Solution Manual for Introduction to Information Systems: People, Technology and Processes, 3rd Edition

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People1Chapter 1Information Systemsand PeopleLearning Objectives1.Describe the main roles that information systems play in organizations.2.Compare the termsdata,information, andknowledge,and describe threecharacteristics that make information valuable.3.Describe the four main components of an information system and the role thateach plays.4.Identify several research areas that are studied in the discipline of managementinformation systems (MIS).5.Provide examples of how business, nonprofit, and government managers,as wellasinformation technology departments, depend on information systemsknowledge.6.Explain how information systems present both promises and perils, and poseethical questions.Solutions to Chapter Review Questions1-1.What are the sixprimaryrolesofinformation systems inorganizations? Howare information systems used in each context?Information systems play critical roles in (1)managingoperations, (2)supportingcustomer interactions, (3) makingdecisions, (4) collaborating on teams,(5)gaining competitiveadvantage, and (6)improvingindividual productivity.In operations management, information systems are used to manage assets andinventories; track employee payroll, taxes, benefits,and timesheets; processtransactions; track accounts payable and accounts receivable; procure goods andservices;and pay suppliers.Information systems that support customerinteractions include customer relationship management systems, web-based frontoffices, online self-service applications, modern point-of-sale systems and self-service checkouts.Information systems support data-driven decision making byusing both internal organizational data and external data from partners, suppliersand public sources.Smart managers use aggregated data to identify trends andpatterns rather than rely on gut instincts.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People2Collaboration and teamwork have considerable support from information systemssuch aswebapplications that enable virtual meeting spaces and social networkingsites.Microsoft’s SharePoint is an example of information technology thatsupports project teams with document management,shared calendars, andcommunication features.The innovative use of an information system can providea competitive advantage until competitors jump on the bandwagon.Consider howApple’s iPhone got the jump on smartphone competitors with Siri, the intelligentpersonal assistant.The selection of information systems and technology toimprove personal productivity ranges fromuse ofemailandsmartphonesto wordprocessing programs and contact databases.The challenge for most people is topick easy-to-use software and devices that integrate with existing applications.1-2.How is data different from information?How is information different fromknowledge?What are examples of each?Data refers to individual facts or pieces of information, and information refers todata or facts that are assembled and analyzed to add meaning and usefulness.Apatient’s temperature reading is one piece of data; however, when combined withother pieces of data in a patient records information system, it becomesinformation that is useful for diagnostic purposes.Aggregated with data fromother patients, it can be further refined and analyzed to become knowledge of aflu outbreak that is even more useful.1-3.What are the three characteristics that make information valuable?Why iseach a critical attribute of information?The three characteristics that make information valuable are timeliness, accuracy,and completeness.Timeliness is a critical attribute for certain kinds ofinformation, such as stock prices.Accuracy is a critical attribute for someinformation, such as a patient’s temperature reading.On the other hand, extremeaccuracy may not be necessary for certain kinds of information, such as acompetitor’s price for a rival product.Completeness is a critical attribute for someinformation, such as a patient’s list of current medications.In the context of amarketing survey, complete information adds value as a means to avoid bias orspin.1-4.What are the four components of an informationsystem?Describe eachcomponent.What are the five functions that these components provide?The four components of an information system are (1) people, (2) technology, (3)processes,and (4) data.People interact with information systems in various rolessuch as systems analysis and developers, managers, users, customers, andcontributors.Information technology includes hardware, software, andtelecommunications equipment.Business processes are activities designed toachieve a task, such as automatically generating form letters to students.Data are

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People3facts represented by values,which have meaning in a certain context.Data maybe numbers, character strings, or symbols.These four components are used tocollect, process, manage, analyze, and distribute information.1-5.How are information systems important to managers in a variety offunctional business units?What are examples of ways that informationsystems are important to the success of a marketing department, a humanresources department,anda small business owner?Information systems are important to business managers because they support thecompany’s business activities throughout every functional department.Information systems are used to streamline processes, reduce costs, increaserevenue, or support a strategic initiative.A marketing department usesinformation systems to develop data-driven marketing strategies, analyze ROI formarketing campaigns, and leverage social networking trends to create interest inthe company’s products.A human resources department uses information systemsto deliver online learning programs to reach more employees.A small businessowner can take advantage of the decline in cost for many information systems,such as inexpensive intelligent dialing software that enables call center staff tomore efficiently reach mobile phone customers.1-6.What are the functional areas that are common to most informationtechnology departments?Common functional areas in an information systems department include end-usersupport and help desk, systems administration, data center operations, enterprisesystems, and telecommunications and network services.1-7.What is the role of the chief information officer?The chief information officer (CIO) oversees the IT department, and helps toshape the organization’s strategic goals and ensure that the information systemssupport them. The CIO might report directly to the CEO or the vice president offinance and administration.1-8.How do information systems offerpromises to organizations?What are someof the perils of information systems?What are some of the ethical questionsassociated with the use of information systems?Students should be able to discuss how information systems offer promises toorganizations by giving them the opportunity or the possibility to change the waythey operate.The perils of information systems include the increased risk ofprivacy breaches and amplification effects that result from interconnectedsystems.A number of ethical questions are associated with the use of informationsystems:Who is responsible forthedamage caused by a privacy breach?Who is

