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INFORMATI
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ON SYSTEM
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IN DECISION
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MAKING
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 INFORMATION SYSTEM IN DECISION MAKING

INTRODUCTION

INFORMATION SYSTEM

Information system is a collective process of collecting, storing, processing the data and delivering
information. Businesses and other firms rely on information system a lot to gain information to carry out
their business operations, maintain data base of customers and suppliers, and keep an eye out on
competitors. The main aim of information system is to avoid uncertainty and the unknown issues that
might arise during the business process. Information system has a variety of technologies like computers,
internet, mobile phones etc to perform specific tasks in organization.

Author James O defines information system as “a systematic computer system that collects, stores,
processes and reports data from various sources to provide information”. The purpose of information is to
process it and save it and transmit it and provide information which is required at that time. The
information system or management information system helps the organization in decision making which
is the most valuable resource of the organization. Information system simply put means that gathering
data as raw material and processing it into information through one or more process. There are some
functional elements-

 Perception-it is the initial entry of data into the organization

 Recording- it is the physical capturing of data
 Processing- it is the transforming of data according to the need of the organization
 Transmission- it is the flow that occurs in information system
 Storage- storing it for future use
 Retrieval- once the data is stored, if there is use of that data in future then it is done in this
function
 Presentation- the nature in which it will be presented and communicated
 Decision making- information system helps the organization in decision making process from
the data and information collected

IMPORTANCE OF INFORMATION SYSTEM

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It is necessary to exploit the information system process to gain maximum benefit from it. Information
system helps in processing the data into useful information for the organization for operating business.
The managers need to have relevant information to increase the knowledge of internal process and
business environment. Having this information reduces the uncertainty and helps in decision making
more practical and rationale. Without proper information, the decisions made by the managers will be trial
and error based which will decrease the efficiency and profitability of the organization. Benefits of
information system is below-

 Economic importance- the installation cost of the information cost in the starting seems very
high but as and when the benefits are enjoyed by the organization it does not seem that way.
With time cost of information tends to decrease. Information system uses network links which
helps the organization to contact external suppliers through this process. It reduces costs as the
orders are placed by links only.
 Information system improves performance- they are designed to improve the overall
efficiency and effectiveness of the organization. Information system helps in speeding up the
process by only keeping the required information and removing the irrelevant information. It
provides real time information which reduces the scope of error which results in high quality
output.
 Importance in decision making- information system helps managers to monitor, plan and
forecast their decisions with more precision to avoid any bad decisions. It helps managers to be
quicker in responding to the situations with changing environment.
 Organizational behavior change- information system helps in leveling of hierarchies by giving
out information to all the lower level employees. It helps in decision making process to the lower
level employees since they have the required information with them which results in eliminating
the need of middle level managers.
 Communication system- information system makes the process of communicating more
efficient and more rapid to the managers because they have all the required information with
them. Managers can store the documents and details in the information system and then later as
and when it is required can be given out to the employees.

INFORMATION SYSTEM IN DECISION MAKING

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Decision making is one of the most essential management tasks in business. An informed decision
making comes from effective decision making. Decision making is like a second nature of business.it is
involved in anything that the managers do. There are many things involved in decision making like
planning, organizing, delegating, directing etc. Some of these tasks involve direct decision making and
other are results of decisions.

In the recent years, increasing competitions has increased the challenges faced by the managers. In order
to be effective, the managers need to take decision which are accurate and will result in organization
success.

The author Hasan (2013) stated that “information system involves the process of collecting, processing,
storing, retrieving and communicating the relevant information for having efficient management
operations”. Information system is defined as a system that transforms the data into information and that
information is meaningful which helps the management in decision making.

RATIOANLE

This research is about the use of information system in decision making in the organization. We will study
the benefits of information system and how it helps in taking the right decision on timely basis. We will
study the challenges faced by decision makers if the information is not accurate. This study is conducted
to study the use of information system in organization and how does it help the managers and bring
success to the organization.
We will look into the challenges faced and the amount of time wasted and cost spend on the system to
generate reports and information for the organization to use. As a result, the research will go into deeper
research to identify the challenges faced by the managers.
The study is important because it will highlight the effectiveness of the information system by the
managers in the organization. It will give all the information to the employees and the managers for better
and quick decision making. It will eliminate the chances of wrong decision and will save their time. The
information system tool can be used by every employee in the organization. Thus it will help the
employees to be confident to take decisions on their own and avoid interference of managers.

