The Impact Of Information Systems On Small And Medium-Sized Businesses

1. Introduction

An Information System Is Formed By Interconnection Of  Digital Components Hardware And Networks Elements Of System Work In Accord To Gather Store Process Data  There are five types of Information Systems that can be especially useful for business needs. These are Transaction processing systems,  Management Information systems, Decision Support Systems, Accounting Information systems, and Executive Support systems. The aim of this paper is to examine the influence of various information systems on businesses. The paper will discuss if the technology is advantageous for small businesses. 

There have been researches that evaluate the performance and use of various information systems in business organizations. Similar research was conducted on the impact of AIS (accounting information systems) on Turkish companies (Uyar  Gungormus and Kuzey  2017).  The positive impact of the system can be observed through efficiency and increased productivity.  Another research on Management Information Systems indicates that MIS has improved traditional logistics management (Zhang et al. 2020). The study was conducted for enterprise logistics in China. 

 Small and medium-sized businesses are looking to grow and establish themselves in a highly competitive market. They have the pressure to enhance business performance and at the same time increase profit. One of the most essential tools for this is efficient business management. However, most small businesses do not have an information technology strategy due to improper planning and decision-making. A possible solution to this could be employing a suitable information system.  According to Aydiner et al. (2019), Information Systems have the capability to provide information for strategic and operational management. Since the businesses are in the growing stage the system needs to be financially viable as well. 

The research focuses at studying the effect of utilizing information systems in small or medium-sized businesses. It will analyze the impact of usage of the system on business performance along with the feasibility of various information systems. 

RQ1: What is the role of the Information systems in increasing efficiency and overall business performance. 

RQ2: Are Information Systems a feasible solution for small and medium-sized businesses.

RQ3: What are the most suitable  Information systems that can be utilized by small and medium-sized businesses for growth.

A study conducted on businesses in Saudi suggests that the integration of management with Information system strategies can result in a powerful tool for achieving the business goal (Almalki  Al-fleit and Zafar 2017). It can give a competitive advantage by increasing the accuracy and speed of data processing. The technology also provides tools for effective planning and control of projects. However, the results also suggest that implementation of strategies formed with the assistance of an Information System might cause management issues due to lack of coordination and communication in the organization. Another factor that can be an obstacle towards the implementation of information systems could be the budget for software and hardware in each department. To take complement the advantage of the system, organizations need to focus on proper implementation and budgeting as well.

1.1 Background of Study

According to the deliberation of Young-Harry et al. (2018),  the implementation of Management Information systems (MIS) and business performance are positively related. It helps by increasing profitability and market share. The author conducts the study on  Seven-Up Company Aba and Port Harcourt. The organization employed the MIS system to collect and process data about competitors, sales, and customers. The information can be further used to analyze the financial performance of the company. 

In the review by Ganyam and Ivungu (2019), it is concluded that Accounting Information systems had a significant effect on the profits and financial performance of firms. The Information system enables users to make financial reports tracking and recording data. It has replaced the need of maintaining manual spreadsheets and hand-written financial statements. Tracking down the financial performance through these reports helps in setting achievable financial objectives for the business. With proper implementation, the system is considered reliable for better decision-making as well.  In the paper by Fitria (2021), the influence of management accounting systems and environmental strategies are studied. In the conclusion, the author recommends using information systems for management and accounting purposes like planning, monitoring, and making decisions. This can result in a significant boost in business performance as compacted to the traditional management accounting system. From the evaluation of traditional management accounting, it is observed that the information gathered through it is minimal and insufficient. An Information system can overcome these shortcomings by providing information that is precise, quick, and accurate. It has additional tools for monitoring the information and making decisions.

