Tuesday, July 28, 2009

Chapter 8 - Information Technology and Information Systems in Business

Chapter 8 Information Technology and Information Systems

Part 1 Information Technology and INformation Systems

Data consists of numbers, letters, symbols, raw facts, events, and transactions, which have been recorded but not yet processed in a form that is suitable for making decisions

Data can also be classified as:
- continuous
- discrete
- primary
- secondary
- qualitative
- quantitative

Information is data that has been processed in such a way that it has a meaning to the person who receives it, who may then use it to improve the quality of decision-making

Managers require information to:
- provide records, both current and historical
- to analyse what is happening within the business
- to provide the basis of decision making in the short-term and long-term
- to monitor the performance of the business by comparing actual results with plans and forecasts

Data may be transformed into information by:
- bringing related pieces of data together
- summarising data
- basic processing of data
- tabulation and diagrammatic techniques
- statistical analysis
- financial analysis

1.1 Deploying Information Systems in the Organisation
Information systems produce output for:
- planning
- recording and processing transactions
- monitoring and measuring performance
- controlling
- decision making

1.2 The Advantages Computerizing will Bring to a Company
- speed
- accuracy
- volume
- complexity
- presentation
- cost
- judgement

Part 2 The Qualities of Information

Accurate - So that decision maker can reply on
Complete- More compelete, More reliable
Cost - Not cost more to obtain than the benefit derived from it
Understandable - Readily acted upon
Relevant - Information provided should concentrate on the essentials and ignore trivia
Adaptable - Information should be tailored to the needs and level of understanding
Timely - Information should up-to-date
Easy to use - Clearly presented and sent using right medium

Part 3 Management Structure and Information Requirements

Strategic level:
-Requires information from internal and external sources.
-Plan long term strategies of organisation

Tactical level:
-Requires information and instructions from strategic level together with routine and regular quantitative information from operational level of management.
-Information is in summarized form.

Operational level:
-Requires information and instructions from tactical level.
-Concerned with day-to-day performance of tasks.

3.1 The Type of Information Used at Each Level of the Organisation

Strategic :
-Expected government policy
-Overall profitability
-Competitor analysis
-Profitability of divisions
-Future market prospects
-Availability and cost of capital
-Total cash needs
-Resource levels
-Capital equipment requirements

Tactical :
- productivity measurements
-budgetary control reports
-Variance analysis
-Cash flow forecast
-short term purchasing requirements
-Labour turnover statistics

Operational:
-Employee hours worked
-Raw materials input to a production process
-Hours spent on each individual job
-Reject rate
-Stock levels

Part 4 Sources of Information

4.1 Internal/External Sources of Information

Data and Information Systems

Internal data/information (activities or transactions performed within the organisation)
-Administrative tasks
-The production of products and services
-The sale of those products

External data/information (come from customers, suppliers and potential suppliers)
-Available from a wide range of sources

4.2 Information from Internal/External Sources

Internal Sources (the amount of information available within an information system will vary from one organization to another)

-Customer records
-Employee records
-Stock Information
-Product or service details and specifications
-Production Information
-Sales and purchase information
-General information and reference books

Managers may also receive info from informal systems which include formal and informal meetings, face-to face exchanges, telephone conversations…etc

External Sources (an organisation's files will be full of information received from customers and suppliers)

-Invoices
-Letters
-Stock price quotations
-Catalogues
-Advertisements

Systems for obtaining external information

-Market research and analysis of competitors’ prices
-
Legal and regulatory update information: Changes to company law, tax law, employment law, accounting standards, environmental protection, etc.
-
Government data on economic and financial conditions
-
Research intelligence: information about technology changes or new discoveries that may have an impact on the organization
-
Other forms of market intelligence: for example the formal collection of feedback forms from customers, salesmen and others ‘in the field’.

Part 5 Information Systems Used Within an Organisation

Businesses need various systems to process, analyse, and store information. Information systems are also used to support decision making within an organisation.

