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Information Systems in Decision Making Research Paper Sample

The Value of Information Systems on Decision-Making in Organizations

The process of decision-making is a daily activity of managers of various organizations, whose choice has an impact on an effective company’s activity. The processing of numerous and inconsistent alternatives and a choice of the “best” is a difficult and responsible process, which has gained a considerable attention recently. The new means aimed at the simplification of the decision-making process appear. Information systems at decision-making occupy one of the central places in the sociology of any organization. Taking into consideration the instrument of management, many sociologists and specialists in the theory of management, such as Al-Mamary, Nowduri, and Moga, directly connect its activity primarily with the preparation and implementation of administrative decisions. The efficiency of management is in many respects caused by the quality of such decisions. The interest of sociologists in this problem is caused by the fact that decisions fix the whole set of relations arising in the course of work and management of the organization. The purposes, interests, communication and rules are reflected though them. The given research paper will discuss the value of information systems on decision-making in organizations.

The value of information is one of the most important properties of information, the assessment of which depends on the purpose of its generation, reception and processing. It is studied by special theories of information, such as a decision-making theory. The decision-making theory includes the area of research, including the concepts and methods of mathematics, statistics, economics, management and psychology, with the purpose to learn the regularities of the choice of different ways of decision-making as well as the most beneficial out of all existing decisions. The interested users of information include all people who have any information needs about the organization and possess sufficient knowledge and skills to understand, estimate and use this information, and also a desire to study this information. Real and potential investors, employees, creditors, suppliers and contractors, buyers and customers, authorities and the general public can be the interested users (Al-Zhrani 1247).

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Decision-making is the process of making a rational or irrational choice of alternatives that is aimed at the achievement of a desired result. The most effective approaches to the organization of a qualitative informational support include the implementation of the analysis of the current situation in this area, the forecast of the development for two – three years ahead, and introduction of information systems that take into account the development plans of business. Decision-making is always connected with the changes in information technologies. The limits of competences covering decision-making are accurately designated in the requirements of a formal structure. Therefore, the main goal of information systems consists in the formation of information about the financial position, financial results of the company’s activity and changes in the financial position of the organization that is useful to a wide range of users interested in decision-making. The information created by proceeding from this purpose meets the general requirements of the interested users. However, it does not mean that all information, which can be necessary for the interested users at decision-making, is formed (Kumar).

One of the most important features of the information technologies in decision-making includes a qualitatively new approach to the interaction of a computer and a person. Decision-making is an iterative process that includes the system of decision-making support, such as a computing link and an object of management, a person estimating the received result and making decision on its basis.

Information technologies in decision-making have a number of features, such as orientation to the solution of badly structured (formalized) tasks; a combination of traditional methods of access and processing of computer data with the opportunities of mathematical models and methods of the solution of tasks on their basis; orientation on a nonprofessional PC user; a high adaptability, providing an opportunity to adapt to the features of the available technical means and software and also to the user requirements (Al-Zhrani 1250).

One of the key factors influencing the creation of an effective decision-making in a company is the right choice of the software product that provides functional and structural communication of members. There is a large number of decisions, which open ample opportunities for the analysis, planning, flexible operational management of the resources of the company and the personnel, finally increase competitiveness of the companies in the market by the improvement of the quality of services, and also the possibility of optimization of external and internal communication by means of effective use of the information technologies. They include computerization of working positions, network technologies used both for intra firm communication and for an active exchange of information with the external economic environment. However, the transformation of the business processes is more many-sided than the process of introduction of new technologies. The information technologies are valuable in decision-making in organizations. In order to understand what the value of information systems in decision-making is, it is necessary to understand what an information system is, define its types and characteristics.

According to Nowduri, the word “system” comes from the Greek “systema”, which means the whole, made out of the parts or a set of elements. The system is a set of interconnected elements that function for the achievement of a definite purpose. The basic characteristics of the system include the purpose, feedback and environment. Systems considerably differ from each other both by structure and overall objectives. The equipment rooms and computer software belong to the systems, telecommunication, life-support systems, education systems, etc. Thus, the basic purpose of information system is the creation of a modern infrastructure for operation of business, organization, and establishment (Nowduri 2).

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A variety of the problems solved by means of information systems led to the occurrence of a set of the polytypic systems, which differ by the principles of construction and the rules of the information processing put in them. Information systems can be classified according to a variety of features. There is a classification of information systems on the basis of the problems structure.

