Management Information Systems (MIS) as a Developmental Tool for Measuring Performance in Manufacturing Firms: Operations Research Perspective

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1 Management Information Systems (MIS) as a Developmental Tool for Measuring Performance in Manufacturing Firms: Operations Research Perspective Magbagbeola, J.A.O * Arogundade, K. K * [Department of Actuarial Science & Insurance, Joseph Ayo Babalola University, Osun state, Nigeria] [Corresponding Author], [Department of Business Administration University of Ado Ekiti, Ekiti State, Nigeria], [karog77@yahoo.co.uk] Copyright 2011 JournalsBank Publishing. Open Access All rights reserved.

2 Management Information Systems (MIS) as a Developmental Tool for Measuring Performance in Manufacturing Firms: Operations Research Perspective Magbagbeola, J.A.O and Arogundade, K. K Abstract More than 90% of Nigerian s income is from exporting of crude oil. In order to expand and search for new avenue for revenue, search light was beamed on the manufacturng industrial areas like the Aluminium industry has to be investigated. The study examined the performance of Aluminium industry in Nigeria with particular reference to the secondary sector of the industry and special cognisance to the appreciation of Operations Research as a veritable tool in Marketing/Management Information Systems. The study among other things x-rayed the developmental use of MIS to measure performance in the Manufacturing sector ofthe economy with the view of Operations Research. A total of 100 questionnaire were carefully prepared and administered on three (3) selected Aluminium companies through the convenience method and are analyzed using various statistical tools. Some of the causes of low performance were revealed and corrective measures were suggested for greater efficiency. Finally, recommendations for better performance in the industry were made. Also, recommendations for further studies in the areas not study were made. Keywords: Market Risks, Option Pricing, Simulation, Development, Management & Operations Research Acknowledgment Nill 28

3 I. INTRODUCTION According to Rochester, Jack B. (1996): A management information system (MIS) is a subset of the overall internal controls of a business covering the application of people, documents, technologies, and procedures by management accountants to solving business problems such as costing a product, service or a business-wide strategy. Management information systems are distinct from regular information systems in that they are used to analyze other information systems applied in operational activities in the organization. Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making. At the start, in businesses and other organizations, internal reporting was made manually and only periodically, as a by-product of the accounting system and with some additional statistics, and gave limited and delayed information on management performances. Types of Systems Management information systems can be used as a support to managers to provide a competitive advantage. The system must support the goals of the organization. Most organizations are structured along functional lines, and the typical systems are identified as follows: Accounting management information systems: All accounting reports are shared by all levels of accounting managers. Financial management information systems: The financial management information system provides financial information to all financial managers within an organization including the chief financial officer. The chief financial officer analyzes historical and current financial activity, projects future financial needs, and monitors and controls the use of funds over time using the information developed by the MIS department.manufacturing management information systems: More than any functional area, operations have been impacted by great advances in technology. As a result, manufacturing operations have changed. For instance, inventories are provided just in time so that great amounts of money are not spent for warehousing huge inventories. In some instances, raw materials are even processed on railroad cars waiting to be sent directly to the factory. Thus there is no need for warehousing. Marketing management information systems: A marketing management information system supports managerial activity in the area of product development, distribution, pricing decisions, promotional effectiveness, and sales forecasting. More than any other functional area, marketing systems rely on external sources of data. These sources include competition and 29

