types of organizational structure:

1. Centralized Structure
2. Decentralized Structure

1. Centralized Structure
A centralized structure is where business decisions are made at the top of the
business or in a head office and distributed down the chain of command.
e.g.
It is often used in retail chains. Usually, all branches will operate in the same way
and store managers will have very little input into how their individual store is
operated.

2. Decentralized Structure
A decentralized structure is where a business allows decisions to be made by
managers and subordinates further down the chain. This structure provides staff
with more decision-making responsibilities.
e.g.
Individual stores or departments may make decisions on staffing levels, which
products and services to offer for sale, and pricing.

Organizational Culture
Organizational culture is defined as the underlying beliefs, assumptions, values
and ways of interacting that contribute to the unique social and psychological
environment of an organization.
Organizational culture includes:

 Values
 Norms
 Beliefs
 Rituals

Organizational culture is a powerful unifying force that restrains political

conflict and promotes common understanding, agreement on procedures, and
common practices.
Organizational culture is a powerful restraint on change, especially
technological change. Most organizations will do almost anything to avoid
making changes in basic assumptions. Any technological change that threatens
commonly held cultural assumptions usually meets a great deal of resistance.

Organizational Environment
For any organization, the environment consists of the set of external conditions
and forces that have the potential to influence the organization.

Micro-environment refers to the environment comprising of all the elements of

an organization’s immediate environment which influences the performance of
the company, as they have a direct effect on the firm’s regular business
operations.

These elements include:

 Competitors
 Suppliers
 Customers
 Intermediaries
 Shareholders
 Employees
 Media

Macro-environment Macro environment refers to those factors which are

external forces in the company’s activities and do not concern the immediate
environment. These factors indirectly affect company’s operation and working
condition.
These factors have an effect on how all business groups operate, perform, make
decisions, and form strategies simultaneously. These factors are uncontrollable
and the company is powerless and incapable of exercising any control over them.
These factors include:

 Political
 Economic
 Socio-Cultural
 Technological
 Ecological
 Demographic

PESTLE Analysis is a framework to analyze the key factors (Political,

Economic, Sociological, Technological, Legal and Environmental) influencing
an organization from the outside.
It offers people professionals insight into the external factors impacting their
organization. The analysis is flexible, so organizations can use it in a range of
different scenarios. People professionals and senior managers can use the results
to guide strategic decision-making.

Organizational Politics
Political resistance is one of the great difficulties of bringing about
organizational change - especially the development of new information systems.
Virtually all large information systems investments by a firm that bring about
significant changes in strategy, business objectives, business processes, and
procedures become politically charged events.
Managers who know how to work with the politics of an organization will be
more successful than less-skilled managers in implementing new information
systems.

Routines and Business Processes

Routines - sometimes called standard operating procedures - are precise rules,
procedures, and practices that have been developed to cope with virtually all
expected situations. As employees learn these routines, they become highly
productive and efficient, and the firm is able to reduce its costs over time as
efficiency increases.

Business processes are collections of such routines. A business firm, in turn, is a

collection of business processes.

Detail on Book Page 84 - 89

Impact of Information Systems on Organizations

Economic Impact
From the point of view of economics, IT changes both the relative costs of
capital and the costs of information. Information systems technology can be
viewed as a factor of production that can be substituted for traditional capital and
labor. As the cost of information technology decreases, it is substituted for labor,
which historically has been a rising cost.
As the cost of information technology decreases, it also substitutes for other
forms of capital such as buildings and machinery, which remain relatively
expensive.
Information technology helps firms contract in size because it can reduce
transaction costs - the costs incurred when a firm buys on the marketplace what it
cannot make itself.
Information technology, especially the use of networks, can help firms lower the
cost of market participation (transaction costs), making it worthwhile for firms
to contract with external suppliers instead of using internal sources.
Information technology, by reducing the costs of acquiring and analyzing
information, permits organizations to reduce agency costs because it becomes
easier for managers to oversee a greater number of employees.