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People4responsible when false, damaging, or illegal videos are shared on theInternet?Isit unethical to broadcast anemailmessage received by mistake?Solutions toProjects and Discussion Questions1-9.As customers, students, patients, taxpayers, and citizens, we are surroundedby information systems that support customer interactions.Identify anddescribe two such systems that youhave used.Briefly,describe the types ofcustomer interactions you have experienced with these systems and comparewhat you found to be important features of each one.Are there features orfunction that you would change or add to either system?Answers will vary, as the object of this question is to prompt the student toconsider features of an information system. An example is a student registrationsystem that allows students to browse class offerings, review course descriptionsand required textbooks, and register for classes.1-10.Web conferencing has been available for many years.In this market space,products from Adobe, Cisco, Citrix, IBM, and Microsoft compete with lower-cost or free web-conferencing applications fromAnyMeeting,Yugma, andothers.What are some of the advantages of using a virtual meeting space?Are there disadvantages?Search the web to learn more about online meetingrooms and prepare a5-minute presentation of your findings.The benefits of virtual meetings include saved time and money, increasedproductivity, increased meeting participation, and the ability to record meetingsfor presentation at a later date. On the other hand, virtual meeting participantsmay be less likely to build strong, personal relationships, and they may be morelikely to experience distractions and engage in multi-tasking (i.e., checkingemail)during the meeting. Acquiring the necessary technology and training in the use ofthat technology are additional drawbacks of virtual meetings.1-11.Information systems play a very large role in decision making, and manywould argue that you can always use more information to make betterdecisions. But sometimes digging deeply for more information leads totroubling ethical dilemmas. Visit 23andme.com, the website of a companythat offers to read your DNA from saliva for $99 and provide reports aboutdisease risk factors, ancestral lineage, and more. If you learn of a significanthealth risk, should you tell siblings who chose not to investigate their ownDNA? Should you tell your fiancée? Listwhatfactors shouldbetakenintoaccount when making decisions about whether to obtain information likethis, and how to use it.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People5Answers to this question will vary based on the student’s perspective andexperience. Potential factors that students may identify are the physical andpsychological health of their friends and family, their own physical andpsychological health, and potential impact to past and future relationships.1-12.One way to be more productive and manage timeefficiently,is to use thecalendar feature ofyouremailsystem.If you use Microsoft Outlook, visitMicrosoft.com and search for “Outlook tutorial” or search the Internetforan Outlook “how to” web page to learn how to set upyourcalendar.Thencreate a calendar for the semester that shows class times as well as test datesand project due dates.Which reminder option did you select for class times?Which reminder option did you select for project due dates?Briefly,describeseveral benefits of using the Outlook calendar feature.Answers will vary,as the object of this question is to require students to workwith softwarethat enhances productivity. At a minimum, students should be ableto list several benefits of the Outlook calendar feature that include the ability tomarkitems such as appointments, meetings, or all-day events, and specify itemsas recurring or one-time events. The scheduling option is used to invite others to ameeting. Reminders can be set anywhere from 15 minutes up to 5 days prior toan appointment.1-13.Although Internet users bemoan its annoying popup ads,Netflix has grownto more than 80 million customers who can stream movies and TV episodes toany Internet-connected device or request DVDs by mail. Describe Netflix interms of (1) the types of information technology it uses and (2) its customer-facing business processes.Answers supplied by students will vary, but generally should be drawn fromchapter information contained in Section 4: The Components of an InformationSystem. Answers should include brief statements relating to people, technology,processes, and data.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People61-14.Consider the information that is maintained by a bank. In addition tocustomer records, the bank maintains records on accounts and loans.Figure1-20and Figure 1-21(below) aretwo examples of database tables for aregional bank.How might this data be aggregated and analyzed to createinformation and knowledge?Figure 1-20Customers tableCustomerIDNameAddressCityStateZip100001Don Baker1215 E. New YorkAuroraIL60504100002Yuxiang Jiang1230 Douglas RoadOswegoIL60543100003EmilyBrown632 Fox Valley RoadAuroraIL60504100004Mario Sanchez24 E. OgdenNapervilleIL60563Figure 1-21AccountstableCustomerIDAccountNumberAccountTypeDateOpenedBalance1000014875940Checking10/19/19712500.001000011660375Savings08/10/19731200.001000021783032Savings05/15/1987500.001000024793289Checking05/15/19873200.001000036213690Checking02/14/19966700.001000041890571Savings10/16/20075300.001000048390126Checking12/02/20082700.00Answers will vary but the student should be able to provide several examples. Forinstance, the student may discuss how customer data may be aggregated withaccount data to create information such as a table showing customers in zip code60504 having a savings account, and how customer data and account data may beaggregated and analyzed to create higher-level knowledge such as whichcustomers may be prospects for a CD savings account or a consumer loan.1-15.Parking is a problem at many universities across the United States. Is it aproblem on your campus? Describe the business process to acquire a parkingpass at your school. Can you get a parking pass online? Can you get one inperson? How does your process compare to that of a smaller school that uses apaper form to apply for a parking permit? How canthat organizationuse aninformation system to improve this business process? Can you think of abusiness process at yourcollege or universitythat can be improved with aninformation system?Answers will vary depending on the business process evaluated. Students shouldbe able to provide a comprehensive description of the process they use to acquirea parking pass and a comparison to the process used at a smaller school.Theymay identify a process they have experienced that can be improved or eliminatedwith the help of information systems.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People71-16.A typical information technology department is comprised of commonfunctional areas, and each requires skills and competencies unique to thatarea.Search thewebor visit an online job search site such ascareerbuilder.com or monster.com to learn more about the IT functionalareas described in Figure1-15.Select two functional areas and compare jobpostings for each.In a brief report, contrast the differences in education,experience, and technical certification that are required for each job.Answers will vary depending on thewebsitesaccessed. Job titles generally shouldbe drawn from information contained inFigure 1-16.Students may identifynetwork and security certifications such as CCNA (Cisco Certified NetworkAssociate), CCNP (Cisco Certified Network Professional), and CompTIA’s A+,Network+,and Security+ certifications.1-17.In June, 2010, a security breach in the AT&T network exposed theemailaddresses of 114,000 Apple iPad 3G owners, many of whom are well-knownbusiness executives.The list of subscribers that were impacted by the breachincluded Diane Sawyer ofABC News, New York City Mayor MichaelBloomberg, andformerWhite House Chief of Staffand Chicago MayorRahmEmanuel.Work in a small group with classmates to consider the severity of thisleak of private information.In this case, is the severity of the breach measuredby the number of affected individuals or by the high-profile status ofsome of thesubscribers?What criteria are best for judging the severity of a data leak?Prepare a brief summary of your group discussion.Answers will vary but studentsshould weigh the factors that they considerimportant in judging the scope of the damage, and defend their criteria. Theextent of harm done directly and indirectly should be considered, whether or nothigh profile individuals are involved.1-18.Information systems are fundamental to the success of every functionalbusiness unitwithin an organization, from marketing to manufacturing tofinance.Work in a small group with classmates to share your career choiceand discuss how information systems support processes within your field.Can you name types of software applications that are used in your chosencareer?Answers will vary depending on students’ career choices. Students should discusshow information systems support processes within a given field in the context ofthedifferentroles information systems play indifferentorganizations. Accountingmajors may identifyQuickBooksor Peachtree accounting programs. Marketingmajors may identifyemailmarketing or Internet marketing software programs.Information technology majors may identify project management softwareprograms.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People8Solutions to Application Exercises1-19.Excel Application:Manpower Planning SpreadsheetPrecisionProducts specializes in custom-manufactured metal parts.The productionmanager has asked you to create an Excel spreadsheet to helpmanage operations.The company needs a way tocalculatestaffingrequirements (number of employees)based on different levels of production.The five manufacturing operations arefabrication, welding, machining, assembly, and packaging.One unit of productionrequires 1.5 hours for fabrication, 2.25 hours for welding, 0.7 hours for machining,3.2hours for assembly, and 0.5 hours for packaging.Create the Excel spreadsheetshownin Figure 1-18to calculate the weekly manpower required, at 40 hours perweek, for production levels of 200, 300, 400,and 500 units.How does the totalrequired for each level of production change if Precision Products operates a 45-hour production schedule?In the file ExcelCh01Ex01,students should go to the cell containing 40 (WeeklyManpower) hours and change it to 45; the formula would then recalculate the TotalManpower amount.Figure 1-18Managing operations at Precision Products using Excel.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People9

