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The benefits of Using Information Systems in Business

Marcus Thomas

INF220: IS Principles (CLH1437A)

Instructor: Jennifer Fennewald

10/13/2014
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How are information systems transforming business and what is their relationship to

globalization?

Information systems allow businesses to research and develop new ways of doing

business. Information systems enable automation of steps in business procedures that used to be

performed manually, like making an invoice, shipping order and labels. “But today, information

technology can do much more. New technology can actually change the flow of information,

making it possible for many more people to access and share information, replacing sequential

steps with tasks that can be performed simultaneously, and eliminating delays in decision

making. New information technology frequently changes the way a business works and supports

entirely new business models. Downloading a Kindle e-book from Amazon, buying a computer

online at Best Buy, and downloading a music track from iTunes are entirely new business

processes based on new business models that would be inconceivable without today’s

information technology” (Laudon, 2009). Perhaps in the future even more manual processes like

getting a back ground check will be automated as well.

A business has to store, analyze, and sort through a plethora of information from many

different sources such as customers, vendors, warehouse, and shipping. In or der to be efficient a

business needs to stay well organized. “Information systems make it possible for firms to

manage all their information, make better decisions, and improve the execution of their business

processes. These activities are supported by flows of material, information, and knowledge

among the participants in business processes” (Laudon, 2009).

Filling an order can be a very complicated process for a business because of the large

amount of information that is needed to get the product to the customer. Computer information
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systems make the transition from one decision maker to another smooth as possible. “In 2009,

FedEx moved over 3.4 million packages daily in the United States, mostly overnight, and the

United Parcel Service (UPS) moved over 15 million packages daily worldwide. Businesses

sought to sense and respond to rapidly changing customer demand, reduce inventories to the

lowest possible levels, and achieve higher levels of operational efficiency. Supply chains have

become more fast-paced, with companies of all sizes depending on just-in-time inventory to

reduce their overhead costs and get to market faster. Despite the recession, e-commerce and

Internet advertising continue to expand. Google’s online ad revenues surpassed $25 billion in

2009, and Internet advertising continues to grow at more than 10 percent a year, reaching more

than $25 billion in revenues in 2010” (Laudon, 2009).

As these example show through the internet and advancements in information systems

globalization has been steadily growing. Global communications has reduced the costs of

operating and transactions. Customers can order products and even medicine from other

countries. Businesses involved in the production of goods and services can find price and quality

information online that will help them save money by finding low cost suppliers. Outsourcing is

another way globalization helps businesses to save money and space by managing facilities in

other countries or relying on them for a service.

Why are information systems so essential for running and managing a business today?

Almost every business has an IT professional, department, or outsourced IT service. This is

because information systems are the backbone of any business. The information systems

department is responsible for maintaining the hardware, software, data storage, and networks that

comprise the firm’s IT infrastructure. “The experiences of Starbucks, Duane Reade, and 1-800-
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Flowers are powerful illustrations of how information systems improve decision making.

Managers at these retail chains were unable to make good decisions about what prices to charge

to improve profitability and what items to sell in stores to maximize sales at different locations

and different time periods. They had access to customer purchase data, but they were unable to

analyze millions of pieces of data on their own. Bad decisions about how much to charge and

how to stock stores lowered sales revenue and prevented these companies from responding

quickly to customer needs” (Laudon, 2009). After these companies started using business

intelligent software to find patterns and trends with the information they collected they were able

to figure out how to keep revenues high and losses low. Better decision making using business

information systems intelligence has made all of these companies more profitable.

What exactly is an information system? How does it work? What are its people,

organization, and technology components?

An information system consists of shared technology resources that provide the platform

for the firm’s specific information system applications. Information systems include hardware,

software, and services if needed. The human components consist of education, and training

across the entire business. “A firm’s information systems provide the foundation for serving

customers, working with vendors, and managing internal firm business processes”(Kahn, 2012).

This includes infrastructures that are cross platform including, laptops, tablets and smartphones.

Other components that an information system is comprised of includes

telecommunications, data management services, application software services, resource

planning, customer relationship management, supply chain management, and knowledge

management systems are shared by all business departments. Depending on the business other
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components would be physical facilities management (not applicable to E-commerce),

information systems account management, and standard business policies management. A

business should always be looking to the future, so another component would be information

systems research and development that will give a business a direction of its potential future

technology and systems investment.

How will a four-step method for business problem solving help you solve information

system-relations problems?

By taking a four step analytical method for business problem solving solutions can be

achieved in an efficient and timely manner. First a business will need to identify the problem

intelligently, then figure out the ripple effects it is having on the business. Next a company will

need to design a system to identify various solutions. After careful consideration of all possible

alternatives a business will want to make a choice of the best path to take. Then the business will

be able to implement the chosen solution and see how it works.