Organizational and Behavioral Impact

 IT Flattens Organizations
Behavioral researchers have theorized that information technology
facilitates flattening of hierarchies by broadening the distribution of
information to empower lower-level employees and increase management
efficiency.
IT pushes decision-making rights lower in the organization because lower-
level employees receive the information they need to make decisions
without supervision.
Because managers now receive so much more accurate information on
time, they become much faster at making decisions, so fewer managers are
required.
Understanding Organizational Resistance to Change
Many new information systems require changes in personal, individual routines
that can be painful for those involved and require retraining and additional
effort that may or may not be compensated.
As information systems potentially change an organization’s structure, culture,
business processes, and strategy, there is often considerable resistance to them
when they are introduced.

Organizational resistance to change is so powerful, many information technology

investments struggle and do not increase productivity. Indeed, research on
project implementation failures demonstrates that the most common reason for
failure of large projects to reach their objectives is not the failure of the
technology but organizational and political resistance to change.

The Internet and Organizations

The Internet increases the accessibility, storage, and distribution of information
and knowledge for organizations. In essence, the Internet is capable of
dramatically lowering the transaction and agency costs facing most
organizations.
e.g.
A global sales force can receive nearly instant product price information updates
using the web or instructions from management sent by e-mail or text messaging
on smartphones or mobile laptops.

Detail on Book Page 89 - 93

Using Information Systems to Achieve Competitive Advantage

Firms that “do better” than others are said to have a competitive advantage over
others: They either have access to special resources that others do not, or they are
able to use commonly available resources more efficiently - usually because of
superior knowledge and information assets.
In any event, they do better in terms of revenue growth, profitability, or
productivity growth.

 Porter’s Competitive Forces Model

Porter's Five Forces is a business analysis model and used to measure
competition intensity, attractiveness, and profitability of an industry or market.
Understanding Porter's Five Forces and how they apply to an industry, can enable
a company to adjust its business strategy to better use its resources to generate
higher earnings for its investors.

Porter's five forces are:

1. Competitive Rivalry
2. Threat of New Entrants
3. Bargaining Power of Suppliers
4. Bargaining Power of Buyers
5. Threat of Substitutes
1. Competitive Rivalry
This refers to the number of competitors and their ability to undercut a company.
The larger the number of competitors, along with the number of equivalent
products and services they offer, the lesser the power of a company. Suppliers
and buyers seek out a company's competition if they are able to offer a better deal
or lower prices.
Conversely, when competitive rivalry is low, a company has greater power to
charge higher prices and set the terms of deals to achieve higher sales and profits.

2. Threat of New Entrants

A company's power is also affected by the force of new entrants into its market.
The less time and money it costs for a competitor to enter a company's market
and be an effective competitor, the more an established company's position could
be significantly weakened.
An industry with strong barriers to entry is ideal for existing companies within
that industry since the company would be able to charge higher prices and
negotiate better terms.

3. Bargaining Power of Suppliers

This refers to how easily suppliers can drive up the cost of inputs. It is affected
by the number of suppliers of key inputs of a good or service, how unique these
inputs are, and how much it would cost a company to switch to another supplier.
The fewer suppliers to an industry, the more a company would depend on a
supplier. As a result, the supplier has more power and can drive up input costs
and push for other advantages in trade.
On the other hand, when there are many suppliers or low switching costs
between rival suppliers, a company can keep its input costs lower and enhance its
profits.

4. Bargaining Power of Buyers

The ability that customers have to drive prices lower or their level of power is
one of the five forces. It is affected by how many buyers or customers a company
has, how significant each customer is, and how much it would cost a company to
find new customers or markets for its output.
A smaller and more powerful client base means that each customer has more
power to negotiate for lower prices and better deals.
A company that has many, smaller, independent customers will have an easier
time charging higher prices to increase profitability.

5. Threat of Substitutes
Substitute goods or services that can be used in place of a company's products or
services pose a threat. Companies that produce goods or services for which there
are no close substitutes will have more power to increase prices and lock in
favorable terms.
When close substitutes are available, customers will have the option to forgo
buying a company's product, and a company's power can be weakened.

