Business Information Systems and Technology

A Primer

Brian Lehaney,Phil Lovett,Mahmood Shah

• Publisher: Routledge
• Year: 2011
• ISBN:
  9781136736339
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión de la información

Business information systems and business information technology are integral aspects of modern business, and managers in these areas are now expected to have knowledge of human and managerial issues, as well as technical ones.

This concise and readable book is a level-by-level primer that addresses the core subjects in business information systems and business information technology to enhance students' understanding of the key areas. Each chapter begins with a case study and features at the end: a summary of major points, glossary of terms, suggested further reading and student activities. Some areas covered include:

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• Different functional areas of business, including accounting, HRM and marketing

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• Development and implementation of information systems

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• Methods to support the analysis and design of policy and practice

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• Strategic management to align information technology with organizational needs

Covering the subject matter in a highly accessible manner, this is an ideal text for both undergraduate and masters students on business information systems, business information technology and business information management courses.

This text is supplemented with over 900 detailed powerpoint slides for instructors, accessible via the Routledge Instructor Resource page at http://cw.routledge.com/textbooks/instructordownload/

1 Introduction

Case study 1.1 K-Mart and Wal-Mart

This case study has been included by the authors to facilitate class discussion rather than to illustrate effective or ineffective management practices. Only publicly available material has been used to write this case study, and it does not reflect any opinions of employees or management at the organizations mentioned.

In 2010 the three largest discount stores in the USA were K-Mart, Target and Wal-Mart. Target has tried to differentiate from the other two by offering what it considers to be more stylish, upmarket goods. This case study therefore focuses on K-Mart and Wal-Mart.

Both K-Mart and Wal-Mart developed from other-named ‘five and dime’ stores and both first opened in 1962. During the 1970s K-Mart put a number of competing retailers out of business and was highly successful. By 1987 K-Mart had 2,223 stores and Wal-Mart had 1,198 stores. K-Mart’s sales were $25.63 billion, while Wal-Mart’s were $15.96 billion. With around half the number of K-Mart’s stores, Wal-Mart was achieving more than half of K-Mart’s sales.

By 1991 Wal-Mart’s sales exceeded those of K-Mart, but K-Mart still had more stores. In the year ending January 1996, Wal-Mart’s sales were $93.6 billion and K-Mart’s were $34.6 billion. From 1987 to 1995 K-Mart’s market share declined from 34.5 per cent to 22.7 per cent, while Wal-Mart’s market share increased from 20.1 per cent to 41.6 per cent. By 2002 K-Mart wanted to sell 250 unprofitable stores and install a new information technology (IT) system, but it was too late. Before these things could happen, K-Mart was declared bankrupt.

During this time, Wal-Mart had been investing millions of dollars in its operations to lower cost. It developed a sophisticated system that integrated its IT with its distribution management. K-Mart’s employees lacked the skills needed to plan and control inventory, but Wal-Mart had invested in the staff development needed to implement the new systems.

Poor supply-chain management appears to have contributed significantly to the downturn in K-Mart’s market share and profitability. Wal-Mart had almost no supply storage areas because it had developed a vendor-managed inventory system, with suppliers responsible for delivering products. By contrast, it was reported that at K-Mart it was not uncommon for suppliers’ representatives to find shelves empty of their company’s goods, but their products piled up in stockrooms. Although K-Mart had invested in IT, it happened too late.

Over the 2001 Christmas period Wal-Mart saw a substantial increase in sales over the same period in the previous year. K-Mart’s Christmas sales were less than they had been for the same period in 2000.

IT systems are very much connected to the success and failure of the supply-chain management of the two companies. During the 1970s–1980s K-Mart lagged behind Wal-Mart on the adoption of several new aspects of retail technology, including back-end computers for individual stores, electronic cash registers and scanners that could read barcodes. In 1973 Wal-Mart had computers in 22 of its 64 stores and went on to ensure every store was IT-equipped.

K-Mart had computers in every store by 1982, but sales data was not current as the company did not have scanning cash registers. Wal-Mart’s scanning cash registers fed updates to store computers, which enabled sales and inventory figures to be adjusted in real time. This was of major importance to supply-chain management, as Wal-Mart’s store managers could place replenishment orders virtually as sales were occurring. Wal-Mart was replacing items in 2–3 days, while K-Mart was taking 21 days for replenishment. Wal-Mart positioned itself as a modern low-cost discount store, offering good service and efficient supply-chain management (which helped to keep prices down).