According to Al-Zhrani, there are three types of problems requiring decision-making, for solution of which information systems are created:

  • Structured (formalized);
  • Non-structured (non-formalized);
  • Partially-structured (1249).

The information systems used for the salvation of partially-structured problems are subdivided into two kinds, creating administrative reports and focused mainly on data processing and developing possible alternatives of a decision.

Information enables us to determine the need to create new products and services. Information tells us to move into new markets or to withdraw from other markets. Without information, the goods are not produced, the orders are not placed, the materials are not procured, the shipments are not delivered, the customers are not billed, and the business cannot survive (Moga).

The Principles of Classification of Information Systems:

  • Strategic management level (3 – 5 years);
  • Intermediate term management level (1 – 1.5 years);
  • Operational management level (month – quarter – half-year);
  • Operational administration level (day – week);
  • Real-time management level (Kumar).

In management systems, the automated procedures of information process are integrated by the modern enterprises with the management functions. Along with the basic functions, they are carried out directly by the managerial personnel. Therefore, modern economists and managers should possess not only professional knowledge regarding their major, but also own modern methods of handling data on computers.

Moreover, the constantly growing competition forces the heads of companies to search for new management methods directed at preservation and expansion of the presence in the market, increase the company’s profitability and to implement new management methods of production and marketing. A special role is played by the informational technologies, which should provide support of all progressive management innovations. Moreover, new approaches to the management of a company are often initially guided by the possibilities of modern information technologies and are almost impossible without the use of computer systems. In these conditions, informational technologies become effective management tools of the enterprises, an integral part of business infrastructure. Information systems applied for planning and management by various resources are called integrated control systems, or corporate information systems. The control systems of management information technology of enterprises and organizations are rather complicated as they take into consideration the interests of the participants involved in the creation and use of IT resources (Nowduri 5).

Criteria for the Selection of Information Systems

In order to make the informational systems effective for decision-making, the following criteria for the selection of information systems valuable for decision-making in a company should be followed:

  • The information system should remain a system: a change in its several parts automatically leads to the change of the corresponding indicators in other sections;
  • The information system should provide employees responsible for decision-making with the realization of the made decisions;
  • The information system should give information in a full size for the immediate decision-making;
  • The system has to give the head a chance to receive information in the volume necessary for adoption of operational decisions;
  • The information system should have the procedures of control over the fulfillment of the accepted decisions for minimization of possible errors.

Being created on the basis of the above-mentioned criteria, informational systems are divided into several types, which can be applied by the organizations in the process of decision-making. There are five main systems: Operation Processing System, Managerial Information System, Decision-Making Support System, Top Management System, and Expert System.

System Types

Operation Processing System

The system is intended for the management of production processes and operations.

Managerial Information System

The system gathers, organizes and summarizes the necessary data in the form convenient for the managers and necessary for their work.

Decision-Making Support System

The system automatically searches for processes and summarizes the information necessary for decision-making.

Top Management System

The system is intended for the satisfaction of the special needs of the top management in information processing.

Expert System

The informational system is created for duplication and imitation of the human thinking.

Operation Processing System (OPS)

A bank manager who is interested not in the information about each operation for VISA card of a definite client, but in the total number of purchases made by the card holder, average monthly financial payments can be an example of such a kind of system. Operation Processing System will provide information that will useful for the future decision-making concerning bank privileges for a definite client.

Managerial Information System (MIS)

An industrial company can develop an all-round control system of stocks, which simultaneously would trace the expected orders and available stock. A factory manager can use this information system for decision-making concerning the quantity of goods a company should produce the following week or month.

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Decision-Making Support System (DSS)

A managing director can be interested in the possible consequences of the prices rise for definite goods sold by the company. He/she can request the decision-making support system to define potential consequences of a rise in prices by 5 percent, 7 percent and 10 percent. A good DSS should have information about the history of the price formation of a product, prices established by the competitors, the latest changes in the prices, influence of prices on sales, seasonal fluctuations of demand and a rate of inflation, and also any other pertinent information. Later, the system can count the sales forecasts, a market share, and also a line of profit for all potential levels of rise in prices.

Top Management System (TMS)

Top Management System fulfills fast gathering and provision of information in the most usable form, possibly, even with the allocation of especially important data. The companies may need to obtain information from the terminals of sellers. TMS can represent the schedules of sales in color. The system can also submit the data about the production of competitors, the methods of sales stimulation, whether the existing representation of goods involves buyers or not.

