Convenience Of Information System

Published Date: 02 Nov 2017

Introduction:

An Information system can be any organized combination of people, hardware, soft ware, communications networks and data resources that collect, transformations and disseminates information in an organization.

Data in any organization is given the most importance. Different type of information is produced from data. As the number and size of the data is large it becomes difficult to process them manually. In order to get quick results and timely information, an Information System is used in almost all organizations.

People have relied on information systems to communicate with each other using a variety of physical devices, information processing instructions and procedures, communication channels and stored data since the dawn of civilization.

Convenience of Information system:

As a consumer, we have to deal regularly with the information systems that support business operations at the many retail stores where we shop.

For example, most retail stores now use computer-based information systems to help record customers purchases, keep track of inventory, pay employees, buy new merchandise evaluate sales trends.

Information systems also help store managers and other business professionals make better decisions and attempt to gain a competitive advantage.

An Example: Decision on what lines of merchandise need to be added or discontinued, or on what kind of investment they require, are typically made after an analysis provided by computer-based information systems.

Type of Information system:

Business professionals rely on many types of information systems.

Some information system use simple manual like paper and pencil, some use hardware devices and informal communication channels.

We will concentrate on computer-based information systems that use computer hardware and software, the Internet and other telecommunications networks.

Information Products:

The information products can most easily visualize are the displays on customers and employees PCs of information on customer accounts and bookstore products and services provided by the E-commerce, web site or the in-house E-business systems.

Printouts from Amazon.com’s book listings brought in by customers are another from of information product.

Function of Information System and Technology:

Successful management of information system and technologies presents major challenges to business managers and professionals. Thus, the information systems function represents:

A major functional area of business that is as important to business success as the functions of accounting, finance, operations management, marketing and human resource management .

An important contributor to operational efficiency, employee productivity and moral, customer service and satisfaction.

A major source of information and support needed to promote effective decision making by managers and business professionals.

A key component of the resources, infrastructure and capabilities of today’s E-business enterprises.

A dynamic, rewarding and challenging career opportunity of million of men and women.

Usefulness:

Cost leadership Strategy:

Becoming a low-cost producer of products and services in the industry or a firm can find ways to help its suppliers or customers reduce their costs or to increase the costs of their competitors.

This may allow a firm to focus its products or services to give it an advantage in particular segments or niches of a market. Many companies are using Internet technologies as the foundation for such strategies.

E- Business and E- Commerce Strategies:

E-business technology has created a seismic shift in the way companies do business. Just knowing the importance and structure of E-business is not enough. We need to create and implement an action plan that allows making the transition from an old business.

An Example: Accel Partners was one of the few Silicon Valley venture capital firms that did not take part in the wide-scale rush to fund pure play dot coms. Instead, they concentrated o carve-out E-Commerce strategies with traditional companies, such as their partnership with Wal- Mart to develop Wal- Mart.com and insisted that E-Commerce business plans clearly meet traditional measures of profitability. Managing partners Jim Breyer scoffed at the "first mover" advantage, emphasizing those second and third movers like Microsoft, Cisco systems, Dell Computers and Siebel Systems usually end up dominating their markets.

Porter's five forces analysis:

Industry competitive analysis begins by focusing on the overall industry in which a firm competes before market segments or sector- level issues are considered. Tools that managers can to perform such industry analysis are discussed in the following sections.

When the boundaries of an industry have been identified, the task facing managers is to analyze competitive forces in the industry environment to identify opportunities and threats. Michael E. Porter’s well-known framework, known as the five forces model focuses on the five forces that shape competition within an industry.

Porter argues that the stronger each of these forces is the more limited is the ability of established companies to raise prices and earn greater profits.

Within Porter’s framework, a strong competitive force can be regarded as a threat because it depresses profits. A weak competitive force can be viewed as an opportunity because it allows a company to earn greater profits.

The strength of the five forces may change through time as industry condition change, as illustrated by the opening telecommunications case. The task facing managers is to recognize how changes in the five force gives rise to new opportunities and threats and to formulate appropriate strategic responses.

In addition, it is possible for a company, through its choice of strategy to alter the strength of one or more of the five forces to its advantage.