Many K-Mart stores were older than Wal-Mart’s and were located in less attractive areas. This made K-Mart’s stores less appealing to shoppers and also made deliveries to stores more difficult. K-Mart was still competing on price, but with higher costs than those of Wal-Mart. K-Mart did not achieve the marketing appeal or the economies of scale achieved by Wal-Mart. Even if K-Mart had caught up and achieved these things before bankruptcy, Wal-Mart, as the first mover, would have been likely to retain many of its customers. In other words, K-Mart had the huge task of trying to catch up with Wal-Mart, and would also have had to offer something extra (such as price reduction or increased quality) to entice customers away from Wal-Mart.

Prior to bankruptcy there had already been concerns about K-Mart’s cash flow, with a reported $400 million in cash and $3.8 billion in debt. Following its poor 2001 Christmas sales, K-Mart’s fourth-quarter earnings were projected to drop to 20¢ per share, down from an original estimate of 43¢ per share. This was particularly worrying, as winter is traditionally a retailer’s best season. A major knock-on effect was that K-Mart had to offer its fourth-quarter excess stock at deeply discounted prices. Normally, retailers use credit to buy stock for the fourth quarter and they use the proceeds from sales to pay for those purchases in January. In K-Mart’s case, this simply was not possible for 2001–2002.

K-Mart did not compete with Wal-Mart in producing clear strategy and operational management to implement that strategy. On 22 January 2002, K-Mart filed for bankruptcy. It had failed to manage properly its supply chain, IT, marketing and cash flow. It also retained too many stores in unprofitable locations. Understanding its business, its management and the IT needed to make it succeed were key factors in Wal-Mart’s success.

1.1 Intended learning outcomes

On completion of this book the reader should be able to:

1 evaluate the operational and strategic roles of information systems and information technologies in organizations;

2 analyse cases of information systems and information technology implementation;

3 using business, organizational and technological bases, present critical arguments for the use of information systems and information technology in organizations;

4 evaluate different approaches to learning and choose appropriate actions.

1.2 Don’t panic!

If you are reading this as a first-year undergraduate or someone who is just starting an MBA, you may be rather concerned that you would be asked to act as a consultant for such a huge project. Don’t panic! That is very unlikely to happen – yet. Hopefully, something like this will happen during your career and this book aims to provide relevant subject material in all the appropriate background areas. Each chapter is accompanied by a case study, a glossary, some exercises, references and suggested further reading. You will find that the case studies help to put the material in an understandable applied context. Read the case study before reading the chapter, then read it again afterwards and you should find that you view it differently the second time around. Look at the case study and the chapter material in light of the intended learning outcomes. Also look at the intended learning outcomes of the modules you are studying. It is against these you will be assessed.

The book is not a quick-guide to becoming a consultant, as that comes with experience and training. It covers a range of subject areas that are to be found in many programmes of study that focus on business information systems. It also covers much of the material found on most MBA programmes and masters degrees in management. It is not a substitute for specialist texts, but it does provide a one-stop guide to most subjects you will come across in these areas. Your particular programme of study may not cover everything in this book, and you may cover topics in a slightly different order from that presented here. You should still find the contents of this text to be invaluable to your study.

1.3 Chapters

The chapters are split into three main groups that coincide with typical subject splits on business information systems degrees. MBA students will find they can dip in and out of these to suit their purposes. You will find that chapters overlap. This is because the issues are not isolated, as they may be considered from different perspectives. This is very important when the time comes for you to produce a dissertation or project. At that stage you will find that academic staff are very keen on integration, and first-class dissertations pull together subject material from more than one subject area.

‘Management and organizations’ is concerned with what managers do, management decisions and organizational functions and structures. ‘Introduction to information systems’ covers the nature and scope of information systems, business information technology and business information systems, types of information system, procurement and development. ‘Applied information technology’ includes the importance of IT, hardware and software. ‘E-commerce 1’ covers the Internet, electronic commerce and barriers to electronic commerce. ‘Quantitative methods’ provides a review of some of the basics, descriptive statistics, charts and graphs and simple inference, including trends, moving averages and seasonal adjustments. ‘Accounting and finance’ covers organizational types, sources of funds, financial accounting and management accounting.

‘Database management’ introduces relational databases and fundamental concepts such as normalization, data manipulation and database administration. ‘E-commerce 2’ covers some of the common e-commerce systems and technologies and gives an introduction to data warehousing and knowledge management. ‘Organizational behaviour’ covers organizational culture and development, change management, teams and human resource management. ‘Systems analysis and design’ covers information systems development, systems lifecycles and information systems methodologies. ‘Data warehousing and business intelligence’ discusses the main features of data warehousing, some benefits and drawbacks associated with its implementation, business intelligence, some common terms used, and why business intelligence is considered to be important in competitive environments.

