Management Information Systems: Managing the Digital Firm, 17e (Laudon)

Chapter 1 Information Systems in Global Business Today

1) Which of the following is not one of the six strategic business objectives of information
systems?
A) New products and services
B) Improved decision making
C) Improved community relations
D) Competitive advantage
E) Survival
*6 strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

2) Verizon's use of a web-based digital dashboard to provide managers with precise real-time
information enabled it to improve which of the following?
A) Compliance with regulations
B) Managerial decision making
C) Efficiency in creation of new products
D) Employee morale
E) Intimacy with its suppliers
*(Real-time data improves the abilities of managers to make decisions)

3) Which of the following may lead to competitive advantage?

1. New products, services, and business models;
2. Charging less for superior products;
3. Responding to customers in real time
A) 1 only
B) 1 and 2
C) 2 and 3
D) 1 and 3
E) 1, 2, and 3
*Competitive Advantages:
 Charging less for superior products
 Better performance
 Better responses to suppliers and customers

1
4) A firm that invests in an information system because it is a necessity of doing business does
so because it is seeking to achieve which of the following business objectives?
A) Operational excellence
B) Improved decision making
C) Competitive advantage
D) Customer intimacy
E) Survival
(invest in information systemskeep up with competitors, federal and state regulations and
reporting requirements)

5) The Mandarin Oriental's use of computer systems to keep track of guests' preferences is an
example of which of the following?
A) Improved flexibility
B) Improved decision making
C) Improved efficiency
D) Customer intimacy (use IT to foster intimate relationship with customers—know preferences)
E) Operational excellence

8) Which of the following is an example of a business using information systems to improve

customer and supplier intimacy?
A) Walmart's RetailLink system
B) The Mandarin Oriental's use of computers to keep track of guest preferences
C) Verizon's use of a web-based digital dashboard to provide real-time company information for
managers
D) Apple's creation of the iPad
E) PCL Construction's use of cloud computing

9) Walmart exemplifies the power of information systems coupled with state-of-the-art business
practices and supportive management to achieve which of the following?
A) New products and services
B) Operational efficiency (improved efficiencyhigher profits)
C) Survival
D) Customer intimacy
E) Competitive advantage

11) To make sure they stock clothes that their customers will purchase, a department store
implements a new application that analyzes spending levels at their stores and cross-references
this data to popular clothing styles. Which of the following business objectives is this
information intended to support?
A) Customer intimacy
B) Survival
C) Operational excellence (improve efficiency and productivity)
D) Improved decision making
E) New products and services

2
13) All of the following are new technology-related trends in MIS (Management information
system) except:
A) cloud computing.
B) big data.
C) IoT.
D) the mobile digital platform.
E) co-creation of business value.
*Management Information Systems:
A computerized information-processing system designed to support the activities of the company
or help managers make improved decisions

14) Which of the following statements about digital firms is not true?
A) In digital firms, time shifting and space shifting are the norm.
B) Today, most firms are fully digital.
C) Digital firms offer extraordinary opportunities for flexible global organization and
management.
D) Digital firms sense and respond to their environments more rapidly than traditional firms.
E) Digital firms have more flexibility to survive in turbulent times.

*Digital Firm: (offer great flexibility in organization and management—time & space shifting)
 Significant business relationships with customers, suppliers, and employees are digitally
enabled and mediated
 Core business processes are accomplished through digital networks
 Key corporate assets are managed digitally

15) A firm that must invest in new information systems capabilities in order to comply with
federal legislation is investing to achieve which business objective?
A) Customer intimacy
B) Operational excellence
C) Survival
(invest in information systemskeep up with competitors, federal and state regulations and
reporting requirements)
D) Creation of new products
E) Improved decision making

16) Which of the following is not one of the IT innovations changing the world of business
today?
A) IoT
B) Big data
C) The mobile digital platform
D) Cloud computing
E) Business intelligence

3
17) Which of the following is not one of the current changes taking place in information systems
technology?
A) Growing business use of big data
B) Growth in cloud computing
C) Growth in the PC platform
D) Emerging mobile digital platform
E) Increased usage of data generated by the Internet of Things

33) The three activities in an information system that produce the information organizations use
to control operations are:
A) information, research, and analysis.
B) input, output, and feedback.
C) data, information, and analysis.
D) data analysis, processing, and feedback.
E) input, processing, and output. (IPO process)

34) Data collected at checkout counters in a grocery store is an example of:

A) output.
B) processing.
C) feedback.
D) input. (data)
E) information systems.

