Billions of bits of information are now “in the cloud.” Information ties all business functions together and provides the basis for all managerial decisions. It is the cornerstone of all organizations. Information represents a major source of competitive management advantage or disadvantage. Assessing a firm’s internal strengths and weaknesses in information systems is a critical dimension of performing an internal audit.
A purpose of a management information system is to improve the performance of an enterprise by improving the quality of managerial decisions. An effective information system thus collects, codes, stores, synthesizes, and presents information in such a manner that it answers important operating and strategic questions. The heart of an information system is a database containing the kinds of records and data important to managers.
A management information system (MIS) receives raw material from both the external and internal evaluation of an organization. It gathers data about marketing, finance, production, and personnel matters internally, and social, cultural, demographic, environmental, economic, political, governmental, legal, technological, and competitive factors externally. Data are integrated in ways needed to support managerial decision making.
Starbucks is an example firm with an outstanding management information system that begins with more than 7 million weekly transactions taking place at Starbucks registers, and 16 percent of those are made from a mobile device. Surprisingly, Starbucks transactions comprise about 90 percent of all mobile pay transactions in the United States. And Starbucks is reportedly developing a stand-alone e-payment system that its customers may use anywhere, anytime, to buy anything. Such a system would compete with Apple Pay, Google’s Wallet, eBay’s PayPal, and CurrentC used by Walmart and CVS Health.
1. Managing Voluminous Consumer Data
Recent research by the Pew Research Center reveals that more than 50 percent of all consumers are concerned about the volume of their personal data on the Internet.29 Basically, every time you get online and do anything at any website with any company or anybody, that information is dissected to determine your patterns of behavior; resultant information is disseminated to marketers. Every time you swipe a card, click, log in, text, tweet, email, or call, your behavior is being tracked. Consider a few facts:
- The number of times the online activity of an average Internet user is tracked every day is estimated to be 2,000-plus.
- Facebook and Twitter can track the activity of visitors at 1,205 and 868 of the most popular websites, respectively, on the Internet.
- The estimated annual value to Facebook of a “very active” versus “relatively inactive” female user is $27.61 and $12.37, respectively, due to their dissemination of the information to marketers.
- People are so worried about their privacy that 86 percent of them have taken steps to conceal their digital footprints.
- More than 25 percent of Americans have downloaded advertisement-blocking tools so companies cannot so easily access data about the users.30
2. Management Information Systems Audit
Questions such as the following should be asked when conducting this audit:
- Do all managers in the firm use the information system to make decisions?
- Is there a chief information officer or director of information systems position in the firm?
- Are data in the information system updated regularly?
- Do managers from all functional areas of the firm contribute input to the information system?
- Are there effective passwords for entry into the firm’s information system?
- Are strategists of the firm familiar with the information systems of rival firms?
- Is the information system user-friendly?
- Do all users of the information system understand the competitive advantages that information can provide firms?
- Are computer training workshops provided for users of the information system?
- Is the firm’s information system continually being improved in content and user-friendliness?
Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).