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People101-20.Access Application:Information Systems in BusinessSeconds Later, a clothing consignment shop, is fast becoming a favorite place toshop.The ownerhas asked you to create an Access databaseto helpmanageinventory.Download andimportthe information provided in the spreadsheetCh01Ex02to create a database with two tables (Consignors and Items).The ownerwants you to add a calculated field to the items table that shows the net selling priceafterhe has paidthe commissionto the consignors.Start with two reports: anInventory Report and a Consignor Report.The Inventory Report summarizes theinventory by item type.This report will include the number of items and the totalselling price for each item type, plus the total sales value of each inventory type.Itwill also include the total potential commission to be earned if all items are sold.TheConsignor Report will list the total number of items and the total selling price andcommission to be paid for each consignor.What other reports could you make withthis data that would be useful to the owner?Students should produce an Access database with two tables by importing data from theExcel file namedCh01Ex02.In Access 2010, you can create table fields that calculatevalues. In Access 2007, calculated fields are created in a query. Students should createqueries to produce the Inventory Report and the Consignor Report, using the Propertysheet caption field to name the columns and the format function to show values ascurrency.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People11Solutions toCase Study QuestionsCase 1—Nasdaq’s Information Challenges: Facebook’s Botched Public OpeningandHigh-Frequency Trading1-21.How has Nasdaq’s business benefited from the use of information systems?The purpose of the first two questions for this case is to have students considerhow information systems (IS) can transform an organization. Nasdaq is atechnology company that would not be possible without IS. IS enabled Nasdaq toenter the trading market even after the NYSE was well established, to offercustomers a full range of trading services even as a relatively new organization,and to achieve an advantage in speed compared with other exchanges. Further, ISare a source of revenue growth for Nasdaq, as Nasdaq has sold its technology toother countries and the IT department directly supports Nasdaq’s new businessstrategies.1-22.What risks do information systems pose for Nasdaq OMX’s business?The purpose of this question is to have students give a balanced consideration tothe risks of IS as well as the benefits of IS. The benefits of IS were addressed inquestion 1 above, and this question addresses risks. One risk is that IS lowers thecost of doing business for all firms in an industry, which is likely to lead to lowerprices. Nasdaq must manage this risk by finding ways to remain profitable even inan environment of lower prices. A second risk is that IS can contribute to highmarket volatility, which could lead to a loss of investor confidence and causeinstability for the entire industry. To manage this risk, Nasdaq would want to beinvolved in the creation of industry-wide technical and trading standards toachieve greater stability.1-23.This chapter discusses the value of information. What types of information arehandled through Nasdaq systems, what are the key characteristics of thisinformation, and how do Nasdaq customers use this information to create value?The purpose of this question is to have students focus on the “information” aspectof IS. The most critical components of information handled through Nasdaqsystems are the security name, price, seller, buyer, and time of the trade. Oneinteresting characteristic is that this information is constantly changing. Forexample, from one moment to the next, the price of a security will change and theseller willing to sell the security at that price will change. Nasdaq customerscreate value based on access to timely information, as a customer may want tobuy at a certain price, sell at a certain price, or transact on an exchange with acertain level of commission.

