Chapter 8 Information technology and information system in business

Chapter 8 Information technology and information system in business
1.) Information technology and information system in business
Data
-something which have been recorded but not yet processed into form that is suitable for making decision
-continuous, quantitative, discrete, primary, secondary, qualitative.
Information
-data that has been processed in such way that use it to improve the quality of decision making.
-provide record, both current and historical
-to analyse what is happening within the business
-to provide the basis of decision making in short term and long term
-to monitor the performance of business by comparing actual results with plans and forecasts
Data processing
-conversion of data into information.
-data may be transformed into information by bringing related pieces of data together,sumarising data, basic processing of data,tabulation and diagrammatic techniques, statistical analysis, financial analysis.
Information technology – any equipment concerned with the capture, storage, transmission or presentation of information.IT is supporting hardware that provides the infrastructure to run the information system.
Information system – refer to the provision and management of information to support the running of the organization.
1.1 Deploying information system in the organization



INFORMATION SYSTEM

Produce output for:-planning-recording and processing transactions-monitoring and measuring performance-controlling-decision making

PROCESS DATA
STORE DATA AND INFORMATION
COMMUNICATE INFORMATION

1.2 The advantages computerization will bring to a company
Speed
-computers are ideal for dealing with repetitive processes
Accuracy
-in general computers do not suffer from errors, or lapses of concentration but process data perfectly
Volume
-computers work fast and do not need to rest,they can work 24 hours days, therefore able to handle vast volumes of data
Complexity
-once subsystems are computerized they can generally function more reliably than human beings. This makes it easier to integrate various subsystems.
Cost
-computers have become highly cost-effective providers of information, the process of substituting computers for human beings has revolutionized information-oriented industries such as accountancy, banking and insurance and this process is continuing.
Presentation
-displaying information in as ‘user-friendly ‘ a way as possible.

Judgement
-although it is possible to program limited reasonableness tests into computer systems, it is still very difficult to program judgement. The computer remain highly trained idiot, which is particularly apparent when a programming error is made or it is subject to a computer virus

2 The qualities of information
Accurate
-information should be sufficiently accurate for its intended purpose and the decision maker should be able to rely on the information
Complete
-the more complete information is , the more reliable it will be
Cost
The information should not cost more to obtain than benefit derived from it
Understandable
-much more readily acted upon
Relevant
-the information provided should concentrate on the essentials and ignore trivia
Adaptable
-information should be tailored to the needs and level of understanding of its intended recipients
Timely
-information that is out of date is a waste of time, effort and money
Easy to use
-information should be clearly presented and sent using the right medium and communication channel.
3 Management structure and information requirements
Strategic level of management
-requires information from internal and external sources in order to plan the long term strategies of organization. Internal information – both quantitative and qualitative – is usually supplied in a summarized form , often on an ad-hoc basis
Tactical level of management
-requires information and instruction from the strategic level of management together with routine and regular quantitative information from the operational level of management. The information would be in a summarized form , but detailed enough to allow tactical planning of resources and manpower
Operational level of management
-requires information and instruction from tactical level management.
-is primarily concerned with the day to day performance of tasks and most of the information is obtained from internal sources. The information must be detailed and precise.


Strategic
-Long term
-Aggregated/summarized
-Mainly external
-Uncertain
-Infrequent

Operational
-Immediate
-Highly detailed
-Internal
-certain
-frequent

3.1 the type
Strategic
· Expected government policy
· Overall profitability
· Competitor analysis
· Profitability of divisions/segments of the business
· Future market prospect
· Availability and cost of capital
· Total cash needs
· Resource levels
· Capital equipment requirementsof information used at each level of the organization

Tactical
· Productivity measurements
· Budgetary control reports
· Variance analysis
· Stock turnover
· Cash flow forecasts
· Short term purchasing requirement
· Labour turnover statistics within a department/factory

Operational
· Employee hours worked
· Raw materials input to a production process
· Hours spent on each individual job
· Reject rate
· Stock levels

16: Governance and social responsibility

1. Seperation of ownership and control
-refers to the situation where the people who own the company may not be the same as the people who control the company. (limited company)
-directors likely to own all the shares in the company as in small company. so there is no seperation of ownership
-large company likely to have a large number of external shareholders who play no role in the day to day running of the company. therefore there is a potential for a conflict of interest.