35) The total number of food items with storage temperature problems is an example of which of
the following?
A) Input
B) Raw data
C) Meaningful information
D) Feedback
E) Processing

36) Output:
A) is feedback that has been processed to create meaningful information that can be used by
others.
B) is information that is returned to appropriate members of the organization to help them
evaluate the input stage.
C) transfers data to the people who will use it or to the activities for which it will be used.
D) is the result of processing raw input data into meaningful information.
E) converts raw input into a meaningful form.

37) Converting raw data into a more meaningful form is called:

A) capturing.
B) processing.
C) organizing.
D) feedback.
E) analysis.

4
38) Which of the following is an example of raw data from an automobile manufacturer?
A) An average of 120 Subarus sold daily in New York in 2017
B) 1,200 Subaru Outbacks sold during the first quarter 2017 in New York
C) One Subaru Outback sold July 27, 20176 in Mohegan Lake, New York for $24,000
D) Annual sales of Subaru Outbacks increased 5.3 percent
E) An average sale price of $25,500 for all Subaru Outbacks sold during July 2017 in Mohegan
Lake, New York

39) In a hierarchical organization, the upper level consists of:

A) scientists.
B) senior management.
C) professional employees.
D) data workers.
E) knowledge workers.
*Hierarchical organization:
1. Senior management
2. Middle management (scientists, knowledge workers)
3. Operational management (production and service workers, data workers)

40) The fundamental set of assumptions, values, and ways of doing things that has been accepted
by most of a company's members is called its:
A) culture.
B) environment.
C) atmosphere.
D) business process.
E) mission.

43) Networking and telecommunications technologies, along with computer hardware, software,
data management technology, and the people required to run and manage them, constitute an
organization's:
A) data management environment.
B) networked environment.
C) information technology (IT) infrastructure. (provides platform that system is built on)
D) information system.
E) culture.

41) Data management technology consists of which of the following?

A) Physical hardware and media used by an organization for storing data
B) Detailed, preprogrammed instructions that control and coordinate the computer hardware
components in an information system
C) Two or more computers to share data or resources
D) Hardware and software used to transfer data
E) Software governing the organization of data on physical storage media
*Data Management Technology:
The technology used to provide services and infrastructure for distributed data-intensive
applications that involve accessing, transferring, and modifying massive data sets stored in
distributed storage resources.
5
42) Which of the following statements best describes organizational culture?
A) It encompasses the sum of beliefs and assumptions by all members.
B) It enables the organization to transcend the different levels and specialties of its employees.
C) It reflects the senior management's perspective on the organization and goals.
D) It allows a company to achieve greater operational efficiency.
E) It is a fundamental set of assumptions, values, and ways of doing things that has been
accepted by most members of the organization.

48) In a business hierarchy, which of the following levels is responsible for monitoring the daily
activities of the business?
A) Middle management
B) Service workers
C) Production management
D) Operational management (monitor daily activities of the business)
E) Knowledge workers

53) Which of the following roles in a firm would be least affected by using mobile devices to
access firm information systems?
A) Senior executives
B) Sales executives
C) Production workers
D) Operational managers
E) Knowledge workers

54) Which of the following would be used as an input for an information system?
A) Sales by region report
B) Sales for stores in a region
C) Product ID, and price (raw data)
D) Year to date sales of products
E) Marketing costs report for each product

55) The three principal levels within a business organization hierarchy are:
A) senior management, operational management, and service workers.
B) senior management, middle management, and operational management.
C) senior management, operational management, and information systems.
D) senior management, middle management, and service workers.
E) senior management, data workers, and service workers.

