System: Knowledge Management and Information Systems

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Management Information Systems


Chapter 2

Managing the Digital Firm

Kenneth C. Laudon

Jane P. Laudon

9th edition


Prentice Hall


After reading this chapter, you will be able to:
1. Evaluate the role played by the major types of systems in a business and their relationship to each other. 2. Describe the information systems supporting the major business functions: sales and marketing, manufacturing and production, finance and accounting, and human resources. 3. Analyze the relationship between organizations, information systems, and business processes. 4. Explain how enterprise applications promote business process integration and improve organizational performance. 5. Assess the challenges posed by information systems in the enterprise and management solutions.  

Discussion Questions:
1. How can a transaction processing system help an organization's strategic-level planning?

2. Which of the four major types of information systems do you think is the most valuable to an organization? Explain your choice.

3. Discuss the benefits and challenges of enterprise systems and explain why a firm would want to build one.

4. Discuss how Customer Relationship Management systems can improve a digital firm’s information and data.

Chapter 2 Information Systems in the Enterprise

As we discussed in Chapter 1, the "digital firm" means more than just plunking or putting down computers that have all the latest bells and whistles (technology) on every employee’s desk. The digital firm must connect each functional area and each management level to one another. Data input to the system in manufacturing must be made available to sales, accounting, and shipping. Managers in the human resources department must have access to appropriate information regardless of its origin. Information integration is the key to the digital firm. As we go through this chapter, we'll look at the types of information systems organizations use at each management level. To help distinguish between the type of function each one is designed to accomplish and to fit them all together, we're going to look at them in the context of manufacturing candy bars. Yes, candy bars. Everyone likes them and everyone has eaten one, so they will be easy to relate to. We'll call the company WorldWide Candy and we'll give the candy bar the timely name of "Cybernuts." 2.1 Major Types of Systems in Organizations

You'll see at the end of this discussion the integral role each type of system plays — from determining which kind of candy bar to make (strategic level systems); to how many people the company will need to make the candy bar (management level systems); to tracking customer orders (operational level systems). Within these three levels we'll discuss the four major types of systems typically used to make an organization successful. [pic]

Transaction Processing Systems

The operational level of the organization includes the various units listed in Figure 2.2 and is responsible for daily operations. The information systems used in this level of the organization are transaction processing systems (TPS), so-called because they record the daily routine transactions that take place in everyday operations. TPS combine data in various ways to fulfill the hundreds of information needs a company requires to be successful. The data are very detailed at this level. For instance, a TPS will record how many pounds of sugar are used in making our Cybernuts candy bar. It also records the time it takes from beginning to end to make the candy bar. And it can record the number of people working on the assembly line when our candy bar is made and what functions they perform. People using transaction processing systems usually need information to help them answer routine questions such as: "How many Cybernuts candy bars did we produce yesterday?" or...
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