Chapter 1:
1.1. How are information systems transforming business, and why are they so
essential for running and managing a business today?
• Describe how information systems have changed the way businesses operate and
their products and services.
Social behavior and business practices have changed as a result of technological
advancements and new, creative company models. Smartphones, social networking, texting,
e-mailing, and webinars have all evolved into crucial business tools to keep managers,
workers, customers, suppliers, and business partners connected. Information technology is
being used by businesses to detect and adapt to fast-changing client demand, get rid of
excess inventory, and increase operational efficiency. The supply chain speeds up as just-in-
time inventory is used to lower overhead expenses for businesses. E-commerce is altering
how companies attract and retain customers.
• Identify three major new information system trends.
The development of mobile digital platform; service online software, and cloud computing.
• Describe the characteristics of a digital firm.
A digital firm is one where almost all the organization's key business contacts with clients,
partners, and staff are enabled and mediated digitally. Business relies entirely on the
internet. In digital organizations, the essential company assets (intellectual property, core
competencies, financial resources, and human resources) are always accessible whenever
and wherever they are needed. They adapt fast to their surroundings and can endure
stressful situations. Furthermore, digital enterprises must follow the time and space changing
regulations. Time shifting is the practice of conducting business constantly rather than only
during the defined hours of the workday. The capacity to conduct commercial activities
anywhere on the globe without being restricted to a single physical location is referred to as space shifting.
• Describe the challenges and opportunities of globalization in a “flattened” world.
Most enterprises, both in developed and developing nations, profit from international trade,
which includes imports and exports. Customers are no longer required to purchase goods
and services from neighborhood businesses. They can almost get whatever they want online
and have it delivered to their houses at any time. Virtual businesses can be run by
companies from any place in the globe. Jobs may shift across the state or across the world
with equal ease. High-level talents that cannot be outsourced must be continuously
developed by employees through education and on-the-job training. Markets for products
and services that can be produced considerably more cheaply overseas must be avoided by
business. The expenses of running and conducting business on a worldwide scale have
been significantly decreased as a result of the Internet's development into a fully-fledged
international communications infrastructure.
• List and describe six reasons why information systems are so important for business today.
Entire sectors of the economy are nearly inconceivable without substantial investment in
information systems. There is a growing interdependence between a firm’s ability to use
information technology and its ability to implement corporate strategies and achieve
corporate goals. Specifically, the company invests heavily in information systems to achieve
six strategic business objectives: operational excellence, new products, services, and
business models, customer and supplier intimacy, improved decision-making, competitive advantage, and survival. Operational excellence
Businesses constantly strive to increase the efficiency of their operations to achieve higher
profitability. Information systems and technologies are some of the most important tools
available to managers for achieving higher levels of efficiency and productivity in business
operations, especially when coupled with changes in business practices and management behavior. e.g: Walmart
New products, services, and business models
Technologies and information systems are a key enabler for businesses to develop goods
and services as well as completely new business models. This business model explains how
a corporation develops, distributes, and markets items to generate revenue. e.g: Apple Customer and supplier intimacy
Devotion to customer services typically leads to the return of the customers. They are
intending to purchase more products resulting in an increase in sales and profitability. e.g:
The more a business engages its suppliers, the better the suppliers can provide vital input.
As a result, costs are reduced. e.g: face mask in Covid-19 Improved decision making
In recent years, information technology has used real-time data from the market to minimize
over- or underproduction, resource misallocation, and even slow reaction times. e.g: Competitive advantage
The combination of doing things better than your rivals, pricing less for superior products,
and reacting to clients and suppliers immediately results in increased sales and profits that
your rivals are unable to compete with. e.g: Survival
Business firms need to invest in information technologies as necessities of doing business.
Sometimes these necessities are driven by industry-level changes such as the improvement
in machine innovation of Citibank and the governmental regulations requiring record- keeping.
1-2 What is an information system? How does it work? What are its management,
organization, and technology components? Why are complementary assets essential
for ensuring that information systems provide genuine value for organizations?
• Define an information system and describe the activities it performs.
An information system is a set of interrelated components that collect, process, store, and
distribute information to support decision making and control in an organization. In addition
to supporting decision making, coordination, and control, information systems may also help
managers and workers analyze problems, visualize complex subjects, and create new products.
• List and describe the organizational, management, and technology dimensions of information systems. -
Organization: The organization dimension of information systems involves issues such
as the organization’s structure, functional specialties, business processes, culture,
people and political interest groups. -
Management: The management dimension of information systems involves setting
organizational strategies, allocating human and financial resources, creating new
products and services and re-creating the organization if necessary. -
Technology: The technology dimension consists of computer hardware, software, data
management technology, and networking/telecommunications technology.
• Distinguish between data and information and between information systems literacy and computer literacy.
Data are streams of raw facts representing events occurring in organizations or the physical
environment before they have been organized and arranged into a form that people can
understand and use. Meanwhile, information is data that has been shaped into a form that is
meaningful and useful to human beings. Information systems literacy is a broad-based
understanding of information systems. It includes a behavioral as well as a technical
approach to studying information systems. In contrast, computer literacy focuses primarily on
knowledge of information technology. It is limited to understanding how computer hardware and software works.
