Chapter 1

Financial Markets Financial Industry

Refers to the markets where financial assets such as Refers to the companies and institutions that
stocks, bonds, currencies, and commodities are facilitate financial transactions and provide financial
bought and sold services

Involve the exchange of securities between buyers Involve the provision of financial products and
and sellers services to individuals and businesses

Provide a platform for investors to invest and trade Provide services such as banking, insurance,
securities investment management, and financial advisory

Operate through various channels such as stock Operate through various institutions such as banks,
exchanges, bond markets, and foreign exchange investment firms, insurance companies, and
markets brokerage firms

Are influenced by various factors such as economic Are influenced by various factors such as market
conditions, government policies, and global events trends, competition, and regulatory environment

In summary, financial markets are the platforms where securities are bought and sold,
while the financial industry is made up of institutions that provide financial services and
products to individuals and businesses.

Review
Magical Toys is a South African toy store chain. The toys are sold in their five stores and from their own
web shop. Each Tuesday, management needs sales reports from last week’s activities. Work at the stores is
hectic, so usually at least one store fails to deliver the report, making it impossible to sum up the previous
week’s sales. The reports, sent by email as spreadsheets, sometimes have inconclusive or erroneous
data, and following up means that employees are unable to give their full focus to the customers. Some
errors in the spreadsheets may also cause the purchasing manager to place unnecessary purchase orders.
What are the main issues that Magical Toys faces in the absence of an information system? How could an
information system be of help, and what issues can an information system not solve?

Main issues that Magical Toys faces in the absence of an information system are:

1. Inconsistent and incomplete sales reports: The stores often fail to deliver the sales report,
making it difficult for management to have an accurate overview of the previous week's sales.

2. Inconclusive or erroneous data: The sales reports sometimes have errors or incomplete data,
which can lead to the purchasing manager making unnecessary purchase orders.

3. Time-consuming manual follow-up: The process of following up on missing or erroneous data is

manual and time-consuming, taking away valuable time from employees who should be focusing
on customers.

An information system could be of help in several ways:

1. Automated reporting: An information system can automate the sales reporting process, ensuring
that all stores deliver reports on time.

2. Real-time data analysis: An information system can analyze the data in real-time, flagging any
inconclusive or erroneous data for further review.

3. Streamlined data management: An information system can provide a centralized database for all
sales data, making it easier for employees to access and review.

However, an information system cannot solve all the issues Magical Toys is facing, such as:

1. Human error: Even with an information system, there is still a risk of human error in data entry,
analysis, and reporting.

2. Operational issues: An information system cannot solve operational issues such as staffing, store
layout, or supply chain management.

In summary, an information system can help address some of the issues Magical Toys is facing, but it
cannot solve all of them. It is important for management to evaluate the specific needs and limitations of
their business and tailor the information system implementation accordingly.

Diskonto operates deep-discount stores in Estonia offering housewares, cleaning supplies, clothing, health
and beauty aids, and packaged food, with most items selling for a very low price. Its business model
calls for keeping costs as low as possible. The company has no automated method for keeping track of
inventory at each store. Managers know approximately how many cases of a particular product the store
is supposed to receive when a delivery truck arrives, but the stores lack technology for scanning the
cases or verifying the item count inside the cases. Merchandise losses from theft or other mishaps have
been rising and now represent more than 3 percent of total sales. What decisions have to be made before
investing in an information system solution?

Before investing in an information system solution, the following decisions need to be made:

1. Cost-benefit analysis: A cost-benefit analysis should be conducted to determine if the benefits of

implementing an information system outweigh the costs. This analysis should consider factors
such as the expected reduction in merchandise losses, increased efficiency in inventory
management, and potential increase in sales.

2. System requirements: The company needs to determine the specific system requirements,
including hardware and software, that are necessary to address their inventory management
challenges. This includes deciding on the appropriate technology for scanning and verifying item
counts.

3. Vendor selection: The company needs to select a vendor that can provide the appropriate
technology and support services to ensure the system's successful implementation and ongoing
operation.

4. Training: The company needs to ensure that all employees who will be using the system are
trained on how to use it effectively to maximize its benefits.

5. Security: The company needs to ensure that the information system is secure, especially when it
comes to sensitive inventory and sales data.

6. Integration: The company needs to ensure that the new information system can be integrated
with its existing systems, such as the point-of-sale system and the accounting system.

By making informed decisions in these areas, the company can determine the best course of action for
implementing an information system solution that can help them address their inventory management
challenges and reduce merchandise losses.