This Document Contains Chapters 1 to 3 Experiencing MIS, 6e (Kroenke) Chapter 1 The Importance of MIS 1) The number of transistors per square inch on an integrated chip doubles every 18 months. This observation is known as ___________ Law. A) Murphy's B) Moore's C) Amdahl's D) Metcalfe's Answer: B 2) Which of the following statements is true of Moore's Law? A) It is based on the technological advancements in weapon manufacturing. B) It made the cost of data processing, communications, and storage essentially zero. C) It states that the total number of transistors produced in the world doubles every 18 months. D) It has resulted in obsoleting the use of transistors. Answer: B 3) Which of the following is a result of Moore's law? A) The risk of technology becoming obsolete has decreased. B) The price to performance ratio of computers has fallen dramatically. C) The outsourcing of nonroutine skills has increased drastically. D) The cost of data processing has increased considerably. Answer: B 4) Which of the following is true about the impact of Moore's Law on business professionals? A) They need to be able to assess, evaluate, and apply emerging information technology to business. B) They have to concentrate more on developing routine skills than nonroutine skills. C) They need to be able to develop better communication and information technologies. D) They no longer need to focus on skills such as abstract reasoning and collaboration. Answer: A 5) Because the cost of data processing, storage, and communications is essentially zero, any routine skill can and will be ___________. A) considered a nonroutine cognitive skill B) a strong marketable skill C) outsourced to the lowest bidder D) sufficient to attain job security Answer: C 6) Which of the following is an impact of rapid technological change on job security? A) Routine skills have more demand. B) Nonroutine cognitive skills have gained more market value. C) Nonroutine jobs are outsourced, thus reducing the need of an in-house workforce. D) Routine skills are no longer required to complete a task. Answer: B 7) Which of the following statements is true of nonroutine cognitive skills? A) They have become less marketable. B) They increase an individual's job security. C) They do not experience any impact of technological changes. D) They are usually outsourced by organizations to the lowest bidder. Answer: B 8) ___________ is the ability to make and manipulate models. A) Abstract reasoning B) Cognitive acceleration C) Adaptive learning D) Holacracy Answer: A 9) ___________ is the ability to model the components of a unit, to connect the inputs and outputs among those components into a sensible whole that reflects the structure and dynamics of the phenomenon observed. A) Systems thinking B) Collaboration C) Adaptive learning D) Critical reasoning Answer: A 10) Which of the following best describes collaboration? A) It is the ability of an individual to model the components of the system, to connect the inputs and outputs among those components into a sensible whole that reflects the structure and dynamics of the phenomenon observed. B) It is the ability to assess, evaluate, and apply emerging information technology to business. C) It is the activity of two or more people working together to achieve a common goal, result, or work product. D) It is the activity of constructing or modifying models with the help of one's nonroutine cognitive skills. Answer: C 11) In a job interview, Lillian is asked to be part of a three-member group and design a mock business process based on the strengths and skills of the group's members. In this case, which of the following skills is the interviewer trying to test? A) collaboration B) cognitive acceleration C) systems thinking D) facilitation Answer: A 12) Patricia, the marketing manager of a manufacturing firm, plans new marketing strategies with the help of her subordinates by providing and receiving critical feedback. Here, Patricia is displaying effective ___________. A) collaboration B) cognitive acceleration C) virtualization D) abstraction Answer: A 13) Which of the following is necessary for effective collaboration? A) modeling the components of a system B) focusing on individual goals C) proper division of tasks D) giving and receiving critical feedback Answer: D 14) ___________ is making a reasoned analysis of an opportunity, envisioning potential solutions, evaluating those possibilities, and developing the most promising ones, consistent with the resources one has. A) Experimentation B) Abstraction C) Systems thinking D) Collaboration Answer: A 15) Marketing managers planning to use new social networking technologies to strengthen their market presence are portraying their ___________. A) ability to experiment B) routine skills C) collaboration skills D) ability to outsource work Answer: A 16) In a job interview, Roy is asked to use a product that he has never used before and is unfamiliar with its functioning. Which of the following skills is the interviewer trying to test? A) systems thinking B) abstract reasoning C) collaboration skills D) ability to experiment Answer: D 17) Moore's Law states that the speed of a computer doubles every 18 months. Answer: False 18) Future business professionals need to be able to apply information technology to business. Answer: True 19) The number of businesses adopting new technologies has seen a downfall over the years. Answer: False 20) The knowledge of managing information systems can lead to greater job security. Answer: True 21) Increased outsourcing has made nonroutine skills less marketable. Answer: False 22) A marketable skill has no impact on job security. Answer: False 23) Routine skills are outsourced to the lowest bidder because the cost of data processing, storage, and communications is essentially zero. Answer: True 24) Strong nonroutine cognitive skills are more in demand than routine skills. Answer: True 25) Abstract reasoning is one of the components of strong nonroutine cognitive skills. Answer: True 26) Critical feedback undermines collaboration. Answer: False 27) Effective collaboration is all about being nice to one's team members. Answer: False 28) Professionals in the 21st century need to be able to experiment in order to have greater job security. Answer: True 29) Successful experimentation is throwing buckets of money at every crazy idea that enters one's head. Answer: False 30) When a user is provided with an unfamiliar program and asked to use it, he or she is being tested on their ability to collaborate effectively. Answer: False 31) Define Moore's Law and explain how the phenomenon described by it affects business. Answer: Moore's Law states that the number of transistors per square inch on an integrated chip doubles every 18 months. The more common version of this is expressed as, "The speed of a computer chip doubles every 18 months," which is incorrect. Due to the impact of Moore's Law, the price to performance ratio of computers has fallen dramatically. Moore's Law is the principal reason why data storage and data transmission are essentially free today. New businesses like YouTube and Facebook have taken advantage of the opportunities offered by this development. 32) What is a marketable skill? Answer: A marketable skill used to be that one could name particular skills, such as computer programming, tax accounting, or marketing, as examples of marketable skills. But today, because of Moore's Law, because the cost of data processing, storage, and communications is essentially zero, any routine skill can and will be outsourced to the lowest bidder. One has to develop strong nonroutine cognitive skills to be more successful and such skills are called marketable skills. Abstract reasoning, systems thinking, collaboration, and the ability to experiment are also classified as marketable skills. 33) What is abstract reasoning? Answer: Abstract reasoning is the ability to make and manipulate models. Constructing a model from the five components of an information system is an example of abstract reasoning. 34) What is meant by systems thinking? Answer: Systems thinking is the ability to model the components of a system, to connect the inputs and outputs among those components into a sensible whole that reflects the structure and dynamics of the phenomenon observed. It shows how components' inputs and outputs relate to one another. 