4 customers, for example. Human resources management information systems: Human resources management information systems are concerned with activities related to workers, managers, and other individuals employed by the organization. Because the personnel function relates to all other areas in business, the human resources management information system plays a valuable role in ensuring organizational success. Activities performed by the human resources management information systems include, work-force analysis and planning, hiring, training, and job assignments (O Brien, J(1999)). The above are examples of the major management information systems. There may be other management information systems if the company is identified by different functional areas. In Nigeria, the development of aluminium industry started from consumption rather than production. The use of aluminium is mainly restricted to building and household utensils whereas its enormous potential as an industrial raw material is yet to be exploited by not using more aluminium in transportation, fuel, oil and energy, whereas maximum consumption of aluminium in the developed countries is in these areas. The role of aluminium in industrial development derives mainly from the various applications of aluminium products in different sectors of the economy such areas of application include the transportation sector in which aluminium can be used for the fabrication of Automobile components like radiator, bolts and engine, in Aerospace, for the manufacturing of Aircraft structural components, in rail transportations, for the production of train coaches and in marine for the construction of various components of ships and boats. Kotler, Phillip and Keller, Kevin Lane (2006), defines marketing as the set of human activities directed at facilitating and consummating exchanges. It is the business function that identifies present unfilled needs and wants, defines and measures their magnitude, determines which target markets the organization can best serve, and decides on appropriate products, services and programs to serve these markets. Thus, marketing serves as the link between a society s needs and wants, and its pattern of industrial response to those needs and wants. Promotion describes the creation of awareness among consumers as it involves decisions concerning marketing communication. The main components are advertising, personal selling, sales promotion where the company formulates the message to communicate to the target market, the advertising media to use in sending the messages when to advertise and what amount to spend (budget). Stair, Ralph M. (1996), defines promotion as 30

5 the amount of personal selling efforts to put into the movement of the product, how to speed up transactions and the incentives to offer customer. Promotion has as its main objective the use of the best method of conveying idea about the product, about its usage, about its benefits, but more so, to inform the consumer as to its availability where and when. In personal selling a transactional approach is referred to as AIDA (i.e. Awareness, Interest, Desire and Action). All the above enumerated elements are key indicators that determine the kind of information that will be available at a point in time to any organization. II. MATERIALS AND METHODS Concepts and components of marketing information system Every firm is scene of many information flows of interest to marketing managers. Many companies are studying their executives information needs and designing marketing information systems (MIS) to meet these needs. Instead of a plethora of unrelated data, an MIS combines various inputs and presents integrated reports. Kotler, P (1994) says Marketing information system is a continuing and interacting structure of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning implementation and control. Marketing Information Marketing Information System Marketing Information Marketing Environment Internal Marketing Accounting Research Marketing Managers Target Markets System System Marketing Channels Analysis Competitors Planning Publics Marketing Analytical Implementation Macro-environment factors Intelligence Marketing Control System System Marketing Decision & Communication Figure 1: The marketing information system The MIS concept is fully illustrated in Figure 1. The box on the left shows the components of the marketing environments that marketing managers must monitor. Trends in the marketing environment are picked up and analyzed through four subsystem making up the marketing information system: 31

6 The internal accounting system Marketing intelligence system Marketing Research system and Analytical Marketing system. The information flows to marketing managers to help them in their marketing analyses planning, implementation and control. The marketing decisions and communication then flow back to the market. The Macro-level Environment All marketing organisations exist in broad environments composed of dynamic and static forces, which act and interact in diverse and sometimes unpredictable ways to create opportunities and pose threats for industries and companies. The broad or macrolevel environment includes five domains in which changes occur that are typically outside the company s control, but which can have both immediate and long term implications for a company s ability to market its products or services. These five (5) domains are economic, political and legal, demographic, socio-cultural and technological as illustrated in Fig. 2. Economic Domain Technological Domain Sociocultural THE MARKETING Domain ORGANISATION Demographic Domain Political & Legal Domain Fig. 2: A 5-domain model of the macro environment 32

