Virgin Atlantic Airlines: Management Information Systems

Executive Summary

The purpose of the research was to look into how information systems affect decision-making processes in the company (Virgin Atlantic Airlines) and how they can be used for competitive advantage. From the research, it was found out that the use of Management Information Systems was low as compared to other companies and airlines. The relationship between the workers and the departmental heads was also found out to be poor. I recommended that Virgin Atlantic Airlines needs to install modern MIS technologies and that the workers need to be involved in decision-making processes. Another recommendation was that more investment needs to be done in the e-ticketing department.

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However, the adoption of such a system will have huge implications on the firm’s finances.

Introduction

Decision-making in a business organization is a very important step towards the realization of the firm’s objectives. Good decision-making brings the about the good life to the firm and gives the managers control over the business. Sound decisions never come about accidentally. Instead, they are often attributed to thoughtful and skillful execution by decision-makers. If at all an organization is to be managed in an effective manner, there is the need for enough information to be provided to those charged with the responsibility of management. Accordingly, management information systems aid an organization in this respect.

They are therefore regarded as fundamental elements of an organization’s general control procedures. This is because they take into account information pertaining to the necessary technology for a firm to utilize and the human resource as well. Manicheanism still remains the simplest model for making decisions. This model entails two options and it divides everything in the world into two discretely opposing ends, such as night and day or black and white. The duality model was applicable in the olden days, however, it is a fact that there are no real opposites and we have to look at the world in a three-dimensional view.

Decision Science (DS) is a field that developed at the beginning of the 19th century and the derived concepts were used to manage the large factories which employed many workers and produced in mass quantities. Effective and efficient managing was thus required. The knowledge of DS, also known as Operations Research (OR) or Management Science (MS), is very essential for managers. It provides them with the tools and skills needed to understand problems in decision making, analysis, and solution (Applied Management Science n.d., Par. 25).

Decision-making models can be placed into two categories; Deterministic and Probabilistic models. With regard to the deterministic model, the decision assumed by the individual involved in this process usually impacts the outcome. On the other hand, as far as a problematic model is concerned; there is no correlation between the decision taken and the ensuing outcome. What this appears to imply is that good results are not always a product of sound decisions. The purpose of the research is to look into the use of Information Systems in relation to business decision-making for competitive advantage in Virgin Atlantic Airlines. After carrying out the research, recommendations will be made as required.

Findings

In my research of the Virgin Atlantic Airways, I found out that the use of Management Information Systems in its various departments was not at par with other airlines of the same size as the company. Further research revealed that the low capacity application of MIS was partly responsible for the recent slump in passenger numbers. This is despite the fact that other airlines registered growth in passenger traffic during the same period.

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Information flow between the workers and the top management was also found out to be poor; managers in different departments were found to ignore information from their juniors. This led to low work morale among the workers, some of whom resigned and joined rival firms. The financial statistics of Virgin Atlantic from 2000 to 2007 were as follows, as shown in table 1 below

Table 1: Financial statistics.

year Pre-tax Profits (£M)
2000 4.1
2001 45.5
2002 (92.6)
2003 15.7
2004 20.9
2005 20.1
2006 41.6
2007 46.8

Apart from year 2002 which had a massive loss, the rest of the years had profits. From the trend it can be seen to have been increasing gradually. The profits are expected to be higher in the recent years, that is, from 2008 to 2010.

Cumulative route revenue collection
Chart 1: Cumulative route revenue collection by February 2007

The pie chart shows the percentage distribution of revenue collection by Virgin Atlantic from its routes. The Far East had 50% of the revenue collected and the least was the Caribbean with just 1%.

Analysis

Types of Business Decisions

The management of a business organization may need to make several types of business decisions, these include;

Programmed decisions are the regular decisions that follow the same process. A series of decisions are followed in fixing such problems and could even be done on a computer program.

Non-Programmed Decisions are irregular and not commonly used. Each decision made is a unique one.

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Strategic Decisions are those decisions that affect the company on a long-term basis, e.g. merger decisions or take-overs.

Tactical Decisions are about strategy implementation decisions, e.g. recruitment of human resources and marketing strategies to use. They affect the company on an average-term basis.

