Components of Information System

An information system can be explained as a co-ordinate and an integrated network of various components, that are combine to develop information from the data gathered. There are majorly five key components in an information system that includes people, network, software, hardware and database. All these components work together to perform control, feedback, output, process and input functions. It is also demonstrated as an academic study of the various systems with a particular reference to the complementary network of software and hardware and information that organisations as well as the people use to create, distribute and process, filter and collect data. All types of organisations irrespective of their size and scale take use of information systems for attaining sustainability, competitive advantages and growth. The small business organisations are concerned with the quality of the goods and services as well as also with the spinning tons of data into the useful information (Oz, 2008). To attain competitive benefits, numbers of small business organisations consider taking use of information systems for formulating the operational, tactical and corporate strategies. To leverage the organisational data as one of the asset of the organisation, the company must incorporate efficient information strategy, which requires the incorporation of various types of information systems which helps in processing the business transactions and empowering the business organisations to make effective, fast and informed decisions.

The large scale and successful organisations also take use of information technologies for managing the business activities and making fruitful decisions. These organisations take use of the information systems for collecting data and processing it in the manner in which it can cater the needs and requirements of the business owners, managers and the analysts. The business activities and functions are operated in a more efficient manner by taking use of various information systems for interacting with the partners, suppliers and the customers, curtailing costs and generating profits. Information systems are not only restricted to the technological part but it can have its presence in all kind of business operations as well as it can increase the efficiency of those business function with its potential incorporation and use (Porter, 2008). The information provided in the essay will help in appreciating the role of information systems in the business activities and business organisations. It will also highlight the various forms of information systems and their usefulness in the businesses. There is an increased competition in the markets and this industrial rivalry in deteriorating number of business organisations. The essay will have it focus on explaining that in what way the there can be achieved efficient management by the means of information systems. The information systems have a major role in solving the problems of a business as well as in gaining high competitive advantages. The aim and objective of this essay in to make the readers understand the role and significance of information systems, their effective use and the advantages drive from their use.

Importance of Information Systems in Business Operations

The significance of an efficient information system should not be undervalued within an organisation or business operations, especially in the present scenario. The way in which the organisational data is transferred and stored internally and taken use in all the various departments is very much essential for the continuous success of an organisation. The role and importance of the information system in the business and business organisation can be explained as through the effective sure of information systems there can be achieve operational excellence. The businesses can have regular improvement in their business operations for achieving higher revenues, it can be done by having the correct quantity of stock in the storage so that there do not take place insufficiency of the goods at the time customers demands for it. It can be done through information system as through this. There will be a fixed record of all the stocks and also the demand forecasting can be performed through various information systems (Laudon, Laudon and Brabston, 2011).

There is significant role of information systems in the development of new services and products for the business organisations. through the use of information systems, there can be creation of new business models as well as the company can describe ion what manner they have been produced, created and sold. With the information systems, the organisation can develop a link with the customers and the suppliers at the same time (Turban, et al., 2008). The improved products and services make the potential consumer a reliable one and this will result in increased sales from the suppliers. Thus, there is development of an improved association among both the parties and the organisations. The decision making in the business organisation is one of the most important tasks, the information system make possible for the managers and the analysts to take use of the real time and actual data while making a decision. Therefore, the information systems help the organisation in making faster and improved decisions by eliminating the time consumes in searching for the information (Turban, Sharda and Delen, 2011).

The business organisations also achieve numerous competitive advantages with the incorporation of an efficient information system in the organisation. The improved decisions, operational excellence, development of new products and services, intimacy among the suppliers and the consumers results in attainment of longer organisational sustainability and growth which empowers the business organisation in achieving the competitive benefits. There are various types of information system which have their significant contribution in the success of the organisation. The information systems such as transaction processing system (TPS), management information system (MIS), decision support system (DSS), operations support system (OSS) and process control system (PCS) have a major role in achieving organizational efficiency and competitive advantage.