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People121-24.What does the example of Goldman Sachs paying to locate its server in theNasdaq data center say about the relationship between information systems andphysical operations?The purpose of this question is to help students understand the relationshipbetween technical considerations and physicaloperations.This theme will surfacein several cases throughout the textbook. Given the importance of timeliness toNasdaq customers (see question 3 above), even with high-speed IS there is a smallbenefit in response time based on server locationand the distance the informationmust travel to confirm trades.Trades are conducted within nanoseconds so anydelays due to physical distance might be costly.Goldman Sachs is willing to paya premium for server location, which represents yet another IS revenue source forNasdaq. Even in automated operations, students will need to understand wherephysical location may still make a difference for firms, workers, and customers.Case 2—Breaking News: Twitter’s Growing Role inEmergenciesand DisasterCommunications.1-25.What are the potential benefits of Twitter and other social media foremergency and disaster communications?The purpose ofthe first two questions for this case is to have students considerhowIScan transform apublic service.Although emergency and disastercommunications have developed through the years based on existing technologies(such as an air horn for a tornado watch, or the Federal Emergency Alert System[EAS] through television and radio), new technologies such as Twitter and socialmedia offer potential benefits for these communications. For example, socialmedia enable emergency and disaster communications to originate from multiplelocations at the same time (while an air horn or a news reporter operates fromonly one location at a time). Social media also enable emergency and disastercommunications to be constantly updated in real-time.1-26.What are the potential risks of using Twitter and other social media foremergency and disaster communications?The purpose of this question is to have students give a balanced consideration tothe risksof ISas well as the benefits of IS.The benefits of IS were addressed inquestion 1 above, and this question addresses risks.One risk is thatthe IT andtelecommunications infrastructure on which social media operatescould beoverloaded or cease to operate in a disaster. For example, on September 11, 2001many mobile phone circuits in large cities were overloaded by excessive demand.To manage this risk, providers would need to look at the robustness of theirinfrastructure in the face of peak demand, and the flexibility of infrastructure toreroute traffic if some nodes are damaged. A second risk is that because various

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People13individual citizens are preparing updates, the updates may vary in depth andaccuracy. Management of this risk will be discussed in the next question.1-27.What types of education would be necessary at the user level to make Twitterand other social media more effective for emergency and disaster communications?The purpose of this question is to have studentsconsider the value chain in socialmedia. As social media begins to play a role in functions (such as public safety)that were previously handled by firms, students need to understand how therelated value chains may be impacted. The key objectives of educating citizens onthe use of social media in emergencies would be to reduce variability and increasequality and timeliness of communications. Accordingly, it would be useful toeducate citizens on basic principles (such as syntax) of using social media foremergency communications. It is also important to remind citizens to issuegenuine communications, and to prioritize urgent communications during anemergency or disaster.1-28.What would need to happen on the part of aid organizations andtraditionalmedia for Twitter and other social media to be effective in emergency and disastercommunications?The purpose of this question is for students to continue the discussion fromquestion 3 and consider the value chain implications of using social media foremergency and disaster communications. Although citizens may originate thecommunications, aid organizations and traditional media would still need tomonitor the communications, integrate the communications, and prioritize thecommunications so that appropriate action can be taken. Aid organizations alsoneed to coordinate directly with each other to ensure that they do not duplicateefforts in the response, and that they allocate resources efficiently to address allimportant areas in a timely manner.Solutions to E-Project QuestionsE-Project 1—Analyzing the May 6 “Flash Crash” with Excel Charts1-29.Download the Ch01_AAPL Excel file, which contains the high, low, andclosing prices for Apple Computers between May 3 and May 14. (AAPL is the tickersymbol for Apple.) Open the file to see how the data are arranged in columns, withthe first row showing the column headers.a)What was the closing price for Apple on May 6?On May 6, the closing price for Applestockwas $60.75 pershare.b)What was the volume of trading for this stock on May 6?

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People14On May 6, 28,560,400shares of Apple stock were traded.1-30.Create a line graph from the AAPL data, in which the dates are on thex-axis(horizontal), and the stock prices are on the verticaly-axis. Include the openingprice, high, low, and closing price on the graph. Add a title to the top of your chart.The line graph would appear as follows:1-31.Download Expedia stock prices (ticker symbol EXPE) for the same timeperiod (May 3–May 14, 2010) from http://finance.yahoo.com. (Click on HistoricalPrices, under QUOTES.)a)Createa line graph to compare the Low and Closing prices for Applestock and Expedia stock. You do not need to include Open and Highprices on this graph.The line graph would appear as follows:3540455055606505/03/1005/04/1005/05/1005/06/1005/07/1005/08/1005/09/1005/10/1005/11/1005/12/1005/13/1005/14/10PriceApple AAPLOpenHighLowClose2025303540455055606505/03/1005/04/1005/05/1005/06/1005/07/1005/08/1005/09/1005/10/1005/11/1005/12/1005/13/1005/14/10PriceApple AAPL and Expedia EXPEAAPL LowEXPE LowAAPL CloseEXPE Close