Detail on Book Page 94 - 95

Information System Strategies for Dealing with Competitive Forces

What is a firm to do when it is faced with all porter’s five competitive forces?
There are four generic strategies, each of which often is enabled by using
information technology and systems:

1. Low-Cost Leadership
2. Product Differentiation
3. Focus on Market Niche
4. Strengthening Customer and Supplier Intimacy
1. Low-Cost Leadership
Using information systems in a way that gives customers the lowest prices is the
low-cost leadership strategy. With offering lower prices than competitors, a
business can create demand for their products.
This strategy requires a business to advertise that their products are the most
affordable for the customers. Product costs and operational expenses must be
kept low in order for customers to take advantage of the savings the low-cost
leadership strategy offers. 
e.g.
Walmart, which uses a top-of-the-line supply chain management information
system to keep their costs low and, consequently, their prices low. Walmart's
system also keeps shelves stocked almost constantly, translating into high profits.
Walmart is able to keep prices in the same cheap range every day.

2. Product Differentiation
Product differentiation is a marketing process that showcases the differences
between products. Differentiation looks to make a product more attractive by
contrasting its unique qualities with other competing products.
Successful product differentiation creates a competitive advantage for the
product's seller, as customers view these products as being unique or superior. It
uses information systems to provide new products and services or greatly change
the customer convenience in using the existing products and services.
e.g.
Google continuously introduces new and unique search services, such as Google
Pay peer payments in 2014, and improvements in Google Docs and Google
Drive.

Apple has also continued to differentiate its hand-held computing products with
nearly annual introductions of new iPhone and iPad models.

3. Focus on Market Niche

A niche market is a focused, small, and target-able portion of a market. A
business that focuses on a niche is addressing a need for a product or service that
is not being addressed by mainstream providers.
A niche market uses information systems to enable a specific market focus and
serve this narrow target market better than competitors. Information systems
support this strategy by producing and analyzing data for finely tuned sales and
marketing techniques.
Information systems enable companies to analyze customer buying patterns,
tastes, and preferences closely so that they efficiently pitch advertising and
marketing campaigns to smaller target markets.

The data comes from a range of sources: credit card transactions, demographic
data, purchase data from checkout scanners at supermarkets and retail stores, and
data collected when people access and interact with websites. Sophisticated
software tools find patterns in these large pools of data and infer rules from them
that can be used to guide decision making.
e.g.
Hilton Hotels’ OnQ system analyzes detailed data collected on active guests in
all of its properties to determine the preferences of each guest and each guest’s
profitability. Hilton uses this information to give its most profitable customers
additional privileges, such as late checkouts.

4. Strengthen Customer and Supplier Intimacy

A business can also use information systems to apply the strategy of
strengthening customer and supplier intimacy. This strategy creates strong
linkage between the company and their suppliers and/or customers.
It also increases loyalty to a business and creates stronger relationships.
Customers and suppliers will feel more valued by the company as well.
e.g.
Toyota, along with other automobile companies, allows their suppliers access to
production schedules. This makes it easier for suppliers to know when to ship
parts and supplies without having to communicate back and forth about fulfilling
orders. This strategy makes the production process run smoother and faster
because the supplier can produce the goods they need and ship them to Toyota
just in time for their production of the vehicles.

Amazon uses the customer intimacy strategy. Amazon tracks their account users’
preferences and recommends certain products that customer may like based on
their recent searches and purchases. Amazon also recommends products based on
if another customer bought the same or a similar product to the user and what the
other customer purchased with it.

Detail on Book Page 96 - 100

Porter's Value Chain Model
A value chain is a set of activities that an organization carries out to create value
for its customers.
Porter proposed a general-purpose value chain that companies can use to
examine all of their activities, and see how they're connected. The way in which
value chain activities are performed determines costs and affects profits, so this
tool can help you understand the sources of value for your organization.

The value that's created and captured by a company is the profit margin:

Value Created and Captured – Cost of Creating that Value = Margin

The more value an organization creates, the more profitable it is likely to be.
When we provide more value to your customers, we build competitive
advantage.

Porter's Value Chain focuses on systems, and how inputs are changed into the
outputs purchased by consumers. Using this viewpoint, Porter described a chain
of activities common to all businesses, and he divided them into primary and
support activities, as shown below:
Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and
support of a product or service. They consist of the following:

 Inbound Logistics – These are all the processes related to receiving,

storing, and distributing inputs internally. Your supplier relationships are a
key factor in creating value here.

