Information Systems for Businesses

Introduction

Information and technology are resources that are used by businesses that are trying to improve their performance and gain competitive advantage (Chaffey & White 2010). Among the key benefits of the IT usage is the increased efficiency of the business processes, the reduction of costs, and the availability of performance measures that help businesses control improvement. Moreover, the fact that it combines perfectly with human resources allows businesses to be especially proficient in the usage of new technologies and teaching employees about how they integrate them into their everyday operations.

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The necessity for organisations to be up-to-date with the latest information technologies is connected with the nature of the modern society that is currently characterised by terms such as “information society” and “information economy” (Chaffey & White 2010, p. 8). This means that the current environment is highly dependent on the collection, storage, and exchange of information. Therefore, modern businesses have to adapt to the fast-changing economy as well as the society that is becoming more and more proficient in the latest technologies every day. To do this, companies are starting to develop information systems (IS) that are instrumental in the collection, storage, and sharing of information. Information systems are made up of various components that interact with each other in order to produce information.

As a basic rule, ISs used by businesses are composed of hardware, software, data, procedures, people, and feedback. Thus, it is important to study various types of IS companies use in order to improve their processes as well as to gain a competitive advantage. The key objectives of this study include giving a definition to information systems, identifying the benefits businesses receive when using information systems, distinguishing between various IS types, as well as focusing on answering the question of whether the usage of information systems could bring a competitive advantage to the business. In conclusion, the study will also provide recommendations for managers as to how information systems can be successfully used for achieving better results in comparison with competitors. Overall, the study will aim to explore the key principles of IS integration into business to get a better understanding of why and how technologies offer many organisations to grow, develop, and compete with the rivals on the market.

Benefits of Information Systems for Businesses

According to Bharati and Chaudhury (2010) from Journal of Computer Information Systems, the social influences that exist in modern society are contributive to the creation and the assimilation of information technology software that supports knowledge acquisition and even supports manufacturing processes. This means that information systems provide a tremendous range of benefits to companies, and it is important to examine these benefits in the first place before discussing various types of IS companies use for gaining a competitive advantage.

The tangible benefits of IS are roughly divided into custom information, custom formats, real-time information, and adaptability. Overall, these types of benefits mean that IS provide companies with an opportunity to collect information in real-time with the use of the most suitable method. First, information systems offer businesses the information they need in order to make appropriate decisions. For example, a sales manager that uses an IS can use the available information to assess the company’s business activities during the current month.

On the other hand, a salesperson that looks at the same set of data can assess how many potential customers have or have not been contacted by the company. If the salesperson or a sales manager were to sift through paper records, it would have taken them much more time, not to mention the possibility of missing some information as well as the increased costs and general inconveniences (Sylvan 2016). Second, the custom formats provided by IS make the review and the analysis of information much easier. If to apply the same example with a sales manager and a salesperson within this context, a sales manager can see data in the form of a pie chart in order to see the share of total sales belonging to each sales representative. A salesperson, on the other hand, can represent the data in an information system in the form of a contact list that will show purchase orders for each customer. Moreover, a firm’s accountant can use the same data used by the salesperson in the form of dollar listings that have been generated by each salesperson of a business (Sylvan 2016).

Therefore, each employee in a company can use an information system in a format that would be the most beneficial for their performance. Third, an information system provides businesses with real-time information that can be used to their advantage. For example, if a manufacturing line in a factory stops, the line operator can use the IS to determine the reason for the shutdown in order to fix the issue as soon as possible. Fourth, ISs are flexible and allow users an option of reprogramming and updating to fit specific needs and requirements without disrupting the overall design. To conclude, businesses use information systems predominantly for their convenience as well as the available option to modify the presentation of information as well as receive important operational data.

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Types of Information Systems for Businesses

In general, information systems are divided into five types that include Decision Support Systems, Transaction Processing Systems, Information Systems in Organisations, Management Information Systems, Expert Systems and Neural Networks. The table presented below explains the types of information systems in better detail:

Decision Support Systems Make the processes of decision-making and data analysis easier through the generation of statistical projections and the creation of data models. Instead of replacing judgement, this type of system provides support for managers that can improve their decisions. Decision Support Systems help companies solve arising issues with the use of external data.
Transaction Processing Systems Provides users with methods of collection, processing, storage, display, modification, and cancelling of business transactions. The key benefit provided by TPS’s is the option to carry out different transactions at the same time. The information collected by these systems is predominantly stored in databases that are used for billing, inventory, schedules, and other processes.
Information Systems in Organisations These systems are useful for collection, storage, and processing of data in order to give companies accurate and real-time information about their business processes. ISs in organisations include data collected from people and machines that produce information that can be used by companies in their operations.
Management Information Systems MIS uses data collected by transaction processing systems and use it for creating reports that managers use for decision-making and problem-solving. Some information is often used to create ad hoc reports and business summaries for increasing the business efficiency and managerial activity (Mindmeister n.d.).
Expert Systems and Neutral Networks Also known as knowledge-based systems, expert systems are used for data analysis to produce recommendations, diagnosis, and controlled decisions. Neural networks work in a way similar to how human brains function – learn or remember the available information.

