How business firms use IS


Lecture notes

Components of business

   A business organization is a complex, formal organization whose aim to produce products or services for a profit. It depends heavily on their surrounding environment. As well as government regulation, economic and political conditions and technological development business environment includes also people, or entities with which the firm is more directly involved, such as customers, suppliers, and competitors.

The kind of organization depend of the various tasks which will be perform (business functions). They are:

  1. What will production division be? - an arrangement of people, machines, and procedures to be followed to produce the product (physical product or a service).
  2. Who and How will sell the product?
  3. Finance and accounting tasks to manage its financial assets and funds.
  4. Human resources group - The people who will work
See for more information Examples of Business Information Systems

Each business organization have a specification, that is division of work - each employee focuses on a specific task.

A major component in each organization is the ethics. People and organizations, such who use computers are morally responsible and can be held accountable just as the operators of the motor vehicle can be held accountable for their actions. In some instances, specific laws govern the use of computers. Because computers aree relatively new.

The ethics within an organization have three major concepts:

   As it has mentioned in the first lecture, the organization is hierarchical and structured. The hierarchy of responding and authority relationship is developed to assume that the work is completed. Organization differ in terms of how much authority is concentrated in each layer.

    People at the bottom of the hierarchy report to those on the next level, and so on the up to senior management. The senior management is the people with the most authority and make long-range decisions for the future of the organization.

   The next lower layer is the middle management group organized into specialized divisions which carries out the programs and plans of senior management by supervising employees.

   In the middle of the hierarchy in an organization are knowledge and data workers. They design the firm's product or service and do much of the paperwork that running a business involves.

   The lowest layer is production or service workers who actually produce the firm's products or services.

   On the other hand within an organization is a network of personal relationships - birthday parties, births, new hires and retirements. This is the informal structure in organization.

   Strategic-level systems help senior managers plan. Some problems are clearly strategic because they involve questions of organizational goals, products, services and long-term survival. Such problems in organization are typically handled by senior management, and often strategic-level systems and applications are developed. Strategic-level systems might be used in deciding whether to introduce new products, invest in new technology, or more to a new location.

   Middle management systems help control an organization's day-to-day activities. In an organization are problems, that are clearly tactical, because they involve questions of how to achieve goals and how to control and evaluate the process of achieving goals. These problems involve the development of tactical, or management support systems. Tactical systems might be used in such applications as monitoring sales to see if annual or quarterly targets were met or reviewing departmental budgets to make sure the firm is not wasting its resources.

   Knowledge systems are used by knowledge workers (such as engineers, doctors, lawyers or scientists) in business organizations to solve questions requiring knowledge and technical expertise.

   Operational systems are used in manufacturing and service delivery to solve problems related to operations, services, and production.


Examples of Business Information Systems

Manufacturing and Production Systems

   Goods-producing typically develop a manufacturing and production function with a division or department of manufacturing that specializes in the production of the goods or services that the firm produces for the customers. In manufactoring, IS are used to process customer orders, develop production schedules, control inventory levels, and monitor product quality. The typical production process can be divided into three stages: inbound logistics, production and outbound logistics.

In-Bound logistics Production Out-Bound logistics
  • Acquire materials
  • Deliver supplies
  • Handle materials
  • Develop and maintain facilities
  • Schedule operations
  • Manufacture products
  • Assemble parts
  • Maintain inventory
  • Process orders
  • Manage shipping
  • Distribute products

   Many firms are trying to create a seamless manufacturing process by integrating the various types of automated manufacturing systems using computers and communication technology. The data produced in one system are immediately available to be used by other system. One of the most popular uses of computers in manufacturing is to keep track of the location and number of component parts and finished products held in inventory by firms. By tracking exactly what items are in stock and where they are located, inventory control systems enable business to keep just the right number of parts and products on hand to fill orders.

   Here another typical manufacturing and production information systems arranged by the organizational level of the problem.

Organizational level systems Strategic-Level Systems Tactical Systems Knowledge Systems Operational Systems
Type information systems Production Technology scanning applications

ties location applications

Competitor scanning and intelligence

Manufacturing resource planning

Computer integrated manufacturing

monitory control systems

accounting systems

acity planning

or-costing systems

Production scheduling

Computer-aided design systems (CAD)

Computer-aided manufacturing systems(CAM)

Engineering workstations

Numerically controlled machine tools

Robotics

Purchase/receiving systems

Shipping systems

Labor-costing systems

Materials systems

Equipment maintenance systems

Quality control systems

Description Deal with the firm's long-term manufacturing goals, such as where to locate new plants or whether to invest in new manufacturing technology. Deal with the management and control of manufacturing and production cost resources. Create and distribute design knowledge or expertise to drive the production process. Deal with the status of production tasks.

Sales and Marketing Systems

   The basic purpose of the sales and marketing function is to sell the product and service to customers. Identifying market needs, locating potential customers and satisfying those customers require a great deal of information that must be effectively analyzed and applied. There are three steps involved in sales and marketing: identifying and creating a market, developing it, and maintaining it.

