CIMA E1 Official Learning System - Enterprise Operations Aug 2009

Подождите немного. Документ загружается.

STUDY MATERIAL E1

INFORMATION SYSTEMS

facts of organisational life. It follows that information technology (IT) and information

systems (IS) assume increasing managerial importance within the modern organisation.

It is at this stage worthwhile explaining the relationship between data, information tech-

nology (IT) and information systems (IS).

Data are facts or ﬁ gures in a raw, unprocessed format. To become useful to a decision-

maker, data must be transformed into information. Information is data presented in a form

that is useful for decision-making, adding value to the decision-maker by reducing uncer-

tainty and increasing knowledge.

The process of turning data into information may include the following stages:

●

Data collection: raw data is collected from both the internal and the external environment.

●

Data evaluation: collected data is ﬁ ltered for relevance.

●

Data analysis: different dimensions of the data are analysed, e.g. comparison with

budget, with the historical record, with industry best.

●

Data interpretation: meaning added to the data.

●

Data reporting: information is disseminated to users.

Hellriegel and Slocum (1992) explain that IT involves:

any devices or systems that help individuals or organisations assemble, store, transmit, process and retrieve

data (raw facts and ﬁ gures) or information

Information technology allows organisations to operate a number of different types of organ-

isational information systems each designed with a speciﬁ c purpose in mind. Information

Systems are therefore products of Information Technology and normally take the form of

software programs. Clegg (2003) explains that technology is just a delivery option and it

may be feasible to have a viable IS strategy without computers, because the ‘quality of

information is more important than technology.’ Despite Clegg’s comments it is difﬁ cult

to imagine an organisation of any size operating effectively without IT.

Within the factory, computer aided design (CAD) and computer aided (or automated)

manufacturing (CAM) offer integrated solutions in product design and control of machin-

ery. This allows ﬂ exibility and the elimination of waste factors integral to a ‘lean philoso-

phy’ and constant improvement. An integrated approach combining both CAD and CAM

can lead to the use of robots and computerised inventory management. The problems of

economic machine loading and provision of customer and stockists’ requirements is one of

the most complex in modern factory management but can be easily facilitated through IS.

The ofﬁ ce, like the factory before it, has been subject to huge technological advance-

ments in recent years. ‘Ofﬁ ce automation’ is a term that refers to the use of computers,

communications and network technology in managing the organisation’s operations and

information resources. In recent years this has resulted in the combination of data, text,

image and sound into ofﬁ ce-built multimedia systems. Many organisations have made use

of network technology, speciﬁ cally electronic data interchange (EDI). EDI is the computer-

to-computer transmission of data contained in standard business documents and reports,

such as customer invoices and purchase orders. EDI replaces conventional business doc-

umentation with structured data transmitted electronically over networks (‘paperless

trading’). Obvious advantages of EDI include saving cost and speeding of transactions,

potentially reducing lead times for material purchases (and stock holding) better customer

service and improved responsiveness to changes in customer demands.

Many forms of automation and other technology are commonly found in most ofﬁ ce

environments. Some are reﬂ ected in Table 2.1.

ENTERPRISE OPERATIONS

INFORMATION SYSTEMS

2.1.1 The role of information systems in organisations

An organisation’s information system serves two important purposes. First, the information

system records and monitors actions in the operational system, by processing, storing and

reporting day-to-day transactions. The second major function of the organisation’s infor-

mation system is to support managerial activities, such as decision-making, planning and

control. Information systems play a vital role in modern day organisations at a number of

levels, whether:

●

improving operations and manufacturing,

●

contributing to enhanced products and services,

Table 2.1 Examples of ofﬁ ce automation

Application Description Comments

Teleconferencing The ability to conduct

meetings, business

negotiations and

presentations without the

participants having to be at

the same location.

Relatively inexpensive means of

communication, allowing a number of

telephone participants to hold multiple-way

communication. One potential difﬁ culty

is the lack of visible identiﬁ cation and

recognition of participants.

Videoconferencing As above. Videoconferencing overcomes the problems

cited above by screening images of

participants. It is still relatively expensive

and requires special equipment. Advantages

include savings in cost and time for

participants, fast communication and

timelier decision-making.

The Internet A virtual network that links

millions of computers all

over the world.

