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    Lecture A3 Information Systems and Data Analytics

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    Lecture A3 Information Systems and Data Analytics

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    13 views8 pages

    Lecture A3 Information Systems and Data Analytics

    Uploaded by

    maharajabby81

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    1

    School of Business and Computer Science Limited

    ACCA: Performance Management (PM)

    Learning Outcome: Information, Technology and Systems for


    Organizations

    Assessment Criteria: A3: Information Systems and


    Data Analytics
    2

    Information levels
    Performance management information systems provide the information which enables
    performance measurement to take place.

    Tactical information is also important to facilitate management planning & control for
    shorter time periods (e.g. 1 year ahead); and those responsible for day to day
    management will also need operational information to facilitate day to day decision
    making.

    Strategic Management Accounting


    Definition: A form of management accounting in which emphasis is placed on
    information about factors which are external to the organisation, as well as non-financial
    and internally generated information.

    It differs from traditional management accounting because it has an external and future
    Orientation.

    Examples of Strategic Management information provided:


    Product profitability
    Customer profitability
    Value of market share
    Capacity expansion
    Brand values
    Shareholder wealth
    3

    Cashflow
    Competitors’ costs
    Financial effect of competitor response
    Effect of acquisitions and mergers

    Management accounting information can be used to support strategic planning,


    control and decision making.

    Strategic management accounting differs from traditional management accounting


    because it has external orientation and a future orientation.

    Management control is the process by which managers ensure that resources are
    obtained and used effectively and efficiently in the accomplishment of the organisation's
    objectives. It is sometimes called tactics or tactical planning.

    Management control decisions need to support an organisation's strategic plans.

    Characteristics of management control


     Short-term and non-strategic
     Management control planning activities include preparing annual sales budget
     Management control activities include ensuring budget targets are (at least)
    reached
     Carried out in a series of routine and regular planning and comparison
    procedures
     Management control information covers the whole organisation, is routinely
    collected/disseminated, is often quantitative and commonly expressed in money
    terms (cash flow forecasts, variance analysis reports, staffing levels).
     Source of information likely to be endogenous (from within the organisation

    Management control and strategic planning compared

    Example: The decision to launch a new brand of frozen foods is a strategic plan, but
    the choice of ingredients for the meals is a management control decision.

    Conflict
     Long-term strategic plans can conflict with the shorter-term objectives of
    management control
     Performance measures/control measures do not take strategic direction into
    account
     Strategic imperatives might not be properly communicated to middle
    management
     Strategic planning information might be difficult to measure
    4

    Operational control/planning
     The process of ensuring that specific tasks are carried out effectively and
    efficiently

    Management control v operational control


     Operational control decisions are more narrowly focused, carried out within a
    shorter time frame and taken by managers less senior in the organisation.
     Operational control focuses on individual tasks whereas management control is
    concerned with the sum of all tasks.

    Example:

    Strategic plan
     Senior management decide sales should increase by 5% pa for at least five
    years.

    Management control decision


     Sales quotas are assigned to each sales territory.

    Operational control decision


     Management of sales territories specify weekly targets for each sales
    representative.

    Characteristics Operational Control Decision


     Short-term and non-strategic
     Occurs in all aspects of an organisation's activities and needed for day to day
    implementation of plans
     Often carried out at short notice
     Information likely to have an endogenous source, to be detailed transaction
    data, quantitative and expressed in terms of units/hours
     Includes customer orders and cash receipts

    Qualities Good information


     Relevant
     Complete
     Accurate
     Clear
     Usable with confidence
     Appropriately communicated (to the right person using the correct method)
     Manageable volume
     Timely
     Cost effective
    5

    What management accounting information helps managers to do (its objectives)


     Measure performance
     Control the business
     Plan for the future
     Make decisions

    Management accounting information is used for score keeping, problem solving and
    attention directing.

    Features that characterise management accounting information in particular


     Forward looking
     Neutral (free from bias)
     Financial, non-financial, quantitative or qualitative

    Types of Management information systems

    (1) Transaction processing system (TPS)


    TPS collect, store, modify and retrieve the transactions of an organisation. There are two main types: Batch
    transaction processing which collects data as a group and processes it later and real time transaction
    processing, which involves immediate processing of data.