The technical implementation of Information Systems requires businesses to have a combination of appropriate software and hardware. Software for IS ranges from operating systems to applications that allow users to collect and manage data relevant to their operations (BBC n.d.). According to the definition given by Valacich and Schneider (2015) in Information Systems today: Managing in a digital world, information systems are “combinations of hardware, software, and telecommunications networks” users employ for collecting, creating, and distributing of useful data in predominantly organisational settings (p. 24). This means that in order to successfully manage relevant data, an organisation must possess a set of hardware and software components. Operating systems are parts of the software and are in charge of controlling both software and hardware. They are responsible for managing processes, memory and file management, allocation of resources, the interpretation of user commands, and the management of outputs and inputs. Hardware, on the other hand, relates to physical components needed for implementing an IS in an organisation. For example, the hardware includes input devices such as a keyboard, a mouse, a scanner or a camera, and output devices such as a monitor, printer, headsets, and even game controllers.

Information Systems’ Implementation for Achieving Competitive Advantage

It is a well-known fact that information gives organisation competitive advantage (Porter & Millar 2007), so companies seek new ways to use information in order to provide customers with products or services that bring more value against competitors. Therefore, the role of information systems is vast: they can influence cost leadership in a company, affect differentiation and spark innovation, promote growth and facilitate strategic alliances with other organisations. The competitive strategies and the role of IS in successfully implementing the strategies can be seen from a table below:

Strategy IS Role
Cost leadership IS can provide data that may change the cost of production or lower the business processes costs (for example, online B2B or B2C business models or electronic procurement systems).
Differentiation IS can facilitate the development of differentiation features to subsequently reduce the differentiation advantage of competitors. For example, a company may use social media or online chatting systems to get a better understanding of customer’s needs and use technology to apply the gathered information to offline practices such as increasing the range of products or providing new features.
Innovation IS can assist in creating new products or services and even facilitate the development of new market segments. For example, a business can use digital modelling and simulation of the product’s design to reduce time and costs (Chui & Fleming 2011).
Growth I am often used for expanding both international and domestic operations and diversifying into new services or products. For example, with the use of information systems, a company can establish a global operation platform for gaining growth through bot offline and online channels.
Strategic alliances Information systems can enhance the relationships with key strategic partners through the use of applications (for example, creating an inter-organisational IS).

Case Study: The Walmart Example

Examples of effective IS implementation in businesses can be found in many spheres, for example, Amazon has recently launched a new “Amazon Go” project that allows people to avoid waiting in long lines and checkout. The company used an array of IS (Just Walk Out technology) that detect products being taken from shelves and immediately charges users from their Amazon account (Griffin 2016).

Answering the question of whether information systems could bring a competitive advantage to a company will be possible with an application of a real-life example. The chosen example is a great success if Walmart, Inc. that used information systems for managing their supply chain. Retail Link, a supply-chain management system made it possible for the company’s suppliers to have access to Walmart’s inventory in order to analyse how well their products are selling. Furthermore, Retail Link allowed suppliers to manage their levels of inventory – if a product is selling very fast, a retailer could contact Walmart and offer to raise the levels of inventory and vice versa (Bourgeois n.d.). This meant that an information system “hired” a lot of product managers that were interested in the product they were selling. As a result, Walmart’s approach to inventory management with the use of an information system influenced the decision-making process with regards to price decreases and allowed the company to quickly respond to the needs of the market, which significantly increased its competitive advantage.

Conclusion and Recommendations

Based on the summary of the key points regarding the usage of information systems in organisations, a conclusion can be made that they can significantly benefit the flow of business operations and provide companies with room for growth in an ever-changing environment where technology is put in the primary spot. Currently, large organisations such as Amazon or Walmart use information technologies not only for facilitating the efficient flow of business processes but also develop new slots on the market that have never been explored previously. This, in turn, increases competitive advantage that is imperative for companies to sustain in order to be profitable. Information systems help businesses create more value and add features that put them above their competitors in ways that cannot always be measured through standard Key Performance Indicators. Therefore, the need for businesses to share information within organisations and beyond them is what makes companies use information systems on a regular basis (Pritchard 2013).