Reasons for the seperation of ownership and control
-specialist management can run the business better than those who own the business
-the original shareholoders cannot personnally contribute all the capital needed, so they need to bring in external capital.

Win-win situation
-managers can get on with ful time management of the company
-shareholders interested in the return from their investment and do not have to concern of the day to day matters.

Theories

Stakeholder theory
-development of the notion of stewardship, stating that management has a duty of care to the owners of the company in terms of maximasing shareholder value but also wider of the community of interest or stakeholder.

Stewardship theory
-someone who manages property or other affairs of someone else

Agency theory
-the state of serving as an official and authorised delegate agent

Governance Principles
a) minimise risk
b) to ensure adherence and satisfaction of the strategic objective of the organisation
c) to fulfile responsibilities to all stakeholders and to minimise potential conflict of interest
d) to establish clear accountability of senior levels
e) to maintain the independance of those who scrutinise the behaviour of its organisation and its senior executive managers
f) to provide accurate and timely reporting of trustworthy data to both the management and owners of the organisation
g) to encourage more proactive involvement of owners in the organisation
h) to promote integrity

Driving force of governance development
- increasing internationalisation and globelisation
- the differential treatment of domestic and foreign investor
- issues conserning financial reporting
- characterlistic of individual countries may have a significant
- influence in a way coperate governance has developed
- increasing number of high profile proper scandals and collapse

2. The meaning of corporate governance
- set of processes and policies by which a company is directed, administered and controlled.

Features of poor corporate governance
-domination by a single individual
- lack of involvement of the Board
- lack of adequate control function
- lack of supervision
- lack of independance scrutiny

Key issues in the corporate governance debate include
- the membership of the Board
- the role of the Board
- the director's remuneration
- the role of internal and external audit

3. The meaning of corporate social reaponsibility (CSB)
refers to the idea that a company should be sensitive to the needs and wants of all the stakeholders and not only shareholders

companies should make decision not only on financial factors but also social and environmental consequences of their actions

4. The importance of CSR to an organisation
benefits:
- monitor changing social expectations
- manage operational risks
- identify new market opportunities
- retain key employees

8. Audit committees

major problems:
-external auditors become too close (familiar) to the executive directors (who run the company)
-external auditors are not comfortable reporting errors,frauds,etc to the very people who have done them!
-internal auditors are not comfortable reporting systems weaknesses to the very people who designed the systems!
-a board might choose to have internal auditors to give a good appearance to the outside world

Internal and external auditors do as following:-

-being available for internal and external auditors
-requiring executive directors to attend as necessary
-reviewing accounting policies and financial statements as a whole to ensure that they are appropriate and balanced
-reviewing systems of internal controls
-agreeing agenda of work for the internal audit department
-receiving results of internal audit work
-shortlisting firms of external auditors when a change is needed
-reviewing independence of external audit firm
-considering extent to which external auditors should be allowed to tender for 'other services'.

9 Public oversight of corporate governance
-The obvious means of public oversight of corporate governance is via the publication by companies of their Annual Report and Accounts.
- companies are required by law to send a copy to each shareholder,but most companies will post a copy on their website or will provide a paper-based copy free of charge to any member of the public who requests one.

10 Stakeholder needs analysis
-can be carried out to bring some structure to the implementation of a CSR programme. The analysis involves doing research to determine:

*Who are the key stakeholders in the business?
*What are their needs?

15: Business ethics and ethical behaviour

1 Definition of business ethics
-analysis of right and wrong, and associated responsibility.
-is the application of ethical values to business behavior.
Approaches to deciding what is right or wrong include discussion of the following:
a. The consequences – ‘the end justifies the means’
b. The motivation of the parties concerned
c. Guiding principles
d. Duties
e. Key values

2 Why business ethics is important
-Business are part of society. Society expects its individuals to behave properly, similarly expects companies to operate to certain standards.
For the organization
For the individual
· Good ethics should be seen as a driver of profitability rather than a burden on business.
· Consumer and employee expectations have evolved over recent years
· An ethical framework is part of good corporate governance and suggests a well-run business
· Consumer may choose to purchase ethical items
· Investors are reassured about the company’s approach to risk management
· Employees will not blindly accept orders to act in a manner that they personally believe to be unethical.
· Employees will be motivated in the knowledge that they operate in an environment of good ethical cooperate behavior


3 How can the ethics of a business decision be judged?

Organisation can draft sets of criteria to be used in making difficult decision:-
-Is it legal?
- Is it contrary to our company's adopted code of ethics?
-Is it contrary to any other published official code of ethics?
- Would you mind other people knowing what you have decided?
-Who is affected by this decision?Would they regard the decision as fair?