35) What is collaboration? How can one ensure effective collaboration? Answer: Collaboration is the activity of two or more people working together to achieve a common goal, result, or work product. It means to develop ideas and plans with others in a team and to provide and receive critical feedback. Effective collaboration is not about being nice. In fact, surveys indicate the single most important skill for effective collaboration is to give and receive critical feedback. 36) What is experimentation? Explain its importance. Answer: Experimentation is making a reasoned analysis of an opportunity, envisioning potential solutions, evaluating those possibilities, and developing the most promising ones, consistent with the resources one has. Fear of failure paralyzes many good people and many good ideas. This can be overcome by having the ability to experiment. 37) A group of components that interact to achieve some purpose is referred to as a(n) ___________. A) system B) element C) unit D) entity Answer: A 38) Which of the following is an example of a hardware component of an information system? A) Web browser B) operating system C) storage disk D) data file Answer: C 39) The five-component framework of an information system consists of computer hardware, software, data, people, and ___________. A) documents B) procedures C) objectives D) results Answer: B 40) In a grocery store, a clerk uses a barcode scanner to read the barcode on an item. Which of the following components of an information system includes this scanning device? A) hardware B) software C) data D) procedure Answer: A 41) An information system is a group of components that interact to produce information. Answer: True 42) The methods used to start a program and save a file are referred to as procedures. Answer: True 43) Building information systems requires many different skills besides those of programmers. Answer: True 44) The use of information systems is restricted to the field of business. Answer: False 45) Describe an information system. Answer: A system is a group of components that interact to achieve some purpose. An information system (IS) is a group of components that interact to produce information. An IS is based on the five-component framework of computer hardware, software, data, procedures, and people. These five components are present in every information system–from the most simple to the most complex. 46) Describe the five components of an information system using an example. Answer: The five components of an information system are computer hardware, software, data, procedures, and people. For example, when one uses a computer to write a class report, he or she is using hardware (the computer, storage disk, keyboard, and monitor), software (Word, WordPerfect, or some other word-processing program), data (the words, sentences, and paragraphs in his or her report), procedures (the methods he or she uses to start the program, enter his or her report, print it, and save and back up his or her file), and people (you). 47) Which of the following statements is true about the management and use of information systems? A) An employee must be a programmer to manage information systems. B) Information systems must be adapted to new requirements. C) Information systems need not be maintained after development. D) Organizations with dynamic business environments do not use information systems. Answer: B 48) Why is it important for business professionals to take an active role in developing and managing information systems? A) They know how to create a database and configure computers. B) They are the people who know how to build networks. C) They know whether a system meets their needs and requirements. D) They are the lone users of information systems. Answer: C 49) Which of the following is a critical responsibility of business professionals in using information systems? A) protecting the security of a system and its data B) reprogramming a system to meet changing needs C) creating and modifying a system's databases D) building and configuring additional networks Answer: A 50) Which of the following reasons is valid for a company to create a new information system? A) to project a modern image B) to avoid falling behind the technology curve C) to help employees achieve the strategies of the business D) to show its social networking presence Answer: C 51) Businesses do not use information systems to achieve their strategies. Answer: False 52) Information systems should be created by a business only if they help achieve the strategies of that business. Answer: True 53) Define management information systems. What are the key elements of its definition? Answer: Management information system is the management and use of information systems that help businesses achieve their strategies. This definition has three key elements: management and use, information systems, and strategies. 54) Explain the management and use of information systems. Answer: Information systems must be developed, maintained and, because business is dynamic, they must be adapted to new requirements. To create an information system that meets specific needs, one will have to take an active role in that system's development. In addition to management tasks, he or she will also have important roles to play in the use of information systems. For example, when using an information system, there will be responsibilities for protecting the security of the system and its data. One may also have tasks for backing up data. 55) What are the points that one should keep in mind when deciding to implement a management information system (MIS)? Answer: When deciding to implement an MIS, one needs to keep in mind that information systems are not created for exploring technology. They are not created so that the company can be "modern" or so that the company can show it has a social networking presence on the Web. They are not created because the information systems (IS) department thinks they need to be created or because the company is "falling behind the technology curve." Information systems exist to help people who work in a business to achieve the strategies of that business. 56) ___________ refers to the products, methods, inventions, and standards that are used to produce information. A) Information technology B) Information processing C) Simulation D) Product specification Answer: A 57) Which of the following statements is true about information systems? A) They can be bought off the shelf. B) They are a group of components that produce information. C) They drive the development of information technology. D) They are not susceptible to the changing needs of the market. Answer: B 58) Which of the following components distinguishes information systems from information technology? A) people B) database structure C) software D) hardware Answer: A 59) Information systems and information technology are not the same. Answer: True 60) Information systems can be bought, whereas information technology cannot be bought. Answer: False 61) Explain the difference and the relationship between information technology (IT) and information systems (IS). Answer: Information technology and information systems are two closely related terms, but they are different. Information technology (IT) refers to the products, methods, inventions, and standards that are used for the purpose of producing information. IT pertains to the hardware, software, and data components. An information system (IS) is an assembly of hardware, software, data, procedures, and people that produces information. Information technology drives the development of new information systems. Users can buy IT; they can buy or lease hardware, they can license programs and databases, and they can even obtain predesigned procedures. Ultimately, however, it is the people who execute those procedures to employ the new IT. For any new system, users will always have training tasks (and costs), they will always have the need to overcome employees' resistance to change, and they will always need to manage the employees as they use the new system. Hence, one can buy IT, but not IS. 62) Security systems ultimately depend on the behavior of their ___________. A) users B) programmers C) hardware components D) database structures Answer: A 63) Which of the following requirements should a password fulfill in order to be considered strong? A) It should have five characters at the most. B) It should contain a complete dictionary word. C) It should not contain many special characters. D) It should not contain the user name or company name. Answer: D 64) A user has created a password that meets all the criteria for a strong password. What is a potential drawback of such a password? A) It will be difficult to remember. B) It will be very short. C) It can be easily guessed. D) It will create