Many organisations now use the Internet to

advertise, trade and search for information

about competitors, customers and suppliers.

The World Wide Web exists on the Internet

and consists of pages of information that

can be found at websites, which can be

accessed through the use of a web browser

by using a unique address called a universal

resource locator (URL). The ﬂ exibility and

accessibility makes it a particularly useful

tool for business.

e-mail Electronic mail. The primary form of organisational

communication. It offers speed,

versatility, the elimination of distance as

an impediment, and the potential for an

immediate response. It can signiﬁ cantly

reduce the volume of paper. A potential

difﬁ culty of e-mail is the risk of computer

viruses being transmitted through the

opening of rogue messages.

Fax Facsimile image transmission.

Messages are digitally coded

then transmitted, recorded

and composed by the

receiver’s equipment.

e-mails popularity may have eclipsed the fax.

Fax transmissions allows the sending of an

exact copy of a document.

STUDY MATERIAL E1

INFORMATION SYSTEMS

●

offering the opportunity for cost reduction,

●

improving communication, or

●

allowing managers to make better informed decisions.

Decision-making is an important aspect of any organisation. The process of decision-

making includes three stages: identifying decision problems, developing decision alterna-

tives and making appropriate choices. Each level of the organisation has different types of

decisions to make and therefore requires different types of information. Classically, three

levels of decision-making are normally identiﬁ ed, strategic, tactical and operational, each

resulting in different informational requirements and information sources:

Information attribute Strategic Tactical Operational

Orientation Mainly externally oriented Internal and external Internal

Planning time Long term Short to medium term Immediate

Performance focus Predictive rather than

historical performance

Historical and current

activities

Current

activities

Coverage Whole organisation Groups of activities within

departments/functions

Speciﬁ c

activities

Level of detail Highly summarised Some detail/some summarised Very detailed

Uncertainity High due to the long-term

focus

Moderate levels Low levels

Objectivity High levels of subjectivity Combination of subjective and

objective information

Objectively

measured

data

Accuracy Less critical Moderate accuracy High accuracy

Decisions may be deﬁ ned in terms of frequency (e.g. volume) and their signiﬁ cance on

the organisation. Operational (low-level) decisions occur most frequently in an organisa-

tion (e.g. on a daily basis). Strategic decisions are less frequently made. On the other hand,

strategic decisions are potentially more signiﬁ cant and far-reaching for the whole organisa-

tion, whereas operational decisions are likely to have a lesser impact on the organisation as

a whole, but are likely to have a signiﬁ cant impact on the particular operational function

in which they are made. (It is important to recognise that there is unlikely to be a clear dis-

tinction of levels in practice, the distinction between operational and tactical decisions and

between strategic and tactical decisions is often a matter of judgement and interpretation).

As good decision-making is at the heart of good management the hierarchy of systems

available to support managers are worthy of consideration at this stage. They range from

straightforward data processing systems to highly sophisticated expert systems. The hierar-

chy of potential systems and their uses are reﬂ ected in Table 2.2.

ENTERPRISE OPERATIONS

INFORMATION SYSTEMS

Exercise 2.1

Identify the beneﬁ ts of having good MIS and good EIS.

Solution

The value of having good MIS includes:

●

Potentially more effective operations and improved management control;

●

More complete information available to managers to improve decision-making;

●

Improved satisfaction and motivation amongst managers;

●

Better information leading to improved budgetary control, stock control, improved fore-

casting, etc.

Table 2.2 Decision-based systems

Type Description Usefulness

Data processing

system (DPS)

or transaction

processing

system (TPS)

The processing of repetitive tasks

using well-deﬁ ned and structured

information that is relatively

easy to capture and store in large

volumes.

Provides ﬁ rst line managers with vital day-to-day

information about efﬁ ciency of operations and

activities, but is limited due to the inﬂ exible

nature of information produced.

Examples: payroll systems, purchase/sales order

entry systems and stock control systems

Management

information

systems (MIS)

Report-producing packages that

use information from the same

source as the DPS.

Provides middle managers with information to

monitor and control the organisation’s activities

and to report this to the senior-level managers.

Useful for decision-making, planning,

programme implementation and control.

Examples: forecasting, reporting, budgeting and

control information (exception reports, variance

reports, etc.)