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People15b)How do you compare the activity on those two stocks?Apple experienced a significant intraday price decline (Low stock price)on May 6 during the “flash crash,” while Expedia did not experience asignificant decline that day.E-Project 2—Gathering, Visualizing, and Evaluating Reports from Twitter andOther Sources During aDisasterDownload the Excel file called“Ch01_OilSpill,”which containssample reports,andanswer the following questions:1-32.First, select columns B through F and reformat them with the word “wrap,” soyou can easily see the actual comments people sent in.Using word “wrap,” the spreadsheet should now appear consistent with thesample of title and first two lines of data below:1-33.Suppose you have a friend who lives in Bay Champagne. First sort the table byLOCATION, and scroll down to Bay Champagne. How many reports do you findusing this strategy? Why would this approach be limited in terms of its ability tofind all the events that may have affected your friend?Eight reportswere found. This search strategy is limited for at least two reasons.First, a user may miscount the number of rows when data is sorted. Second, it is possible

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Wallace, Introduction to Information Systems, 3rdeditionInstructor’s ManualChapter 1, Information Systems and People16that Bay Champagne may be mistyped for other entries (for example, “Champagne Bay”)and may not show next to the other eight Bay Champagne entries in the spreadsheet.1-34.For crisis management, timeliness is important, but so is accuracy. How manyreports in this sample were not verified (NO in the Verified column)? You can useExcel’s‘countif’function to determine the number of NO and YESresponses.What is the percentage of total reports that have not been verified?The verified column indicates that 791 out of 2464 reports (32.1 percent) have notbeen verified.1-35.Sort the file by CATEGORY then by LOCATION. Take a look at the reportsthat are categorized as Health Effects in Grand Isle. Why do you think many ofthese reports are not verified?Many reports of Health Effects in Grand Isle involve internal symptoms (such ascoughing or difficulty breathing) that may be more difficult to verify during areporting visit. This may be partly because the symptom may not manifest duringthe reporting visit, and partly because the report data collection involved verbalinterviews rather than medical examinations.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy1Chapter 2Information Systemsand StrategyLearning Objectives1.Describe Porter’s five competitive forces that shape industry competition.2.Explain how disruptive innovations, government policies, complementaryproducts and services, and other factors affect howthe competitive forces operate.3.Identify the components of the value chain and explain its extended version.4.Describe how information systems apply to competitive strategies for business.5.Explain how information systems apply to strategy for nonprofit organizationsand governments.6.Explain why the role of information systems in organizations shiftsdepending onwhether the systems are deployed to run, grow, or transform the business.Solutions to Chapter Review Questions2-1.What are the five competitive forces that shape industry competition?Howare these forces interrelated?The five forces that influence industrycompetition are (1) threat of new entrants,(2) power of buyers, (3) power of suppliers, (4) threat of substitutes, and (5)rivalry among existing competitors. The five forces determine industry structureand how profitable companies in the industry will be. The five interrelated forcesare “internal” to the industry.2-2.How do disruptive innovations, government policies, complementaryproducts and services, and environmental events affect how the competitiveforces operate?Disruptiveinnovations, government policies, complementary products andservices, and environmental are “external” forces that affect how the five forcesoperate. For example, certain innovations can flood through an industry, changingeverything in their path, forcing every company to change its strategy.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy22-3.What are the components of the value chain?Which components comprisethe primary activities?Which components comprise the support activities?What is the extended value chain?The primary activities of a value chain are: (1) bring in raw resources; (2) makethe product or service; (3) market the product or service; (4) deliver the product orservice; and (5) provide customer support. The support activities are: (1)administration and management; (2) human resources; (3) technology support;and (4) procurement. The extended value chain links the company’s value chainwith the value chains of its suppliers and its customers.2-4.How do managers use benchmarks to analyze the value chain and ITspending?Organizations use the value chain model to compare their performance to industrybenchmarks and identify areas that should be targeted for improvement. Forexample, an organization may compare its budget allocation to each value chainactivity to industry benchmarks (i.e., average expenditures in its industry). ITbenchmarks include average IT spending by industry and amount spent on IT peremployee.2-5.How do information systems apply to competitive strategies for business?All of the competitive strategies leverage information systems to achieve success.Low cost leaders must automate as much as possible using information systems toreduce costs in many different ways depending on the industry. Organizationswith a differentiated product or service often rely on innovations in IT toimplement their strategy.2-6.How are information systems used to run, grow, and transform a business?Information systems are used to run a business by supporting productivitythroughout the organization, in every component of the valuechain, helping tostreamline processes in administration and management and improve customerloyalty. As a strategic enabler, IT can be used to grow and transform a businessby facilitating a new business model.2-7.How do information systems apply to competitive strategies for nonprofitorganizations?Nonprofit organizations can apply information systems to their competitivestrategy in two critical areas: fund-raising and volunteer management. Specializedinformation systems assist nonprofits inmanaging donations and online fund-raising as well as building relationships with volunteers.