IP address conflicts in networks. Answer: A 65) A password is said to be weak if it contains ___________. A) a complete dictionary word B) both upper- and lowercase letters C) the numbers 9 and 3 D) three special characters Answer: A 66) Which of the following passwords is the weakest? A) B33rmu9 B) Qw37^T1bb?as C) 3B47qq5!7bdE D) As60$T1dd?dc Answer: A 67) Which of the following passwords is the strongest? A) sword123 B) RileyyeliR C) paranoid4EVER D) [email protected] Answer: D 68) Which of the following techniques is best suited for creating memorable, strong passwords? A) using at least one dictionary word in the password B) repeating previously used passwords C) basing passwords on the first letter of the words in a phrase D) creating a password that is related to one's name or company's name Answer: C 69) Which of the following precautions should be taken to protect one's password? A) Do not base it on the first letter of the words in a phrase. B) Do not write it down or share it with others. C) Do not use virtual keyboards to enter it. D) Do not have multiple special characters in it. Answer: B 70) Which of the following statements on password etiquette is true? A) If someone asks for the password, do not just give it out. B) Always back up the password by writing it down. C) Never access an information system from a computer that is connected to the Internet. D) Never use the password more than three times a day. Answer: A 71) What should be done if someone needs to log into a user's account to solve a problem and asks for the user's password? A) The user should refuse to provide the password. B) The user should enter the password themselves. C) The user should say it out loud. D) The user should provide the password through an email. Answer: B 72) Strong passwords have a maximum of five characters. Answer: False 73) Good passwords contain a complete dictionary word. Answer: False 74) If a password is complex, it is ideal to write it on a piece of paper and keep it near the workstation. Answer: False 75) Moving away to let another user enter his or her password is a mark of professionalism. Answer: True 76) Users are advised not to share their password with others. Answer: True 77) What is the role of users in information security? Answer: Like all information systems, security systems have five components, including people. Thus, every security system ultimately depends on the behavior of its users. If the users do not take security seriously, if they do not follow security procedures, then the hardware, software, and data components of the security system are wasted expenses. Almost all security systems use user names and passwords. Users of information systems in a business organization will be instructed to create a strong password and to protect it. It is vitally important for users to do so. 78) Explain the characteristics of a strong password. Answer: The characteristics of a strong password are: 1. It should have 10 or more characters, 12 is even better. 2. It should not contain one's user name, real name, or company name. 3. It should not contain a complete dictionary word in any language. 4. It should be different from the previous passwords the user has used. 5. It should contain both upper- and lowercase letters, numbers, and special characters (such as ˜ ! @; # $ % ^; &; * ( ) _ +; — =; { } | [ ] : " ; ' ;? , . /). 79) How can a strong password be made memorable? Answer: One technique for creating memorable, strong passwords is to base them on the first letter of the words in a phrase. The phrase could be the title of a song or the first line of a poem or one based on some fact about one's life. For example, one can take the phrase, "I was born in Rome, New York, before 1990." Using the first letters from that phrase and substituting the character for the word before, one can create the password IwbiR,NY<1990. 80) Explain the necessary password etiquette to be followed by the users of an information system. Answer: Once users create a strong password, they need to protect it with proper behavior. Proper password etiquette is one of the marks of a business professional. Users should never write down their password, and should not share it with others. They should never ask others for their passwords. If, in a work-related or emergency situation, someone asks for the password, users are advised not to give it out. Instead, it is better for the user to get up, go over to that person's machine, and enter the password. Users should be present while their password is in use, and should ensure that their account is logged out at the end of the activity. Chapter 2 Business Processes, Information Systems, and Information 1) Members of a team in a company need to understand business processes since they need to evaluate new technologies. Answer: True 2) Creating an abstraction or model of their company's current process helps a team have an informed and better discussion about developing new business processes. Answer: True 3) A ___________ is a network of activities for accomplishing a business function. A) process capital B) task force C) business portfolio D) business process Answer: D 4) In the swimlane format, the specific tasks that need to be accomplished as part of a business process are known as ___________. A) decisions B) resources C) activities D) databases Answer: C 5) A ___________ is a subset of the activities in a business process that is performed by an actor. A) sequence flow B) resource C) swimlane D) role Answer: D 6) Activities within a business process are shown in ___________. A) circles B) rectangles with rounded corners C) squares D) diamonds with rounded corners Answer: B 7) According to the business process modeling notation standard, the start of a business process is symbolized by a ___________. A) circle having a thick border B) circle having a narrow border C) square having a thick border D) square having a narrow border Answer: B 8) Which of the following statements is true about roles in a business process? A) A role is the superset of the activities in a business process. B) Roles are grouped in swimlane diagrams according to the number of actors involved. C) The name of a role is written at the top of a swimlane. D) A particular role can be fulfilled by just one person. Answer: C 9) Which of the following statements is true of the swimlane format? A) It lists the names of actors on the top to specify individual roles. B) It specifies the tasks that need to be accomplished as part of a business process. C) It illustrates the flow of activities involved in a business process using grids. D) It uses numerals to indicate the start and end of a business process. Answer: B 10) According to the business process modeling notation, the end of a business process is symbolized by a ___________. A) circle having a thick border B) circle having a narrow border C) square having a thick border D) square having a narrow border Answer: A 11) A(n) ___________ is a collection of data that is stored within a business process. A) repository B) sequence flow C) activity D) resource Answer: A 12) ___________ represent the movement of data from one activity to another. A) Data charts B) Data buses C) Data modules D) Data flows Answer: D 13) According to the business process modeling notation standard, an activity with a boxed plus sign inside it indicates a ___________. A) subprocess B) data flow C) sequence flow D) data repository Answer: A 14) Which of the following statements is true about business process modeling notation? A) Sequence flows are indicated by dashed lines. B) Data flows are indicated by solid labeled lines. C) A circle with thin border represents a decision. D) The medium of data flow is represented by thick solid lines. Answer: D 15) A role is a subset of activities in a business process. Answer: True 16) Swimlane diagram is a graphical arrangement in which all the activities for a given role are shown in a single vertical lane. Answer: True 17) In some business cases, a role can be fulfilled by an information system. Answer: True 18) According to the business process modeling notation standard, the start of a business process is symbolized by a circle having a thick border. Answer: False 19) According to the business process modeling notation standard, the end of a business process is symbolized by a circle having a narrow border. Answer: False 20) According to the business process modeling notation standard, solid lines between activities are called sequence flows. Answer: True 21) A collection of files on the Internet is a repository. Answer: True 22) Data flows represent the movement of data from one activity to another. Answer: True 23) A repository can be printed records stored in a shoebox or a collection of files in the cloud. Answer: True 24) In a business process modelling notation diagram, the medium of data delivery is very important. Answer: False 25) What is a business process? How are business process modelling notations used in business processes? Answer: A business process is a network of activities for accomplishing a business function. The business process modelling notation is an international standard for creating business process diagrams. These notations are used in the constructing diagrams of business processes. 