• Explain how the Internet and the World Wide Web are related to the other technology
components of information systems.
The Internet and World Wide Web have had a tremendous impact on the role information
systems play in organizations. These two tools are responsible for the increased connectivity
and collaboration within and outside the organization. The Internet, World Wide Web, and
other technologies have led to the redesign and reshaping of organizations. They have
helped transform the organization’s structure, scope of operations, reporting and control
mechanisms, work practices, work flows, and products and services.
• Define complementary assets and describe their relationship to information technology.
Complementary assets are those assets required to derive value from a primary investment
(Teece, 1998). Research indicates that firms that support their technology investments with
investments in complementary assets, such as new business models and processes, receive superior returns.
• Describe the complementary social, managerial, and organizational assets required
to optimize returns from information technology investments. -
Social assets: The Internet and telecommunications infrastructure, IT-enriched
educational programs raising labor force computer literacy, standards (both government
and private sector), laws and regulations creating fair, stable market environments and
technology and service firms in adjacent markets to assist implementation. -
Managerial assets: strong senior management support for technology investment and
change, incentives for management innovation, teamwork and collaborative work
environments, training programs to enhance management decision skills and
management culture that values flexibility and knowledge-based decision making. -
Organizational assets: a supportive organizational culture that values efficiency and
effectiveness, appropriate business model, efficient business processes, decentralized
authority, distributed decision-making rights and strong IS development team.
Case Study: Did Information Systems Cause Deutsche Bank to Stumble?
1. Identify the problem described in this case study. What management, organization,
and technology factors contributed to this problem?
The issue in this case study is related to the bank’s outdated technology which has been
cited by US authorities as one reason for the inaccurate information needed for conducting
business correctly. In decades of mergers and developments at Deutsche bank, they made
no adjustments to integrate its information systems with those of its acquisitions.
There was a lack of communication in the business in updating the management about the
problems faced in the bank. Furthermore, the CFTC charged that Deutsche Bank submitted
incomplete and untimely credit default swap data, failed to properly supervise employees
responsible for swap data reporting and lacked an adequate business continuity and disaster
recovery plan which was to be done by the management.
The organization did not create effective strategies and the bank's system outage and
subsequent reporting problems occurred in part because Deutsche Bank failed to have an
adequate business continuity and disaster recovery plan and other appropriate supervisory systems in place.
Deutsche Bank used outdated technology hence its swap data reporting system experienced
a system outage that prevented Deutsche Bank from reporting any swap data for multiple
asset classes for approximately five days. The bank's efforts to end the system outage
repeatedly exacerbated the existing problems and led to creating new problems.
2. What was the role of information technology at Deutsche Bank? How was IT related
to the bank’s operational efficiency, decision-making capability, and business strategy?
Information technology is used to help with mergers, with core procedures, any tracking, and
reports, as well as any shared information. The procedures and software were not up to date
in Deutsche bank which is why it caused a lot of problems within the business such as
misinformation. Later, changes were made in the business with the information technology
being updated by eliminating legacy software, standardizing and enhancing data, and
improving reporting. The changes made to the technology by John Cryan led to IT helping
the operational efficiency, decision-making capability and business strategy.
Deutsche Bank reduced the number of its individual operating systems that control the way a
computer works and made a multibillion-dollar deal with HP which then allowed the bank to
shift its applications and functions from its mainframe to HP’s cloud computing services. This
promotes efficiency and better control and will reduce the costs of 800 million euros and
create total savings of 1 billion euros.
The deal made with Hewlett Packard allowed Deutsche Bank to standardize and simplify its
IT infrastructure, reduce costs, and create a more modern and agile technology platform for
launching new products and services. Deutsche Bank migrated its systems to a cloud
computing software infrastructure which would allow Deutsche Bank to have all the
information available to them at any time hence allowing them to make precise decisions
quickly. Furthermore, this would allow employers to have good communication with their
employees as it would make it easier to contact them.
Information technology implemented would allow Deutsche bank to have all the data
available to them through the cloud which helps them to launch products and services.
Moreover, the bank is still in charge of application development and information security
technologies which are proprietary and crucial for competitive differentiation. All these factors
allow the bank to focus on making strategies that would help them analyze long-term competitive goals
3. Was Deutsche Bank using technology effectively to pursue its business strategy? Explain your answer.
Deutsche bank did not use technology effectively to pursue its business strategy as:
● In 2008, they received a penalty of $7.2 billion to settle U.S. regulator complaints
● In 2016, the bank got a complaint from CFTC for giving a late submission of swap data
Deutsche’s Bank’s old technology made them not be able to give the right information in
order to run its business properly and respond to other regulators. The bank also had trouble
with managing the underlying value of the traded financial products they had which also
caused not efficient operations because of non-compatible platforms.
4. What solution for Deutsche Bank was proposed? How effective do you think it will be? Explain your answer
They later joined a 10-year multi-billion dollar deal for technology innovation with Hewlett-
Packard. It created a new business strategy for Deutsche Bank: ● Reducing prices ● More modern technology
● Saving costs on automating processes
● Avoiding high risk client transactions
● Improving control framework
I think it will be very effective because all of these improvements were to fix all the mistakes
they had made in the past and make their bank better again.