The beauty of using this four step method is that if a chosen solution does not work then

it is easy to retrace steps and discover why it didn’t work and either adjust or go with a new

solution. In order for this method to work a business decision maker will need high quality

information. If the output of information systems does not meet these quality criteria, decision-

making will suffer. If the business has been gathering inaccurate or incomplete files it can

degrade the quality of the solution (Laudon, 2009). “Even with timely, accurate information,

some managers make bad decisions. Managers (like all human beings) absorb information

through a series of filters to make sense of the world around them. Managers have selective
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attention, focus on certain kinds of problems and solutions, and have a variety of biases that

reject information that does not conform to their prior conceptions” Laudon, 2009).

For instance, “Wall Street firms such as Bear Stearns and Lehman Brothers imploded in

2008 because they underestimated the risk of their investments in complex mortgage securities,

many of which were based on subprime loans that were more likely to default. The computer

models they and other financial institutions used to manage risk were based on overly optimistic

assumptions and overly simplistic data about what might go wrong. Management wanted to

make sure that their firms’ capital was not all tied up as a cushion against defaults from risky

investments, preventing them from investing it to generate profits. So the designers of these risk

management systems were encouraged to measure risks in a way that minimized their

importance. Some trading desks also oversimplified the information maintained about the

mortgage securities to make them appear as simple bonds with higher ratings than were

warranted by their underlying components” (Hansell, 2008).

Identify and describe the major features of a business that is important for understanding

the role of information systems.

A business process is a logically related set of activities that define how specific business

tasks are performed. “Business processes are the ways in which organizations coordinate and

organize work activities, information, and knowledge to produce their valuable products or

services. How well a business performs depends on how well its business processes are designed

and coordinated using information systems. Well-designed business information systems are
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undoubtedly a source of competitive strength for a company to perform better than their rivals in

today’s information age” (Kahn, 2012).

A business will want to have a solid infrastructure, a web presence, updated software and

hardware within budget, inexpensive ways to produce goods and services, and vendor /shipping

companies included within the business network. Putting all of these systems together will give a

business better customer relationship management service which increases profits.

Describe the information systems supporting the major business functions: sales and

marketing, manufacturing and production, finance and accounting, and human resources.

Sales and marketing help the firm identify customers for the firm’s products or services,

develop products and services to meet customers’ needs, promote the products and services, sell

the products and services, and provide ongoing customer support (Laudon, 2006).

Manufacturing and production systems deal with the planning, development, and

production of products and services, and controlling the flow of production (Laudon, 2006).

Finance and accounting systems keep track of the firm’s financial assets and fund flows

(Laudon, 2006).

Human resources systems maintain employee records; track employee skills, job

performance, and training; and support planning for employee compensation and career

development (Laudon, 2006).

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How will information systems affect business careers and what information systems skills

and knowledge are essential?

Employers are actively looking for potential managers with a background in both software

technology and business. The effects of an information system manager on the business has been

realized to just as important in the day to day activities as a CEO in the direction of the business.

One core skill is to be current with as much technology in the general or specialized field as

possible. A company uses information technology for various purposes, having the skills to

manage these systems for them to be most effective is a huge thumb’s up from most employers.

If you enjoy learning about technology and using technology to improve people's lives, that's

another key skill required of a business information systems professional (ehow.com).

Analytical skills are also very important. In using technology to improve business processes,

you should know how to analyze business processes and find solutions (ehow.com). Identifying

inefficiencies and problems in the processes and making an assessment is what managing

information systems require. Professionals also provide expertise for the design and development

of databases as part of analyzing the company's information systems. For instance, a department

store could use a database to track which products are selling best (ehow.com). As an

information system professional being able to manage the information system after

implementation is also important, especially with large amounts of data.

Collecting data input and information from various areas in the organization calls for

communication and interpersonal skills (ehow.com). This is where interpersonal management

skills are put to the test in order for the changes needed to improve the information systems to
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take effect. This calls for management of time and resources. An information systems manager

will need a lot of attention to detail.

By bringing together all of the components of information systems hardware, software,

infrastructure, and people a business will have a better chance of adapting with new technology

and keep up with consumer trends to remain profitable and competitive.

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References:

http://www.ehow.com/list_6811745_management-information-system-

skills.html#ixzz1B503r9ab

Laudon, K., Laudon, J. (2009). Essentials of management information systems (8th ed.). Upper

Saddle River, NJ: Pearson Prentice Hall.

http://www2.sta.uwi.edu/~anikov/info1400/lectures/05-ITF-tutorial.pdf

Laudon, K. & Laudon, J.

(2006)
Management Information Systems:
Managing the Digital Firm, 9th