Executive

information

system (EIS)

Powerful software for supporting the

types of high-risk, unstructured

decisions that are made by

strategic-level managers. EIS

combines information from

within the organisation and from

its external environment, then

organises, analyses and presents it.

Provides senior-level managers with strategic-

level information to help them make strategic

decisions. Presents output using text and

graphics (e.g. bar charts and histograms),

which can be tailored and customised.

Examples: key performance indicators (KPIs)

through user-friendly interface graphical user

interface (GUI)

Decision

support

systems (DSS)

Possesses interactive capabilities,

assists in solving ‘ad hoc’ queries

and provides data-modelling

facilities.

Provides managers with information to support

unstructured, one-off decisions by retrieving

and analysing data. The complex mathematical

models used are designed to simulate the

behaviour of an organisational activity in

an unpredictable situation. DSS generate

a number of potential solutions, enabling

managers to carry out ‘what if?’ analysis.

Expert systems

(ES).

A system that simulates the

problem-solving techniques of

human experts, by applying

human expertise and knowledge

to a range of speciﬁ c problems

about a particular area of

expertise.

Higher degree of support than that provided by

the EIS or DSS. The major beneﬁ ts of expert

systems include a preservation of knowledge

and its distribution.

Examples: investment appraisal decisions

STUDY MATERIAL E1

INFORMATION SYSTEMS

The value of having good EIS includes:

●

Ability to make informed, potentially signiﬁ cant decisions of strategic signiﬁ cance;

●

Maintaining a competitive advantage over rival companies who do not make this

investment;

●

Improved ability to recognise opportunities or external challenges;

●

Ability to track key performance indicators (KPIs) meaning that monitoring and control

at strategic level is more effective.

Information systems should possess a number of important features in order that they ful-

ﬁ ll a useful role within the organisation. These include:

●

Relevance. Relevant information is capable of making a difference in a decision by reduc-

ing uncertainty and increasing knowledge about that decision. For example, making a

decision about offering credit to a new customer might include an analysis of the cus-

tomer’s ﬁ nancial statements or previous credit history. An analysis of the customer’s staff

levels would not be relevant.

●

Timeliness. Information must be provided to the decision-maker in sufﬁ cient time

for it to be used in the decision-making process. Information that is presented to the

decision-maker before it loses its inﬂ uence on the decision being taken has timeliness.

Information has to be available in order to be timely.

●

Understandability. Understandable information is presented in a form that permits the

user to apply it effectively to a decision-making situation. Information needs to be clear

so that the user can recognise how important the information is to a particular decision.

●

Comparability. This is the quality of information that enables users to identify the simi-

larities and differences in various pieces of information. If we can compare information

about the same object or event collected at two or more points in time, then the infor-

mation is also consistent. Consistency aids comparability in decision-making.

●

Accuracy. This is the degree to which there is agreement between the information and the

events or activities that the information is meant to represent. Information must be suf-

ﬁ ciently accurate for it to be relied upon by the manager, and for the purpose for which it

is intended. It is important to assess the level of accuracy required by managers before pro-

viding the information, as the accuracy requirements will differ between decisions.

●

Completeness. This is the degree to which information includes data about every relevant

event necessary to make the decision.

●

Neutrality. This means that information is not biased towards one particular perspective

or from one particular source or location. Biased information is likely to lead the decision-

maker to the wrong decision or an incomplete decision.

●

Meaningful. The content of information, particularly, if the information is provided to

managers, should be of strategic importance, meaningful and actionable. Meaningful

information is synthesised from various pieces of data and is usually interpreted.

●

Effectiveness. Effective information is that which is relevant and pertinent to the business

process, as well as being delivered in a timely, correct and consistent manner.

●

Efﬁ ciency. Efﬁ cient information is provided through the optimal use of resources.

2.2 Organisational dependence on information

systems

Many organisations cannot function adequately without their information systems, e.g. air-

lines, travel agents, banks, insurance companies, even supermarkets. It has become difﬁ cult

ENTERPRISE OPERATIONS

INFORMATION SYSTEMS

for ﬁ rms to survive on domestic business alone. To achieve scale economies, ﬁ rms need

to develop new markets and e-marketing has allowed organisations to trade more easily

globally and seek out and exploit new markets. This trend is evidenced by the fact that the

last 20 years has seen world trade has grown at twice the rate of world GNP.