    The four important characteristics of a TPS are as follows.


    (a) Controlled processing. The processing must support an organisation’s operations.

    (b) Inflexibility. A TPS wants every transaction processed in the same way regardless
    of user or time. If it were flexible there would be too many opportunities for non-standard
    operations.

    (c) Rapid response. Fast performance is critical. Input must become output in seconds
    so customers don’t wait.

    (d) Reliability. Organisations rely heavily on transaction processing systems with failure
    potentially stopping business. Back-up and recovery procedures must be quick and
    accurate.
    6

    (2) Management information systems (MIS) convert data from mainly internal
    sources into information (eg summary reports, exception reports). This information
    enables managers to make timely and effective decisions for planning, directing and
    controlling the activities for which they are responsible.

    MIS have the following characteristics:

     Support structured decisions at operational and management control levels.


     Designed to report on existing operations.
     Have little analytical capability.
     Relatively inflexible.
     Have an internal focus.

    (3) Executive information systems (EIS) provide a generalised computing and


    communication environment to senior managers to support strategic decisions

    Executive information systems (EIS) draw data from the MIS and allow
    communication with external sources of information.

    Key characteristics
     Menu driven used friendly interfaces
     Interactive graphics
     Communication capabilities linking the executive to external databases

    Enterprise resource planning systems (ERP)

     Software systems designed to support and automate the business processes of


    medium-sized and large organisations

     Aid the flow of information between functions within an organisation and can
    manage connections to outside suppliers

     All departments that are involved in operations or production are integrated in


    one system

    Key characteristics
    • Work in real-time
    • Multiple languages and currencies
    • Integrate the key processes in an organisation
    • Decision support features
    • Extranet links to major suppliers and customers

    (4) Customer relationship management systems (CRM systems)


    7

    CRM systems are software applications which specialise in providing information


    concerning and organisation’s products, services and customers. Usually based on a
    database these systems offer companies a cost effective way of offering a personalised
    service to customers, which should lead to greater levels of customer retention.

    There is a different need for volume of data at each level of the organisation. For
    example, the CEO is not going to be concerned about the detail of every sale (which
    would be represented in the TPS) but is going to require strategic information including
    external data (represented in the EIS) so that he can set strategy for the business. The
    volume of data decreases the higher you go in the organisation.

    Big Data
    Big Data refers to the mass of data that society creates each year, extending far beyond
    the traditional data created by companies. Sources of Big Data includes social
    networking site, internet search engines and mobile devices. How organisations use this
    data

    The three Vs of Big Data:

    Big data and business value


    8

    Big data can be used to analyse opportunities to increase revenues by improving


    product offerings, or reducing costs through process efficiencies.
    In 2013 Tesco used big data analytics to ensure its in-store refrigeration units worked
    at the correct temperature. On initial investigation they were being kept much colder
    than the expectations of the Energy and Carbon Manager. Cooling cost savings of up to
    £20m were realised by Tesco once refrigeration performance was being monitored.

    Big data and the customer


    Organisations can build a more rounded picture of their customer base through past
    transactions, website data cookies, responses to emails, and social media.
    Certain businesses have been early adopters of big data and have benefited from
    significant competitive advantage as a result. Tesco partnered with customer science
    company Dunnhumby to create the Tesco Clubcard, a loyalty programme the company
    used to track customer behaviour through a vast database of customer data.

    Big data and corporate strategy


    After identifying how business value can be improved, taking into account customer
    requirements, business priorities can be determined.

    Big data and the finance professional


    Five traits of a data-enabled finance professional:

     Understands the fundamental drivers and metrics of the business


     Has a clear sense of what customers care about, and how to track this
     Embraces new, unconventional sources of data
     Comfortable with uncertainty
     Looks for new visual ways to present data with impact

    Big data analytics is the term used to describe the extraction of meaning from vast quantities of data with
    the aim of putting it to commercial use.

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