7 Macrolevel forces are multidimensional, however, and can be addressed in more than one domain simultaneously. Worldwide interest rate fluctuations for example, can influence demand for McDonnell Douglas s fighter aircraft through both the political and legal domain and economic domain (Samuel V Smith, Richard H.Brien, and James E Stafford (1968)). Consequently, any static model of the macro environment be it five-dimensional or otherwise, is not an exact representation, nor should such models be taken to imply that macrolevel forces are easy to classify and manage. In fact, practically all attempts at modeling the environment are flawed, either because they miss some aspects in their attempt to be simple, or because their accuracy makes the models, too complex to be useful. The value of modeling the macro environment is the forcing marketing managers to adopt a broad and systematic perspective when considering the factors that can affect their companies marketing strategies. However, the sample used for this study was segmented into three viz: Top Management, Middle Management, and Lower Management. The Top management personnel consisted of those that were responsible for making vital and strategic decision for the whole organization. This level of staff sees the organization as a complete unit taking a more analytical and conceptual approach (Taylor, Bernard W (2006) ). Since marketing starts with top management it is very important to use it as a significant part of the study. For the purpose of this study, the management staff are those responsible for tactical decision in their respective departments. However, the marketing department will be highly focused because of its relevance to the study. The lower management staff consists of mainly the operatives who are very instrumental in the execution of management plans. Two main sources of data were employed for the purpose of this study. They are primary and secondary sources. The former allows us to capture certain data specifically for the study while the later only gives opportunity to use already captured data, which have been used for previous researches. Questionnaire, Documentary evidence, Personal interview and Observation were employed as data gathering instruments for the study. The chi-square described by the Greek letter χ 2 is frequently used in testing hypothesis concerning the difference between a set observed frequency of a sample and corresponding set of expected frequency. Chi-square is a sample statistic computed with the use of the following formula: 33

8 χ 2 = (o-e) 2 e Where: = Summation O = observed frequency e = expected frequency Pakistan Journal of Business and Economic Review Vol. 1, Number 1 (2011). Our interest is to make decisions based on the right information and employment of statistical approach through the use Chi-square technique in determining the role and contributions of management information system as a developmental tool for performance measurement in a Manufacturing firm. Our choice of Chi-suare technique stems from the fact that It will be nessesary for simplicity purpose to state eight-phases that are important in employment of O.R (Operations Research) as a tool to solving problems viz: Problem Identification Problem formulation; Construct a mathematical model; Derive a solution for the model; Test the model and the solution; Establish control for the solutions; Simulation; Put the solution to work; According to Taha, Hamdy A (2005), once the objectives, the decision makers, their courses of action, and the uncontrolled variables have been identified and defined, a measure of performance can be developed and selection can be made of a quantitative function of this measure to be used as a criterion for the best solution. Provided the model is good, experiments (called simulations ) can be conducted on it, or other methods can be used to obtain useful results. The type of decision criterion that is appropriate to a problem depends on the state of knowledge regarding possible outcomes. The first thing in any O.R related issue just as the topic under consideration is Observation, hence our choice of the technique that guarantees a relationship between observed and the expected outcomes. 34

9 Hypothesis Tested 1. H 0 : Marketing Information System has a significant impact on organization s performance (profitability) H 1 : Marketing Information System does not have significant impact on organization s performance (profitability) 2. H 0 : The recognition and acceptance of marketing information system is fundamental to the success of any business concern. H 1 :The recognition and acceptance of marketing is not fundamental to the success of any business concern. 3. H 0 : Marketing information system strives under a conducive environment which must be created by top management. H 1 : Marketing information system strives under a conducive environment which is not created by top management. 4. H 0 : Marketing information s considerations are the most critical factors in planning and decision making H 1 : Marketing information s considerations are not the most critical factors in planning and decision making. III. RESULTS A total of 100 questionnaire were carefully prepared and administered on the three(3) selected Manufacturing Firms in the Aluminium companies i.e. ALUMACO, FIRST ALUMINIUM NIG. PLC & GMP LTD. The questionnaires were distributed to companies based on their staff strength. 35 copies were given to ALUMACO PLC, 35 copies to FIRST ALUMINIUM NIG. PLC and 30 copies to GMP LTD. Tables below, shows both the responses from distributed questionnaires generally and those obtained from each of the selected companies and detailed analysis that tested the first hypothesis was presented. 35