26) Briefly describe activities and roles in swimlane format. Answer: Swimlane format is a graphical arrangement in which all of the activities for a given role are shown in a single vertical lane. Each swimlane has activities, which are specific tasks that need to be accomplished as part of the process. A role is a subset of the activities in a business process that is performed by an actor, which is a person, group, department, organization, or information system. The name of the role is written at the top of a swimlane, not people's names. This is because a given role may be fulfilled by many people, or the organization may change the people who are assigned to a given role. 27) Briefly describe a repository. Answer: A repository is a collection of data that is stored within a business process. A repository can be a cardboard box, a notebook, a list, an Excel spreadsheet, a database, or even a collection of databases. For the purpose of documenting a business process, the particular medium in which repository data is stored is unimportant. 28) Briefly describe data flows. Answer: According to the business process modeling notation (BPMN), the labeled dashed lines are called data flows. They represent the movement of data from one activity to another. The data can be delivered via email, text message, over the phone, by fax, or by some other means. In a BPMN diagram, the medium of the data delivery is also unimportant. 29) ___________ is the ratio of benefits to costs. A) Effectiveness B) Efficiency C) Scalability D) Performance rating Answer: B 30) Which of the following statements is true of the dimensions to measure process quality? A) Process effectiveness is determined by the ratio of benefits to costs. B) An effective business process enables an organization to accomplish its strategy. C) If two versions of a business process create the same benefit, the higher cost version is more efficient. D) Cost of infrastructure is not included under cost of business process. Answer: B 31) The outermost components of the information systems framework ___________. A) can take action B) can be automated to reduce human intervention C) form a bridge between the human and computer sides D) represent sunk costs Answer: A 32) The software and procedure components of the information systems framework are ___________. A) actors B) sets of instructions C) the outermost components D) bridges between the human side and the computer side Answer: B 33) The ___________ component of the information systems framework provides instructions for people. A) procedure B) software C) hardware D) data Answer: A 34) In an information systems framework, ___________ is the bridge between the computer side on the left and the human side on the right. A) hardware B) software C) procedure D) data Answer: D 35) Which of the following components of an information system play the role of actors? A) software and people B) procedures and people C) data and people D) hardware and people Answer: D 36) When activities formerly done by people following procedures are moved to computers that perform the work by following instructions in software, the activities are said to be ___________. A) outsourced B) automated C) documented D) systematized Answer: B 37) Automation of a process activity consists of moving work from the ___________ of the symmetrical five-component framework. A) software side to the human side B) data side to the procedure side C) human side to the computer side D) software side to the hardware side Answer: C 38) Which of the following statements is true of using an information system to improve process quality? A) Information systems that are most user friendly are also most cost effective. B) Information systems are most effective at improving process quality if they are developed solely by technical personnel. C) Information systems can improve process efficiency but not process effectiveness. D) Information systems that are labor saving may not be efficient. Answer: D 39) Process effectiveness and process efficiency are the two dimensions in which the process quality can be measured. Answer: True 40) An effective business process enables an organization to accomplish its strategy. Answer: True 41) Effectiveness is the ratio of benefits to costs. Answer: False 42) An activity is considered to be automated when it is characterized by people following procedures. Answer: False 43) The outermost components of the symmetrical five-component framework of information systems are data and procedures. Answer: False 44) In the five-component framework of information systems, the actors are hardware and people. Answer: True 45) In the five-component framework of an information system (IS), data is the bridge between the computer side and the human side. Answer: True 46) In an information systems framework, data is considered to be a part of the computer side. Answer: False 47) In an information systems framework, software and procedure components are both sets of instructions. Answer: True 48) Procedures act as the bridge between the computer and human sides of the five-component framework of an information system (IS). Answer: False 49) Automation is the process in which the work is transferred from human side to computer side. Answer: True 50) Automation moves work from the software component to the hardware component. Answer: False 51) One of the major benefits of an information system is that it improves process quality. Answer: True 52) Information systems can improve process efficiency but not process effectiveness. Answer: False 53) Describe the process of automation against the background of the five-component framework of an information system. Answer: The five components of an information system are hardware, software, data, procedures, and people. They are arranged symmetrically in the framework. The outermost components, hardware and people, are both actors–they take action. The software and procedure components are both sets of instructions: Software is instructions for hardware, and procedures are instructions for people. Finally, data is the bridge between the computer side on the left and the human side on the right. When an activity in a business process is handled by an automated system, it means that work formerly done by people following procedures has been moved so that computers now do that work by following instructions in software. Thus, the automation of a process activity consists of moving work from the right-hand side of the five-component information system (IS) framework to the left. 54) Describe the benefits of using an information system to store vendor and product-related data. Answer: In order to select a vendor, a buyer has to gather data about vendors and products, make analyses of costs and margins, and store the results of those analyses. If an information system (IS) is not used to store these results, accessing past records and results will require a manual search. An IS makes the process of finding reliable data and reports faster and more reliable, improving the efficiency and quality of the business process. 55) ___________ is defined as recorded facts or figures. A) Information B) Substance C) Data D) Content Answer: C 56) John's height is 6 feet 3 inches. This is a type of ___________. A) data B) information C) procedure D) content Answer: A 57) The fact that Joe works nine hours per day is an example of ___________. A) sample B) content C) information D) data Answer: D 58) People can perceive different information from the same data. Answer: True 59) Repositories are collections of data. Answer: True 60) Data presented in a meaningful context is known as information. Answer: True 61) Information is data processed by grouping, comparing, or other similar operations. Answer: True 62) Data is knowledge derived from information. Answer: False 63) Average wage is knowledge that can be derived from the data of individual wages. Answer: True 64) Define information. Answer: The most common definition of information is that information is knowledge derived from data. It can also be defined as the data presented in a meaningful context. The data can be processed by summing, ordering, averaging, grouping, comparing, or other similar operations. 