Page 628 - Introduction to Business

602 PART 6 Managing Business Operations, Management Information Systems, and the Digital Enterprise

they use information from external sources, such as interest rates and pricing
from competitors. For example, a decision-support system could help Sony decide
on its optimal product mix: How many units of each product should be produced
monthly for next year? As another example, McDonald’s could use a decision-
support system to predict the effect of a promotion strategy on its market share.
Decision-support systems contain a variety of models to analyze data, and they
can condense large amounts of data into a format that is useful for middle man-
agers. These systems are interactive and have user-friendly software. Using a
decision-support system involves four basic types of analytical modeling activi-
ties: what-if analysis, sensitivity analysis, goal-seeking analysis, and optimization
analysis.
what-if analysis A modeling activity in a In what-if analysis, the value of one or more variables is changed to observe the
decision-support system where the effect on one or more other variables of interest. For example, the user may change
value of one or more variables is the value of production lot sizes to observe the effect on production lead times.
changed to observe the effect on one or
more other variables of interest In sensitivity analysis, the what-if analysis is used repeatedly to establish a
sensitivity analysis A modeling activity range where the variables of interest do not change. For example, we may use
in a decision-support system where sensitivity analysis to conclude that as long as the price of a product is in the range
what-if analysis is used repeatedly to $150 to $200, the sales level of the product will not change. Thus we may say
establish a range where the variables of
interest do not change that the sales level for this product is insensitive to prices in the range $150 to
$200.
goal-seeking analysis A modeling
activity in a decision-support system In goal-seeking analysis, a target for the variables of interest is set and then the
where a target for a variable or values of other variables are changed until the target is achieved. For example, we
variables of interest is set and then the
values of other variables are changed may specify a sales level of $10 million dollars, and then the values of prices and
until the target is achieved advertising budgets would be changed until the sales level is reached.
optimization analysis A modeling Optimization analysis finds the optimal, maximum or minimum, value of one
activity in a decision-support system or more variables by changing the values of one or more other variables, which are
that tries to find the optimal, maximum typically subject to constraints. For example, we may find the production levels of
or minimum, value of one or more
variables by changing the values of one different products such that the total profit is maximized, where the production
or more other variables, which are levels are constrained by production capacity and demand. Optimization analysis
typically subject to constraints
relies on sophisticated mathematic techniques such as linear and nonlinear
programming.

Information Systems for Senior Managers
Senior mangers are concerned with strategic issues and long-term trends inside the
firm and in the external environment. These managers develop overall organiza-
tional goals and objectives to assure that the company can survive and be success-
ful in a competitive environment. The information systems for senior managers are
executive information systems called executive information systems, and they support non-routine, unstruc-
Information systems for senior tured decisions requiring judgment, evaluation, and insight. Executive information
managers that support nonroutine,
unstructured decisions requiring systems combine the features of managerial information systems and decision-
judgment, evaluation, and insight support systems, but they tend to make less use of analytical modeling. Instead
they filter, compress, and track critical data and employ the most-advanced graph-
ics software to minimize the time and effort required from senior managers. For
example, senior managers of DaimlerChrysler could use an executive information
system to assist them in answering the questions, Should we launch a new product
line? What is the competition doing? Should we sell one of our business units?
Should we consolidate or expand our existing manufacturing facilities? Executive
information systems have drill down capabilities, which allow senior managers to
access related information at lower levels of detail.

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