Management information system lesson1:

Topic: Role of Information Systems in an Organization

An information system increases organizational productivity.
These systems provide management with control over their data, with various tools to extract
data or view data structures and records. The role of an information system is to foster a data
management environment that is robust and can be expanded according to an organizations’
strategic plan for information processing. An information system also satisfies diverse
information needs in an organization.

i. Automation of Manual Tasks

Information systems architecture can assist an organization in automating manual tasks.
Automation can save time, money and resources and enhance organizational workflow. There
are various types of information systems that automate manual tasking, ranging from robotic
information systems used in areas such as health and medical services to logistical information
systems (automated warehouses and distribution systems).
ii. Hardware and Software Integration
An organization can have several different computer platforms (hardware and software). The
concept of information systems as a scalable platform can merge different hardware and software
systems. A system can process, store and distribute information if integrated into the workflow
of an information system. For example, a local area network (LAN) can integrate into a
mainframe system that processes accounting information through a concept called a “gateway.”
An open architecture information system allows for integration at all levels throughout an
organization.
iii. Support of a Multi-Processing Environment
An information system can support a “real-time” multi-processing environment through the
concept of “time-sharing application.” Time-sharing application allows for the prioritizing of
applications based on user-id and system priority assigned to an application, device, and database
or system catalog. These features are important to an organization that process transactions while
developing and testing program applications. In a multi-processing environment, various
departments, divisions or branches can have access to the system at the same time intervals.
iv. System Partitioning
The layout of an information system is partitioned according to data security policies, user access
and program applications. The partitioning of the physical hard drives, memory and storage
space related to software applications creates system balance and effective use of the system
Central Processing Unit (CPU). System partitioning programs, tools and routines keeps the
system from overloading, which slows down system performance. Extra files paged to memory
that are not being used can slow down a customer support system, which relies on timely
processing of customer inquiries. System partitioning is maintained by a process of “preventive
maintenance” which ensures the integrity of system partitioning.

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 v. Provides Data for Decision Support

The most important role of an information system in an organization is to provide data to help
executive management make decisions. Data is compiled through transaction processing or query
routines built into the information system to access item and detail records. Through decision
support programs, which are packaged as software routines, executive management can analyze
several areas of an organization and create scenarios through the information system for a
desired result. These results are defined in the organizations’ objectives and goals to improve
productivity.

Application of IS in an organization
Management Information Systems are typically organized around the functional areas of an
organization.
Many organizations are structured based on functional areas. This is often reflected in an
organizational chart. Typically, functional areas include finances, human resources, marketing,
etc. Many of these functional areas have their own Management Information System, or MIS.

i. Financial MIS
A financial MIS provides financial information for managers to make daily decisions on
operations within the organization. Most systems provide these functions:

 Integrate financial information from multiple sources

 Provide easy access to financial information in summarized form
 Enable financial analysis using easy-to-use tools
 Compare historic and current financial activity

A financial MIS often has a number of subsystems, depending on the type of organization. These
include systems to analyze revenues, costs and profits, auditing systems for both internal and
external purposes and systems to manage funds. A financial MIS can also be used to prepare
reports for third parties, such as external auditors or shareholders.

ii. Marketing MIS

A marketing MIS supports activities throughout the many activities of marketing departments.
Some of the typical subsystems of a marketing MIS are marketing research, product
development and delivery, promotion and advertising, product pricing and sales analysis.
One of the most common uses of a marketing MIS is to produce sales reports. These are typically
produced on a regular schedule, such as by week, month and quarter. Reports can be organized
by sales representative, product, customer or geographic area. Such reports allow managers to
see which aspects of sales are doing well and which ones need attention.
Perhaps one sales representative has suddenly experienced a drop in sales by losing one major
customer and needs some support to develop some new leads. If there are only a handful of sales

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reps sharing one office, a manager might be able to pick up on this just by talking to everyone.
However, what if a manager has to oversee more than 100 sales reps in 12 different offices
around the nation? A specialized information system that provides regular updates in a
meaningful format will make it a lot easier for the manager to make effective decisions.

iii. Manufacturing MIS

Manufacturing is one of the areas where information systems have made a major impact. A
typical manufacturing MIS is used to monitor the flow of materials and products throughout the
organization. In a manufacturing process, raw materials or parts are transformed to finished
products, and a manufacturing MIS is used at every stage. Some of the common subsystems in a
manufacturing MIS include: design and engineering, production scheduling, inventory control,
process control and quality control.
Importance of Information Systems in an Organization
To gain the maximum benefits from your company's information system, you have to exploit all
its capacities. Information systems gain their importance by processing the data from company
inputs to generate information that is useful for managing your operations.
i. Communication

Part of management is gathering and distributing information, and information systems can make
this process more efficient by allowing managers to communicate rapidly. Email is quick and
effective, but managers can use information systems even more efficiently by storing documents
in folders that they share with the employees who need the information.. The manager collects
the inputs and sends the newly revised document to his target audience.
ii. Operations

How you manage your company's operations depends on the information you have. Information
systems can offer more complete and more recent information, allowing you to operate your
company more efficiently. You can use information systems to gain a cost advantage over
competitors or to differentiate yourself by offering better customer service. Sales data give you
insights about what customers are buying and let you stock or produce items that are selling well.
With guidance from the information system, you can streamline your operations.
iii. Decisions

The company information system can help you make better decisions by delivering all the
information you need and by modeling the results of your decisions. A decision involves
choosing a course of action from several alternatives and carrying out the corresponding tasks.
When you have accurate, up-to-date information, you can make the choice with confidence. If
more than one choice looks appealing, you can use the information system to run different

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scenarios. For each possibility, the system can calculate key indicators such as sales, costs and
profits to help you determine which alternative gives the most beneficial result.
iv. Records

Your company needs records of its activities for financial and regulatory purposes as well as for
finding the causes of problems and taking corrective action. The information system stores
documents and revision histories, communication records and operational data..