65) Explain data with an example. Answer: Data is defined as recorded facts or figures. Information is knowledge derived from data. The facts that an employee of an organization earns $17.50 per hour and that another employee of the same organization earns $25.00 per hour are examples of data. 66) Which of the following refers to information that is based on correct and complete data and has been processed correctly, as expected? A) relevant information B) measurable information C) accurate information D) timely information Answer: C 67) The effectiveness of new online ad programs needs to be evaluated based on the frequency at which a customer clicks those ads. Identify the most effective and efficient method to analyze this data. A) The click ratios must be tracked in real time. B) The data must be saved in batches and processed a few hours later. C) The clicks can be monitored for a short period of time and can be integrated for the total time. D) The sample time at which the maximum data is accumulated is assumed to prevail for the entire cycle. Answer: B 68) Which of the following is a characteristic of good data? A) It must be available in the cloud storage. B) It must be more than just barely sufficient. C) It must be based on incomplete data. D) It must be contextually relevant. Answer: D 69) Which of the following statements is true about data characteristics of quality information? A) Information systems that produce real-time data are less expensive than those that produce data at a later time. B) The timeliness of information can be measured against events. C) Accurate information can be conceived from inaccurate data. D) Data that appears on any Web page is reliable. Answer: B 70) Which of the following information is good information for the CEO of a call center? A) hourly variance reports of performance parameters in each queue B) daily report of calls attended by each employee C) real-time information about the average time spent per call by employees D) department-level averages of revenue generation figures Answer: D 71) ___________ information is information that directly pertains both to the context and to the subject. A) Timely B) Relevant C) Measurable D) Expensive Answer: B 72) Which of the following statements is true regarding the characteristics of good information? A) Information needs to be more than just barely sufficient for the purpose for which it is generated. B) Information must hold an appropriate relationship between its cost and value. C) Accurate information can be based on incomplete data. D) Good information is just recorded facts and figures. Answer: B 73) As long as information is relevant and timely, it need not always be complete. Answer: False 74) Data delivered with active graphics need not be cross-checked for accuracy. Answer: False 75) Accurate information is based on correct and complete data, and has been processed correctly. Answer: True 76) Users develop work-arounds when data from an information system is unreliable. Answer: True 77) Timeliness of information can be measured against a calendar. Answer: True 78) The quality of thinking determines the quality of the information that is produced. Answer: True 79) Data needs to be sufficient for the purpose for which it is generated, but just barely so. Answer: True 80) Accurate data should be relevant both to the context and to the subject. Answer: True 81) All data about an organization are relevant to the higher management. Answer: False 82) For data to be worth its cost, an appropriate relationship must exist between the cost of data and its value. Answer: True 83) Information systems should not be subject to the same financial analyses to which other assets are subjected. Answer: False 84) Describe accurate information. Why does an information system that provides accurate information crucial to an organization? Answer: Good information is accurate information, which is based on correct and complete data, and it has been processed correctly as expected. Accuracy is crucial; business professionals must be able to rely on the results of their information systems. The IS function can develop a bad reputation in an organization if a system is known to produce inaccurate data. In such a case, the information system becomes a waste of time and money as users develop work-arounds to avoid the inaccurate data. 85) Explain the importance of timeliness of information in an organization. Answer: Good information requires that data be available in time for its intended use. A monthly report that arrives six weeks late is most likely useless. In such a case, the data has arrived long after the decisions that needed that information have been made. An information system that sends a poor customer credit report after the goods have been shipped is unhelpful and frustrating. Timeliness can be measured against a calendar (six weeks late) or against events (for example, before shipping). 86) In some cases, developing systems that provide data in near real time is much more difficult and expensive than producing data a few hours later. Provide an example that supports this statement. Answer: A person who works in marketing needs to be able to assess the effectiveness of new online ad programs. He or she wants an information system that will not only deliver ads over the Web, but one that will also enable him or her to determine how frequently customers click on those ads. In this case, determining click ratios in near real time will be very expensive; saving the data in a batch and processing it some hours later will be much easier and cheaper. If the user can manage with data that is a day or two old, the system will be easier and cheaper to implement. 87) Describe relevant data. Explain the importance of relevant data in an organizational context. Answer: Relevant data is data that directly pertains to both the context and the subject. Considering context, a CEO needs data that is summarized to an appropriate level for his or her job. A list of the hourly wage of every employee in the company is unlikely to be useful. More likely, the CEO needs average wage information by department or division. A list of all employee wages is irrelevant in this context. Data should also be relevant to the subject at hand. If data about short-term interest rates is required to find a possible line of credit, then a report that shows 15-year mortgage interest rates is irrelevant. 88) Why is it important for data to be just barely sufficient? Answer: Data needs to be sufficient for the purpose for which it is generated, but just barely so. People are inundated with data; one of the critical decisions that people make each day is what data to ignore. The higher one rises into management, the more data one will be given, and because there is only so much time, the more data one will need to ignore. So data should be sufficient, but just barely. 89) What are the costs associated with data? When is data considered to be worth its cost? Answer: Data is not free. There are costs for developing an information system, costs of operating and maintaining that system, and costs of time and salary for reading and processing the data the system produces. For data to be worth its cost, an appropriate relationship must exist between the cost of data and its value. Chapter 3 Organizational Strategy, Information Systems, and Competitive Advantage 1) The competitive strategy of an organization determines its ___________. A) industry rivals B) functions C) value chains D) strategic alliances Answer: C 2) The competitive strategy followed by an organization is derived from the ___________ of its industry. A) function B) structure C) profits D) goals Answer: B 3) Competitive strategy determines an organization's value chain. Answer: True 4) Briefly describe how organizational strategy determines the functions of information systems. Answer: Organizations examine the structure of their industry and, from that, develop a competitive strategy. This strategy determines value chains, which, in turn, determine business processes. The nature of business processes determines the requirements and functions of information systems. 