Operational Planning

  • Programmable decisions with specific inputs and outputs.
  • The Transaction Processing System (TPS) is usually used

Tactical Planning

  • Use a variety of data some different sources
  • There is great emphasis on exception reporting
  • Management System (MIS) is usually used

Strategic Planning

  • Varied information requirements
  • Management System (MIS) and Executive Information Systems (EIS) is usually used

There are 5 main types of information processing systems:

  • Transaction Processing System
  • Management Information System
  • Decision Support System
  • Executive Information System
  • Expert System

Transaction Processing System

The TPS is mainly used:

  • To record all daily routine transactions in an organisation
  • By operational level managers
  • As a source of summary data fed to the Decision Support System

The following are examples of the TPS and its role in the organisation:

  • Sales/marketing systems – they record sales transactions and provide details on marketing and promotional activities
  • Manufacturing production system- they record details of purchases, production and shipping of the goods
  • Finance/accounting systems- maintenance of financial data in an organisation
  • Human resources- maintain details of employees

Management Information System

The MIS is mainly used:

  • To convert data from internal and external sources into information that is relevant to managers at all levels
  • To enable managers to make timely and effective decisions for planning and controlling the activities for which they are responsible
  • Extensively by operational users

The following are examples of the MIS and its role in the organisation:

  • Product information- online categorised information at a keystroke
  • Sales ledger- information relating to customer turnover and payment records. Trend analysis to identify customers whose business is growing or declining
  • Supplier information- information such as amount spent and reliability indicators to use when negotiating and making strategic decisions

Within most MIS there are four system types:

  • Database systems
  • Direct control systems
  • Enquiry systems
  • Support systems

Decision Support System (DSS)

  • An integrated, computer based, user machine system that provides information for supporting operations and decision-making functions
  • Used to assist tactical or management level decision makers
  • There is no typical system but it really does depend on the organisation’s needs

The following are the roles of the DSS in the organisation:

  • Supports structured decision making
  • Provides online access to TPS to obtain summary data
  • May provide external information on competitors
  • Basic statistical analysis normally found in a DSS

Executive Information System (EIS)

  • A system for total business modelling
  • Monitors internal and external environment

The following are the examples of use of the EIS in the organisation:

  • Company performance data on sales, production, earnings, budgets and forecasts
  • Internal communications such as personal correspondence, reports and meetings
  • Environmental scanning for news on government regulations, competition et cetera.

Expert System (ES)

  • A form of DSS that allows users to benefit from expert knowledge and information
  • Not part of normal “hierarchy” of information systems but provides useful information to any management level
  • Uses a knowledge base from which an inference engine determines solutions to user questions

The following are examples of use of the ES in the organisation:

  • Process loan applications
  • Legal advice
  • Forecasting of economic or financial developments or of market and customer behaviour

Part 6 Spreadsheet and Database Software Application

6.1 Spreadsheets

- to analyse data and sort list items, not for long-term storage of raw data.
- used for "crunching" numbers and storage of single list items
- include graphing fucntions that allow for quick reporting and analysis of data

ADVANTAGES:
- user-friendly
- require training to get started
- most data managers are familiar with them

DISADVANTAGES:
- have to re-copy data over and over again to maintain it in separate data files.
- inability to efficiently identify data errors
- lack detailed sorting and querying abilities
- can be share violations among users wishing to view or change data at the same time
- restricted to a finite number of records, require a large amount of hard-drive space for data storage

6.2 Databases

- store large amounts of raw data
- for two or more user share information

ADVANTAGES
- ease of reporting and sharing data
- require little or no duplication of data between information tables
- changes made to the data do not corrupt the programming
- offer better security to restrict user from accessing privileged information and from changing coded infromation in the programming

DISADVANTAGES
- requires user to learn a new system
- requires a greater investment in training and software
- initial time and cost of migrating all of the data into a new database system

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