Research Questions

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  Do the employees need to have any training to use the information system tool?
 How will use of information system help in decision making?
 What types of challenges and problems is faced by managers while using the information system
tool?

OBJECTIVE OF THE STUDY

The following objectives have been identified for the study-

 The extent to which information system is used to support strategic planning for decision making
in the organization.
 The extent to which information system is used to support tactical planning for decision making
in the organization.
 The role of information system on strategic decision making by managers.
 The role of top level management on decision making.

LITERATURE REVIEW

INFORMATION SYSTEM IN DECISION MAKING

There has been a lot of research on information system for the development of decision making in the
organization. There has been no actual definition of information system and the ones in literature review
are only out of author words. Author Lee (2001) defines information system as “a system or process that
provides information needed to manage organizations effectively”.

Another Author Baskerville and Myres (2002) defined information system as “the development, use and
application of information systems by individuals, organizations and society”. In Becta (2005) study, he
defined information system as “a system consisting of the network of all communication channels used
within an organization”. Laudon (2003) defined information system as “the study of information systems
focusing on their use in business and management”. The above mentioned definitions shows that
information system has shown the development, application and validity for the theories mentioned above
to deliver quality work in the area.

Over the time information system has developed and has brought great ease and success to the
organizations. Earlier information system only focused on-

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  Electronic data process which only used to carry out transaction related functions and recording
of factual data.
 Managing reporting system which evaluated the operational activities of the organization and
providing summaries and information and feedback.

Only in the recent times the information system has become the primary need of the organization which is
a basis of communication within the organization be it between the managers and employees or
management and the employees. Baskerville and Myres (2002) states that they have seen a shift in the
information system from technical focus to a more of organizational and management social focus.

The author Skyrius (2009) states that the managers decision making towards business decisions are
affected by various factors like information sources, different tools and information technologies used.
Handzic (2010) also states that the ability of the managers to interpret the information in long term or
short term planning also affects the decision making. The better the manager can interpret the the
information, the better would be decisions for the business.

Liu and Yang (2007) talks about the different information system models which affect the working of the
business. He provides with three different models and scenarios. He states that global businesses are
doing well and ahead of everyone because of Enterprise Application System which is provided by IT tools
like Enterprise Resource Planning (ERP), Knowledge Management System (KMS) and Customer
Relationship Management (CRM) to help in enhancing the effectiveness and efficiency of decision
making in the organization.

To improve the financial stability of the business and be ahead of its competitors then there is a need to
understand the working of information system. It should define and develop the resources for human,
technological and internal processes and manage them well across the organization.

Organizations that do not have information system process in their organizations often fail in the right
decision making which affects the growth and innovation in the business. Information system exchanges
the experience of the management which transfers the information to managers to sustain competitive
advantage because this affects the decision making to bring improvement in the business. That is the
reason why Barachini an author who did a research on information system in decision making says that
the organization should motivate the employees to share the information so that it can be used to grow the
business.

Information system helps the business to manage its knowledge base and help in carry out and maximize
the initiatives carried out by the management to implement the strategies adopted by the business. Obi

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(2003) stated that information system can monitor the instability in the system and give out instruction to
verify any glitch in the system and control any mishappenings. It has been recently stated that information
system is required to improve and enhance the decision making regarding human capital and material
resources Adebayo (2007).

From the above literature review we can say that it is very important to both top level and middle level
management to use information system in the organization. In all the organizations, information system is
used by all the employees be it top level managers or middle level managers or employees to take
accurate decisions which helps to meet the goals and objectives of the organization. Information system
also helps in providing the managers with facts which helps in enhancing the process of decision making.