Role of Information Systems in Decision Making

In this information system, the TPS meets the output functions, processing, storage and data collection for the core and key operation of any business. In the transaction processing information systems, the data is collected from the user inputs and then there is generation of the outputs on the basis of the data which was gathered (Rainer, et al., 2013). There is a well recognized business operation by which the functioning of TPS could be understood, i.e. the online booking of the air tickets. In this online booking system, there is selection of the seats and flights by the travelers and there is updating of the seats availability through the systems by removing the selected seats, which is known as a processing system. Then the system only generates a copy of the ticket as well as the bill which is the output of the process. The TPS information systems can be either batch processing or can be real time based. These TPSs helps the business organisation in meeting the requirements without getting hold of the additional personnel (Stair and Reynolds, 2013).

The business organisations generally rely upon the industry based management information system for attaining the historical and current operational performance data for example data related to the inventories and sales. Occasionally MIS helps in developing prescheduled reports which are taken use in the operational, tactical and strategic planning. For instance, the MIS report can be a pie chart which shows the sales volume of a product by region or territory or it can be shown in the form of a graph showing the percentage decrease or increase in the sales of a product in a specific time period. The managers and executives take use of MIS to make estimations, preparing reports, proposing decisions etc. (Laudon and Laudon, 2013).

The DSS information system helps the business organizations and the managers in taking use of the ad hoc or predefined reports for supporting the decisions taken for problem resolution and for effective operational planning (Arnott and Pervan, 2008). With the use of DSS information system, the users can be able to find answers for their particular questions for evaluating the impact of any decision before implementing in the actual operations. The answers are delivered in the form of the report for example a sales report of a quarter showing the revenue of a particular product. There is also taken use of a dashboard for having then graphical presentation of the data of different products of a particular product line (Bonczek, Holsapple and Whinston, 2014).

Types of Information Systems

In the business organisations, the end user is liable to perform the data input for generating the information of the products in the form of the reports. The data presented in the reports are taken use b y the external as well as by the internal users. And this entire information system is known as the OSS i.e. operations supports system. The primary objective of taking use of this information system is to update the central database of the organisation, support external and the internal communications, controlling production and to facilitate the various business transactions of the organisation (Melville, 2010).

In the various business organisations, there are certain decisions which are made by the computer systems only, which involve no manual interference. In such cases, the information is updated in the systems on the basis of real-time, thus, there is taken sue of process control information system. For example, there is efficient use of the PCS information system in the organisations of appear manufacturing, oil and chemical industries. With the help of process control systems there enables automation in the business operations. Without the need of manual intervention, the business operations are completed in an efficient manner by the use of PCS (Davenport, 2013). 

The information systems have their vigorous and robust role in offering effective management and competitive benefits to the organizations. There are several potential factors of information systems which support the effective functioning of the information systems such as research and development, production statistics, customer database, financial indicators, cost of sale, customer satisfaction, management process, competitor activity and management decision making. The primary factor which helps the business organizations in attaining competitive benefits and effective management out of all these factors is the management decision making and the production statistics. Through the various types of information systems, the managers used to get adequate research and development which help in gathering the adequate data regarding the production statistics and financial indicator that how much capital will be required for managing the production activities (Chapman and Kihn, 2009). Once there has been gathered customer database through the information systems, the production and other functions are lined up in a more strategic way which helps the organisation in making production and other managerial decisions. It results in effective management by taking more concerned and improved decisions which offer increased organisational efficiency and growth.

Another best use of information system is that it offers competitiveness to the business organisation by having analysis of the activities of the competitors. Once the data is gathered related to the competitors’ operations, it becomes easy for the company to plan the future strategic moves and procedures. It helps the business in developing more innovative products and satisfying the needs of the customers in a more refined way (Borges, Hoppen and Luce, 2009). The cost of sales is also gathered, analyzed and evaluated through the use of information systems which offer the organization to plan its future sales and costs. The costs and revenues of different quarter periods are gathered and evaluated through the information system and by this; the company analyze the total cost of sale taken place. If the business organisation has adequate information about the production, sales, cost incurred, customer database, competitive organisation and market trends, then it becomes uncomplicated for the organisation to take accurate decisions rapidly (Garrison, Kim and Wakefield, 2012). Thus, it is clear from the analysis and the information presented that all these aspects of information systems have their recognized role in offering competitive advantages and efficient management to the business organisation.