56) Personnel who design new products or services for a firm belong to which level of a business
hierarchy?
A) Middle management
B) Production workers
C) Knowledge workers
D) Data workers
E) Service workers

6
60) Which of the following is a global network that uses universal standards to connect millions
of different networks around the world?
A) An extranet
B) The World Wide Web
C) The Internet
D) An intranet
E) Verizon

61) Which of the following is a service provided by the Internet that uses universally accepted
standards for storing, retrieving, formatting, and displaying information in a page format?
A) HTML
B) The World Wide Web
C) E-mail
D) An extranet
E) FTP

62) Which of the following is a private corporate network extended to authorized users outside
the organization?
A) An intranet
B) The World Wide Web
C) The Internet
D) An extranet
E) FTP

63) Which of the following 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?
A) Information systems literacy
B) Information systems architecture
C) Business processes
D) Information technology infrastructure
E) Management information systems

64) Which field of study focuses on both a behavioral and technical understanding of
information systems?
A) Sociology
B) Operations research
C) Economics
D) Computer science
E) Management information systems

45) All of the following are examples of environmental actors in an information system except:
A) competitors.
B) regulatory agencies.
C) customers.
D) suppliers.
E) sales force.
7
6) The Toxic Substances Control Act requires firms to retain records of employee exposure to
toxic chemicals:
A) for 10 years.
B) for 5 years.
C) for 30 years.
D) for 1 year.
E) forever.

7) Which of the following is the key business objective behind the technologies implemented by
PCL Construction, as discussed in the chapter-opening case?
A) Higher customer satisfaction levels
B) Survival
C) Improved employee morale
D) Reduced delays in document management
E) Reduced cost of supplies

20) All of the following describe the effects of globalization except:

A) significant decreases in operating costs.
B) reduction of labor costs through outsourcing.
C) ability to find low-cost suppliers.
D) increases in transaction costs.
E) replication of business models in multiple countries.
*Globalization:
 Drastically reduced costs of operating on a global scale
 Increases in foreign trade
 Presents both challenges and opportunities

44) Maintaining the organization's financial records is the central purpose of which main
business function?
A) Manufacturing and accounting
B) Finance and accounting
C) Sales and manufacturing
D) Finance and sales
E) Human resources

46) Which of the following best describes the primary reason for implementing a new
information system, from a business perspective?
A) The system enables the firm to create new products and services.
B) The system will create new value for the firm, beyond its costs.
C) The system will automate key business processes.
D) The system is in use by our primary competitors.
E) The system integrates well with the Web.

8
49) In ________, raw data is systematically acquired and transformed during various stages that
add value to that information.
A) an information value chain
B) the firm value chain
C) information processing
D) the feedback process
E) the dissemination process

50) A corporation that funds an employee training program to build computer skills could be
seen as investing in which main category of complementary assets?
A) Managerial (management innovation)
B) Governmental
C) Social
D) Organizational
E) Auxiliary

51) Which of the following is an example of an organizational complementary asset?

A) Choosing the appropriate business model
B) A collaborative work environment
C) Laws and regulations
D) The Internet and telecommunications infrastructure
E) Strong senior management
Organizational complementary assets:
 Appropriate business model
 Efficient business processes

52) Which of the following is an example of a social complementary asset?

A) Technology and service firms in adjacent markets
B) Training programs
C) Distributed decision-making rights
D) Incentives for management innovation
E) A strong IS development team
Social complementary assets:
 The Internet and telecommunications infrastructure
 Technology standards

47) Which of the following would not be a complementary asset for a solar panel manufacturer?
A) International solar equipment certification standards
B) Government funding for green technology
C) Centralized hierarchical decision making
D) Innovation-driven management team
E) Subsidies for adoption of solar energy

9
57) Which main business function is responsible for maintaining employee records?
A) Sales and marketing
B) Human resources
C) Finance and accounting
D) Manufacturing and production
E) Middle management

58) Which of the following constitutes an organizational element in the UPS tracking system
described in the chapter?
A) The specification of procedures for identifying packages with sender and recipient
information
B) Monitoring service levels
C) Promoting the company strategy of low-cost, superior service
D) The use of handheld computers and networks for managing package delivery
E) A web-based Post Sales Order Management System

59) Which of the following constitutes a managerial element in the UPS tracking system
described in the chapter?
A) Taking inventory
B) Providing package status reports to customers
C) Using information to creating plans to deal with competitors
D) In-house package tracking software
E) Ability to embed UPS functions in external sites

94) Disciplines that contribute to the technical approach to information systems include:
A) computer science, engineering, and networking.
B) operations research, management science, and computer science.
C) engineering, utilization management, and computer science.
D) management science, computer science, and engineering.
E) economics, sociology, and psychology.
* The technical approach to information systems emphasizes mathematically based models to
study information systems, as well as physical technology and formal capabilities of these
systems.

