In modern day businesses it is widely accepted that investment in an information system is of vital importance. The advancement in technology in recent times has sparked this urgent need for up to date information systems in businesses. The emergence of the global economy has also transformed the landscape for the business world which has lead to businesses developing information systems in order to keep up with compeditiors and to gain an advantage.
The following are 6 reasons why businesses use information systems.
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
I will now explore the advantage gained by a business for each of the above six benefits.
1. Operational excellence. Business improve the efficiency of their operations by the use of information systems in order to achieve higher profitability. Information systems are important tools available to managers for achieving higher levels of efficiency and productivity in business operations. A good example is Wal-Mart that uses a RetailLink system , which digitally links its suppliers to every one of Wal-Mart’s stores. as soon as a a customer purchase an item , the supplier is monitoring the item , knows to ship a replacement to the shelf.
2. New products, services. Information system is a major tool for firms to create new products and services. An information system can fast track the launch of a new product and also help market the product.
3. Customer/supplier intimacy. When a business serves its customers well, the customers generally respond by returning and purchasing more. this raises revenue and profits. The more a business engage its suppliers, the better the suppliers can provide vital inputs. This lower costs. Example: The use of value club cards in Dunnes Stores tracks the type of products that customers buy and offers savings on these particular items to customers.
4. Improved decision making. Many managers operate in an information bank, never having the right information at the right time to make an informed decision. These poor outcomes raise costs and lose customers. Information system made it possible for the managers to use real time data from the marketplace when making decision. Example: Having an up to date level of stock will help a manager in his decision on what stock to bring in.
5. Competitive advantage. When firms achieve one or more of these business objectives( operational excellence, new products, services, and business models, customer/supplier intimacy, and improved decision making) chances are they have already achieved a 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. Example: Toyota Production System focuses on organizing work to eliminate waste, making continues improvements, TPS is based on what customers have actually ordered.
6. Day to day survival. Business firms invest in information system and technology because they are necessities of doing business. This necessities are driven by industry level changes. Example: Citibank introduced the first automatic teller machine to attract customers through higher service levels, and its competitors rushed to provide ATM’s to their customers to keep up with Citibank. providing ATMs services to retail banking customers is simply a requirement of being in and surviving in the retail banking business. Firm turn to information system and technology to provide the capability to respond to these.
It is clear for the above six benefits that developing and purchasing an information system is a must in todays business environment.