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy32-8.How do governments use information systems to improve services and fundresearch?Governments use information systems to improve services in varied waysdepending on the specialized requirements and responsibilities of the agencyproviding the service. For example, the military uses real-time systems to supportmilitary personnel and material distribution; a ministry of information andbroadcasting uses information systems to provide news services and other typesof information broadcasts; state and local police use information systems toaccess information on criminal offenses. Government funding is critical to certainkinds of research projects that private investors might avoid for various reasonsincluding risk and uncertainty. For example, the Internet was developed by theDefense Advanced Research Projects Agency. Currently, green sources of energyand the smart electricity grid are receiving significant funding from governments.Solutions to Projects and Discussion Questions2-9.Although many people think electronic book readers are too expensive, thereis a massive global demand for the devices,and the trend is likely to continuefor some time.Search the web to learn more about how digital technologyhas disrupted the book publishing industry, and prepare a5-minutepresentation of your findings.Answers will vary. At a minimum, students should be able to list several effectsof digital technology on book publishing such as a decrease in sales of non-digitalbooks and new options for self-publishing books and make them available onKindle and iBooks and other websites.2-10.Is a value meal related to a value chain?The value that attracts over60million customers to McDonald’s every day comes from capabilities that arebased in its value chain.Briefly,describe McDonald’s value chain anddiscuss how information systems facilitate each component in the chain.Canyou think of a way that information technology could improve your next tripto McDonald’s?Answers will vary but should include an example of at least one informationsystem that is used in each component of the value chainand one improvementusing information technology.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy42-11.Information technology enables nonprofit organizations to reach out toconstituents 24 hours a day, 7 days a week.Visit www.redcross.org and notethe various ways this charity is using itswebsiteto communicate withvolunteers, donors, and people who need assistance.Compare the Red Crosssite to your university’s alumni associationwebsite.Prepare a brief summaryof your findings that includes a list of specific services provided on each site.How does eachwebsitesupport the organization’s strategic goals?Answers will vary depending on the services made available by their local alumniassociation. Because the content of www.redcross.org may change, expectedresults will vary but should include services such as these: Get Assistance,Volunteer, Take a Class,andGiveBlood.2-12.Government agencies and corporations have similar information needs.Identify and briefly discuss specific examples of information systemstypically used by a law enforcement agency such as a state or local policedepartment.Which of these systems are used to “run”the business?Whichare used to fulfill the agency’s mission?Answers will vary,but should include an example of an information system usedto manage operations such as human resource scheduling, payroll, or accountspayable. The mission of a state or local police department includes safeguardingthe lives and property of the people it serves. Examples of systems to fulfill theagency’s mission may include systems to manage criminal history records, arrestwarrants, stolen vehicles and property, fingerprint identification, sex-offenderregistration, and concealed handgun licenses.2-13.What are the three basic strategies that companies adopt to compete?Describe how information systems support each strategy. What is a “hybrid”strategy? Describe a company, product, or service that adopts each of thesefour competitive strategies.The three basic strategies are (1) low cost leadership, (2) product differentiation,and (3) focused. The low cost leadership strategy relies on information systemsthat automate and streamline processes and eliminate costly human labor. Theproduct differentiation strategy requires systems that add special features orunique add-ons for which customers are willing to pay more. The focused strategyrelies on special features for a particular market niche such as a business orgovernment segment. A hybrid model incorporates aspects of several strategies.An example of a hybrid strategy is providing the best value for the lowest price.Answers will vary regarding names of companies, products, or services that adopteach of these competitive strategies. This question draws on the student’s abilityto understand the four strategies and their knowledge of companies, products, andservices.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy52-14.What are network effects?Search thewebor visitwebsitessuch asEversave.com andAmazonLocal.com and discuss how network effects canimpact the threat of new entrants.Is there anEversaveoffering or anAmazonLocaldeal in yourhometown?How would you describe the long-termvalue proposition of this online shopping phenomenon?In youropinion, are there any disadvantages for an organization that offers a dailydeal?Network effects refer to the increased value of a product or service, which resultssimply because there are more people using it.Eversaveillustrates networkeffects by offering a daily deal to people once a group reaches a “tipping point” ofpeople who agree to participate. A value proposition describes the benefits, cost,and value of a product or service that a business can deliver to customers.Eversavedelivers customers to those businesses who sign up to sponsor a dailydeal. Answers will vary on the disadvantages for an organization that offers adaily deal. AlthoughEversaveoffers can drive traffic to a business, unless thenumber of coupons offered is capped, the offer can overwhelm a small business.Additionally, some businesses report mostly one-time buyers rather than sales thatturn in to repeat customers.2-15.In 2011, the U.S. federal government collected approximately $2.3trillionintaxes including individual income taxes, Social Security/Social Insurancetaxes, and corporate taxes.Visit www.irs.gov and describe how thiswebsiteenhances services to the public.What types of services are available toindividuals?To businesses?To charities and nonprofit organizations?Whatkind of “tax information for students”does this site provide? Prepare a 5-minute presentation of your findings.The list of services provided at www.irs.gov could be extensive. For example,services provided to individuals include assistance with finding a “free file”provider, transmitting a tax return electronically, and checking on the status of atax return. Services provided to businesses include electronic submission of taxreturns, links to compliance and enforcement information, and taxpayer advocateservices. Services provided to charities and nonprofit organizations are similar tothose provided to businesses. Services provided to students include links to aninteractive tax education program and information on education credits andstudent loan interest. Student lists will vary and should include specific servicesfor each category of client.