95) Which of the following disciplines focuses on mathematical techniques for optimizing
parameters of organizations, such as transportation and inventory control?
A) Management science
B) MIS
C) Computer science
D) Utilization management
E) Operations research

10
96) Sociologists study information systems with an eye to understanding:
A) how systems affect individuals, groups, and organizations.
B) how human decision makers perceive and use formal information.
C) how new information systems change the control and cost structures within the firm.
D) the production of digital goods.
E) mathematically based models and physical technology.

97) Psychologists study information systems with an eye to understanding:

A) how systems affect individuals, groups, and organizations.
B) how human decision makers perceive and use formal information.
C) how new information systems change the control and cost structures within the firm.
D) the production of digital goods.
E) mathematically based models and physical technology.

21) How many service jobs move offshore to lower-wage countries in a typical year?
A) 3,000
B) 30,000
C) 300,000
D) 3 million
E) 30 million

22) Which of the following statements is not true?

A) In 2017, American businesses invested about $1 trillion in information systems hardware,
software, and telecommunications equipment.
B) In 2017, American businesses spent $500 billion on business and management consulting and
information technology services.
C) Private business investment in information technology has grown from 21 percent of total
invested capital in 1999 to 33 percent of all invested capital in 2017.
D) Most of the business value of IT investment derives from organizational, management, and
cultural changes inside firms.
E) Much of the money spent by American businesses on business and management consulting
involves redesigning firms' business operations to take advantage of new technologies.

23) Approximately how many Americans access the Internet using a smartphone or tablet?
A) 118 million
B) 172 million
C) 194 million
D) 230 million
E) 258 million

24) Which of the following statements is not true?

A) Many Fortune 500 U.S. firms derive more than half their revenues from foreign operations.
B) Most PCs manufactured in China use microprocessor chips manufactured in Korea.
C) Eighty percent of the toys sold in the United States are manufactured in China.
D) In 2017, 60 percent of Apple's revenue was generated outside of the United States.
E) Technology companies are particularly dependent on offshore revenue.

11
10) How much did American businesses spend on information systems hardware, software, and
telecommunications equipment in 2017?
A) About $100 million
B) About $1 billion
C) About $100 billion
D) About $1 trillion
E) About $10 trillion

12) Approximately how much revenue was generated by e-commerce in 2017?

A) About $1 trillion
B) About $2 trillion
C) About $229 billion
D) About $700 billion
E) About $180 billion

18) Thomas Friedman's description of the world as "flat" refers to:

A) the flattening of economic and cultural advantages of developed countries.
B) the use of the Internet and technology for instantaneous communication.
C) the reduction in travel times and the ubiquity of global exchange and travel.
D) the growth of globalization.
E) the increased use of global currencies.

19) In 2017, what percent of the U.S. economy resulted from foreign trade?
A) 10 percent
B) 25 percent
C) 30 percent
D) 50 percent
E) 66 percent

12
25) Internet advertising is growing at approximately 5 percent a year.
Answer: FALSE

26) Creating a marketing plan is not an example of a business process.

Answer: FALSE (is)

27) In order to be considered a digital firm, all of the firm's significant business relationships and
core business processes must be digitally enabled.
Answer: FALSE (A digital firm typically integrates digital networks to enhance efficiency and
connectivity, but there can still be some non-digital elements)

28) A business model describes how a company produces, delivers, and sells a product or
service to create wealth.
Answer: TRUE

65) Information technology (IT) consists of all hardware and software that a firm needs to use in
order to achieve its business objectives.
Answer: TRUE

66) Computers and programs are the only things required to produce the information an
organization needs.
Answer: FALSE (It also involves people, processes, and data management.)

67) Information systems literacy focuses primarily on knowledge of information technology.

