The Key Issues Surrounding Financial and Marketing Applications of Management Information System - Term Paper Example

Introduction A business is a collection of business processes where business processes are the sets of activities that enable workflow of materials, information and knowledge. Familiar business processes include manufacturing and production, sales and marketing, finance and accounting, human resources and so on. Increasing the efficiency of existing processes and / or enabling entirely new processes are sure ways of transforming a business (Laudon & Laudon 2010). This can be achieved by integrating computer systems with business processes and the objectives of a given organization, what is referred to as Management Information Systems (MIS). MIS systems enable organisations to transform unmanageable volumes of data into formats that supports faster decision making. Faster decision making empowers organisations with the capability to survive in today’s rapidly changing business environment. MIS systems also enables organisations run simulations based on raw data which allows them to answer ‘what if’ questions regarding their strategy. Broadly, MIS increase information utility across an organization. Information availability is essential to the decision making process at all levels of the organisation: functional, operational and strategic. In this discussion we shall look at the key issues surrounding application of MIS in two major business processes, namely: marketing and finance. Marketing management information systems Marketing management information systems (MkIS) are computerized systems designed to support the availability of information required to ensure effective marketing activities of an organization. These needs of the organization can only be met by the marketing information systems if it provides the organization with operational, analytical and collaborative functionality (Harmon 2003). The operational needs aspect is addressed by the customer management applications that focus on daily customer transactions and customer service. The analytical function is done by MkIS decision support systems that enable data analysis on factors affecting the market conditions such as customers, competition and technology. The collaborative MkIS applications make it easier for managers to share information and work together virtually. Also, it assists in encouraging organizations to collaborate with their customers on product designs and preferences. Managing marketing information by means of IT has become an indispensible element of effective marketing. MkIS offer new approaches for making better the internal efficiencies of a firm especially with regards to the collection and sharing of marketing information. Kotler and Keller (2006) define marketing management as “the process consisting of analyzing market opportunities, researching and selecting target markets, developing marketing strategies, planning marketing tactics, and implementing and controlling the marketing effort.” We can classify marketing management information systems (MkIS) into two categories based on the organizational rank of the users and type of use: the systems for the managers and the systems for operational sales and marketing activities. Senior executives, marketing managers, and marketing analysts generally use marketing intelligence, research, planning and decision-making systems while at the operational level ordinary employees and supervisors use marketing and sales systems for data gathering and implementation. Some of the key issues that MkIS aids organizations in addressing include product range management, category management, sales analysis and forecasting. In product range management the dilemma that arises is usually on whether the business should continue to support weak products to make them strong or to let them die. The dilemma is that weak products do contribute to sales in spite of their low contribution while at the same time promoting them takes vital resources away from the strong products. Additionally, an excessive product range increasingly absorbs and thereby dilutes a brand’s power because it creates the environment for having weak products within the brand. The key to a successful product range management lies in concentrating all resources on the strong products, i.e. the ones bringing both turnover and profits. Data collected and analyzed by marketing information systems enables organization to keep pace with their market, to forecast and thus to be able to develop to create profitable ranges of products. Category management is the process of grouping lines of products into categories so that they can be managed under business unit with the aim of maximizing sales and profits. Category management improves the intimacy between retailers and suppliers because some products are tailored to the specific retail store. This can only take place if supplier and retailer have an intimate knowledge about their customers so that they can develop effective product categories. To determine the products that make up a category, to analyze the performance of a category and to determine optimal marketing mix require running through vast volumes of data which is the domain of marketing information systems. According to Marketing Forecasting: the Hidden Secret of Today’s Most Accountable CMOs (2010) CEOs and boards are impressed by accurate, forward – looking forecasts. This means that marketers cannot afford to be left behind if other functions of the organization are already doing the same. To deliver credible forecasts requires analytical