5) Porter developed the five forces model to help organizations determine the ___________. A) potential profitability of an industry B) services of an industry C) reason for the collapse of certain industries D) means for improving resource utilization Answer: A 6) Which of the following statements describes suppliers in a position of strong bargaining power? A) coffee planters during a season of frost that decreases production B) domestic suppliers of corn in the event of removal of import duties on corn C) providers of logistic support when fuel prices have been reduced D) temporary part-time gym instructor Answer: A 7) Simpson's Lawn Services decides to offer two free mowing services for all customers who booked garden landscaping in the fall. Which of the following forces is Simpson's Lawn Services addressing? A) the control exercised by Acme Corp., who supplies Simpson's with lawn mowers B) the power held by the landlord of the Simpson's office space C) the threat posed by Roger's Landscapes, a new competitor D) the bargaining power of the City Football Club who are Simpson's customers Answer: C 8) Porter's five competitive forces can be grouped into two types: forces related to ___________ and forces related to supply chain bargaining power. A) pricing B) labor C) competition D) consumers Answer: C 9) The bargaining power of ___________ is one of the five competitive forces in Porter's five forces model. A) investors B) competitors C) employees D) customers Answer: D 10) In Porter's five forces model, each of the three competitive forces concerns the danger of ___________. A) suppliers favoring rival companies B) customers taking their business elsewhere C) investors refusing to back new projects D) employees not working toward organizational goals Answer: B 11) In Porter's five forces model, the two strength factors that relate to competitive forces are ___________ and customer loyalty. A) employee unions B) nature of products C) customer services D) switching costs Answer: D 12) In which of the following cases is the strength of competitive forces low? A) when switching costs are high B) when the prices of rival products are relatively high C) when customers are not loyal to the existing company or brand D) when finding rival products is difficult Answer: A 13) If the price of an alternative is lower than the price of the existing product, and customers perceive similar benefits from both the products, then the ___________. A) switching cost is high B) price of the product should be increased to retain market share C) threat from the substitute is strong D) customers' bargaining power decreases Answer: C 14) Which of the following is true if the threat from a substitute is strong? A) Customers are likely to switch to competitors' products. B) Competitors' products are of a lower quality. C) Competitors are yet to overcome the entry barriers. D) Prices of competitors' products are higher. Answer: A 15) Which of the following is true about new entrants? A) They have strong customer loyalty. B) They will have records on customers' purchase habits. C) They are yet to develop relationships with suppliers. D) They can lock in suppliers to gain a competitive advantage. Answer: C 16) The strength of bargaining power forces depends on the availability of substitutes and ___________ compared to the size of suppliers or customers. A) the amount of profit made annually B) the relative size of the firm C) the production capacity D) the relative size of the employee union Answer: B 17) Which of the following statements describes a scenario in which the bargaining power of a supplier is strong? A) Competitors have decreased demand for raw materials. B) The availability of raw materials is limited. C) The supplier has excess inventory. D) There are many suppliers providing the same raw materials for comparable prices. Answer: B 18) The bargaining power of a customer is weak if ___________. A) the availability of a rival product is limited B) the cost of switching to a substitute is low C) competitors offer products with same benefits at lower prices D) new entrants are offering a product that uses more recent technology Answer: A 19) Porter originally developed the five forces model in order to understand organizations' workforce. Answer: False 20) According to Porter's five forces model, a company is profitable if all the five competitive forces are strong. Answer: False 21) Porter identified the bargaining power of competitors as one of the competitive forces. Answer: False 22) The three competitive forces in Porter's model concern the danger of customers taking their business elsewhere. Answer: True 23) If the costs of switching to another vendor are high, then the strength of the competitive forces is low. Answer: True 24) The strength of bargaining power forces does not depend on the availability of substitutes. Answer: False 25) Typically, as an individual, a customer has substantial bargaining power over a large manufacturing industry. Answer: False 26) Availability of substitutes plays a role in determining the bargaining power of suppliers. Answer: True 27) Vendor knowledge and vendor relationships serve as a barrier to entry for new competitors. Answer: True 28) Describe Porter's five forces model. Answer: Organizational strategy begins with an assessment of the fundamental characteristics and structure of an industry. Porter developed the five forces model to help organizations determine the potential profitability of an industry. Over the years, this model has also been applied to understand organizations' competitive environments. Porter's five competitive forces can be grouped into two types: forces related to competition and forces related to supply chain bargaining power. The competitive forces include competition from vendors of substitutes, competition from new competitors, and competition from existing rivals. The bargaining power forces include the bargaining power of suppliers and the bargaining power of customers. The intensity of each of the five forces determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be. Organizations examine these five forces and determine how they intend to respond to them. This examination leads to development of competitive strategies. 29) An organization responds to the structure of its industry by choosing a ___________ strategy. A) competitive B) growth C) leadership D) diversification Answer: A 30) Which of the following competitive strategies does a company follow if it produces a uniquely formulated anti-ageing face cream targeted at women above the age of forty? A) providing the lowest cost across the industry B) providing a better product across the industry C) focusing on lowering the cost within an industry-segment D) focusing on product differentiation within an industry-segment Answer: D 31) A firm introduces a new range of laptops that concentrate on delivering good graphics performance. Which of the following competitive strategies has the firm adopted if these laptops have relatively low prices? A) focused differentiation B) focused low cost C) industry-wide differentiation D) industry-wide low cost Answer: B 32) Which of the following is an example of a competitive strategy employed by a firm? A) increasing the price of its product when raw material prices increase B) laying off staff in order to cut down costs during a recession period C) advertising its products nationwide like its competitor organizations D) launching a unique product targeted at a section of consumers Answer: D 33) According to Porter, to be effective, an organization's goals, objectives, culture, and activities must be consistent with the organization's ___________. A) functions B) competitors C) strategy D) workforce Answer: C 34) An organization can choose to either minimize cost or maximize differentiation to gain a competitive advantage. Answer: True 35) Focused differentiation is a strategy in which a product is unique and is used by a wide range of consumers. Answer: False 36) According to Porter, to be effective an organization's goals, objectives, cultures, and activities must be consistent with the organization's strategy. Answer: True 37) What are the four competitive strategies based on Porter's five forces model? Answer: An organization responds to the structure of its industry by choosing a competitive strategy. Porter defined four fundamental competitive strategies. According to Porter, a firm can engage in one of these four fundamental competitive strategies. An organization can focus on being the cost leader, or it can focus on differentiating its products from those of the competition. Further, an organization can employ the cost or differentiation strategy across an industry, or it can focus its strategy on a particular industry segment. To be effective, the organization's goals, objectives, culture, and activities must be consistent with the organization's strategy. 