Answer: FALSE
Information systems literacy involves understanding how information systems are used within
organizations, including the interplay between technology, people, and processes.

68) The three main dimensions of information systems are management, organizations, and
information technology. (4th: Business)
Answer: TRUE

69) Knowledge workers make long-range strategic decisions about products and services.
Answer: FALSE
(Knowledge workers typically handle tasks that require specialized knowledge and expertise, but
long-range strategic decisions are usually made by senior management or executives.)

70) There are four major business functions: human resources; manufacturing and production;
finance and accounting; and information technology.
Answer: FALSE
(human resources, manufacturing and production, finance and accounting, marketing and sales)

71) You need to know something about the hierarchy and culture of the company in order to
understand how a specific business firm uses information systems.
Answer: TRUE

13
72) All business processes are formally documented by an organization.
Answer: FALSE (some processes may remain informal or undocumented)

73) Creative work driven by new knowledge and information is a significant part of management
responsibility.
Answer: TRUE (helps in innovation and strategic decision-making)

74) Intranets link different systems and networks within a firm.

Answer: TRUE

75) UPS's use of web-based tools that allow customers to embed UPS functions such as tracking
and cost calculations into their own website is an information systems solution used to achieve
customer intimacy.
Answer: TRUE

79) Data is information that has been shaped into a form that is meaningful to human beings.
Answer: FALSE (Data: raw facts and figureprocessed to meaningful information)

80) Feedback is output returned to appropriate members of the organization to help them
evaluate or correct the input stage.
Answer: TRUE

82) Middle managers make long-range strategic decisions about the firm's products and services.
Answer: FALSE (Senior management)

83) Detailed, programmed instructions that control computer hardware components in an

information system are known as computer software.
Answer: TRUE

81) The key elements of an organization are its structure, business processes, politics, culture,
and people.
Answer: TRUE

76) There is little variation in returns on IT investment across firms.

Answer: FALSE (significant variation)

77) Laws and regulations creating fair, stable market environments are examples of
complementary social assets required to optimize returns from IT investments.
Answer: TRUE

78) A firm that invests in a strong IS development team is making an investment in

organizational complementary assets.
Answer: TRUE

29) Private business investment in information technology constituted 55 percent of all invested
capital in 2017.
Answer: FALSE
14
98) The behavioral approach to information systems focuses on analyzing the psychological,
social, and economic impacts of systems rather than the technical aspects.
Answer: TRUE

15
84) Define operational excellence. How can information systems help achieve it?
Answer:
Operational excellence is the achievement of higher levels of productivity, efficiency, and
profitability.
Information systems can help achieve operational excellence by improving communications to
suppliers and optimizing the supply chain.
Information systems could help managers communicate with workers more efficiently, enable
technological innovation in products, minimize warehouse overhead, and streamline distribution.

30) You are starting a small bike messenger company. Given your type of services (hand-
delivering packages within a small geographical area), could your firm be a digital firm? If so,
what would make this a digital firm?
Answer:
Yes, your firm could be a digital firm. Being a digital firm doesn't mean that you just offer
digital goods and services. A digital firm would have most of its relationships with customers,
suppliers, and employees be digitally enabled. Ordering deliveries, assigning deliveries,
managing employees and assignments could certainly be digitally enabled; using cell phones,
information systems, and handheld devices to connect customers, delivery management, and bike
messengers.

31) What are the main changes taking place in organizational use of information systems? Which
of these do you think is having the greatest impact on businesses?
Answer:
The main organizational changes taking place are:
1. Businesses using social networking platforms to deepen interactions with employees,
customers, and suppliers,
2. Growing numbers of employees use mobile devices to connect with their firm, customers,
and suppliers.
3. Co-creation of business value, with the sources of business value shifting from products to
solutions and experiences and from internal sources to networks of suppliers and collaboration
with customers.
An example answer is: The increase in collaboration is having the greatest impact, as customers
are essentially gaining greater control in determining the end product; businesses who are
flexible enough to listen to and respond to customer demand will be more successful.

86) What is the difference between information technology and information systems? Describe
some of the functions of information systems.
Answer:
Information technology (IT): Consists of all the hardware and software that a firm needs to use
to achieve its business objectives.