COMPETITIVE ADVANTAGE OF IS IN AN ORGANISATION

 Firms with a competitive advantage over others typically have access to special resources
that others do not or are able to use resources more efficiently, resulting in higher revenue
growth, profitability, or productivity growth (efficiency), all of which ultimately in the
long run translate into higher stock market valuations than their competitors.
Michael Porter's competitive forces model describes five competitive forces that shape
the fate of the firm.

1. Traditional competitors: Existing firms that share a firm's market space

2. New market entrants: New companies have certain advantages, such as not being
locked into old equipment and high motivation, as well as disadvantages, such as less
expertise and little brand recognition. Some industries have lower barriers to entry, ie:
cost less for a new company to enter the field.

3. Substitute products and services: These are substitutes that your customers might use if
your prices become too high. For example, Internet telephone service can substitute for
traditional telephone service. The more substitute products and services in your industry,
the less you can control pricing and raise your profit margins.

4. Customers: The power of customers grows if they can easily switch to a competitor's

products and services, or if they can force a business and its competitors to compete on
price alone in a transparent marketplace where there is little product differentiation and
all prices are known instantly (such as on the Internet).

5. Suppliers: The more different suppliers a firm has, the greater control it can exercise
over suppliers in terms of price, quality, and delivery schedules.

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FIGURE 3-10 PORTER’S COMPETITIVE FORCES MODEL

There are four generic strategies used to manage competitive forces, each of which often is
enabled by using information technology and systems:

1. Low-cost leadership: Use information systems to achieve the lowest operational costs

and the lowest prices. For example, a supply chain management system can incorporate
an efficient customer response system to directly link consumer behavior to distribution
and production and supply chains, helping lower inventory and distribution costs.

2. Product differentiation: Use information systems to enable new products and services,

or greatly change the customer convenience in using your existing products and services.
For instance, Land's End uses mass customization, offering individually tailored
products or services using the same production resources as mass production, to custom-
tailor clothing to individual customer specifications.

3. Focus on market niche: Use information systems to enable a specific market focus and
serve this narrow target market better than competitors. Information systems support this
strategy by producing and analyzing data for finely tuned sales and marketing techniques.
Hilton Hotels uses a customer information system with detailed data about active guests
to provide tailored services and reward profitable customers with extra privileges and
attention.

Strengthen customer and supplier intimacy: Use information systems to tighten linkages with
suppliers and develop intimacy with customers. Chrysler Corporation uses information systems
to facilitate direct access from suppliers to production schedules, and even permits suppliers to
decide how and when to ship suppliers to Chrysler factories. This allows suppliers more lead
time in producing goods. Strong linkages to customers and suppliers increase switching
costs (the cost of switching from one product to a competing product) and loyalty to your firm. 

The Internet has nearly destroyed some industries and has severely threatened more. The Internet
has also created entirely new markets and formed the basis for thousands of new businesses.

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Because of the Internet, the traditional competitive forces are still at work, but competitive
rivalry has become much more intense. Internet technology is based on universal standards,
making it easy for rivals to compete on price alone and for new competitors to enter the market.
Because information is available to everyone, the Internet raises the bargaining power of
customers, who can quickly find the lowest-cost provider on the Web. Some industries, such as
the travel industry and the financial services industry, have been more impacted than others.
However, the Internet also creates new opportunities for building brands and building very large
and loyal customer bases, such as Yahoo!, eBay, and Google.

The value chain model highlights specific activities in the business where competitive strategies
can best be applied and where information systems are most likely to have a strategic impact.
The value chain model views the firm as a series or chain of basic activities that add a margin of
value to a firm's products or services. These activities can be categorized as either primary
activities or support activities.

 Primary activities are most directly related to the production and distribution of the
firm's products and services, which create value for the customer. Primary activities
include inbound logistics, operations, outbound logistics, sales and marketing, and
service.

 Support activities make the delivery of the primary activities possible and consist of
organization infrastructure (administration and management), human resources
(employee recruiting, hiring, and training), technology (improving products and the
production process), and procurement (purchasing input).

 Benchmarking involves comparing the efficiency and effectiveness of your business

processes against strict standards and then measuring performance against those
standards.

 Industry best practices are usually identified by consulting companies, research

organizations, government agencies, and industry associations as the most successful
solutions or problem-solving methods for consistently and effectively achieving a
business objective.

A large corporation is typically a collection of businesses. Information systems can improve the
overall performance of these business units by promoting synergies and core competencies.

 In synergies, the output of some units can be used as inputs to other units, or two
organizations pool markets and expertise, and these relationships lower costs and
generate profits.