Business Information System Md Rashedul Hasan Southern University
Business Information System Md. Rashedul Hasan Southern University Bangladesh.
Why Information Systems? Ask managers to describe their most important resources and they'll list money, equipment, materials, and people — not necessarily in that order. It's very unusual for managers to consider information an important resource, and yet it is. As electronic business and electronic commerce grow in popularity and more firms digitize their operations, having useful information is becoming even more important to the global business community. This chapter will begin to explain why you need to manage your information resources as closely as any other in your organization.
A Business Perspective on Information Systems Information systems are more than just technology. Businesses invest in IS in order to create value and increase profitability. Information systems are an organizational and management solution to business challenges that arise from the business environment. Based on information technology but also require significant investment in organizational and management changes and innovations IS create value primarily by changing business processes and management decision making.
A Business Perspective on Information Systems
What Is an Information System? From the Technology perspective A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization
Data Streams of raw facts representing events such as business transactions Data is the input Think of data as a "raw material" - it needs to be processed before it can be turned into something useful. Data comes in many forms - numbers, words, symbols. Data relates to transactions, events and facts.
Information is data that has been processed in such a way as to be meaningful to the person who receives it. Information: Clusters of facts meaningful and useful to human beings in the processes such as making decisions Information is the output.
Uses of Information in a Business Use Description Planning To plan properly, a business needs to know what resources it has (e. g. cash, people, machinery and equipment, property, customers). It also needs information about the markets in which it operates and the actions of competitors. At the planning stage, information is important as a key ingredient in decision-making. Recording Information about each transaction or event is needed. Much of this is required to be collected by law - e. g. details of financial transactions. Just as importantly, information needs to be recorded so that the business can be properly managed. Controlling Once a business has produced its plan it needs to monitor progress against the plan - and control resources to do so. So information is needed to help identify whether things are going better or worse than expected, and to spot ways in which corrective action can be taken Measuring Performance must be measured for a business to be successful. Information is used as the main way of measuring performance. For example, this can be done by collecting and analyzing information on sales, costs and profits Decision-making Information used for decision-making is often categorized into three types: (1) Strategic information: used to help plan the objectives of the business as a whole and to measure how well those objectives are being achieved. Examples of strategic information include: - Profitability of each part of the business - Size, growth and competitive structure of the markets in which a business operates - Investments made by the business and the returns (e. g. profits, cash inflows) from those investments (2) Tactical Information: this is used to decide how the resources of the business should be employed. Examples include: - Information about business productivity (e. g. units produced per employee; staff turnover) - Profit and cash flow forecasts in the short term - Pricing information from the market (3) Operational Information: this information is used to make sure that specific operational tasks are carried out as planned/intended (i. e. things are done properly). For example, a production manager will want information about the extent and results of quality control checks that are being carried out in the manufacturing process.
Sources of data and information: Internal Information • Accounting records are a prime source of internal information. They detail the transactions of the business in the past - which may be used as the basis for planning for the future (e. g. preparing a financial budget or forecast). The accounting records are primarily used to record what happens to the financial resources of a business. For example, how cash is obtained and spent; what assets are acquired; what profits or losses are made on the activities of the business. However, accounting records can provide much more than financial information. For example, details of the products manufactured and delivered from a factory can provide useful information about whether quality standards are being met. • Data analyzed from customer sales invoices provides a profile of what and to whom products are being sold. • A lot of internal information is connected to accounting systems - but is not directly part of them. For example:
Records of the people employed by the business (personal details; what they get paid; skills and experience; training records) Data on the costs associated with business processes (e. g. costing for contracts entered into by the business) Data from the production department (e. g. number of machines; capacity; repair record) Data from activities in direct contact with the customer (e. g. analysis of calls received and missed in a call centre) A lot of internal information is also provided informally. For example, regular meetings of staff and management will result in the communication of relevant information.
Sources of data and information : External Information As the term implies, this is information that is obtained from outside the business. There are several categories of external information: - Information relating to way a business should undertake its activities E. g. businesses need to keep records so that they can collect taxes on behalf of the government. So a business needs to obtain regular information about the taxation system (e. g. PAYE, VAT, Corporation Tax) and what actions it needs to take. Increasingly this kind of information (and the return forms a business needs to send) is provided in digital format. Similarly, a business needs to be aware of key legal areas (e. g. environmental legislation; health & safety regulation; employment law). There is a whole publishing industry devoted to selling this kind of information to businesses.