rigor and a deep understanding of the revenue cycle. This can only be done with the aid of marketing information systems. Finance and accounting information systems Finance and accounting information systems (AIS) combine traditional accounting controls and methods with IT resources to make available to users financial information needed to manage businesses. In practice, the heart of AIS is made up of financial applications such as general ledgers, projects, budgeting and so on. AISs encompass all business functions from transaction processing accounting systems to the sophisticated financial management planning systems. Similar to the MkIS, finance and accounting information systems provide the organisation with the ability to track their costs, improve resource allocation and performance tracking, simulate answers for ‘what if’ scenarios etc Accounting is usually done by an organisation for two purposes: to comply with the law of the land and to provide the company with a basis for internal economic decision making. The former is referred to as financial accounting while the later is referred to as managerial accounting (Eisen 2003). International standards regardless of whether they follow Generally Accepted Accounting Principles (GAAP) guidelines or International Financial Reporting Standards (IFRS) require sophisticated accounting that can no longer be done without the aid of an AIS. Therefore finance and accounting information systems have become a necessity for compliance with the accounting standards. Managerial accounting is all about financial control. The principal financial controls are: the cash flow statement, the balance sheet and the income statement. Financial controls enable managers to take a proactive management position of their business. Each of the financial controls gives managers insight into how well the organisation is performing in realizing its objectives (Financial Controls n.d.). Points of sale systems are a combination of hardware and software that enable an organization to not only record sales but also interface the sales data with their inventory systems. A point of sale system’s fundamental function is to gather and apply information effectively. Cash registers and the checkout systems are the preferred locations for point of sale information systems. Some other benefits of a POS are: it reduces cost, it improves customer service and marketing and it ensures consistency especially for multi-store businesses. Additionally POSs are among the few applications that have an impact on three or more business functions simultaneously, that is purchasing, supply chain management, accounting and marketing. With regards to marketing, POSs collect customer information such as addresses, names and credit card details which can be used for targeted promotions. Also, for multi-store businesses such as Wal-Mart customers could go to different stores yet from the POS the firm can be able to put all that information in a central database. This, for instance, could simplify the process of category management at Wal-Mart. Wal-Mart is also famous for its sophisticated but highly effective supply chain that has given it a competitive edge over competitors. The POS is one of the key components of the Wal-Mart, UPS, Zara Fashions and other business success stories. We cannot complete the discussion on financial and accounting information systems without addressing the issue of increased vulnerability brought about by increasing use of the Internet by organisations. The fastest-growing threat on the Internet is the theft of sensitive financial data (Beard & Wen 2007). The potential for conducting business on the Internet may be gravely damaged if people lose confidence over how secure their information is. Since our concern is with regards to accounting, insufficient information security would heighten the opportunity for unauthorised alteration or falsification of accounting records. Beard and Wen (2007) provide many examples of threats to accounting systems. At the point of data collection, hackers could piggyback or masquerade as authorised users. At the point of data processing introduction of malicious files and viruses could distort the accounting program’s logic thus causing erroneous calculations and summaries to be made. There is also the possibility of theft of data that could be of competitive advantage to a competitor taking place. In conclusion, Beard and Wen (2007) state that with the increasing use of computer technology, business have no other option than to restructure themselves and put in place unique internal control techniques to address exposure to the many new dangers. The buck stops with the management. They are responsible for the establishment and maintenance of effective internal control systems to protect the customer, the business and themselves. References Beard, D & Wen, HJ 2007, ‘Reducing the Threat Levels for Accounting Information Systems’, The CPA Journal, May Eisen, PJ 2003, Accounting the Easy Way (E-Z Accounting), 4th ed., Barrons, New York. Harmon, RR 2003, ‘Marketing Information Systems’, Encyclopedia of Information Systems, Elsevier Science (USA), Vol. 3, pp.137-151. Kotler, P & Keller KL 2006, Marketing Management, 12th ed., Prentice-Hall International, London. Laudon, KC & Laudon, JP 2010, Management Information Systems: Organization and Technology in the Networked Enterprise, Prentice Hall, New York. Marketing Forecasting: the Hidden Secret of Today’s Most Accountable CMOs 2010, Marketo, viewed 15 June 2010 Financial Controls n.d., MissouriBusiness.net, viewed 15 June 2010 Read More