The competitive advantage to be gained from adept use of this potential to create new

business models is easily apparent. Philips (2000) for instance cites the strategic implica-

tions of e-business as including the death of distance as a communication impediment and

the reality of virtual organisations able to make savings and operate differently.

2.2.1 Emerging IS trends in organisations

This section explores emerging IS trends in organisations including:

●

enterprise-wide systems such as area networks and databases,

●

knowledge management systems,

●

customer relationship management systems such as e-business and Web 2.0 tools.

Enterprise-wide systems. In early computer systems many organisations consolidated their

information systems into one centralised data processing system. However, as companies

become more diverse and distributed across large geographical areas, it was recognised that

information systems were required that could meet the speciﬁ c processing requirements of

these distributed locations, but still retain communication to a central computer facility. This

is known as distributed data processing (DDP), where the individual processing centres are

linked to a centralised computer but have individual processing capabilities at each location.

The use of DDP in the modern business environment is increasing and, as a result, large vol-

umes of data transmission over wide area networks (WANs) are increasingly common.

A network is where a number of computers and other devices are linked in such a way

that any one device can communicate with any other so enabling resource sharing between a

number of users. Many organisations adopt a computer systems conﬁ guration that utilises a

data communications network. Networks may link computers in different organisations and

can involve widely distributed geographical sites (known as wide area networks or WAN),

or computers within the same local site (known as local area networks or LAN). Where the

WAN uses dedicated links it is called a physical network. Where a WAN uses a combination

of links that are ‘transparent’ to the user, the network is called a virtual network.

Databases. Data needs to be stored, managed and retrieved. One method of simplifying

matters is by means of an integrated dataset, whereby one set of data can be used by the

enterprise as a whole. Traditional approaches to ﬁ le management have taken an applica-

tions approach to data structure. For example, ﬁ les based around accounting transactions,

such as stock records, sales invoices and purchase orders, would be collected and stored

in an accounting application. Under this approach each application collects and manages

its own ﬁ les and data, normally within separate ﬁ les for each application. The accounting

department may keep ﬁ les relating to customers, as might the marketing department, but

these records are likely to be kept separately within different departmental applications.

One outcome of this type of ﬁ le structure is ‘data redundancy’, a duplication of data in two

or more ﬁ les, leading to inconsistencies of the same data and an increased storage costs.

A database is a collection of data structured completely independent of any one application.

A database could be described as a collection of data ﬁ les that are integrated to provide one

single ﬁ le system. The main aim of a database ﬁ le structure is to provide one common data-

set for a wide variety of users and their information needs. A database management system

(DBMS) is a set of integrated programs designed to organise and simplify the creation, man-

agement and access of data held within a database structure. A DBMS represents the way in

STUDY MATERIAL E1

INFORMATION SYSTEMS

which an organisation coordinates the complex activities carried out by its department into

one data location. A DBMS should enhance the organisation’s ability to provide reliable, rel-

evant information to decision makers easily, efﬁ ciently and effectively.

Exercise 2.2

Your organisation is considering changing to a database system. List the issues it would

need to consider.

Solution

●

Specialist staff required (in implementing and running the new system, such as a data-

base manager and administrators).

●

Set-up costs of new software and possibly new hardware.

Table 2.3 Features of databases

Aims Advantages Disadvantages

Provide data for a number

of users and meet their

individual information

requirements.

Data independence: allows multiple

applications to use the same data

at the same time. The data can be

accessed in a number of different

ways according to what the user

is doing (e.g. preparing a report,

performing a query or through

basic applications processing, etc.).

Privacy. A requirement is for

sophisticated security features

to protect the database from

unauthorised access, alteration or

data destruction. (These are to be

found in a DBMS)

Allow multiple users to

have shared access to the

database to carry out their

own processing.

Reduction of data redundancy. In

a database structure, data is only

stored once. Any application that

requires an item of data can access

and retrieve it from a central store.

Data ownership. A dispute over

who ‘owns’ the data within the

database may result in problems

over who should carry out ﬁ le

maintenance.

Maintain the integrity of the

data (as there is only one

dataset).

Reduced storage costs. Potential ﬁ le

storage requirements are reduced,

resulting in ﬁ le storage savings.