Information about the markets in which a business operates This kind of external information is critically important to a business. It is often referred to as "market" or "competitive intelligence". Most of the external information that a business needs can be obtained from marketing research. Marketing research can help a business do one or more of the following: 1. Gain a more detailed understanding of consumers’ needs – marketing research can help firms to discover consumers’ opinions on a huge range of issues, e. g. , views on products’ prices, packaging, recent advertising campaigns 2. 2. Reduce the risk of product/business failure – there is no guarantee that any new idea will be a commercial success, but accurate and up-todate information on the market can help a business make informed decisions, hopefully leading to products that consumers want in sufficient numbers to achieve commercial success.
• 3. Forecast future trends – marketing research can not only provide information regarding the current state of the market but it can also be used to anticipate customer needs future customer needs. Firms can then make the necessary adjustments to their product portfolios and levels of output in order to remain successful.
The information for marketing research tends to come from three main sources: • Internal Company Information – e. g. sales, orders, customer profiles, stocks, customer service reports • Marketing intelligence – this is a catch-all term to include all the everyday information about developments in the market that helps a business prepare and adjust its marketing plans. It can be obtained from many sources, including suppliers, customers and distributors. It is also possible to buy intelligence information from outside suppliers (e. g. Mintel, Dun and Bradstreet) who will produce commercial intelligence reports that can be sold profitably to any interested organization. • Market Research – existing data from internal sources may not provide sufficient detail. Similarly, published reports from market intelligence organizations cannot always be relied upon to provide the up-to-date, relevant information required. In these circumstances, a business may need to commission specific studies in order to acquire the data required to support their marketing strategy.
Components of an information system
Why Information Systems Matter There are four reasons why IT makes a difference to the success of a business: Capital management Foundation of doing business Productivity Strategic opportunity and advantage
Capital Management: • IT is the largest single component of capital investment in the United States. • About $1. 8 trillion is spent each year by American businesses. • Managers and business students need to know how to invest this capital wisely. • The success of your business in the future may well depend on how you make IT investment decisions.
Foundation of doing business: • Most businesses today could not operate without extensive use of information systems and technologies. • The local restaurant probably manages their lunchtime crowds using hand-held devices that allow the waiter or waitress to communicate menu orders directly to the kitchen. • The rental car company uses information technology to track not only customer orders but may also use global positioning systems that relay the exact position of every car wherever it is.
Productivity: • IT is one of the most important tools managers have to increase productivity and efficiency of businesses. • According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0. 5 to 1% in the last decade. For firms this means IT is a major factor in reducing costs. • It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For firms this means IT is a major source of labor and capital efficiency.
Strategic Opportunity and Advantage: Create competitive advantage: IT makes it possible to develop competitive advantages. New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-order business model that other firms have not been able to imitate. Create new services: e. Bay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success. Differentiate yourself from your competitors: Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.
What is digital firm? Characteristics of the Digital firm When a firm goes digital, it's not about just adding a computer system to the mix. Throwing a computer system at outdated business processes is exactly the wrong thing to do. A truly digital firm has several characteristics that distinguish it from most of the firms claiming to be digitized: Characteristics: Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks and span the entire organization Key corporate assets are managed digitally internal and external environments are quickly recognized and dealt with And the number one reason digital firms experience greater opportunities for success and profits is because they view information technology as the "core of the business and the primary management tool. "
Dimensions of Information Systems There are three basic dimensions of information systems.