Marketing is vital for the growth and expansion of small businesses. Although the conventional marketing methods could be costly for their business. According to Syafrizal (2021), a web-based marketing system and sales information system are the solutions to these limitations. It also speeds up the information gathering process as well as reduces the change of error. The sales Information system tracks the flow of sales activities and interactions with consumers to keep a record of invoices and sales (Simorangkir and Widodo 2022). The system can be aligned with other information systems according to the business needs. Establishing a sales information system also ensures coordination among various departments of the company, since the record is accessible to all. It provides a detailed report with charts and graphs. The system-generated reports of the sales save time as well as allow easy data analysis with no specialized supervision. Rekarti and Doktoralina (2017) state that marketing and accounting capabilities are significant for small and medium-sized businesses to gain a competitive advantage hence information systems need to be employed.  Many small and medium businesses are competing against big and established franchises. A lack of systemic financial reporting strategy and accurate financial information can put them at disadvantage. However, employing a team of analysts and accounts is a costly solution for a growing business. Such a business can use Accounting Information Systems (AIS). High-quality information gathered from the system will lead to quality decision-making for long-term goals. AIS is usually used by accountants, consultants, financial officers, and auditors. An advantage of AIS is that it has a user-friendly interface therefore it can be used by anyone with minimal technical skill and basic accounting knowledge. This makes it easier for small businesses to adopt.  In the review by Meiryani Heykal and Wahyuningtias (2020), AIS performs various beneficial tasks like collecting storing processing data, analyzing cost and time efficiency based on financial performance, and proving systematic presentation of data for easier decision making. The systematic arrangement is also important for coordination among employees, owners, or shareholders. Another system that can help small and medium businesses for efficient decision-making is the Decision support system (Rivera-Castro Ojeda-Castro and Valera 2018). It increases efficiency by timely problem resolution and taking fast and informed decisions with, data collection and analysis.  It also provides visual data representation that can be utilized to comprehend the decision-making process. According to the study by Kitsios and Kamariotou (2018), the challenges faced by small businesses like planning, strategic decision making, and sharing information can be resolved by decision support systems (DSS). The author concluded that DSS supports businesses by cost-cutting by helping in curating products according to customers’ needs and reducing their lifecycle. An executive information system or executive support system takes data from external components like legislation, competitors, suppliers, or customer and collaborate with other information systems to give a comprehensive report that identifies opportunities, threats, and competitiveness (Abualloush Bataineh and Aladwan 2017). Knowledge of these factors is crucial for any business to successfully implement create and implement a strategic plan focusing on the development of the business. The system was developed according to the needs of a senior executive of an organization. However, many businesses provide access to their employees so they can contribute to decision-making regarding their workplace or department. The study Azudin and Mansor (2018), sheds light on the cost efficiency of small and medium-sized businesses along with the use of Management Accounting Practices (MAP). This can benefit the business by improving business sustainability.  MAP provides various tools one of these is the accounting information system. It assists in budgeting, planning, profit, and performance evaluation. In views of Wahyuni and Lestari (2020),  Marketing information systems for small businesses based on website technology help in using operational costs. Marketing could be just as expensive as it is important. However, the Marketing Information system helps by providing operational costs. The technology also provides easy access to multiple people. It stores the data that’s always ready for retrieval and provides the marketing manager with regular reports about the data collected.  The marketing information system is considered economical as it doesn’t require expensive hardware. The system can work on a suitable computer.  It saves money from data collection as well. The large database is stored in a computer and only the relevant data is kept.  In the review by Muneer Ahmad and Ali  (2017), the relationship between accounting management practices and their effect on profits of small and medium-sized businesses is studied. The study focuses on Accounting management systems and financial information systems. Accounting Information System is used for bookkeeping, accounting, and tracking transactions by businesses, and the reports generated by this system are analyzed by the financial information system. The study concludes that both accounting and financial information system has a positive relationship with the profitability of small and medium-sized businesses (Muneer  Ahmad and Ali 2017). These systems can solve major difficulties like lack of financial resources and minimal expertise in budget management. A Geographical Information system can be utilized by certain businesses depending on the requirements. Widaningrum Surjandari and Arymurthy (2018) suggest that fast food restaurants can collect relevant data and provide a visualization that is useful in decision making.  It can conduct an analysis of a particular location based on socioeconomic and demographic factors to find a location where a fast food business will perform well. Setting up a business in a good geographical location can highly impact profits and future growth. The decision is quite permanent and involves high investment. Hence, analyzing multiple factors and assistance from information systems in decision-making can save money for small businesses.

1.3 Problem Statement

There are various philosophies that can be used in the study to develop a detailed interpretation. It could be interpretivism, realism, and positivism. For this research, positivism will be considered. The philosophy does not follow a subjective approach and relies on quantitative data. The well-defined and representative structure diminishes the possibility of error. It also helps in understanding the pattern and trends in the sample data. The other two philosophies are rejected. This is because of the subjective nature of interpretivism and the dependence of realism on human opinions. 

Most research works are conducted based on three types of research design – exploratory, analytical, and explanatory. The most suitable design for this research is analytical research.  This research design involves the analysis of relevant information with the help of critical thinking and analytical skills.  It focuses on providing a factual and accurate representation of factors that influence the research objectives. Exploratory research is more appropriate for large samples and comparatively new subjects. Explanatory research design is ideal when the relationship between two variables is studied or the reason behind and occurrence needs to be identified. 

The data can be collected from two types of sources- primary and secondary. Primary data is collected from sources like questionnaires, focus groups, interviews, surveys. It involves physical interaction and communication with the subject of study. However, secondary data do not require such interactions. Secondary data is collected from sources like books, journals, or articles. It requires deep research and the availability of data on the subject. Thus, for this study, both types of data will be used. 

For sampling two techniques that are used are probability technique and the non-probability technique.  Probability sampling requires random selection whereas the non-probability sampling technique is non-random and considers certain criteria. Along with these, simple random sampling will be part of the sampling method.  The expected sample size for the study is three small or medium-sized business organizations. It will include around 50 employees and three owners and managers of the selected organization. 

To analyze the qualitative data collected for primary data sources, it needs proper representation. It will be represented through various charts like bar graphs or histograms. The pictorial representation also helps in recognizing the trend among the data. The data will be converted into numerics and percentages for easier comparison and drawing comprehensive conclusions. Thematic analysis can be used for qualitative data analysis of data collected from interviews and questionnaires.

1.4 Research aim and questions

There are certain guidelines based on ethical values that need to be followed while conducting the research. While collecting primary data, the participants must not be forced to provide any information. Also, the participants must sign a form of consent that will clearly define the survey method, objective of the research, and information about the use of collected data.  The participants will also have the option to withdraw their participation at any stage. The confidential data of an organization such as budget or financial data will not be compromised. For collecting secondary data, reliable sources will be used with proper referencing and credit to the author. Any kind of plagiarism will be avoided. 

There could be some unavoidable limitations in any research due to time constraints or the availability of resources. There could be issues regarding these factors even after extensive planning. Sometimes the sample for primary may not be accessible according to the need of the studies. The permission, consent, and active participation influence this type of data. Apart from that, availability of secondary data is another concern. For relatively new research subjects, secondary data are difficult to obtain as not many researches or studies has been conducted on the topic.

Fig: Gantt Chart

References

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Almalki, M., Al-fleit, S. and Zafar, A., 2017. Challenges in implementation of information system strategies in saudi business environment: A case study of a bank. International Journal of Computer Trends and Technology, 43(1), pp.56-64.

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