 Operations – These are the transformation activities that change inputs into
outputs that are sold to customers. Here, your operational systems create
value.
  Outbound Logistics – These activities deliver your product or service to
your customer. These are things like collection, storage, and distribution
systems, and they may be internal or external to your organization.

 Marketing and Sales – These are the processes you use to persuade clients
to purchase from you instead of your competitors. The benefits you offer,
and how well you communicate them, are sources of value here.

 Service – These are the activities related to maintaining the value of your
product or service to your customers, once it's been purchased.

Support Activities
These activities support the primary functions. In the above diagram, the dotted
lines show that each support, or secondary, activity can play a role in each
primary activity.
e.g.
Procurement supports operations with certain activities, but it also supports
marketing and sales with other activities.

 Procurement (Purchasing) – This is what the organization does to get the

resources it needs to operate. This includes finding vendors and negotiating
best prices.

 Technological Development – These activities relate to managing and

processing information, as well as protecting a company's knowledge base.
Minimizing information technology costs, staying current with
technological advances, and maintaining technical excellence are sources of
value creation.

 Human resource Management – This is how well a company recruits,

hires, trains, motivates, rewards, and retains its workers. People are a
 significant source of value, so businesses can create a clear advantage with
good HR practices.

 Firm Infrastructure – These are a company's support systems, and the

functions that allow it to maintain daily operations. Accounting, legal,
administrative, and general management are examples of necessary
infrastructure that businesses can use to their advantage.

Companies use these primary and support activities as building blocks to create a
valuable product or service.

Detail on Book Page 101 - 105

 Introduction to Computers by Peter Norton

Chapter 1
Introducing Computer Systems

Computer
A computer is an electronic device that processes data, converting it into
information that is useful to people.

Data
Raw facts and figures are called data.
e.g.
2+2

Information
Processed form of data is called information.
e.g.
2+2=4

Computer Language
Computers only understand binary language in the form of binary numbers
called bits and bytes.

8 bits = 1 Byte
1024 Bytes = 1 Kilobyte
1024 Kilobytes = 1 Megabyte
1024 Megabytes = 1 Gigabyte
1024 Gigabytes = 1 Terabyte

Analog Computers
Analog computers operate on the mathematical variables in the form of
continuously changeable physical quantities/entities like mechanical, electrical,
hydraulic, etc.
They use continuous values rather than discrete values so they work on analog
signal.
e.g.
Analog Clock

Digital Computers
Digital computers are the computer systems which uses the binary number
system, which has two digits: 0 and 1 and performs many computational tasks.
It processes the data represented in discrete and the main three components of
digital computers are input, processing and output.
e.g.
Digital Watch

Detail on Book PDF Page 24 - 25

Category of Computers
There are two categories of computers:

1. Computers for Individual Users

 2. Computers for Organizational Users

1. Computers for Individual Users

Most computers are meant to be used by only one person at a time. Such
computers are often shared by several people (such as those in your school’s
computer lab), but only one user can work with the machine at any given
moment.

The six primary types of computers in this category are:

i. Desktop Computers
ii. Workstations
iii. Notebook Computers
iv. Tablet Computers
v. Handheld Computers
vi. Smartphones

i. Desktop Computers
The most common type of personal computer is the desktop computer – a PC that
is designed to sit on (or under) a desk or table. These are the systems you see all
around you, in schools, homes, and offices.

ii. Workstations
A workstation is a specialized, single-user computer that typically has more
power and features than a standard desktop PC. These machines are popular
among scientists, engineers, and animator who need a system with greater than
average speed and the power to perform sophisticated tasks.

iii. Notebook Computers

Notebook computers, as their name implies, approximate the shape of an 8.5-by-
11-inch notebook and easily fit inside a briefcase. Because people frequently set
these devices on their lap, they are also called laptop computers. Notebook
computers can operate on alternating current or special batteries.

iv. Tablet Computers

The tablet PC is the newest development in portable, full-featured computers.
Tablet PCs offer all the functionality of a notebook PC, but they are lighter and
can accept input from a special pen – called a stylus or a digital pen – that is
used to tap or write directly on the screen.

v. Handheld Computers
Handheld personal computers are computing devices small enough to fit in your
hand.
A popular type of handheld computer is the personal digital assistant (PDA). A
PDA is no larger than a small appointment book and is normally used for special
applications, such as taking notes, displaying telephone numbers and addresses,
and keeping track of dates or agendas.

vi. Smartphones
Smartphones offer advanced features not typically found in cellular phones.
These features include Web and e-mail access, special software such as personal
organizers, or special hardware such as digital cameras or music players. Some
models even break in half to reveal a miniature keyboard.