VARIABLES

The researcher has identified multiple variables that directly affect the study. Table (1) has shown the
various variables have been classified:

Dependent Variable Independent Variables

Information System
Increase of speed
Extension of issue analysis
Increased awareness of
information availability
Developed model
Strategic planning
Financial cost

RESEARCH METHODOLOGY

INFORMATION SYSTEM IN DECISION MAKING

METHODOLOGY

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This reports aims to explain relationship between information system and decision making process of the
organization. We have taken many hypothesis to prove the above statement. This has resulted in
quantitative research design to test those hypothesis. In order to test those hypothesis surveys are done to
collect the data. The hypothesis consider are below-

 The short term planning (tactical) by information system is positively affecting the decision
making.
 The long term planning (strategic) by information system is positively affecting the decision
making.
 The role of information system on strategic decision making by managers has positive effect.
 The role of top level management on decision making has positive effect.

DATA SOURCES AND COLLECTION METHOD

The survey was done using the Likert scale (1-5) where the response was based on “strongly agree” to
“strongly disagree”. The questionnaire was based on 2 sections. In section 1consists of basic profile of the
respondent like age, gender, qualification, profession and income level etc. The second section consists of
use of information system in the business. The respondents were provided with a list of questions related
to the following factors-

 Importance of information system in tactical planning and how it enhances the decision making
process
 Importance of information system in strategic planning and how it enhances the decision making
process
 The effectiveness of decision making process in the organization

The respondents were the top level management, mid-level management and employees. The respondents
knew the use of information and how to use them.

DATA ANALYSIS

Table 1 Gender arrangement

Gender Frequency Valid percentage %

Male 51 56.5
Female 49 43.5

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 Total 100 100.0
A total of 100 people responded to the questionnaire.

Table 2 Age distribution of respondents

Education level Frequency Valid Percent

18-25 25 24.2
26-35 30 40
36-45 29 25.8
46-55 10 6.7
56-59 6 3.33
Total 100 100.0
30 respondents between 26 to 35 years of age representing 40% formed the majority.

Table 3 Education background of Respondents

Education level Frequency Valid Percent

Degree 40 49.0
Post degree 60 51.0
Total 100 100.0
The majority respondents have a post degree.

Table 5 Respondent’s use of information system

Response Frequency Percentage

YES 95 95.0
NO 5 5.0
Total 100 100.0
95 respondents represents, having use of information system.

Table 6 Impact of information system in their decision making

Response Frequency Percentage

YES 96 96.0
NO 4 4.0
Total 100 100.0
96% of respondents say that information system helps in their decision making.

CONCLUSION

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After the research carried out, it shows that information system plays an important part in decision
making in the organization. The literature review showed the role of information system in the decision
making process in the organization.

Information system is an integrated system that provides information to decision making at various levels
of the organization.

The employees, mid-level managers and top level managers are aware of information system having a
useful objective in the organization.

The study shows that information system should be accessible to all the levels of the organization to gain
knowledge from the same.

There should be free flow of information to the employees from information system so that the decisions
taken are very accurate.

A proper training explaining the use of information system should be given to all the employees.

To enhance the decision making of the managers, there needs to be a proper flow of communication
between management and employees. Good communication helps in giving out full information which
leads to a successful decision.

REFERENCES

Karim, A.J., 2011. The significance of management information systems for enhancing strategic and
tactical planning. JISTEM-Journal of Information Systems and Technology Management, 8(2), pp.459-
470.

Adeoti-Adekeye, W.B., 1997. The importance of management information systems. Library

Review, 46(5), pp.318-327.

Alpdemir, A., 2003. System, method, and business model for speech-interactive information system
having business self-promotion, audio coupon and rating features. U.S. Patent 6,658,389.

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Ravichandran, T., Lertwongsatien, C. and Lertwongsatien, C., 2005. Effect of information systems
resources and capabilities on firm performance: A resource-based perspective. Journal of management
information systems, 21(4), pp.237-276.

Castro, J., Kolp, M. and Mylopoulos, J., 2002. Towards requirements-driven information systems
engineering: the Tropos project. Information systems, 27(6), pp.365-389.

Avison, D. and Fitzgerald, G., 2003. Information systems development: methodologies, techniques and
tools. McGraw Hill.

Peter, G.W. and Morton, S., 1978. Decision support systems: an organizational perspective.

Pettigrew, A.M., 2014. The politics of organizational decision-making. Routledge.

Adebayo F.A. (2007). Management Information System for Managers. Ado-Ekiti: Green Line Publishers.

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