38) Porter defined ___________ as the amount of money that a customer is willing to pay for a resource, product, or service. A) margin B) profit C) price D) value Answer: D 39) Which of the following is true of a value chain? A) It is a network of value-creating activities. B) It consists of only primary activities. C) It is specific to manufacturing industries. D) It nullifies the importance of support activities. Answer: A 40) A business that selects a differentiation strategy ___________. A) adds cost to an activity, provided it has a positive margin B) provides essential functions at lowest costs C) imitates rival companies' strategy and products D) always tries to price its products' higher than its competitors' products Answer: A 41) The difference between the value that an activity generates and the cost of the activity is called the ___________. A) equity B) liability C) overhead D) margin Answer: D 42) Which of the following primary activities describes collecting, storing, and physically distributing products to buyers? A) customer service B) sales and marketing C) outbound logistics D) operations/management Answer: C 43) Which of the following primary value chain activities induce buyers to purchase a product and provide a means for them to do so? A) inbound logistics B) sales and marketing C) outbound logistics D) operations/management Answer: B 44) Which of the following statements describes a customer service activity? A) receiving and storing materials B) transforming customers' inputs into the final product C) inducing buyers to purchase the product D) assisting customers with the use of the product Answer: D 45) Which of the following is true of supporting activities? A) Their contribution toward a product's value is negligible. B) Their contributions to margin can be calculated easily. C) Customer service is considered as a supporting activity. D) Negotiation of prices is considered as a supporting activity. Answer: D 46) Each stage of the value chain not only adds value to the product but also ___________. A) improves supplier relationships B) accumulates costs C) devalues the final product D) attracts competitors Answer: B 47) Which of the following is a primary activity in the value chain? A) process of finding vendors B) setting up contractual arrangements C) negotiating prices D) delivering products to consumers Answer: D 48) ___________ includes general management, finance, accounting, legal, and government affairs. A) Human resources B) Research and development C) Firm infrastructure D) Operations management Answer: C 49) Porter's model of business activities includes ___________, which are interactions across value activities. A) linkages B) evaluations C) iterations D) operations Answer: A 50) A manufacturing system uses sales forecasts to plan production. It uses the production plan to determine raw material needs and then uses the material needs to schedule purchases. This ultimately leads to reduced inventory costs. Which of the following is being used to reduce the inventory cost? A) linkages B) margins C) competitive strategy D) support activities Answer: A 51) Organizations analyze the structure of their industry and use that analysis to formulate a competitive strategy. Answer: True 52) A business that selects a differentiation strategy will always structure itself around least-cost activities. Answer: False 53) The difference between the value that an activity generates and the cost of the activity is called the margin. Answer: True 54) Customer service falls under the category of supporting activities in a value chain. Answer: False 55) Procurement falls under the category of primary activities in a value chain. Answer: False 56) Porter's definition of technology is narrow because it includes only research and development. Answer: False 57) Support activities are business functions that relate directly to the production of the organization's products or services. Answer: False 58) A business with a differentiation strategy will add cost to an activity only as long as the activity has a positive margin. Answer: True 59) Each stage of the generic value chain accumulates costs and reduces the value of the product. Answer: False 60) The support activities in the generic value chain facilitate the primary activities and contribute only indirectly to the production, sale, and service of the product. Answer: True 61) Receiving, storing, and disseminating inputs to a product is an operations management activity. Answer: False 62) A company uses the outbound logistics activity to deliver the finished product to a customer. Answer: True 63) Porter's model of business activities includes linkages, which are interactions across value activities. Answer: True 64) Firm infrastructure excludes general management, finance, accounting, legal, and government affairs. Answer: False 65) It is easier to calculate the margin of supporting activities. Answer: False 66) Value chain analysis has a direct application to manufacturing businesses. Answer: True 67) Manufacturing systems avoid linkages to reduce inventory costs. Answer: False 68) Value chains exist in service-oriented companies. Answer: True 69) Inbound and outbound logistics are the primary value generators in a service-oriented company. Answer: False 70) How does competitive strategy determine value chain structure? Answer: Porter defined value as the amount of money that a customer is willing to pay for a resource, product, or service. A value chain is a network of value-creating activities. Organizations analyze the structure of their industry and formulate a competitive strategy using that analysis. They then need to organize and structure the organization to implement that strategy. If, for example, the competitive strategy is to be a cost leader, then business activities need to be developed to provide essential functions at the lowest possible cost. A business that selects a differentiation strategy would not necessarily structure itself around least-cost activities. Instead, such a business might choose to develop more costly systems, but it would do so only if those systems provided benefits that outweighed their risks. 71) Distinguish between a primary and a support activity in the value chain. Answer: Primary activities are business functions that relate directly to the production of an organization's products or services. Primary activities include inbound logistics, operations, customer service, and sales and marketing. These activities add value to a product. Support activities are business functions that assist and facilitate the primary activities. Supporting functions add value to a product indirectly. They also have costs and contribute to a margin. It is difficult to calculate their margins because the specific value added is difficult to measure. 72) Differentiate between value and margin. Answer: Porter defined value as the amount of money that a customer is willing to pay for a resource, product, or service. The difference between the value that an activity generates and the cost of the activity is called the margin. A business with a differentiation strategy will add cost to an activity only as long as the activity has a positive margin. 73) Describe the primary activities in a value chain using an example. Answer: In a bicycle manufacturing unit, the primary activities of a value chain are followed. The manufacturer acquires raw materials using the inbound logistics activity. This activity concerns the receiving and handling of raw materials and other inputs. The accumulation of those materials adds value in the sense that even a pile of unassembled parts is worth something to some customer. A collection of the parts needed to build a bicycle is worth more than an empty space on a shelf. The value is not only the parts themselves but also the time required to contact vendors for those parts, to maintain business relationships with those vendors, to order the parts, to receive the shipment, and so forth. In the operations activity, the bicycle maker transforms raw materials into a finished bicycle, a process that adds more value. Next, the company uses the outbound logistics activity to deliver the finished bicycle to a customer. Of course, there is no customer to send the bicycle to without the marketing and sales value activity. Finally, the service activity provides customer support to the bicycle users. 