4 How is a profession distinguished from other occupations?

A profession is characterised by the following factors:

-the mastering of specialised skills during a period of training
-governance by professiona; association
-compliance with an ethical code
-a process of certification before being allowed to practice

Eg; accounting, law, teaching and medicine

In many countries,it is possible for unqualified people to call themselves accountants and set themselves up in business offering accountancy device. They are not professional accountants because tehy belong to no professional accountancy body (eg ACCA) and have no obligation to follow an ethical code.

5 The accountant's role in promoting ethical behaviour

An ethical dilemma involves a situation where a decision-maker has to decide what is the 'right' and 'wrong' thing to do.

Accounting issues:
-Creative accounting to boost or suppress reported profits
-Director's pay arrangement-should directors continue to receive large pay packets even if the company is performing poorly?
-Should bribes be paid to facilitate contracts, especially in countries where such payments are commonplace?
-Insider trading, where for example directors may be tempted to buy shares in their company knowing that a favourable announcement about to be made should boost the share price.

Production issues:
-Should the company produce certain products at all (eg guns and tobacco) aimed at teenagers?
-Should the company be concerned about the effects on the environment of its production processes?
-Should the company test its products on animal?

Sales and marketing issues:
-Price fixing and anti -competitive behaviour may be overt and illegal or may be more subtle
-Is it ethical to target advertising at children?
-Should products be advertised by junk mail or spam mail?

Personnel (HRM) issues:
-Employees should not be favoured or discriminated against on the basis of gender,race,religion,age and disability?
-The contract of employment must offer a fair balance of power between employee and employer.
-The workplace must be a safe and healthy place to operate in


6. Codes of ethics and codes of conduct

• Most companies (especially large companies) have approached the business ethics issues by formulating a set of internal policies and instructing employees to follow them.
• Ethics officer are appointed to monitor the application of the policies and to be able to discuss ethical dilemmas with employees who approach them.
• The policies can either be broad generalisations (a corporate ethics statement) or can contain specific detailed rules (a corporate ethics code).
• When employees is caught doing something wrong, the company can try to claim that is not the company's fault when a rogue employee acts outside the stated rules.
• Codes of conduct can also be a marketing tool that companies can use to highlight to the public how well they behave.

7.IFAC and ACCA codes of ethics.

Both IFAC and ACCA have developed codes of ethics for their members. Both of the organisation have the same Fundamental Principles :

• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour

14: Committees in the Business Organisation (Part 2)

Just click on the image to view it. hehe

14: Commettees in the business organisation (Part 2)

1 What is a committee?
-a group of people to which some matter is committed
a) Ad hoc committees- temporary and are created for specific purpose for a short-term
b) Formal committees- part of organisationalstructure with specific delegated duties and authority

Committees:
-Permenant
-Authority
-provide a well tried way of resolving difficult decisions because all are involved in decision making process

Features
- Rules of procedure
- Chairperson and secretary
- Committee papers and reports to help committee make well-informed decisions or proposals
- Notice-announcement of the meeting prepared and circulated in advance
- Agenda-setting out what is to be discussed and in what order
- The minutes of the meeting which are the official record of what has taken place

Rigid procedure
- Speaking
- Voting rights
- Proposing the motion and meetings
- Rights of attendance
- The construction of the agenda
- Adding emergency items to the agenda
- Quorum

1.1 The rules of procedure
- To promote the smooth running of a committee
- To ensure that consistancy and fair play are maintained
- To enable both sides in an argument to state their case
- To help to minimise the effect of bullyinh tactics
- To ensure a proper record of all the proceedings is kept

1.2 The size and success of a committee
- too large: not giving individual time to give their view but if everybody speaks waste of time
- too few: lack of breadth of expertise and insufficient deliberation

successful committee should
- representative of all interests
- have a chairperson with qualities of leadership
- suitable subjects for actions and make precise proposals
- circulate reports
- clear cut terms of reference
- necessary skills and experience
- worth the cost of its operation

2. The purposes of committees in an organisation
Task
- decision making
- relaying decisions and instructions
- brainstorming- free exchange to generate new ideas and approaches
- participative problem-solving
- providing advice and information
- consultation

purpose of committee
- gather information
- disseminate information
- generate ideas
- coordinate people
- delaying mechanism
- oversee a dunction or procedure