Porters five forces ares-

Threat of new competitors

threat of substituted product

Bargaining power of customer

Bargaining power of supplier

intensive of competitive rivalry

Threat of new competition:

Established companies already operating in an industry often attempt to discourage to potential competitors from entering the industry because the more companies that enter, the more difficult it becomes for established companies to protect their share of the market and generate profits.

Barriers to entry:

Economies of Scale

Product Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independents of Size.

Government Policy

Threat of substitute products or services:

Those products that appear to be different but can satisfy the same need as another product is called substitute products. To the extent that switching costs are low, substitute can have a strong effect on an industry.

For example, public-transportation is a substitute for driving a car, and e-mail is a substitute for writing letters.  Conditions that increase the threat of substitutes are:

An attractive price of substitutes: The price of substitutes acts as a ceiling to the price of the subject product. An attractive price of a substitute acts inhibits an industry from reaching its profit potential.

Increased quality of substitutes: If the quality of a substitute is high, there is increased pressure to increase the quality of the subject product. For example, products such as Netflix and Hulu have introduced video on demand services offered through the internet. Cable and internet companies have answered back by introducing fiber optic networks to not only compete in the video on demand space, but offer incredible picture quality not yet available to the new technologies.

Low switching costs: Switching costs arise when it costs a customer time, energy, and money to switch from the products offered by one established company to the products offered by a new entrant. When switching costs are high, customers can be locked in to the product offerings of established companies, even if new entrants offer better products.

A familiar example of switching costs concerns the cost associated with switching from one computer operating system to another. If a person currently uses Microsoft’s Windows operating system and a library of related software applications (e.g., word processing software, spreadsheet, games) and document files, if is expensive for that person to switch to another computer operating system.

Bargaining power of customers (buyers):

The third of Porter’s five competitive forces is the bargaining power of buyers. An industry’s buyers may be the individual customers who ultimately consume its produces (its end users) or the companies that distribute an industry’s products to end users, such as retailers and wholesalers.

For example, while soap powder made by Procter and Gamble and Unilever is consumed by end users, the principal buyers of soap powder are supermarket chains and discount stores, which resell the product to end users.

According to Porter, buyers are most powerful in the following circumstances:

When the industry that is supplying a particular product or service is composed of many small companies and the buyers are large and few in number. These circumstances allow the buyers to dominate supplying companies.

When the buyers purchase in large quantities, in such circumstances, buyers can use their purchasing power as leverage to bargain for price reductions.

When the supply industry depends on the buyers for a large percentage of its total orders.

When buyers can threaten to enter the industry and produce the product themselves and thus supply their own needs, also a tactic for forcing down industry prices.

Bargaining power of suppliers:

The fourth of Porter’s five competitive forces is the bargaining power of suppliers. The organizations that provide inputs into the industry, such as materials, services and labor (which may be individuals, organizations such as labor unions or companies that supply contract labor). If suppliers are weak, companies in the industry have the opportunity to force down input prices and demand higher- quality inputs (e.g., more productive labor). As with buyers, the ability of suppliers to make demands on a company depends on their power relative to that of the company.

According to Porter, suppliers are most powerful in these situations:

The product that suppliers sell has few substitutes and is vital to the companies in an industry.

The profitability of suppliers is not significantly affected by the purchases of companies in a particular industry, in other words, when the industry is not an important customer to the suppliers.

Suppliers can threaten to enter their customer’s industry and use their inputs to produce products that would compete directly with those of companies already in the industry.

Intensity of competitive rivalry:

The last of Porter’s five competitive forces is the intensity of rivalry among established companies within an industry. Rivalry refers to the competitive struggle between companies in an industry to gain market share from each other.

The competitive struggle can be fought using price, product design, advertising and promotion spending, direct selling efforts, and after-sales service and support.

More intense rivalry implies lower prices or more spending on non- competitive weapons or both. Because intense rivalry lowers prices and raises costs, it squeezes profits out of an industry.

Alternatively, if rivalry is less Intense, companies may have the opportunity to raise –prices or reduce spending on non- price-competitive weapons, which leads to a higher level of industry profits.

VALUE CHAIN ANALYSIS

The term value chain refers to the idea that a company is a chain of activities for transforming inputs into outputs that customer’s value. The process of transformation is composed of a number of primary activities and support activities that add value to the product.

Research and development:

Research and development is concerned with the design of products and production processes. Although we think of research and development as being associated with the design of physical products and production processes in manufacturing enterprises, many services companies also undertake research and development.

