Strategic planning for an organization involves long-term policy decisions, like location of a new plant, a new product, diversification etc. Information technology has played an important part in the U.S. and global economies. Companies rely on IT for fast communications, data processing and market
intelligence. Specifically, business firms invest heavily in information to achieve six strategic business objectives:
® Operational excellence
® New products, services, and business models
® Customer and supplier intimacy
® Improved decision making
® Competitive advantage
Operational Excellence: This relates to achieving excellence in business in operations to achieve higher profitability. For example, a consumer goods manufacturer may decide upon using a wide distribution network to get maximum reach to the customers and exposure. A manufacturing company may pursue a strategy of aggressive marketing and mass production.
New Products, Services, and Business Models: This is part of growth strategy of an organization. With the help of information technology, a company might even opt for an entirely new business model, which will allow it to establish, consolidate and maintain a leadership in the existing market as well as provide a competitive edge in the industry. As successful as Apple Inc., BestBuy, and Walmart were in their traditional brick-and- mortar existence, they have all introduced new products, services, and business models that have made them even more competitive and profitable.
Customer and Supplier Intimacy: When a business really knows its customers, and serves them well, the way they want to be served, customers generally respond by returning and purchasing more. The result is increased revenues and profits. Likewise with suppliers: The more a business engages its suppliers, the better the suppliers can provide vital inputs. The result is a lower cost of doing business. JC Penney is an excellent example of how the use of information systems and technologies are extensively used to better serve suppliers and retail customers. Its information system digitally links the supplier to each of its stores worldwide. Suppliers are able to ensure the continuous flow of products to the stores in order to satisfy customer demands.
Improved Decision Making: A very important pre-requisite of strategic planning is to provide the right information at the right time to the right person, for making an informed decision. Well planned Information Systems and technologies make it possible for the decision makers to use real-time data from the marketplace when making decisions. Previously, managers did not have access to accurate and current data and as such relied on forecasts, best guesses, and luck. The inability to make informed decisions resulted in increased costs and lost customers.
Competitive Advantage: Doing things better than your competitors, charging less for superior products, and responding to customers and suppliers in real time all add up to higher sales and higher profits that your competitors cannot match. Toyota and Walmart are prime examples of how companies use information systems and technologies to separate themselves from their competition. Toyota worked its way to top of its industry with the help of its legendary information system. Walmart is the most efficient retail store in the industry based in large part on how well it uses its information resources.
Survival: Firms also invest in information systems and technologies because they are necessities for doing business. Information systems are not a luxury. In doing so, they had a major competitive advantage over their competitors. In order to remain and survive in the retail banking industry, other banks had no choice but to provide ATM services to banking customers.
Data Vs Information
Data is a collection of raw facts that may or may not be meaningful for managers. Input to any system may be treated as Data. It is very difficult to understand data and needs to be processed to understand. Data may not be in the order.
Information is the outcome derived after processing the data and is always meaningful. Output after processing the system is Information. Processing is performed by performing arithmetic logical calculations on data of simply by rearranging the data. It is very easy to understand information. Information should be in the order.
For example, researchers who conduct market research survey might ask a member of the public to complete questionnaires about a product or a service. These completed questionnaires are data; they are processed and analyze in order to prepare a report on the survey. This resulting report is information.
Characteristics of Information
Good information is that which is used and which creates value. Experience and research shows that good information has numerous qualities.
- Availability/accessibility: Information should be easy to obtain or Information kept in a book of some kind is only available and easy to access if you have the book to hand. A good example of availability is a telephone directory, as every home has one for its local area.
- Accuracy: Information needs to be accurate enough for the use to which it is going to be To obtain information that is 100% accurate is usually unrealistic as it is likely to be too expensive to produce on time. Accuracy is important. As an example, if government statistics based on the last census wrongly show an increase in births within an area, plans may be made to build schools
and construction companies may invest in new housing developments. In these cases any investment may not be recouped.
- Reliability or objectivity: Reliability deals with the truth of information or the objectivity with which it is You can only really use information confidently if you are sure of its reliability and objectivity. Unless you know who the author is, or a reputable university or government agency backs up the research, then you cannot be sure that the information is reliable. Some Internet websites are like vanity publishing, where anyone can write a book and pay certain (vanity) publishers to publish it.
- Relevance/appropriateness: Information should be relevant to the purpose for which it is required. It must be suitable. What is relevant for one manager may not be relevant for The user will become frustrated if information contains data irrelevant to the task in hand. For example, a market research company may give information on users‘ perceptions of the quality of a product. This is not relevant for the manager who wants to know opinions on relative prices of the product and its rivals. The information gained would not be relevant to the purpose.
- Completeness: Information should contain all the details required by the user. Otherwise, it may not be useful as the basis for making a For example, if an organization is supplied with information regarding the costs of supplying a fleet of cars for the sales force, and servicing and maintenance costs are not included, then a costing based on the information supplied will be considerably underestimated.
- Level of detail/conciseness: Information should be in a form that is short enough to allow for its examination and use. There should be no extraneous For example, it is very common practice to summaries financial data and present this information, both in the form of figures and by using a chart or graph. We would say that the graph is more concise than the tables of figures as there is little or no extraneous information in the graph or chart. Clearly there is a trade- off between level of detail and conciseness.
- Presentation: The presentation of information is important to the user. Information can be more easily assimilated if it is aesthetically
pleasing. For example, a marketing report that includes graphs of statistics will be more concise as well as more aesthetically pleasing to the users within the organization.
- Timing: Information must be on time for the purpose for which it is Information received too late will be irrelevant. For example, if you receive a brochure from a theatre and notice there was a concert by your favorite band yesterday, then the information is too late to be of use.
In a simplest sense, a system that provides information to people in an organization is called information system (IS). It can be defined as a collection of interrelated components working together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization. An information system is an organized combination of people (persware), hardware, software, communication networks, and data resources.
Information systems in organizations capture and manage data to produce useful information that supports an organization and its employees, customers, suppliers and partners. So, many organizations consider information system to be the essential one. Information systems produce information by using data about significant people, places, and things from within the organization and/or from the external environment to make decisions, control operations, analyze problems, and create new products or services. As already mentioned, Information is the data shaped into a meaningful form. Data, on the other hand, are the collection of raw facts representing events occurring in organizations or the environment before they have been organized and arranged into a form that people can understand and use.
The three basic activities to produce information in an information system are input, processing, and output.
® Input captures or collects raw data from within the organization or from its external environment for processing. Normally input is hardware component of information systems.
® Processing converts raw data into the meaningful information. Normally processing is done by software. Processing is done either by performing arithmetic or logical calculations on the data or by simply rearranging the data.
® Output transfers information produced from processing data to the people who will use it or to the activities for which it will be used.
Information systems also include two additional components: feedback and control.
- Feedback: It is data about the performance of a It is the idea of monitoring the current system output and comparing it to the system goal. For example, data about sales performance is feedback to a sales manager.
- Control: On the basis of feedback, the control function makes necessary adjustments to a system‘s input and processing components to ensure that it produces proper For example, a sales manager exercises control when reassigning salespersons to new sales territories after evaluating feedback about their sales performance.
The two types of information systems are formal and informal. Formal information systems are based on accepted and fixed definitions of data and procedures for collecting, storing, processing, disseminating, and using these data with predefined rules. Informal information systems, in contrast, relay on unstated rules. Formal information systems can be manual as well as computer based. Manual information systems use paper-and-pencil technology. In contrast, computer-based information systems (CBIS) relay on computer hardware and software for processing and disseminating information.