   In marketing, Information Systems are used to develop new goods and services (product analysis), determine the best location for production and distribution facilities (place or site analysis), determine the best advertising and sales approaches (promotion analysis), and set product prices to get the highest total revenues (price analysis). There are several ways in which information systems help firms become more effective markets.

Organizational level systems Strategic - Level Systems Tactical Systems Knowledge Systems Operational Systems
Type information systems Demographic market forecasting system

Economic forecasts

Competitor scanning applications

Sales management systems

Pricing strategy decision support systems

Sales personnel management systems

Marketing data analysis

Marketing workstations Sales person support systems

Order entry systems

Point-of-sale systems(POS)

Telemarket systems

Credit information systems

Description Monitor trends affecting new products and sales opportunities, support planning for new products and services and monitor the performance of competitors. Support market research , advertising and promotional campaigns, and pricing decisions and analyze sales performance and the performance of the sales staff. Support marketing and analysis workstations. Assist in locating and contacting prospective customers, tracking sales, processing orders, and providing customer service support.

Finance and Accounting Systems

   Many firms place finance and accounting in the same department, although they are actually separate processes. Finance involves the proper management of a firm's financial assets and to menage the capitalization of the firm. The accounting process menages financial records.

Finance Accounting
  • Manage financial assets
  • Maximize return
  • Manage capitalization of firm
  • Manage financial records
  • Track flow of funds
  • Develop financial statements

   In finance and accounting, information systems are used to forecast revenues and business activity, determine the best sources and uses of funds, manage cash and other financial resources, analyse investments, and perform audits to make sure the organization is financially sound and that all financial reports and documents are accurate.

Problem Systems Strategic-Level Systems Tactical systems Knowledge systems Operational Systems
Types Systems Financial and security market data analysis

Economic and demographic forecasting systems

Budget forecasting systems

Fixed assets accounting

Cost accounting systems

Budgeting systems

Financial management workstations

Portfolio analysis systems

Security analysis systems

Trader workstations

Accounts payable/receivable

General ledger

Payroll

Description Establish long-term investment goals for the firm and provide long range forecasts of the firm's financial performance. Help managers oversee and control the firm's financial resources. Support finance and accounting by providing analytical tools and workstations for evaluating the firm's financial performance. Track the flow of funds in the firm through transaction such as paychecks, payment to vendors, stock reports, and receipts.

Human Resources Systems

   The purpose of the human resources function is to attact, develop and maintain an effective labor force. This includes the identification of potential employees, the maintenance of complete records on existing employees, and the creation of training programs.

Attact Labor Force Develop Labor Force Maintain Labor Force
  • Forecast labor needs
  • Identify potential employees
  • Analyze jobs
  • Recuit employees
  • Forecast future needs
  • Appraise performance
  • Compensate employees
  • Plan career paths
  • Manage labor relations
  • Train employees
  • Provide competitive
    compensation/benefits
  • Maintain records
  • Meet legal and and safely requirements

Human Resources information systems by type and level
Problem Systems Strategic-Level Systems Tactical systems Knowledge systems Operational Systems
Types Systems Human resource planning

Labor force forecasting systems

Demographic analyses

Succession planning systems

Labor force budgeting systems

Position control systems

Compensation and job analysis systems

Contact cost and labor relations systems

Equal employment opportunity (EEO)
compliance systems

Career path systems

Training systems

Human resource workstations

Personnel record keeping

Applicant tracking

Benefit systems

Training skills inventory systems

Positions tracking

Description Identify the manpower requirements (skills, educational level, types of positions, number of positions, and cost) for meeting the firm's long-term business plans. Help managers monitor and analyze the recruitment, allocation and compensation of employees. Support analysis activities related to job design, training, and the modeling of employee career paths and reporting relationships. Track the the requirement and placement of the firm's employees.

Questions

  1. How would you define a business organization?
  2. What are the levels of a business firm?
  3. What are major functional information systems of business? Give some examples of each.
  4. Is there any difference between business function and business process?
  5. What are major steps when business is organizing?

Suggested Essay Topics

  1. Look at the last reference link. Select two or three corporation. Compare and contrast them
  2. Describe structure, units, and unit activities of the business organization. Give some examples.
  3. Why do business organization develop information systems?

References

  1. http://www.cio.com/CIO/re_wtcio.htm - "What is CIO?". Look also:
  2. http://www.cio.com/CIO/100intro.html - The Eighth Annual CIO -100 "best practices" in areas currently considered critical to organizational improvement.
  3. http://www.dtic.dla.mil/c3i/bprcd/3003s2.htm - Framework for Managing Process Improvement / Section 2: Process Management and Improvement
  4. http://www.cio.com/WebMaster/0996_personnel.html - "Human resources has long lagged behind the technology curve. Now the Web is making it possible for this most democratic of functions to bring power to the people." By Heath Row
  5. http://www.cio.com/CIO/011597_skills.html - "Tracking employee competencies can help companies recuit, match people to jobs and even develop their staffs" By Tom Davenport
  6. http://www.cio.com/central/businesses.html The major corporations on the Web