Using Information System in Business Model will reduce Cost and Increase Profit
Information systems have transformed the way business organizations perform their operations in the modern times. This transformation is as a result of the contemporary technological advancement that is enabling people to communicate, transfer data and store information with ease,in a cost-effective manner. For instance, information systems are allowing businesses to engage in market research so as to develop new ways and implement new strategies of doing business considering the cut-throat competition in the business arena. They are also allowing these organizations to automate their steps in the business procedures, which were being performed manually in the past. Among the practices that have been significantly simplified include making invoices, shipping orders and labels among others (Laudon, 54). Therefore, suffice to say, utilizing the information system in a business model will reduce cost and eventually increase the organization’s profitability.
The invention of new technologies has changed the flow of information, thus making it possible for the global society to access and as well share information without problems. As a matter of fact, this has replaced the traditional sequential steps with tasks that can be executed simultaneously to eliminate undue delays in decision making (Laudon, 54). In simple, information systems have completely changed the business working environment, supporting new models that have further reduced operational costs of businesses. A significant example is how businesses have been able to sell their products online, irrespective of where their clients are located on the global scale. To attest to this, it is possible to download a Kindle e-book online from the Amazon’s website without much hassle. More so, it is possible for a client to buy a computer online from Best Buy and download music tracks from iTunes (Laudon, 56). These are entirely new businesses that have come to operation as a result of the invention of new information systems that have made it easy to start businesses online because less capital is required. Therefore, in the view of this issue, it is prudent to conclude that it would be largely difficult and completely inconceivable for globalization to take without the current technological developments (Laudon, 56).
Information systems can also be used to accomplish strategic advantages at the industry level. Such benefits are associated with the building of strategic alliances with other businesses so as to be able to work closely with other related firms (Laudon, 57). This is achieved by developing industry-wide standards for information exchange and completion of business transactions electronically, something that forces all the key players in the market to subscribe to the same standards. Such efforts hence have an immediate effect of increasing efficiency to make the substitution of produces greatly difficult and perhaps incrementing the market entry costs so as to curb competition. In simple, the internet technology creates highly synchronized industrial value chains referred to as value webs (Laudon, 57). A value web is, therefore, a collection of autonomous firms that utilize information systems to coordinate and monitor their value chains so as to produce products and services that are consumed in the broader market collectively. Hence, the value is derived from a networked system that can be used to synchronize the predominant value chains of business partners within a specific industry, enabling them to respond and adapt to changes in the demand and supply of different products and services in the market scale (Laudon, 60). Unlike before when businesses incurred humongous costs to adopt mechanisms that best suited the demand and supply patterns in the market, this can be done at a press of a button with information systems today. The information systems thus improve the general performance of diverse businesses by promoting core competencies and synergies within their units. Fundamental to note is that core competencies entirely rely on knowledge that can either be gained through experience or incorporated through new external technologies. Hence, it follows that any information system that enhances knowledge sharing among business units also facilitates competency, an aspect that is key to achieving reasonable profitability in the business world (Laudon, 60).
Business models based on networks may accrue strategic benefits to a firm by taking advantage of the beneficial aspects of network economics. Notably, in the network economics, the marginal cost of having an additional participant as well as those of creating additional products is negligible (Laudon, 63). However, the marginal gains from the same are higher by far. For instance, taking an example of a huge group of people who offer their products on eBay, it can be established that the more the products are listed on the site, the more preferable it becomes for the customers. This is because more competition among suppliers on the site has an effect of lowering prices as one of the most significant competitive strategies. Thus, this enables organizations dealing in such products to acquire them at relatively lower costs and sell them at normal prices, something that makes them increase their profit margins (Laudon. 63).