Potential Factors of Information Systems

Conclusion and recommendations

In present scenario, every organisation is employing information technology and information systems in their business operation whether directly or indirectly. The use of the information systems have grown in an expanded manner and is touching even the day to day lives of the individuals via internet, mobile phones, laptops, etc. The information systems have their significant role in enhancing the organizational performance as it offers edge in resolving the operational issues in a business organization as well as improving the management decisions of the organisations. The use of information systems have brought gigantic change in the business operations of the organizations whether it be manufacturing, sales, financing, etc. In this essay, an important aspect of the information systems, improving competitive strategies and identifying the competitive benefits through the use of information systems was discussed. There is a need to have proper understanding of the information systems for utilizing all its potentials and capabilities.

The organizations have spend huge capital in attaining the most efficient and innovative use of the information technologies. With the introduction of the information systems, the organizations have now achieved their desired objective. In the last decade, there has been observed a rapid increase in the use of information systems in the business operations for attaining higher growth and success. The business organizations have achieved numerous advantages with the implementation of the information systems such as enabling innovation, focusing on the particular market segments, delivering differentiated services and products and offering the customers with a lowered cost product or service. From this essay it can be concluded that the information systems have came as one of the best tool for efficient and improved decision making in the organisations. It is essential for the managers to take sue of appropriate information which can enhance their knowledge of the external as well as the internal business environment (Easterby?Smith and Prieto, 2008). By achieving accurate knowledge and information, there is reduced degree of vagueness in the managerial decision making and the decisions are more practical and rational in nature. But in the absence of relevant and accurate information, the decisions taken by the executives are more of like a trial and error method, which in result decreases the profits and efficiency and enhances the uncertainty in the business organizations. Thus, there is an essential need of the effective information system in the business organizations. The use of the information systems have offered the advantage of gathering adequate and correct form of data and also generating valuable and useful information from that data. For different business operations, there are various types of information systems explained in the essay. All these types of information systems generate value for the organisation by improving the specific business function in which they are incorporated.

For achieving higher competitive advantages through the incorporation of information systems, it is recommended to the business organizations to take use of the information systems in a strategic manner such as to attain competitive advantage of cost leadership, the organizations must use ISs to essentially reduce the business processes’ cost or shift the cost of performing business or to lower down the costs related to the suppliers and the customers by taking use of e-procurement systems, online business to business models and online business to consumer models for reducing the operational costs. The second recommendation for achieving competitive advantage through information system is by having strategic alliance; the organisations can employ information systems for creating and enhancing the association with the partner through application for example, creating inter-organisational information system and virtual organisations (Shapiro and Varian, 2013).

It is also recommended to the business organizations to have innovations in the business operations through the use of information systems. It can b e used for identifying and having assistance in developing new and pioneering services and products and to expand niche markets and to fundamentally modify the business processes by means of automation i.e. taking use of simulation of the product design and digital modeling for reducing the cost and time to the market. The business organisations can also work over the pioneering initiatives of setting up of pure online commerce or business operations. At the similar time period, the telecommunication networks and the internet offers improved opportunities and capabilities to the organisation for business innovation (Bilgihan, et al., 2011). There are recommended two good examples of innovation through information systems in the business oragnisations i.e. open innovation and combinational innovation. Generally the components parts on the various networks are of high cost and are not affordable by the business oragnisations as well as some are extremely different in nature. The organizations have the opportunity to recombine or combine the various components on the networks for creating pioneering innovations. In the meantime, the organizations are connected with their mobile devices, laptops and personal computers through the mobile networks, wireless networks or cable networks (Göker and Myrhaug, 2008). There are enormous numbers of opportunities available to the business organizations to co-create with the internal organizational people, external partners and the customers.

Another recommendation for the business organizations is achieving the competitive benefit of differentiation through implementation of information systems; the business organizations can take use of the ISs for developing differentiated attributes and to decrease the differentiation benefits of the competitors i.e. taking use of the social networks and the online systems for live chatting and serving the potential customers (Liang, et al., 2011). Incorporating information systems for taking use of technology for creating the inform diaries for offering value-added services to the customers as well as enhancing the stickiness of the customers with the business and websites. Through the ISs, there can also be application of established and advanced measures for the offline practices to online operations for achieving more systematic and accurate ways of evaluating the effectiveness and efficiency of advertising (Hemmatfar, Salehi and Bayat, 2010). 

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