An 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.
(Information systems are more complex)
• supports decision making, coordination, and control.
• helps employees analyze problems and visualize complex subjects.
• helps create new products.
16
87) You are a marketing manager for a national movie theater chain. Give an example of data
that your department could use for creating meaningful information. What type of information
could that data produce?
Answer:
Movie ticket sales from individual theaters would be an example of raw data.
Meaningful information from this would be: average number of tickets sold to seniors on certain
days of the week.

32) Define business process. What might be a business process used at a hospital?
Answer:
A business process is a set of logically related tasks and behaviors for accomplishing work.
Hiring a new employee, customer intake, and filing medical records are examples of business
processes at a hospital.

85) You work for an auto manufacturer and distributor. How could you use information systems
to achieve greater customer intimacy?
Answer:
You could create a website that allows customers to customize cars, communicate with support
personnel and other car owners. You could create an automated e-mail service reminding car
owners to take their car in for periodic checkups. You could have an information system that
tracks customer preferences in local areas, so you can provide cars that reflect local customer
needs and desires.

88) This chapter discusses how each organization has its own culture and sets of values shared
by most of its members. What kind of shared values might you find at a law firm?
Answer:
Shared values at a law firm might be: The legal system works, the legal system is fair, lawyers
help people, and people need help with the legal system because it is complicated.

89) You work at the business headquarters for a chain of movie theaters. Describe this firm's
information value chain.
Answer:
An information value chain adds value to data at various stages, transforming it into valuable
data.
At a chain of movie theaters, data would be gathered from ticket sales and concession sales.
Information systems would help transform this into meaningful information, such as determining
the types of movies popular in certain regions, times and days of the week that people most often
saw movies, and what snacks were the most popular. This information would be valuable in
making decisions, such as offering ticket discounts during less popular time slots and offering
more popular snack items. Further feedback based on the results of these decisions could
determine whether these decisions were effective.

17
90) How does a company's use of information systems affect its corporate strategies? Provide an
example.
Answer:
A firm's ability to effectively use information technology is interdependent with its ability to
implement corporate strategies and achieve corporate goals. More and more, the ability to
compete and succeed depends on a company's ability to implement technology. What a business
would like to do in the future can depend on what its systems will be able to do.
Examples of this might be a company who invests in information systems that enable it to create
new products or to make its distribution system more efficient, allowing the company to become
the low-cost producer.

91) Why is the building of a house an appropriate analogy for the building of an information
system?
Answer:
Houses are built with hammers, nails, and wood, but these do not make a house. The
architecture, design, setting, landscaping, and all of the decisions that lead to the creation of
these features are part of the house and are crucial for solving the problem of putting a roof over
one's head. Computers and programs are the hammer, nails, and lumber of computer-based
information systems, but alone they cannot produce the information a particular organization
needs. To understand information systems, you must understand the problems they are designed
to solve, their architectural and design elements, and the organizational processes that lead to
these solutions.

92) What is the single most important theme of the book?

Answer:
The single most important theme of the book is that managers need to consider the broader
organization and management dimensions of information systems to understand current
problems as well as to derive substantial above-average returns from information technology
investments.

93) What are complementary assets and how does investment in them impact returns on
technology investments?
Answer:
Complementary assets are those assets required to derive value from a primary investment.
Research indicates that firms that support their technology investments with investments in
complementary assets, such as new business models, new business processes, management
behavior, organizational culture, or training, receive superior returns, whereas those firms failing
to make these complementary investments receive less or no returns on their information
technology investments.

99) Describe the sociotechnical view of management information systems.

Answer:
In the sociotechnical view of management information systems, optimal organizational
performance is achieved by jointly optimizing both the social and technical systems used in
production. Adopting a sociotechnical system's perspective helps to avoid purely technological
approach to information systems.

18
100) Which academic disciplines contribute to the behavioral approach to information systems?
Answer:
Sociologists study information systems with an eye toward how groups and organizations shape
the development of systems and also how systems affect individuals, groups, and organizations.
Psychologists study information systems with an interest in how human decision makers
perceive and use formal information. Economists study information systems with an interest in
understanding the production of digital goods, the dynamics of digital markets, and how new
information systems change the control and cost structures within the firm.

19