Expert System

Such a system can generalize the knowledge base for the company’s policy in a pricing question. It will include the facts and unforeseen circumstances of the type “if – that”. It allows loading the system with a question: What is the price policy? It also assists in correct decision-making.

There are also the basic stages of the creation of information systems. The first step includes the definition of the organizations’ information requirements and formation of the corresponding purposes of the system. These purposes should be supported by adherence to managing directors and corresponding financial support. The following three groups of actions can be made simultaneously. They include the formation of a database, definition of the requirements for hardware, definition of the software and purchase of operating systems. The following step includes the development of engineering specifications of the system and preparation of people for its exploitation (Nowduri 2).

In order to be effective in decision-making, the information systems should be properly integrated. It means the merge of various information systems within one organization or various organizations into a single whole. The distinctions in technology and operating systems can seriously hinder integration. The strategy for overcoming these difficulties consists in a simultaneous development of the whole system. However, it can be extremely expensive, and managing directors can meet difficulties, estimating the future information needs. It is necessary to take into consideration that the system will become outdated (Al-Mamary, Shamsuddin and Aziati 010).

A definitive check of the value of an organization’s information system is the degree to which it can be involved. The system should have such characteristics as simplicity, an easy access and a low technological level. A managing director should have a possibility to enter the corresponding new data or to request the delivery of the definite types of information. The effective system will also allow processing these data effectively and presenting them successfully.

Information systems in decision-making influence the base structure and organization building in various directions, such as the organization should have a division for work with the system of administrative information; a new top management position can be created to provide installation and system operation; many levels of hierarchy can be eliminated. The value of the information systems in decision-making consists in the help to managers to work with a considerable quantity of subordinates, eliminating the levels of a step control. Moreover, information systems improve individual productivity and give more satisfaction from work. They also provide cross-section communication in the organization. However, they can reduce the necessity of interaction to a minimum, which will lead to the fact that labor relations will become less personal. It, in its turn, reduces the unity levels in groups (Al-Mamary, Shamsuddin and Aziati 012).

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The information support of the process of decision-making is complex. At present, information technologies compose the key basis for decision-making of different levels because the basic statistics for decision-making is also collected in the information corporate system. Moreover, more and more complex and integrated practically into all fields of human activity in-formational systems covering almost all business processes of a company are created. Information technologies sharply increase the speed and quality of interaction of the members of small production groups among themselves, considerably reducing the time of achievement of the planned tasks. Accumulating the statistics of decision-making, information technologies allow accelerating the development rate of a company in a strategic prospect, giving the chance to plan for a long-term period of time. There are two administrative factors, such as area and hierarchy, which reflect a kind of the organization’s information systems (Al-Zhrani 1250).

Each of the basic functional divisions of the organization has a unique set of information requirements. The degree, in which managing directors of key functional divisions are integrated and coordinated, is connected with this factor. In case there is a requirement for a highly coordination, the information system coordination is necessary. For example, a market information system can be improved to include the sales increase forecast for the next year by 10 percent in comparison with the data expected earlier. The integrated information system provides financial operating the data about that, how much additional working capital is required for the maintenance of higher levels of a salary and market cost. It can give a signal to the managers that the release of additional production is necessary.

Hierarchy: the position of a managing director in the hierarchical system of an organization helps to define the organization’s requirements for this or that type of information. At strategic level managing directors may need a wide spectrum of general information during various periods of time. Extremely definite information in very short terms is necessary to managing directors of the lowest link (Al-Mamary, Shamsuddin and Aziati 015).

Summing up, the application of information technologies in decision-making leads to a choice of more effective and actual decisions, and can also be used at all management levels. As the decisions made at different levels should be coordinated, an important function of such systems is the coordination of people making these decisions. Information systems influence labor productivity, giving tools for the simplification of processing and transformation of data and coordination of labor activity. They make the company more effective and transparent. Being a well-developed branch, informational technologies and systems influence the economic growth of a company. Moreover, the use of expert systems allows reducing the risk from the consequences of decision-making and gives the invaluable help to young managers and experts. Therefore, information technologies are widely used all over the world and the future is for them. Moreover, IT infrastructure wins the world, and due to these technologies globalization makes people closer to each other. The managerial success of any organization can be achieved by means of modern IT technologies based on the application of computers and means of telecommunications.

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