Data integrity by keeping only one

version of each data item within

the database, inconsistencies in

data between applications are

eliminated.

It is important to restrict users from

making unauthorised changes

that could spoil the data for all

other database users. However,

users must be able to have access

to the data so that they can

update it when necessary.

Database failure, should the power

or the database fail, no processing

or access to ﬁ les is possible

anywhere within the organisation.

Contingency planning. As all ﬁ les

are held in one location the

risks of loss is an increased

concern. Contingency planning

is signiﬁ cantly more important,

which may be costly and

time-consuming.

Advance corporate

objectives.

An ability to develop as the

organisation’s information needs

evolve.

Some organisations may implement

databases without considering the

beneﬁ ts to their speciﬁ c situation.

ENTERPRISE OPERATIONS

INFORMATION SYSTEMS

●

Training costs.

●

Security features.

●

Possible disruption.

●

Responsibilities.

●

Contingency and back-up facilities.

When a database is connected to a web server by a database connectivity component, (e.g.

Microsoft ADO and Open Database Connectivity) visitors from outside the organisation

(such as potential customers) can make enquiries about product and price information,

and make orders and view shopping cart items from a web browser.

Exercise 2.3

Reﬂ ection

Think about the way in which you and your organisation use the World Wide Web. Take

a few minutes to consider how it is used:

●

to trade

●

to network

●

for entertainment

●

for information

●

for marketing.

What are the trends in web-based technology?

Undeniably sharing information within an organisation can lead to more effective opera-

tions and innovation, however this becomes difﬁ cult where the organisation grows in

size and complexity. Often knowledge is contained in pockets within the organisation.

Knowledge Management Systems (KM Systems) as its name implies is a system for manag-

ing knowledge. The software allows the collection, storage, organising and dissemination

of various kinds of information for future use as part of internal ideas generation, col-

laboration, or operational efﬁ ciency, etc. Mind maps, diagrams, notes, reports, contracts,

policy documents, e-Learning materials, e-mails, messages and training manuals might be

managed by the software. Knowledge management solutions range from small software

individual packages, such as brainstorming (thought shower) software, to highly sophisti-

cated tailored software suitable for shared use. The philosophy that underpins KM systems

is consistent with other trends such as knowledge workers, the learning organisation and

collaborative team working. Organisations clearly believe in the importance of KM sys-

tems as evidenced by growing corporate expenditure on software of several pound billion

per year.

The Internet is a public and global communication network that provides direct con-

nection to anyone over a local area network (LAN) and represents an example of a virtual

network. Access is potentially open to all, which arguably has resulted in an unruly prolif-

eration of information of varying standards of reliability. Common Internet tools include

STUDY MATERIAL E1

INFORMATION SYSTEMS

e-mail, World Wide Web (www), social networking, shopping online, newsgroups, blog-

ging and electronic conferencing.

Exercise 2.4

What signiﬁ cant beneﬁ ts can the Internet bring to modern day organisations?

Solution

●

online survey and market research,

●

access to competitors’ information and intelligence,

●

improved communication,

●

enhanced relationships with business partners,

●

improvements to the supply chain,

●

the potential to access new customers and markets,

●

online customer services leading to enhanced customer loyalty,

●

innovation in new products and services offered,

●

online contract tendering,

●

the potential for home working,

●

a platform for doing business and Internet shopping.

According to the UK Government’s Ofﬁ ce of Fair Trading internet shopping market in the

UK is estimated to be worth over £21.4bn, and over 20 million people shop online.

Using the Internet as a platform a rapid growth in so-called ‘dot.com companies’ took

place about a decade ago, most taking advance of e-marketing. Although not all of these

start-up companies survived more established organisations have since invested in this

technology to enhance their operations.

Berens (2006) explains:

The dot-com boom was led by start-up companies that had unproven records, but the latest growth is being

led by established retailers who understand their customers, have brands that people trust and see the web

as a bolt-on’, says Nick Gladding, senior retail analyst at Verdict Research. ‘Lots of businesses that were sit-

ting on the sidelines have now taken the plunge. It has been a difﬁ cult time for the retail industry, but there

seems to be more conﬁ dence now and e-retailing is one area that has a lot of potential for attracting new

business.