10 Total responses received from distributed questionnaires Number of Responses Numbers Collected Percentage (%) (Distributed Questionnaire) Respondents 70 70% Non-respondents 30 30% Total Questionnaire Responses from selected Companies ALUMACO PLC, FIRST ALUMINIUM PLC & GMP LTD Item Responses Number of Responses Percentage (%) 1 ALUMACO PLC % 2 FIRST ALUM. PLC % 3 GMP LTD % Total Responses % Also, it was observed that about 93% of the total respondents from the three (3) selected organizations were male within the age bracket of years and substantial numbers of these respondents were first degree holders in marketing related disciplines. Table 1 HYPOTHESIS I H 0 : H 1 : Marketing information system has a significant impact on organizational performance (success). Marketing information system has no significant impact on organizational performance (success). Data Collection Strongly Agree Agree Disagree Total Below is the logical presentation of the above data. Responses No. of Responses Percentage (%) Strongly agree Agree Disagree Total % 36

11 Since Chi-square allows researchers to adopt a scientific approach to problems by providing a reliable base for testing of the stated hypothesis under an acceptable level of significance, therefore, the researcher will limit himself to 95% and 99% considered to be ideal for international standard. For the purpose of a comprehensive analysis using Chi-square the data classified above will be broken as follows: Responses Mgt. staff Marketing Contracts Accounts Dept. Dept. Dept. Strongly agree Agree Disagree Application of Chi-square (χ 2 ) Responses Mgt. Staff Marketing Contract Accounts Ratio Dept. Dept. Dept. 0 e 0 e 0 e 0 e Strongly agree Agree Disagree Total From the frequency table, it is the duty of the researcher to obtain the empirical using the formula: Chi-square χ 2 = (o-e) 2 e By substitution o e (o-e) (o-e) 2 (o-e) 2 /e χ 2 =

12 χ 2 = Degree of freedom = ( r - 1) ( c- 1) = ( 3-1 ) ( 4 1) = 2 x 3 df = 6 Q 99% significance level Table value = Decision rule If the table value is greater than the calculated value we accept the null hypothesis (H 0 ) and reject the alternate hypothesis (H 1 ), otherwise we reject the null and accept the alternate hypothesis. i.e if table value > calculated value, we accept (H 0 ) > Since the table value is greater than empirical evidence, we accept the null hypothesis that Marketing Information System has significant impact on organizational performance (success). Other hypotheses were treated with relevant computations based on the data presented and the null hypothesis in each case was accepted. The emphirical values obtained were strictly greater than the critical values. IV. DISCUSSION & RECOMMENDATION The study shows that about 93% of the respondents were males within the age bracket of years and a substantial number of these respondents were first degree holders in marketing and related disciplines. Maturity coupled with good education of the respondents add weight to the reliability of the responses. As a result, we are able to obtain first hand information necessary to carry out a result oriented study. It was also gathered that lack of the right kind of marketing information is the rationale behind the failures of many new products. It was crystal clear that any organization that does not practice the concept of marketing information system has only prepared to fail in the competitive market environment. Many however agreed that marketing starts with top management, which must create the conducive climate necessary for the implementation of successful marketing programmes. Also, a review of the null hypothesis revealed that majority of the respondents spoke in favour of Marketing information system pointing out that it is the most suitable strategy to launch into market in order to satisfy consumers effectively. Organizations that are involved in selling one thing or the 38

13 other should endeavour to accept and fully implement MIS concept. To reap the full benefit of the MIS concept, the philosophy must be translated into action implying that the executive be given more important role in the company planning and the marketing activities of the firm which must be better coordinated and managed. This will bring about the development of Marketing Management. Marketing Information should be applied especially to the marketing of product that has already had competition in both the market and similar product. Marketers should not single-handedly construct ideas that should be perfected to meet total solution. He should apply the multi-author contribution; that marketing is more of practice and decision making 95% accuracy. Marketing research, marketing intelligence and marketing information system must not be neglected in the company s marketing operation. Marketers should recognize their positions in a particular market industry so as to be able to adopt the appropriate strategies for survival. Finally, having produced the product that will meet a specific need (as earlier determined through the first phase of the eight-phases in the employment of O.R as a tool for solving problem), marketers (well groomed, trained and vast in application and use of MIS) must then determine the best way to price, promote and distribute this want satisfying product or service. 39

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