To give recommendations as to how businesses can use information systems to their advantage, it is important to briefly mention Porter’s Competitive Forces Model, in which the strategic position of a company, as well as its strategies, are characterised not only by the actual competition with the key rivals on the market but also by four factors that influence the environment in the industry: customers, suppliers, substitute products, and new market entrants (Investopedia n.d.). As mentioned previously, companies can address the challenges associated with these factors through using IS for cost leadership, differentiation, and innovation, growth, as well as building relationships with strategic alliances.

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With regards to cost leadership, it is recommended for a business to use information systems in a way that could decrease the operational costs and subsequently lower the prices on products/services to have an advantage over competitors. For example, similar to Walmart’s experience, an organisation can incorporate a supply-chain management system that will allow suppliers to have access to inventory levels to reduce distribution costs. When it comes to product differentiation, an information system can be successfully used to change the customers’ convenience in using available products or services. As one of the options, a company can integrate mass customisation into its operation, which will allow it to offer customised products by using the conventional methods of mass production. Regarding innovation and growth as drivers of competitive advantage, business is advised to focus on a specific (sometimes completely new) market niche to narrow a target market in a way that exceeds competitors’ efforts. The growth and innovation can be achieved, for example, through creating an information system that will provide the business with detailed information about active customers for rewarding them with new services, privileges, and innovative products developed by their requirements and needs. Lastly, to address the difficulties in the value chain, it is recommended for companies to strengthen the relationships with suppliers and key business partners (similar to the Walmart’s information system allowing suppliers to access inventory levels).

If implemented in a proper manner, information systems can become the key to a company’s success by elevating its competitive advantage and offering tools for integrating technologies into the business processes. Companies like Nestle, Microsoft, Toyota, Target, Google, Apple, IBM, Mayo Clinic and many others have already integrated information systems into their businesses processes to deliver top quality products and services on the basis of speed, precision, and accuracy (Columbus 2013). It is crucial for businesses that are looking for expansion to investigate the way in which information technology and the implementation of information systems can broaden their reach and spawn new business opportunities.

To identify new business opportunities, it is advised for managers to answer questions like “What information-processing capacity exists internally to start a new business?” or “Does information technology make it feasible to produce new items related to the company’s product?” as mentioned by Porter and Millar (2007) in their Harvard Business Review article (para. 45). Furthermore, managers should cooperate with key business stakeholders and develop a cohesive action plan of how a company can take advantage of information systems. In such an action plan, extra attention should be paid to identifying the main strategic investments into hardware and software as well as subsequent development activities that would increase the value of the offered products or services. Overall, gaining a competitive advantage in business with the use of information systems is possible through an extensive analysis of the market environment, studying of the customers’ needs and requirements, and the integration of innovative technologies.

It is important to continue studying the impact of information systems on business since the pace with which technologies are currently developing is gaining momentum with each year. Today, the integration of information technologies into businesses is an integral component of business since it allows managers collect an abundance of data about customer behaviours, the progress of competitors, as well as possible trends companies will follow in the future. It is recommended for all organisations regardless of their type or the sphere of operation to develop cohesive action plans for incorporating IS into their businesses in order to reduce costs, increase productivity, and bring more value to potential customers.

Reference List

BBC n.d., Technical implementation (software), Web.

Bharati, P & Chaudhury, A 2010, ‘Impact of knowledge acquisition on technology assimilation’, Journal of Computer Information Systems, vol. 51, no. 2, pp. 97-106.

Bourgeois, D n.d., Chapter 1: What is an information system, Web.

Chaffey, D 2010, Business information management: Improving performance using information systems, Pearson Education, England.

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Chui, M & Fleming, T 2011, ‘Inside P&G’s digital revolution’, McKinsey Quarterly, vol. 25, pp. 1-11.

Columbus, L 2013, 21 most admired companies making IT a competitive advantage, Forbes, Web.

Griffin, A 2016, Amazon Go launches, letting people walk into shops and take things from the shelves, Web.

Investopedia n.d., Porter’s 5 forces, Web.

Mindmeister n.d., 5 types of information systems, Web.

Porter, M & Millar, V 2007, How information gives you competitive advantage, Web.

Pritchard, S 2013, Information services: Better accounting systems offer richer forecasting resources, Web.

Sylvan, R 2016, Tangible benefits of information systems, Web.

Valacich, J & Schneider, C 2015, Information systems today: Managing in a digital world, Pearson, Saddle River.

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