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy62-16.Why are IT resources described as a commodity?How do IT resources“matter” in terms of the different rolestheyplay in an organization?Whichcomponent of an information system is most critical to success in growingand transforming the business?Why?A commodity is a product for which quality is the same no matter who producesit. Examples are milk and paper. The price of a commodity fluctuates dependingon supply and demand. Nicholas Carr suggests that IT resources have become socommonplace that their strategic importance has diminished, and they havebecome an infrastructure commodity, much like electricity. Informationtechnology resources that are used to run the business generally fall into thecommodity category where price competition is fierce. Consequently,organizations can avoid wasteful spending for these systems and get the bestvalue for the lowest cost. On the other hand, information systems that are used togrow and transform an organization include the “people” component. Althoughmany technologies are commodities, the ability to extract their value requireshuman imagination. Innovative business practices, new products and services, andchanged processes come from talented people who know how to leverageinformation technology.2-17.According to the Computer History Museum (www.computerhistory.org),the Kenbak Corporation sold the first personal computer in 1971.Since then,several billion PCs have been sold under various brand names.Currently,HP, Dell, Acer, Lenovo,andAsusare the leading brands in the highlycompetitive PC market.Work in a small group with classmates to analyzeand describe the personal computer industry using thefivecompetitiveforcesmodel.Students should be able to provide a brief analysis that describes competitiverivalry as high due to little differentiation in PCs, supplier power that comes fromthe lack ofsubstitutes for their input product and the cost associated withchanging suppliers, and buyer power that comes from customer price sensitivityand the low cost of switching to another PC. The threat of substitutes is relativelyhigh because it is easy for customers to switch to alternate products such aslaptops, notebooks, and netbooks. The threat of a new entrant in this industry isrelatively low due to barriers to entry such as acquiring necessary inputs from keysuppliers.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy72-18.Work in a small group with classmates to discuss how informationtechnology plays a role in the competitive environment of your college oruniversity.How do you describe the competition to attract and retainstudents?How do you describe the threat of substitutes in higher education?How does the threat of substitutes affect supplier power in education?Answers will vary. At a minimum, students should provide a list of ways that ITis used by their college or university to attract and retain students and discuss thecompetitive environment of their school. The threat of substitutes in highereducation includes programs provided by community colleges and technicalschools,as well as online degree programs offered by traditional and virtualuniversities. As students have more choices, supplier power for institutions ofhigher education is reduced.Solutions to Application Exercises2-19.Excel Application: IT BenchmarksJay’s Bikes is a family-owned and-operated business that stocks a wide range ofbikes designed to fit the needs of professional riders,achild’s first bike, andeverything in between. The business has 12 full-time employees.Jay has asked youto create a spreadsheetfrom the data in Figure 2-21to calculate average ITspending so thatit can becomparedto the retail industry average.What is theaverage IT spending in the retail industry?What is the average IT spending peremployee in the retail industry?How do Jay’s IT expenditures compare to theindustry averages?How much would Jay need to increase spending in order tomatch the retail industry average?The average IT spending in retail is 1.5percent of revenue. The average IT spending peremployee in retail is $5,379.Students should use formulas to calculate Jay’s average IT spending as a percent ofrevenue and his average IT spending per employee, then use Goal Seek to determine howmuch he needs to increase IT expenditures to match the industry benchmark of 1.5percent of revenue or $5,379per employee. To answer the question, “How much wouldJay need to increase spending in order to match the retail industry average?,” studentsshould use a formulas to calculate (a) the difference between Jay’s current IT spending asa percent of revenue and the target spending as a percent of revenue and (b) thedifference between Jay’s current IT spending per employee and the target spending peremployee.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy82-20.Access Application:Telethon Call ReportsThe volunteer coordinator of the Downtown Emergency Shelter has asked you touse the information providedin Figure 2-20to create an Access database.(You candownload the Excel file called Ch02Ex02 and import the data into your database.)Your instructions are to create two tables (donors and volunteers) and prepare aPhonathon Call Report for each volunteer.The shelter manager wants you to addthree fields to the donor table: this year’s contribution, a calculated field that showsthe average contribution per employee, and a calculated field that shows a targetcontribution that is 5percenthigher than last year’s contribution.The reportshould list the volunteer’s name and number, as well as the following donorinformation: donor number, donor name, company name, phone number,andcontributionamount from the prior year, number of employees, average