6 The role of the chair and secretary of a committee
6.1 The Chair
Responsibilities
· Keeping the meeting to a schedule and to the agenda.
· Maintaining order
· Ensuring correct procedure is observed in convening and constituting the meeting , and during the meeting
· Ensuring impartiality and giving all parties a reasonable opportunity to express their views.
· Putting the issue to the vote and declaring the result.
· Depending on the level of formality of the meeting.
Chairperson must have :
· Ability to be decisive
· The ability to silence people in a firm and friendly manner
· Skill in communicating rulings clearly but tactfully.
· The skill of summarizing.
· An awareness of non-verbal behavior
· Sound knowledge of the relevant regulations
6.2 The Secretary
Responsibility of secretary to the committee meeting
· Before meeting
-fixing the date and time of meeting
-booking the venue
-preparing and issuing the agenda and other relevant document
· During meeting
-assisting the chairperson
-making notes
-advising the chairperson on points of procedure
· After meeting
-preparing the minutes
-acting on and communicating decisions
-dealing with correspondence

Stakeholders

3 External Stakeholders

Stakeholder	Need/expectation	Example
Community at large	General public can be a stakeholder,esp if their lives are affected by an organisation’s decision	Local residents’ attitude towards out-of-town shopping centres
Environmental pressure groups	Does not harm the external environment	If airport wants to buy a new runway, the pressure groups may stage a ‘sit in’
Government	Company activities=central to the success of economy.Eg. providing jobs& paying taxes. Legislation (e.g health&safety) must be met by the company	Actions by companies could break the law, or damage environment &governments therefore control what organizations can do.
Trade unions	Active in the decision-making process	If a dept is to be closed, union’ll want to be consulted & there should be a scheme in place to help employees find alternative employment.

4 Stakeholder conflict

Stakeholders	Conflict
Employees vs managers	Jobs/wages vs bonus (cost efficiency)
Customers vs shareholders	Product quality/service levels vs profits/dividends
General public vs shareholders	Effect on the environment vs profit/dividends
Manages vs shareholders	Growth vs independence

*The problem with analysing stakeholders-
they tend to belong to > than 1 group& will change their groupings depending on the issue in hand

-Meeting the needs of most dominant stakeholders is important but other stakeholders' needs have to be considered-nearly every decision becomes a compromise.

Mendelows' power-interest matrix is used when org has difficulty deciding who the dominant stakeholder is.

Level of interest
Low	High	Level of power
Minimal effort	Keep informed	Low
Keep satisfied	Key players	high

-With this, dominant stakeholders/the key players can be identified.
-The needs of the key players must be considered during the formulation and evaluation of new strategies.
-Stakeholder groups can emerge& move from quadrant to quadrant due to specific event-->Change of position in the matrix occur.

Sources of stakeholder power:
Hierarchy: provides people/groups with formal power over others
Influence: may arise from personal qualities (leadership)
control of the government: knowledge, contact& influence of the environment.

13: Stakeholders (Part 1)

Stakeholder is an individual or group, who has an interest in what the organization does, or an expectation of the organization.

1 Internal Stakeholders
They are intimately connected to the organization, and their objective are likely to have a strong influence on how it is run.

Internal stakeholders include:
1. Employees are those who get paid from working and concern about their job security.
Example: If workers are to be given more responsibility, they will expect increased pay.

2. Managers/Directors are those who have higher status in the organization, they also get paid, bonus from working and they concern about their job security too.
Example: If growth is going to occur, the managers will want increased profits, leading to increased bonuses.


2 Connected Stakeholders
They are having a contractual relationship with the organization.

Connected Stakeholders include:
1. Shareholders are those who want steady flow of income so possible capital growth and the continuation of the business will give them confident on the organization.
Example: If capital is required for growth, the shareholders will expect a rise in the dividend stream .

2. Customers are those who want satisfaction from the services and goods/products.
Example: Any attempt to for example increase the quality and the price, may lead to customer dissatisfaction.

3. Suppliers are those will get paid promptly while they supplying the goods/products.
Example: If a decision is made to delay payment to suppliers to ease cash flow, existing suppliers may cease supplying goods.

4. Finance Providers are those who invest or buy the security of the company hence they are looking for the ability to repay the finance.
Example: The firm’s ability to generate cash.