Organizations • organizations exist everywhere, and each has its own structure, just as workplace organizations have structures and personalities to fit their needs, or in some cases, their old habits. • A baseball team needs talented, well-trained players at different positions. Sometimes, the success of the team depends on a good, well-informed coach or manager. So too with the workplace organization. Business organizations have their major business functions, which need many kinds of players with various talents, who are well-trained and well-informed, in order to succeed. • The larger the organization, the more formal the management structure, including the need for standard operating procedures (SOPs). SOPs can help streamline standard business processes so that managers and employees can properly complete their tasks in a more efficient manner. Many companies now integrate these business processes into their information systems to ensure uniformity, consistency, and compliance. As we'll see in upcoming chapters, many companies are even incorporating the informal work processes into their information systems in an effort to capture as much corporate knowledge as possible. • Just as every baseball team needs good players at different positions, a business organization requires different employees to help it succeed. Knowledge workers help create new knowledge for the organization and data workers help process the paperwork necessary to keep an organization functioning. Without production or service workers, how would the company get its products and services to the customer?
Management • Every good organization needs good managers. Pretty simple, pretty reasonable. Take professional baseball managers. They don't actually play the game; they don't hit the home run, catch the fly ball for the last out, or hang every decoration for the celebration party. They stay on the sidelines during the game. Their real role is to develop the game plan by analyzing their team's strengths and weaknesses. But that's not all; they also determine the competition's strengths and weaknesses. Every good manager has a game plan before the team even comes out of the locker room. That plan may change as the game progresses, but managers pretty much know what they're going to do if they are losing or if they are winning. • The same is true in workplace organizations. In every organization you'll find senior managers making long-range decisions, middle managers carrying out the plans and goals set by senior managers, and operational managers handling the day-to-day operations of the company. As we'll see, information systems output must be geared to each of these levels of management.
Technology The World Wide Web allows big companies to act "small” and small companies to act "big. " It has leveled the playing field so entrepreneurs can break into new markets previously closed to them. A Web site, consisting of a few pages or hundreds of pages, enables businesses to get close and stay close to their customers in new ways. It is truly a revolution in our global economy.
The Challenge of Information Systems: Key Management Issues 1. The Information Systems Investment Challenge: Too often managers look at their technological investments in terms of the cost of new hardware or software. They overlook the costs associated with the non-technical side of technology. Is productivity up or down? What is the cost of lost sales opportunities and lost customer confidence from a poorly managed ecommerce or e-business Web site? How do you determine if your management information system is worth it? Many brick-and-mortar companies have seriously struggled with ecommerce Web sites because of the drain on corporate resources for which they weren't prepared. As successful as Wal-Mart is in the traditional retailing sense, their Web site, Walmart. com has at times resembled a yo-yo more than a successful e-commerce venture. The site has been reinvented, reworked, and reintroduced more times than a second-rate rock band. Information systems should be part of the solution and not part of the problem.
2. The Strategic Business Challenge: Companies spend thousands of dollars on hardware and software only to find that most of the technology actually goes unused. "How can that be? " you ask. Usually because they didn't pay attention to developing the complementary asset associated with the full integration of the technology into the organization. Merely buying the technology without exploiting the new opportunities it offers for doing business smarter and better doesn't make you a digital firm. Think and rethink everything you do, and figure out how you can do it better. Information must be managed just as you would any other resource.
3. The Globalization Challenge: The world becomes smaller every day. Competition increases among countries as well as companies. A good management information system meets both domestic and foreign opportunities and challenges. How does Daimler. Chrysler integrate its organizations and cultures into one — or almost one?
4. The Information Technology Infrastructure Challenge: You have to decide what business you are in, what your core competencies are, and what the organization's goals are. Those decisions drive the technology, instead of the technology driving the rest of the company. Purchasing new hardware involves more than taking the machine out of the box and setting it on someone's desk. Information architecture is the description of how technology is incorporated into the mainstream processes in which the business is involved. How will the new information system support getting the product produced and shipped? How will the information system help the Advertising and Marketing department know when to launch ad campaigns? How will Accounting know when to expect payment using the information system?
5. The Responsibility and Control Challenge: Remember, humans should drive the technology, not the other way around. Too often we find it easier to blame the computer for messing up than to realize it's only doing what a human being told it to do. Your goal should be to integrate the technology into the world of people. Humans do control the technology, and as a manager, you shouldn't lose sight of that fact. Many pundits, experts, and technology companies sometimes gloss over the negative impacts of new technology in an attempt to win over converts. Unfortunately, we've learned a lot of our ethical and security lessons the hard way. By educating yourself on the positive and negative issues, you, as a manager, can make more informed decisions.
Thank. You
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