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy9contribution per employee, and target contribution for this year.Although addressinformation will not be included on the report, that information will be used to sendreceipts to the donors at the conclusion of this year’s fund-raising event.Students should produce an Access database with two tables by importing data from theExcel file namedCh02Ex02.Students should create a query to produce the PhonathonCall Report. The query includes two calculated fields: average contribution per employeeand target contribution per employee for the current year. Set the format for both fields tocurrency in the Property sheet.Solutions toCase Study QuestionsCase 1—Can GameStop Survive with Its Brick-and-Mortar Stores?2-21.Perform a five forces analysis of the online gaming industry.What aretheimplications of the five forces analysis for GameStop?The purpose of this question is to have students apply a framework from thechapter to the case. A five forces analysis provides an idea of whether or not anindustry would be attractive to enter. In the online gaming industry, entry barriersare reasonably low (implies that industry is not attractive), because all that isrequired to enter the industry are developers to program a game and a website topublish the game. There are numerous available substitutes (implies that industry

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy10is not attractive), as online gaming is only one of many forms of entertainment.Internal rivalry is increasing (implies that industry is not attractive) with multipleproviders of online gaming. Buyer power is low (implies that industry isattractive), because buyers are individual consumers and no consumer wieldsundue market power. There is some supplier power (implies that industry ismoderately attractive), because there may be a limit to the number of talenteddevelopers available for hire. This five forces analysis suggests that the onlinegaming industry has low to moderate attractiveness. It is not necessary forstudents to arrive at this suggested answer, instead it is more important forstudents to get experience in performing and drawing implications from a fiveforces analysis.2-22.What role have information systems played in the five forces you identified?Building from the five forces analysis in the previous question, IS plays a key rolein at least three of the five forces. For example, one reason that barriers to entryare low is because online distribution reduces the barriers to entry. A gamepublisher does not require physical logistics to distribute games to retail locations,the publisher can simply distribute directly to consumers via the Internet. Onereason that substitutes for online gaming are high is that the target demographiccan use online social media (another form of entertainment) at no cost. Onereason that internal rivalry is increasing is because existing retailers (such asGameStop) are adding online channels. It is not necessary for students to developthis precise analysis,instead it is more important for students tounderstand therelationship between IS and strategy.2-23.How has GameStop used information systems to compete more effectively?The five forces analysis performed in questions 1 and 2 relate with GameStop’sevaluation of the industry and GameStop’s response to the industry. The purposeof this question is to have students understand how firms can incorporate IS aspart of their strategy. GameStop acquired an online gaming company to embraceonline gaming as a substitute for offline gaming and to enter that segment of theindustry. Firms can use IS as a tool to implement their strategies.2-24.What other strategic actions will GameStop need to take to protect itsbusiness?The purpose of this question is to have students understand that IS are only onecomponent of strategy, and that organizations need to integrate IS together withother components to successfully execute a strategy. For this case, in addition toacquiring the online gaming company, GameStop will need to integrateoperations of the online gaming company with its brick and mortar operations, totake advantage of GameStop’s physical footprint.Offeringopportunities to earnPowerUPreward pointson Kongregateis anexampleof how the company can

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy11attract more in-storecustomers. The company might alsoconduct gamingtournamentsthat further integrate its online presence with in-store events.GameStop management will need to think through whether the firm will competemore based on low price (in which case it might increase its focus on onlinegaming) or quality service (in which case it might maintain focus on the brick andmortar stores and personnel).

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy12Case 2—The Battle for Net Neutrality2-25.What are the strategic interests of carriers?What are the strategic interestsofwebsites?The purpose of this case is to give students the opportunity to think throughstrategic considerations at the industry level, as opposed to the firm level as in theGameStop case. In this case, the strategic interests of carriers such as Verizon andAT&T are not necessarily aligned with the strategic interests ofwebsites such asYouTube and Facebook. Carriers argue that they have invested substantialfinancial resources to build Internet capacity, and want to protect their ability togenerate additional revenues from their investments. On the other hand,websitesargue that their success depends on a direct connection to the customer and theability to offer the customer an exceptional user experience.2-26.How do the interests of carriers differ from the interests ofwebsites?Whatare the implications for websites from a value chain perspective?The purpose of this question is to help students further understand the relationshipbetween IS and strategy at the industry level. Building from question 1, one wayfor carriers to protect their investments andgenerate additional revenues would beto haveuserspay for enhancedInternetconnectivity.Another way for carriers togenerate additional revenues would be to have websites pay for higher priority.On the other hand,websites would view less robustInternetaccess for some usersorwebsites(implied if not allusers or websitespay for enhanced access)asinterference to their user experienceand business models.From a five forcesperspective, the decision on net neutrality could dramatically impact theproportion of online revenues that accrue to carriers versuswebsites (carriers areone supplier forwebsites), and the relative attractiveness of each industry.2-27.Whatis the basis for Verizon’s lawsuit against the Federal CommunicationsCommission? Why did they claim a violation of free speech?This questionhelps students understand how companies can use the legal systemto fight government regulations. As a carrier, Verizon is hindered by the FCC’sruling in favorof net neutrality. Verizon is claiming a “violation of free speech”because the FCC’s rulings are taking away control over the carrier’s property,which in some contexts might be considered speech. Students might also answerthis question more fully by researching the outcome of the case and the court’sresponse.2-28.Whatare relevant considerations on the role government could play toresolve differences between carriers and websites?As in questions 1 and 2 above, the carriers have different interests than thewebsites. This situation is likely to require some resolution between these

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy13differences. Governments also have conflicting considerations. On one hand,governments have a responsibility to protect the rights of citizens. On the otherhand, governments have a responsibility to regulate commerce. Governments willneed to balance these conflicting considerations as they make decisions related tonet neutrality.Solutions to E-Project QuestionsE-Project 1—Identifying Company Strategy with Online Financial Chart ToolsOne useful way to catch up on acompany’s strategy is to check outtrends in itsstock price, and the net offers many free tools. Go toGoogle’s financewebsite(www.google.com/finance) and type the stockticker symbol for GameStop (GME)into the search bar to pull up currentnews about the company, including a graph ofits share prices, fromGoogle finance.2-29.The letters on the graph tie to the news stories, and some of them have majoreffects on the company’s stock. Change the graph to show 1 year of data by clicking‘1y’at the top left of the graph. Do you see any sudden changes in share price pairedwith a news story? Does the news shed light on how investors view its strategy or theexecution of it?The answer to this question will vary based on the date the student performs thesearch. A screen shot of the search as ofDecember2016is below. This screen shot showsadropin the stock’s prices inDecemberof 2016, tied torecent price moves of shares.

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Wallace, Introduction to Information Systems, 3rd editionInstructor’s ManualChapter 2, Information Systems and Strategy142-30.One way to get an idea of how well the company is doing is to compare thetrend in its share prices to the Dow Jones Industrial Average. Check the box next toDow Jones at the top of the graph and compare the trends. How does GameStop’sperformance compare?The answer to this question will vary based on the date the student performs thesearch.A screen shot of the search as ofDecember 12,2016,isbelow.Thisscreen shot shows that stock price for GameStopdecreasedfaster than the DowJones Industrial Average (DJIA) during theperiod shown in the graph.E-Project 2—Analyzing Movie Download Times with ExcelIn this e-project, you will obtain and analyze information about downloadtimes toassess Internet connectivity.2-31.Download the file called CH02_MediaDownloads. This file showstheapproximate file sizes for different kinds of media, along with estimated downloadtimes.

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