4 The Role of IS in Business and Managerial Challenges

4.1 The Fundamental Roles of IS in Business

There are three fundamental reasons for all business applications of information technology.
They are found in the three vital roles that information systems can perform for a business
enterprise.

• Support its business processes and operations.
• Support decision making by its employees and its managers
• Support its strategies for competitive advantage

For example, lets consider these three roles in a retail store.

Support Business Processes: most retail stores now use computer based information systems
to help them record customer purchases, keep track of the inventory, buy new
merchandise, pay employees and evaluate sales trends.

Support Decision making: CBIS allow management to make decisions on what lines of
merchandise is required or should be discounted and which areas need investments.
Support Competitive Advantage: Gaining a strategic advantage over competitors requires
innovative use of IT.

For example, store management might make a decision to install touch-screen kiosks in all of
their stores, with links to their e-commerce website for online shopping. This might attract new
customers and build customer loyalty because of the ease of shopping and buying
merchandise provided by such information systems. Therefore, strategic information systems
can help provide products and services that give a business a competitive advantage over
its competitors.

4.1.1 Information Systems In the Functional Areas of Business
Studies have shown that the involvement of managers and decision makers in all aspects of
information systems is a major factor for organizational success, including higher profits and
lower costs.

Information systems are used in all functional areas and operating divisions of business.
The principal business functions are;

- Sales and Marketing: ensuring that the firms products meet the needs of the
marketplace, developing a market for those products, providing them at the right
time for the right price.
- Production: creating or adding value by producing goods or offering services. In
firms that produce goods, the production function is known as manufacturing.
- Accounting and Finance: managing the funds of the enterprise.
- Human Resources: developing the personnel of the firm.

Let’s consider application of information systems in these functional areas of a business.

Sales and Marketing: to develop new goods and services (product analysis), determine the
best location for production and distribution facilities (place or site analysis), determine the
best advertising and sales approaches (promotion analysis),and set product prices to get
the highest total revenues (price analysis).

Manufacturing: to process customer orders, develop production schedules, control inventory
levels, and monitor product quality.

In addition, information systems are used for product design. Applications used include
Computer-Assisted Design *CAD ). Others include manufacturing of items using Computer-
Assisted Manufacturing *or CAM ),and integration of multiple machines or pieces of
equipment using computer-integrated manufacturing ,or CIM.

Finance and Accounting: to forecast revenues and business activity, determine the best
sources and uses of funds, manage cash and other financial resources, analyze investments,
and perform audits to make sure that the organization is financially sound and that all
financial reports and documents are accurate.

Human Resource Management: to screen applicants, administer performance tests to
employees, monitor employee productivity, and more.

4.1.2 Information Systems in Industry
Information systems are used in almost every industry or field.
The airline industry employs Internet auction sites to offer discount fares and increase
revenue.

Investment firms use information systems to analyze stocks, bonds, options, the future market,
and other financial instruments, as well as to provide improved services to their customers.
Banks use information systems to help make sound loans and good investments, as well as to
provide online check payment for account holders.

The transportation industry uses information systems to schedule trucks and trains to deliver
goods and services at the lowest cost.

Publishing companies use information systems to analyze markets and to develop and
publish newspapers, magazines, and books.

Healthcare organizations use information systems to diagnose illnesses, plan medical
treatment, track patient records, and bill patients.

Retail companies are using the Web to take customer orders and provide customer service
support. Further, they use information systems to help market products and services, manage
inventory levels, control the supply chain, and forecast demand.

Power management and utility companies use information systems to monitor and control
power generation and usage.

Professional services firms employ information systems to improve the speed and quality of
services they provide to customers.

Management consulting firms use intranets and extranets to provide information on
products, services, skill levels, and past engagements to its consultants.

Apart from business organizations, non-governmental organizations as well as Government
organizations use information systems to streamline its operations in order to achieve
efficiency and effectiveness.