12/18/2025

 

Samuel Clifford

 

Source: Laudon, Kenneth C., and Jane P. Laudon. “Management Information Systems: Managing the Digital Firm”. 17th ed., Pearson, 2021.

 

This article goes over chapter 1 “Information Systems in Global Business Today” from Kenneth C. Laudon and Jane P. Laudon’s book, Management Information Systems: Managing the Digital Firm. The terms and definitions they give in their book are provided here. In this article some real-life examples are given to help improve the reader’s familiarity with the terms.

 

Chapter 1 Information Systems in Global Business Today”

 

-Information Technology (IT): all the hardware and software that a firm needs to use in order to achieve its business objectives. Examples include computer machines, storage devices, handheld mobile devices, software (such as Windows) and many thousands of computer programs. 

 

Real Life Example: A retail chain like Walmart relies on handheld scanners and inventory software to track stock in real time, reducing waste and ensuring shelves are stocked.

 

-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. They may also help managers and workers analyze problems, visualize complex subjects, and create new products. Information Systems contain information about significant people, places, and things within the organization or in the environment surrounding it.

 

Real Life Example: Hospitals use electronic health record systems to store patient data, process lab results, and distribute information to doctors for decision-making.

 

-Information: data that has been shaped into a form that is meaningful and useful to human beings.

 

Real Life Example: Raw sales numbers from Walmart that, when put on a chart or graph, tell a story. 

 

-Data: streams of raw facts representing events occurring in organizations or the physical environment before they have been organized into a form that people can understand and use. 

 

Real Life Example: A list of customer clicks on a website is raw data; once analyzed, it becomes insight into buying behavior.

 

Three activities in an information system produce the information that organizations need to make decisions, control operations, analyze problems, and create new products or services:

 

• Input: captures or collects raw data from within the organization or from its external environment

• Processing: converts this raw input into a meaningful form

• Output: transfers the processed information to the people who will use it or to the activities for which it will be used.

 

-Feedback: output that is returned to appropriate members of the organization to help them evaluate or correct the input stage.

 

Real Life Example: Netflix gathers viewing data (input), processes it into recommendations (processing), shows them to users (output), and then adjusts based on what users actually watch (feedback).

 

-Information Systems Literacy: a broader understanding of the management and organizational dimensions of systems as well as the technical dimensions of systems

 

-Computer Literacy: focuses primarily on knowledge of information technology

 

-Management Information Systems (MIS): deals with behavioral issues as well as technical issues surrounding the development, use, and impact of information systems used by managers and employees in the firm

 

The Three Dimensions of Information Systems:

 

Organizations

 

Information Systems are an integral part of organizations as, for some companies, there would be no business without an information system. The key elements of an organization are its people, structure, business processes, politics, and culture. Organizations have a hierarchical structure that is composed of different levels and specialities (division of labor). The upper levels of the hierarchy consist of managerial, professional, and technical employees, whereas the lower levels consist of operational personnel.

 

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

 

-Middle Management: carries out the programs and plans of senior management

 

-Operational Management: responsible for monitoring the daily operations of the business

 

-Knowledge Workers: design products or services and create new knowledge for the firm (think engineers, scientists, and architects)

 

-Data Workers: assist with scheduling and communications at all levels of the firm (think secretaries and clerks)

 

-Production or Service Workers: actually produce the product or deliver the service

 

-Business Functions: or specialized tasks performed by business organizations, consisting of sales and marketing, manufacturing and production, finance and accounting, and human resources. 

 

-Culture: Each organization has a unique culture, or fundamental set of assumptions, values, and ways of doing things, that has been accepted by most of its members. 

 

Real Life Example: Apple’s organizational culture emphasizes design and innovation, which shapes how its IS are used to develop new products.

 

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. They must also create new products and services and even re-create the organization from time to time. Information technology can play a powerful role in helping managers design and deliver new products and services and redirecting and redesigning their organizations. 

 

Information Technology

 

-Computer Hardware: the physical equipment used for input, processing, and output activities in an information system. It consists of computers of various sizes and shapes; various input, output, and storage devices; and telecommunications devices that link computers together

 

-Computer Software: consists of the detailed, pre programmed instructions that control and coordinate the computer hardware components in an information system

 

-Data Management Technology: consists of the software governing the organization of data on physical storage media

 

-Networking and Telecommunications Technology: consists of both physical devices and software. It links the various pieces of hardware and transfers data from one physical location to another

 

-Network: links two or more computers to share data or resources, such as a printer

 

-Internet: world’s largest and most widely used network. The Internet is a global “network of networks” that uses universal standards

 

-Intranets: Internal corporate networks based on Internet technology

 

-Extranets: private intranets extended to authorized users outside the organization. Firms use such networks to coordinate their activities with other firms for making purchases, collaborating on design, and other interorganizational work. 

 

-World Wide Web: a service provided by the Internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a page format on the Internet. 

 

-Information Technology (IT) Infrastructure: all of these technologies and the people required to run and manage them represent resources that can be shared throughout the organization 

 

This infrastructure provides the foundation, or platform, on which the firm can build its specific information systems. 

 

-The decision to build or maintain an information system assumes that the returns on this investment will be superior to other investments in buildings, machines, or other assets. These returns will be expressed in productivity or long-term strategic position of the firm in certain markets.

 

-Information systems enable a firm to increase its revenue or decrease its costs by providing information that helps managers make better decisions or that improves execution of business processes. 

 

-Information Value Chain: raw information is systematically acquired and then transformed through various stages that add value to that information

 

Why Do Some Firms Receive More or Less Return from an Information System with Equal Investment?

 

Information technology cannot make organizations and managers more effective unless they are accompanied by supportive values, structures, and behavior patterns in the organization and other complementary assets.

 

-Complementary Assets: assets required to derive value from a primary investment. An example would be automobiles in which their value requires complementary assets of highways, roads, gasoline stations, and repair facilities. In the business world complementary assets may be new business models, new business processes, management behavior, organizational culture, or training. 

 

-Organizational and Management Capital: investments in organization and management such as new business processes, management behavior, organizational culture, or training. 

 

-Sociotechnical View of Information Systems: in this view, optimal organizational performance is achieved by jointly optimizing both the social and technical systems used in production.