‘Strategy and information systems’ provides an overview of strategy, some well-known approaches such as the five-forces model, and specific information system strategies. ‘Project management’ offers an overview of planning, criteria, methodologies, tools and risk. ‘The digital society’ is concerned with how individuals and groups relate to technology, and includes computer crime, credit card fraud, ethics, IT law and employment. ‘E-commerce 3’ covers strategy development, customer service, security, trust, e-marketing, channel integration, media, technological infrastructure, change, ethics and human resource management. Knowledge management is about how to facilitate explicitly and specifically the creation, retention, sharing, identification, acquisition, utilization and measurement of information and new ideas. ‘The project’ covers selecting a topic, you and your supervisor, research methods, academic writing and referencing, and ethical, legal and professional issues. The chapter on final thoughts includes some important topics that have not been covered elsewhere in the book.

1.4 Your study

Typically, programmes of study in the business information systems and technology domain are divided into modules. At your place of study ‘programmes of study’ (programmes) might be called ‘courses’. ‘Modules’ might be called ‘courses’ or ‘units’. These are just examples, and other terms may be used. Essentially, the programme of study is the complete set of everything that comprises your degree. A module is an individual component within that. Typical modules are ‘Introduction to Information Systems’ and ‘Database Management’. Normally, an honours degree in the United Kingdom comprises 360 credits. This usually works out to 120 credits per year, and equates to six 20-credit modules per year. Programmes may vary.

A standard working week in many jobs is 35–40 hours. Full-time degree study typically involves around 12 contact hours (scheduled teaching sessions) per week. It is not accidental that those students who do just the contact time do not perform particularly well. Those who put in 12 hours per week of their own time, in addition to scheduled sessions, do a lot better. Those who do the equivalent of a full working week (say 36 hours) tend to do best. In other words, the best students do two hours of preparation and reflection for each taught hour. They participate and practice. A really good way of helping to do this is by using a diary and scheduling your non-contact study time. For this to work you have to treat that schedule very seriously. One day you will want a reference from a lecturer – get a good reputation and make it easy for them to write positive things about you. Turn up on time, participate properly and show that you are a serious student.

Teaching is usually by a mix of lectures, seminars (tutorials) and workshops (labs). The best way to get the most from your studies is by participation, practice, preparation and reflection. To participate properly you have to prepare. To get the most from any taught session you have to reflect on what went on and try to understand the concepts. Going to sessions unprepared will not help you to gain a good degree. In other words, you need to work hard. Knowledge is not imparted via osmosis by standing next to someone in the student bar that has been to the lecture you did not attend!

A lecture would normally be delivered to everyone taking the module, unless there are too many students to fit into one session. In such a case the lecture would be repeated in the same week the first one was delivered. Most lecturers now use Microsoft PowerPoint slides. Each lecture is normally for a nominal one hour, but time has to be allowed for lecturers and students to move from one place to another, so each lecture may be 50 minutes in practice. Lectures tend not to be interactive and usually involve the lecturer providing the main ‘skeleton’ of the subject. Questions tend to be limited to clarification. To put the ‘flesh’ on this skeleton requires you to read and take notes. Even if you have copies of the PowerPoint slides, make your own notes to aid understanding. Read before the lecture. Read after the lecture. Make notes before, during and after the lecture.

Your module should have a reading list. Use that as a start, but do not be afraid to ‘read around the subject’ by looking at other material. In your first year you will probably find that textbooks give you almost all you need. These may be supplemented by case studies, simple journal papers, articles from newspapers, and so on. In your final year you should read journal papers – these should be the main source of references for your dissertation. A dissertation is sometimes called a project. This is a piece of final-year independent work, sometimes based on a job placement, which is usually just before the final year. The dissertation is normally at least a double module, but may be as large as four modules. Chapter 18 offers more information on this subject. It is a good idea to read that chapter after you have read this one. Read it again and again. Students who get a first-class dissertation grade (70 per cent or more) often get a first-class degree. Students who get a poor dissertation grade never get a first-class degree. What grade of degree would you like to get?

Seminars are sometimes called tutorials or workshops. The number of students in a seminar varies. It could be six; it could be 40. Commonly, it is around 20 students. A seminar is usually much more interactive than a lecture. In a lecture, you try to gain knowledge of the subject from the material delivered by the lecturer. You use the generic learning skills you have. In a seminar, you also use your learning skills. In addition, you need to demonstrate your subject knowledge and skills. It often requires prior reading and other preparation. It also often involves students discussing the outcomes of investigations. Sometimes lecturers will ask students to work in a small group for a particular exercise. In advance of attending a seminar, think: what do you want from it? How should you prepare? After a seminar, think about what you have gained from it and any additional work you could do to enhance your knowledge and skills.

The term ‘workshop’ is used here to mean a scheduled contact session that involves using a computer. Workshops are sometimes called ‘labs’. As an example, you may use a spreadsheet for forecasting or budgeting in your contact sessions. Again, participation, practice, preparation and reflection are key elem...