For example, banks compete with each other by developing new financial products and new ways of delivering those products to customers. Online banking and smart debit cards are two recent examples of the fruits of new product development in the banking industry where ATM machines, credit cards and debit cards.

Research and development creates value by developing ever more powerful microprocessors and helping to pioneer ever more efficient manufacturing processes (in conjunction with equipment suppliers).

Production:

Production is concerned with the creation of good or service. For physical products, when we talk about production, we generally mean manufacturing. For service such as banking or retail operations, "Production" typically takes place when the service is delivered to the customer, as when a bank makes a loan to a customer.

By performing its activities efficiently, the production function of a company helps to lower its cost structure.

For example, the efficient production operations of Honda and Toyota help those automobile companies achieve higher profitability relative to competitors such as General Motors.

The production function can also perform its activities in a way that is consistent with high product quality, which leads to differentiation (and higher value) and lower costs.

MARKETING AND SALES:

Marketing and sales can create value by discovering customer needs and communicating them back to the research and development function of the company, which can then design products that better match those needs.

For example, in the 1980s, the French company Perrier persuaded U.S. customers that slightly carbonated bottled water was worth $ 1.50 per bottle rather than a price closer to the $ 0.50 that it cost to collect bottle and distribute the water.

Perrier’s marketing function essentially increased the perception of value that customers ascribed to the product.

SERVICE:

The role of service function of an enterprise is to provide after sales service and support. This function can create a perception of superior value of customers by solving customer problems and supporting customers after they have purchased the product.

For example, Caterpillar, the U.S. based manufacturer of heavy earthmoving equipment, can get spare parts to any point in the world within twenty- four hours, thereby minimizing the amount of downtime its customers have to face if their Caterpillar equipment malfunctions.

This is an extremely valuable support capability in an industry where downtime is very expensive. It has helped to increase the value that customers associate with Caterpillar products, and thus the price that Caterpillar can change for its products.

In short, The value chain also is useful in outsourcing decisions. Understanding the linkages between activities can lead to more optimal make or buy decisions that can result in either a cost advantage or a differentiation advantage.

SECONDARY VALUE CHAIN

The secondary value chain is support activities of the value chain provide inputs that allow the primary activities to take place. These activities are broken down into four functions:

MATERIALS MANAGEMENT:

The materials management (or logistics) function controls the transmission of physical materials through the value chain from procurement through production and into distribution. The efficiency with which this is carried out can significantly lower cost, thereby creating more value. Wal-Mart, the U.S. retailing giant, reportedly has the most efficient materials management setup in the retail industry.

By tightly controlling the flow of goods from its suppliers though its stores and into the hands of customers, Wal-Mart has eliminated the need to hold large inventories of goods. Lower inventories mean lower costs and hence greater value creation.

HUMAN RESOURCE MANAGEMENT:

There are a number of ways in which the human resource function can help an enterprise to create more value. This function ensures that the company has the right mix of skilled people to perform its value- creation activities effectively. It is also the job of the human resource function to ensure that people are adequately trained, motivated and compensated to perform their value- creation tasks.

If human resources are functioning well, employee productivity rises (which lower costs) and customers service improves (which raises perceived value), thereby enabling the company to create more value.

Information System:

Information systems refer to the largely electronic systems for managing inventory, tracing sales, pricing products, selling products, dealing with customer service inquiries, and so on.

Information systems when coupled with the communications features of the internet are holding out the promise of being able to improve the efficiency and effectiveness with which a company manages its other value- creation activities.

For example, Wal-Mart use information systems to alter the way if dose business. By tracking the sale of individual items very closely, its materials management function has enabled it to optimize its product mix and pricing strategy. Wal-Mart is rarely left with unwanted merchandise on its hands, which saves on costs and the company is able to provide the right mix of goods to customers, which increases the perception of value that customers associate with Wal-Mart.

FIRM INFRASTRUCTURE

Firm or company infrastructure is the companywide context within which all the other value creation activities take place; the organizational structure, control systems and company culture. Because top management can exert considerable influence in shaping these aspects of a company, top management should also be viewed as part of the infrastructure of a company indeed, though strong leadership, top management can shape the infrastructure of a company and through that the performance of all other value- creation activities that take place within if.