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Chapter 1 Information Systems in Global Business Today 43

FIGURE 1.2 THE INTERDEPENDENCE BETWEEN ORGANIZATIONS AND
INFORMATION SYSTEMS

In contemporary systems, there is a growing interdependence between a firm’s information systems
and its business capabilities. Changes in strategy, rules, and business processes increasingly require
changes in hardware, software, databases, and telecommunications. Often, what the organization
would like to do depends on what its systems will permit it to do.

Operational Excellence
Businesses continuously seek to improve the efficiency of their operations in
order to achieve higher profitability. Information systems and technologies are
some of the most important tools available to managers for achieving higher
levels of efficiency and productivity in business operations, especially when
coupled with changes in business practices and management behavior.
Walmart, the largest retailer on earth, exemplifies the power of infor-
mation systems coupled with brilliant business practices and supportive
management to achieve world-class operational efficiency. In fiscal year
2012, Walmart achieved $460 billion in sales—nearly one-tenth of retail sales
in the United States—in large part because of its Retail Link system, which
digitally links its suppliers to every one of Walmart’s stores. As soon as a
customer purchases an item, the supplier monitoring the item knows to ship
a replacement to the shelf. Walmart is the most efficient retail store in the
industry, achieving sales of more than $28 per square foot, compared to its
closest competitor, Target, at $23 a square foot. Other retail firms producing
less than $12 a square foot.

New Products, Services, and Business Models
Information systems and technologies are a major enabling tool for firms to
create new products and services, as well as entirely new business models.
A business model describes how a company produces, delivers, and sells a
product or service to create wealth.
Today’s music industry is vastly different from the industry a decade ago.
Apple Inc. transformed an old business model of music distribution based on
vinyl records, tapes, and CDs into an online, legal distribution model based on its
own iPod technology platform. Apple has prospered from a continuing stream of
iPod innovations, including the iTunes music service, the iPad, and the iPhone.

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