Grocery shopping has become one of the key interests for UK consumers. Tesco’s and Asda’s online serv-

ices have had a dramatic impact, the former controlling two-thirds of the Internet groceries market. Other

Table 2.4 Practical advice for building a commercial website

Ensure that the site works across all platforms (e.g. Apple Mac, PCs, Linux) and across browsers

(e.g. Internet Explorer, Firefox and Opera).

Inform users how secure their transactions are. Winning your customers’ trust is vital.

Take account of any Consumer Protection and privacy legislation.

Draw up a privacy policy and terms of use for the site.

Do not collect too much information from site users in case it deters them.

Stay in contact with your customers, (e.g. by sending e-mail newsletters).

Get advice from experts sponsored by the government

Source: Berens (2006)

ENTERPRISE OPERATIONS

INFORMATION SYSTEMS

big names among the country’s top 20 Web retailers include Argos, B&Q, Comet, Currys, John Lewis,

Marks & Spencer and Next…………………..

Conventional retailers must also adjust to the fact that the Web has redeﬁ ned how people shop. It’s ena-

bling consumers to choose goods that meet their requirements precisely, empowering them to ﬁ nd the

lowest-priced product and allowing them to go shopping at any time that suits them.

So what are the keys to successful online trading? ‘You have to provide something extra in terms of the

product, the service and the price,’ Gladding says. ‘With the advent of comparison sites such as Kelkoo,

prices are very visible online, particularly those of electrical goods. But established retailers still have the edge,

because customers ﬁ nd that a reputable brand provides a lot of reassurance.’

With the incredible uptake of use of the Internet a number of beneﬁ ts present themselves in marketing

term (for example, in terms of data collection and providing enhanced value to customers and suppliers). It

should, however, be noted that there are potentially a number of drawbacks of internet trading (e.g. ﬁ nancial

security issues, computer disruptions, and a possibility of organisations ceasing trading).

Early e-business pioneers claimed a 20% reduction in costs. Berens (2006) highlights

the online auction house of eBay that has become one of the largest UK marketplaces. The

UK population now spends 10% of its web-surﬁ ng time on buying and selling goods. This

seems to emphasise a new technology-enabled retail marketplace, and

. . . most retailers can’t afford not to trade on the internet, particularly those based in the UK. According to

analysts, online shoppers in the UK will spend £1,170 per head on the Web this year, compared with their

US counterparts’ £987. One of the factors behind this growth is thought to be the rapid take-up of domestic

broadband services.

The Internet has transformed our environment presenting a global canvas and in the

process has reshaped the business world. The electronic business phenomenon has seen

phrases such as ‘e-commerce’, ‘e-business’, ‘digital economy’, ‘Internet commerce’ and

other besides becoming mainstream language. Phillips (2000) believes that they all mean

similar things, drawing a slight distinction whereby:

●

e-commerce (electronic commerce) represents the means by which companies commu-

nicate via digital transactions, but

●

e-business (electronic business) also incorporates doing business throughout the value

chain (with suppliers and customers).

An Intranet is an internal organisational network that is based on the Internet technologies,

and can be accessed only by authorised employees. While the Internet has open access to the

public, an Intranet is private and is protected by a ‘ﬁ rewall’ (an access control system consist-

ing of hardware and software that is placed between an organisation’s internal network and

external networks). One of the main advantages of an Intranet is that it allows conﬁ dential

internal information sharing (e.g. corporate policies, document sharing, telephone directories,

training programmes, etc). An Extranet refers to an extended Intranet of an organisation that

links to its business partners (such as customers, suppliers or other trade organisations). Only

authorised users are allowed access. One of the main advantages of an Extranet is to connect

dispersed networks together. It has great potential in enhancing inter-organisational commu-

nication, facilitating electronic data interchange (Internet-based EDI) and e-procurement.

Web 2.0 is a category of Internet tools that effectively turn users into media contribu-

tors. The technology allows virtual communities to be built and opinion, knowledge and

ideas can be shared. The potential for this has clear implications for not only social com-

puting but also education, government and business. Wikis, second life, blogs and RSS

feeds are examples of facilities offered by Web 2.0. (RSS involves subscribing to syndicated

feeds and get publication updates every time there’s new information (such as news head-

lines) in a variety of visual and audio formats).