Purposes of information

This article can be use a guide to help you explain how organisations use business information.

One of the key aspects is to understand the purposes of information such as operational support and monitoring and controlling activity; analysing information by identifying patterns or trends; using information to make operational, tactical and strategic business decisions and gaining commercial advantage over competitor by using information correctly.

Companies use information to support their operations and day to day activity. This is categorised as operational support. Operational support means that businesses use information to monitor and control activity within the business. An example of this could be a multinational high street trader that monitors the sales of certain types of jeans in different locations. They might find that the style of jeans that sells well in the UK would not sell as well in China due to different fashion influences at the time. When the company monitors this information they can use it to control the business and what items are sold in certain areas. This monitoring and controlling means that the business can use operational support to maximise profit by minimising delivery costs of incorrect items. This is just one small example of how a business can be used to support operations by monitoring and control activity. Other examples would be monitoring stock to order more items when needed or calculating what items made the most profit and spending most of the marketing budget to promote this item as it is the most profitable.

Another important part of managing a business is to analysis your information to identify patterns or trends. If we refer back to the example about the sales of jeans in different countries it can be said that the company analysed the information to identify patterns and trends in the business to boost profits. By identifying patterns and trends companies are able to minimise losses and maximise profit. If Mc Donald’s were able to check their sales information and see that using a wrapper instead of a box to package a Big Mac would save them 2 cents per sale, they could use this information to identify that the company could boost profits by 0.2% in the next quarter by making this change.

Information is also used by businesses to help them to make decisions at different levels. Business decisions can be made at operation, tactical and strategic levels. An operational decision is a decision made by a Manager who has control over day to day running of the business. An example of an operational decision might be the Manager at a PC World store deciding that they would be advertised for new sales representatives in the local paper. As this is a day to day decision and would use the stores advertising budget the Store Manager would probably not need to consult his District Manager about this. A tactical decision is more a medium term decision and would involve a higher level of management or what could be called middle management. A District Manager who is in charge of a chain of store in a certain district might make the decision to cut the number of hours that Sales Representatives work in all of the stores in the district. He would need to make the tactical decision to try and reduce the hours of certain staff and work with individual store managers to ensure this is done in a balanced way so that this change can be made with the least amount of hassle possible. A longer term or strategic business decision would be made from head office by a Senior Manager or Management team. A strategic decision would affect the business on a wider scale and needs to be intelligent as it will affect the long term strategy of the business. A strategic decision at PC World might be to discontinue the sale of DVD players in Europe as sales have gone down in the past year. When considering this strategy senior management at PC World might consider it better to sell DVD players on their website only so as not to lose customers.

Another purpose of information is to help a company in gaining commercial over a competitor. If a company with two competitors found out that one of the competitors was going out of business from a contact within the company they could contact the competitor and try and buy all of their stock before the other competitor at a cheap rate. Another possibility might be to merge both companies together to become bigger than their competitor. By gaining all of the customers from the company that was going out of business along with their own customer base a company will then gain commercial advantage over the other main competitor. There are many opportunities to gain commercial advantage over competitors such as stocking a new tech item first by creating a partnership with the manufacturer and then being the first business to sell in your area.

For more relevant information, see our article on the types of information that help us to make business decisions. This includes qualitative, quantitative, primary and secondary.

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