2. Computers for Organizational Users

Some computers handle the needs of many users at the same time. These
powerful systems are most often used by organizations, such as businesses or
schools, and are commonly found at the heart of the organization’s network.
There are four types of computers in this category:

i. Network Servers
ii. Mainframe Computers
iii. Minicomputers
iv. Supercomputers

i. Network Servers
Today, most organizations’ networks are based on personal computers.
Individual users have their own desktop computers, which are connected to one
or more centralized computers, called network servers. A network server is
usually a powerful personal computer with special software and equipment that
enable it to function as the primary computer in the network.
PC-based networks and servers offer companies a great deal of flexibility.
e.g.
Large organizations may have dozens or hundreds of individual servers working
together at the heart of their network.

ii. Mainframe Computers

Mainframe computers are used in large organizations such as insurance
companies and banks, where many people frequently need to use the same data.
In a traditional mainframe environment, each user accesses the mainframe’s
resources through a device called a terminal.
Mainframes are large, powerful systems. They can handle the processing needs
of thousands of users at any given moment. Mainframe computers lack
flexibility because they are designed to handle only a specific set of tasks.
e.g.
Banks use mainframe computers.
iii. Minicomputers
Minicomputers got their name because of their small size compared to other
computer of the day. The capabilities of minicomputer are somewhere between
those of mainframes and personal computer. For this reason, minicomputers are
often called midrange computers.
Minicomputers can handle the processing needs of hundreds of users at a time.

iv. Supercomputers
Supercomputers are the most powerful computers made, and physically they are
one of the largest computers. These systems can process huge amounts of data,
and the fastest supercomputers can perform more than one trillion calculations
per second.
Some supercomputers can house thousands of processors. They are designed to
handle highly complex problems that require extreme calculating power.
e.g.
Supercomputers have long been used in forecasting weather and modeling
complex processes like nuclear fission.

Detail on Book PDF Page 26 - 32

Computer vs Computer System

A computer is an electronic device that can perform sequential operations by
logical and arithmetic calculations.

It has two components:

i. Software
ii. Hardware
A computer system specifically describes the set of hardware (devices) and
software (programs/applications) that join together to perform a computational
task.

It has four components:

i. Software
ii. Hardware
iii. User
iv. Data

Software
Software is a set of instructions the makes the computer perform tasks. In other
words, software tells the computer what to do.

Types of Software
There are two types of software:

1. System Software
2. Application Software

1. System Software
System software is any program that controls the computer’s hardware or that
can be used to maintain the computer in some way so that it runs more
efficiently.
There are three basic types of system software:

i. Operating Systems
ii. Network Operating Systems
iii. Utility Programs

i. Operating Systems
An operating system tells the computer how to use its own components. OS acts
as an interpreter between the hardware, application programs, and the user.
e.g.
Operating systems include Windows, the Macintosh OS, and Linux.

ii. Network Operating Systems

A network operating system allows computers to communicate and share data
across a network while controlling network operations and overseeing the
network’s security.

iii. Utility Programs

A utility is a program that makes the computer system easier to use or performs
highly specialized functions. Utilities are used to manage disks, troubleshoot
hardware problems, and perform other tasks that the operating systems itself may
not be able to do.

2. Application Software
Application software tells the computers how to accomplish specific tasks, such
as word processing or drawing, for the user. Thousands of applications are
available for many purposes and for people of all ages.
e.g.
Word processing software, Database management software, Graphics programs,
Multimedia applications etc.

Detail on Book PDF Page 53 – 55

Essentials of Computer Hardware

A computer’s hardware devices fall into one of four categories:

1. Processor
2. Memory
3. Storage Devices
4. Input and Output Devices

1. Processor
A central processing unit (CPU), or just processor, is the electronic circuitry that
executes instructions comprising a computer program.
The CPU performs basic arithmetic, logic, controlling, and input/output (I/O)
operations specified by the instructions in the program.