74) What is a value chain? List the primary activities in a value chain. Answer: A value chain is a network of value-creating activities. The generic value chain developed by Porter consists of five primary activities and four support activities. Primary activities are business functions that relate directly to the production of the organization's products or services. The primary activities are: a. Inbound logistics—deals with receiving, storing, and disseminating inputs to the product. b. Operations—involves transforming inputs into the final product. c. Outbound logistics—deals with collecting, storing, and physically distributing the product to buyers. d. Marketing and sales—involves inducing buyers to purchase the product and providing a means for them to do so. e. Customer service—involves assisting customer's use of the product and thus maintaining and enhancing the product's value. 75) Explain value chain linkages. Answer: Porter's model of business activities includes linkages, which are interactions across value activities. For example, manufacturing systems use linkages to reduce inventory costs. Such a system uses sales forecasts to plan production; it uses the production plan to determine raw material needs and then uses the material needs to schedule purchases. The end result is just-in-time inventory, which reduces inventory sizes and costs. Value chain analysis has a direct application to manufacturing businesses and also exists in service-oriented companies. 76) How did Porter define technology, human resources, and firm infrastructure? Answer: Porter defined technology broadly. It includes research and development, but it also includes other activities within the firm for developing new techniques, methods, and procedures. Human resources include recruiting, compensation, evaluation, and training of full-time and part-time employees. Firm infrastructure includes general management, finance, accounting, legal, and government affairs. 77) Describe the support activities in a value chain. Answer: Support activities are business functions that assist and facilitate the primary activities. The support activities in the generic value chain facilitate the primary activities and contribute only indirectly to the production, sale, and service of the product. They include procurement, which consists of the processes of finding vendors, setting up contractual arrangements, and negotiating prices. Porter defined technology broadly. It not only includes research and development, but it also includes other activities within the firm for developing new techniques, methods, and procedures. Human resources includes recruiting, compensation, evaluation, and training of full-time and part-time employees. Firm infrastructure includes general management, finance, accounting, legal, and government affairs. Supporting functions add value, albeit indirectly, and they also have costs. 78) According to Porter, the processes and systems in an organization pursuing differentiation strategy must ___________ to avoid negative margins. A) create sufficient value to cover their costs B) provide products at lowest costs to customers C) develop and adopt new technologies D) increase procurement Answer: A 79) Which of the following statements is true of business processes? A) If a value chain's margin is negative, the value should be decreased. B) Value chain activities differ based on the business processes being used. C) If a value chain's margin is negative, the costs of the value chain should be increased. D) The processes implementing a value chain must create sufficient value to cover their costs. Answer: D 80) Business processes implement value chains or portions of value chains. Answer: True 81) Each value chain is supported by one or more business processes. Answer: True 82) Value chain activities are not dependent on the competitive strategies used by organizations. Answer: True 83) Two companies with the same value chain activities will have the same business processes. Answer: False 84) If a value chain's margin is negative, the company must reduce the cost of the value chain. Answer: True 85) What is the criterion on which business processes should run? Answer: According to Porter, whether business processes are low-cost or high-service, these processes and systems used must create sufficient value that they will more than cover their costs. If not, the margin of those systems will be negative. If a value chain's margin is negative, the company must make some change. Either the value must be increased, or the costs of the value chain need to be reduced. 86) Which of the following is a product implementation principle of competitive advantage? A) raise barriers to market entry B) enhance existing products or services C) establish alliances with other organizations D) lock in customers and buyers Answer: B 87) Which of the following strategies is also called establishing high switching costs? A) increasing production B) locking in suppliers C) reducing output D) locking in customers Answer: D 88) Which of the following is a process implementation principle of competitive advantage? A) creating a new product B) enhancing existing services C) establishing alliances with other organizations D) differentiating a service Answer: C 89) Which of the following is least likely to be an outcome of organizations forming alliances with each other? A) promotion of product awareness B) development of market size C) establishment of standards D) increment of purchasing costs Answer: D 90) Jupiter Shop is an online store. Customers have to create an online account to purchase products. The purchased products are delivered free of cost. The address of delivery is stored, so that customers can choose the same address for future purchases. Jupiter Shop features seasonal discounts and exchange offers. It also accumulates redeemable points for regular shoppers. Which of the following statements describes the use of information systems (IS) by Jupiter Shop to lock in customers? A) providing free home delivery B) saving the delivery addresses C) offering seasonal discounts D) collecting feedback online Answer: B 91) An information system can be part of a product, but it cannot provide support for a product or service. Answer: False 92) Raising barriers to market entry is a product implementation principle. Answer: False 93) Establishing alliances with other organizations promotes product awareness. Answer: True 94) Enhancing existing products and services is a competitive advantage created by the implementation of business processes. Answer: False 95) How can one develop competitive strategies using products? How can information systems help in the process? Answer: Some competitive techniques are created through products and services, while some are created through the development of business processes. There are three principles that concern products and services. Organizations gain a competitive advantage by creating new products or services, by enhancing existing products or services, and by differentiating their products and services from those of their competitors. An information system can be part of a product or it can provide support for a product or service. 96) Describe some competitive advantage strategies that are based on business processes. Answer: Some of the competitive strategies that are based on business processes include: 1. Locking in customers—organizations can lock in customers by making it difficult or expensive for customers to switch to another product. This strategy is also called establishing high switching costs. 2. Locking in suppliers—organizations can lock in suppliers by making it difficult to switch to another organization, or, stated positively, by making it easy to connect to and work with the organization. 3. Creating entry barriers—competitive advantage can be gained by creating entry barriers that make it difficult and expensive for new competition to enter the market. 4. Establishing alliances—another means to gain competitive advantage is to establish alliances with other organizations. Such alliances establish standards, promote product awareness and needs, develop market size, reduce purchasing costs, and provide other benefits. 5. Reducing costs—organizations can gain competitive advantage by creating better business processes at reduced costs. Such reductions enable the organization to reduce prices and/or to increase profitability. Test Bank for Experiencing MIS David Kroenke, Randall Boyle 9780133939132, 9781292107707, 9780134773636, 9780136509868, 9780136078685, 9781486019281, 9780132157940
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