A business organization performs key functions such as storing, analyzing and sorting data through a plethora of info from diverse sources such as vendors, warehouse, customers and shipping (Laudon, 64). Therefore, to promote efficiency in its operations, a business ought to be well organized, acquainting their employees with the latest knowledge about the new developments of information systems. Incorporating them in business models make it possible for business organizations to improve the execution of operations and as well enable them to make better decisions. Such activities are supported by a continuous flow of knowledge, information, and material among the participants in the market. For instance, filling an order is and can be a greatly complicated process for a business organization because of the wide information required so as to be able to deliver the produce to the customer’s vicinity (Laudon, 65). In fact, computerized systems make such a transition as smooth as possible. This, in turn, enables business organizations to increase their sales and their profitability.
Taking a deep analysis of the operation of the global business in the modern times, businesses are seeking to respond to the ever-changing customer demands, maintaining inventories as low as possible so as to achieve high operational efficiencies (Laudon, 68). For example, they are making their supply chains more fast-paced, with many companies adopting the just-in-time sales strategy irrespective of their size to get a market for their goods faster and also reduce overhead costs. Therefore, internet advertising and e-commerce continue to expand. Google is one of the major companies that have greatly benefited from incorporating information systems in their business models. The company’s sales have been growing at an accelerated rate of more than 10% every year, something that enabled it to realize revenues more than $17 billion in the year 2015 (Laudon, 67). Therefore, from this example, advancement of the information systems as well as the internet has maintained globalization growing steadily. It follows that global communications have reduced operational and transactional costs. This means that customers have now been able to order products from all corners of the globe, overcoming the physical barriers that increase operational costs of organizations as well as prices of goods and services to the customers. Notably, businesses that are involved in the production of goods and offering services can find quality information online that help them to save money because they can find low-cost suppliers by just comparing their costs online. They have also been able to outsource more business opportunities and seize them, something that has enhanced their sales as well as their profitability (Laudon, 68).
Information systems have become so essential to managing and running any form of business today. This is one of the primary reasons as to why almost every organization has IT professionals, outsourced IT services or IT departments (Laudon, 70). Such professionals are in charge of maintaining networks, data storage, software and hardware capabilities that comprise the IT infrastructure of a firm. The experiences of Starbucks, 1–800-Flowers, and Duane Reade are powerful illustrations of how incorporating information systems in the business models can enable organizations to make better decisions. In fact, managers of these retail chains proved their inability to make significant decisions such as what prices to charge to advance profitability, what items to stock to increase sales during different time periods and at different locations among others. Research shows that the managers were able to access customer purchase statistics but however, they were not able to analyze such a comprehensive data on their own. It is as a result of the bad decisions related to prices and inventory management that saw low sales, making the retail stores unable to respond to the customers’ demand patterns, tastes, and preferences adequately. To counter this challenge completely, the businesses undertook to incorporate the business intelligent software in finding and predicting trends and patterns, to devise appropriate strategies to enable them to keep losses low and revenues high. In fact, it is as a result of the better decision making accrued from utilizing business information systems that have made these companies more profitable in the current times.
Overall, business processes define how tasks in a different organization are performed. These processes denote the way in which business organizations organize and coordinate their work activities, knowledge, and information to produce valuable products and services. Therefore, based on the above analysis of the significance of the information systems in business, it can be found that the level of business performance relies largely on how well its processes are coordinated and designed. Hence, information systems that are well-designed are undeniably an important source of competitive strength that enables companies to perform better than their rivals in the today’s information age. Businesses will always strive to have solid infrastructures, a web presence and up-to-date hardware and software. More so, they will often make effort to adopt inexpensive ways of producing goods and services, while including the information related to these products in their networks. Indeed, putting such systems together gives businesses better customer relation management services, something that enable them to increase their profit margins. Accounting and finance systems also play a fundamental role in planning, production, development and control of the flow of production, primarily to reduce costs and increment profit.
Laudon, Kenneth C. Essentials of Management Information Systems. 7th ed. Vol. 102. S.l.: Prentice Hall, 2015. Print. Ser. 14.