2. Memory
Memory is one or more sets of chips that store data and program instructions,
either temporarily or permanently.

Following are three types of memory used in computer:

 i. RAM
ii. ROM
iii. Cache Memory

i. RAM (Random Access Memory)

Random Access Memory is a type of memory which is both readable and
writeable, it is referred to as 'random access' as all the stored data words can be
read equally quickly.
Unlike ROM, RAM is a type of volatile memory. This means that the data stored
in its memory is lost when the power to it is switched off.
e.g.
DDR4 (2400MHz)

ii. ROM (Read-Only Memory)

Read Only Memory is the simpler of the two major memory types. It is a type of
memory which is readable only. In other words - you cannot continually write
new data to the memory - the information it contains is fixed before operation.
This type of memory is also referred to as 'non-volatile', as it retains its data after
it is powered off.
e.g.
BIOS software is stored in an Electrically Erasable and Programmable ROM
(EEPROM)

iii. Cache Memory

Cache memory is a chip-based computer component that makes retrieving data
from the computer's memory more efficient. It acts as a temporary storage area
that the computer's processor can retrieve data from easily. This temporary
storage area, known as a cache, is more readily available to the processor than
the computer's main memory source called RAM.
3. Storage Devices
A storage device is any type of computing hardware that is used for storing or
extracting data files and objects. Storage devices can hold and store information
permanently.

There are two types of storage devices:

i. Magnetic Disk
ii. Optical Disk

i. Magnetic Disk
A magnetic disk is a storage device that uses a magnetization process to read,
write, rewrite and access data. The Magnetic disk is made of a set of circular
platters. It is covered with a magnetic coating and stores data in the form of
tracks, spots, and sectors.
e.g.
Hard disks and floppy disks

ii. Optical Disk

An optical disk is any computer disk that uses optical storage techniques and
technology to read and write data. It is a storage device in which optical LASER
(Light Amplification by Stimulated Emission of Radiation) energy is used. It is a
computer storage disk that stores data digitally and uses laser beams to read and
write data.
e.g.
CD, DVD, and Blu-ray Disk

4. Input and Output Devices

An input device sends information to a computer system for processing.
e.g.
Keyboard, mouse, microphone, scanner

An output device reproduces or displays the results of that processing.

e.g.
Monitor, speaker, and printer

Detail on Book PDF Page 48 – 53

 Chapter 2
Interacting with your Computer

Types of Input Devices

Types of input devices include:

i. Keyboard
ii. Mouse

i. Keyboard
The keyboard was one of the first peripherals to be used with computers, and it is
still the primary input device for entering text and numbers. A standard
keyboard includes about 104 keys; each key sends a different signal to the CPU.

Standard Keyboard Layout

The layout of a standard keyboard consists of following types of keys:

 Alphanumeric Keys
The alphanumeric keys - the area of the keyboard that looks like a typewriter's
keys - are arranged the same way on almost every keyboard. Sometimes this
common arrangement is called the QWERTY (pronounced QWERTY) layout
because the first six keys on the top row of letters are Q, W, E, R, T, and Y.

 Modifier Keys
The SHIFT, ALT (Alternate), and CTRL (Control) keys are called modifier keys
because they modify the input of other keys.
 Numeric Keypad
The numeric keypad is usually located on the right side of the keyboard. The
numeric keypad looks like a calculator's keypad, with its 10 digits and
mathematical operators (+, -, *, and /).

 Function Keys
The function keys, which are labeled F l, F2, up to F12, are usually arranged in
a row along the top of the keyboard. They allow you to input commands without
typing long strings of characters or navigating menus or dialog boxes.

 Cursor-Movement Keys
Most standard keyboards also include a set of cursor-movement keys, which let
you move cursor around the screen without using a mouse.

 Special-Purpose Keys
In addition to the five groups of keys described earlier, all keyboards feature
eight special-purpose keys, each of which performs a unique function. They
include Insert, Home, Page up, Delete, End, Page down, Start, and Menu keys.

