BUIS LU1

Introduction to Business Information System

Objectives

• By the end of this unit, students should be able to:
    - Discuss common applications of computers and information systems;
    - Explain the difference between computer literacy and information literacy;
    - Discuss the differences between data and information;
    - Define transaction processing systems;
    - Define management information systems;
    - Describe the four major components of an information system;
    - Explain the importance and applications of information systems in functional areas of an organisation;
    - Discuss how information technologies are used to gain a competitive advantage.

Common Applications of Computers and Information Systems

• Everyday use of computers includes:
    - Social media
    - Online payments
    - Online shopping
    - Job searching

• Companies utilize computers and information systems for:
    - Online marketing and advertising
    - Customer support
    - Keeping customers informed

Definition of a Computer

• A computer is also referred to as a computing device; it is any machine capable of executing various applications.

• A computer is defined as a system that performs the following functions:
    - Input
    - Processing
    - Output
    - Feedback and control

Definition of a System

• A system is defined as a set of interrelated elements that operate together towards common objectives or goals.

• It comprises the following components/functions:
    - Input
    - Processing
    - Output
    - Feedback and control

Input, Processing, Output, and Feedback

• Input:
    - Refers to the activity of gathering and capturing raw data. Input devices include keyboards, mice, etc.

• Processing:
    - Involves converting data into information using the CPU.

• Output:
    - The production of useful information after processing, which can be in the form of reports or results. Outputs can be soft copies or hard copies.

• Feedback:
    - Utilization of output to modify input or processing; serves as a control mechanism for adjustments.

Information System (IS)

• An Information System is defined as a set of interrelated components that collect, capture, process, output results, store for future use, and distribute data, information, and knowledge to support management in an organization.

• How IS Supports Management:
    - Increases the speed of service delivery.
    - Records and manages stock levels with automated reordering.
    - Generates reports that aid managerial decision-making.

Components of an Information System

• Data

• Databases

• Processes

• Information

Data

• Data is described as raw facts devoid of meaning. Example: During registration, capturing a student's name, surname, and enrolled course is considered data.

• Information systems should glean data from both internal and external sources:
    - Internal sources: sales records, personnel records.
    - External sources: customers, competitors.

• Data possesses time orientation: historical, current, or future.

Databases

• Collected data should be organized and integrated into files, referred to as databases.

• Database Management Systems (DBMS) manage databases, enabling efficient data capture and processing.

Processes

• Processes generate information for informed managerial decisions and are responsible for required report generation.

Information

• Information is the output following processing.

• It is crucial to understand that:
    - Data does not aid decision-making; information does.

• Characteristics of valuable information include:
    - Accessible: Available to authorized users when needed.
    - Accurate: Error-free; inaccuracies result from faulty input data.
    - Complete: Contains all essential facts.
    - Economical: Should be cost-effective to produce.
    - Reliable: Dependable information.
    - Secure: Protected from unauthorized access.
    - Simple: Not overly complex.
    - Timely: Provided when required for decision-making.
    - Verifiable: Can be checked for correctness, often by source verification.

Computer Literacy vs Information Literacy

• Computer Literacy:
    - Refers to one’s ability to effectively utilize a computer and its productivity software. For instance, an employee is computer literate if they operate their work computer and software effectively.
    - Skills associated with computer literacy include end-user computing skills.

• Information Literacy:
    - Involves understanding the value of information in generating and utilizing business intelligence.
    - Example: Post-test reflection to identify areas for improvement, adjusting behavior accordingly for future success, indicating information literacy through understanding and adjustment based on results.

Types of Information Systems

• Transaction Processing System (TPS):
    - Used at the operational level to handle routine activities through capturing, classifying, storing, and processing data from business transactions.
    - Consists of:
      - Collection of people, procedures, hardware, software, databases, and devices recording business transactions.
    - Performs two types of processing:
      - Batch Processing: Transactions accumulate and process later as a group (e.g., payroll).
      - Online/Real-time Transaction Processing (OLTP): Data is processed immediately after capture, e.g., inventory updates at point-of-sale.
    - Competitive advantages from TPS include:
      - Increased customer loyalty;
      - Superior customer service;
      - Improved supplier relationships;
      - Enhanced information gathering efficiency;
      - Cost reductions;
      - Optimized stock levels.

• Management Information System (MIS):
    - Organized integration of hardware, software, data, processes, and human elements to produce timely, integrated, relevant, accurate, and useful information for decision-making.
    - Used by middle management for data storage, processing, and retrieval to support decision-making, focusing on operational efficiency and generating standard reports from TPS.

Information Systems in Organizations

• Information systems can support various functional areas. Examples include:
    - Human Resource Information System (HRIS):
      - Supports human resources tasks, helping make decisions about hiring, employee scheduling, predicting staffing needs, and generating employee demographics reports.
    - Logistics Information System (LIS):
      - Aims to reduce logistics process costs, supporting decisions on routing, delivery schedules, transportation modes, budgeting, and shipment planning.
    - Manufacturing Information System (MFIS):
      - Focused on cost reduction and product quality enhancement while supporting ordering decisions, cost calculations, space utilization, tender decisions, and pricing adjustments.
    - Financial Information System (FIS):
      - Provides timely financial information, aiding decisions regarding budget allocations, capital investment risk management, cost trend monitoring, cash flow management, and portfolio structuring.

Using Information Technologies for Competitive Advantage

• Definition: Competitive advantage is a long-term strategic edge an organization possesses against its competitors.

• Well-designed IT can support strategies that enable achieving competitive advantage:
    - Cost Leadership Strategy:
      - Focus on reducing overall product/service costs. IT aids in cutting costs through:
        - Minimizing physical resource usage (e.g., transitioning to electronic statements).
        - Modernizing workplaces with energy-efficient technologies.
        - Utilizing social media for marketing, thereby increasing sales volume and reducing per-unit production costs.
    - Differentiation Strategy:
      - Creating a clear distinction between products/services and competitors'. Example:
        - Oscar Health Insurance's unique user experience via IT for customizing healthcare plans.
    - Focus Strategy:
      - Concentrating on specific market segments to achieve either cost or differentiation strategy. E.g., Apple Computer’s marketing directed towards consumer and professional creative users.

Michael Porter’s Five Forces Model Framework

• Analyzing organizational strategy through:
    - Buyer Power: High when customers have numerous options; decreases with fewer options.
    - Supplier Power: High as buyer options decrease; low when buyers have more choices.
    - Threat of Substitute Products/Services: Competitors with similar offerings increase threat; organizations can counter this by adding value.
    - Threat of New Entrants: Mitigated through strategies ensuring product/service uniqueness, often employing focus strategy.
    - Rivalry Among Existing Competitors: Heightened competition as market players increase; managed by offering additional value.