How the Computer Accepts Input from the Keyboard

When you press a key, a tiny chip called the keyboard controller notes that a key
has been pressed. The keyboard controller places a code into pan of its memory.
called the keyboard buffer, to indicate which key was pressed. (A buffer is a
temporary storage area that holds data until it can be processed.)
The keyboard controller then sends a signal to the computer's system software,
notifying it that something has happened at the keyboard. When the system
software receives the signal, it determines the appropriate response.
When a keystroke has occurred, the system reads the memory location in the
keyboard buffer that contains the code of the key that was pressed. The system
software then passes that code to the CPU.
Non-Maskable Interrupt (NMI)
A non-maskable interrupt (NMI) is a type of hardware interrupt (or signal to the
processor) that prioritizes a certain thread or process. Unlike other types of
interrupts, the non-maskable interrupt cannot be ignored through the use of
interrupt masking techniques.
e.g.
Shutdown and Restart command.

ii. Mouse
A computer mouse is a handheld hardware input device that controls a cursor in
a GUI (graphical user interface) and can move and select text, icons, files, and
folders on your computer.

There are two types of computer mouse:

 Mechanical Mouse
Mechanical mouse is a device integrated with an internal metal or rubber ball,
which can spin in all directions (left, right, up and down). Thus, the display
cursor moves as the mouse detects the direction.
The ball in the mechanical mouse spins when it comes in contact with surface on
which it is placed.

 Optical Mouse
A mouse that uses light (LED) to detect movement is called optical mouse. They
work by emitting light from an LED or laser, and a CMOS sensor detects the
light reflections as the mouse is moved.

Variants of Mouse
Following are some variants of mouse:

 Trackball
A trackball is an input device used to enter motion data into computers or other
electronic devices. It serves the same purpose as a mouse, but is designed with a
moveable ball on the top, which can be rolled in any direction. Instead of
moving the whole device, you simply roll the moveable ball on top of the
trackball unit with your hand to generate motion input.

 Trackpad
A trackpad or "touchpad" is a flat control surface used to move the cursor and
perform other functions on a computer. Touchpads are commonly found on
laptops and replace the functionality of a mouse.
 Pointing Stick in the Keyboard
A pointing stick is a pointing device that looks like a pencil eraser between the
G, H and B keys on laptop keyboard.
The pointing stick moves and manipulates the computer cursor like a joystick.
Its height is designed to be slightly above the keys. If a laptop does not have the
proper space for a touchpad, a pointing stick is a useful alternative.

Detail on Book PDF Page 71 – 80

Other Input Devices

Following are some other input devices for computer:

i. Light Pen
ii. Touch Screen
iii. Game Controller
iv. Bar Code Reader
v. Image Scanner and Optical Character Recognition (OCR)

i. Light Pen
Light Pen (similar to the pen) is a pointing device which is used to select a
displayed menu item or draw pictures on the monitor screen. It consists of a
photocell and an optical system placed in a small tube. When its tip is moved
over the monitor screen, and pen button is pressed, its photocell sensing element
detects the screen location and sends the corresponding signals to the CPU.

ii. Touch Screen

A touch screen is a display device that allows the user to interact with a
computer using their finger or stylus. They're a useful alternative to a mouse or
keyboard for navigating a GUI (graphical user interface). Touch screens are used
on a variety of devices, such as a computer and laptop display, smartphones,
tablets, cash registers, and information kiosks.

iii. Game Controller

A game controller is an input device used with video games or entertainment
systems to provide input to a video game, typically to control an object or
character in the game.

iv. Bar Code Reader

A bar code reader (or bar code scanner) is an optical scanner that can read
printed barcodes, decode the data contained in the barcode and send the data to a
computer. Like a flatbed scanner, it consists of a light source, a lens and a light
sensor translating for optical impulses into electrical signals.

v. Image Scanner and Optical Character Recognition (OCR)

An image scanner - often abbreviated to just scanner, is a device that optically
scans images, printed text, handwriting or an object and converts it to a digital
image.

Optical character recognition or optical character reader (OCR) is the electronic

or mechanical conversion of images of typed, handwritten or printed text into
machine-encoded text, whether from a scanned document, a photo of a
document, a scene-photo (for example the text on signs and billboards in a
landscape photo) or from subtitle text superimposed on an image (for example:
from a television broadcast).

Detail on Book PDF Page 90 – 94