The last type of decision made by a company is Operational Decisions and is those decisions that affect the company on a short-term basis.

The type of decision taken by the management depends on the nature of the problem; this is when Management Information Systems (MIS) comes into play. A Management Information System assists the management in making well-informed decisions in order to carry out its roles. The MIS uses both external and internal information for the analyses, for example, demand and the workforce may be used to make decisions on whether to increase the production of a specific product.

Information Flow in an Organization

There are two types of information flows in an organization; formal and informal.

A formal flow is defined by the hierarchy in an organization and is of two types; downward and upward communication.

Downward communication is the information flow of the managers to those immediately below them, such communication is frequently used to communicate office procedures and practices. Upward communication is where information flows from subordinates to superiors and is mostly used to report work-related problems. This type of information flow can only be effective if the upper and mid-level management shows genuine interest in hearing from the subordinates. Practices such as the open-door policy and the use of the suggestion box are helpful methods often employed by organizations to collect information from other workers. Information can also flow between workers of the same rank; this is referred to as horizontal communication and is mainly used in job co-ordinations, conflict diffusion, and solving a common problem.

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An informal flow is a type where the information comes from the interaction between friends, media, or chance meetings and is not based on any company protocols. It may be used to sort out contradictions in formal messages, discuss the consequences of a formal message earlier received, or pass formal information to those who haven’t received it. Information passed through this form of communication reaches the recipients faster than that passed formally.

Both information flow systems are important and are useful for the growth of the organization, employees must be supplied with information in an accurate and timely manner informal communication. The success of both forms of communication will encourage integration among the employees. Communication channels must also be left open and short if possible to facilitate upward communication. This can also prevent rumors from spreading within the firm.

Management Information System Models

Decision Support Models (DSS) improve decisions made by managers by providing additional information on the same.

Linear programming model helps the management to look into ways of minimizing or maximizing the variables in an organization so as to realize the full potential of the resources allocated. The company can for example look into whether increasing staff and increasing the distribution channels can lead to increase its profitability.

Spread sheets are another MIS model that can be used by the management in a decision-making process through the use the ‘what if’ scenarios. All information pertaining to a company is fed into a spreadsheet and different scenarios experimented by the analyst to know their effect on the company performance. Simulations can also be carried out where a model is run repeatedly under different conditions. This can include adjustments such as decreasing the workforce or increasing the production units. Spreadsheets can further be used for optimization procedures, forecasting and to increase the sensitivity of a process.

It is worth noting that the spreadsheet gives the analyses based on the information it received, hence it should not be the sole source of information that is used to make decisions.

Management Information Systems are therefore the best criteria that should be used by the management in making decisions.

Benefits of MIS to the Organization

Revenue Monitoring: an MIS provides up to date revenue figures for all the company’s flights in all the routes and regions of operation. In addition, the company can have a projection of its future revenues by analyzing market trends from past and current figures. This may help the company in placing future targets and assessing their attainability.

Revenue analysis helps the company in gauging the profitability of the company and looking into ways of increasing the profitability.

Sales and Marketing Statistics: A Management information System provides information on branches of the airline that need to be marketed based on their market performance. It also gives information on the effect of media advertising i.e. whether this has increased the number of passengers or has helped in increasing the public awareness of the brand.

Operational Efficiencies: time and resources are efficiently managed with the adoption of a MIS. Online ticketing and reservations increases the number of customers for they do not have to come to the ticketing offices, and they have a chance to pick their best seats. This will impact positively on the profitability of the company while at the same time reducing expenditure on the running of the ticketing offices. There will be less staff in these offices. Online ticketing (e-ticketing) will also help in avoiding fake ticket sales, besides identifying un-ticketed passengers.

Analysis and Planning: real-time analyses of the bookings will be possible. Bookings through the web, agents or call centers will be monitored instantly and statistics will be collected on the peak and slack periods of the financial year. This will help in staff planning.

Personnel and Salaries management: Adoption of the MIS will lead to effective management of the human resource and their allowances or salaries. The system will clearly indicate the over-time hours served by a particular employee so as to facilitate payments; salaries will also be processed on time.

The company shall also be at position to know the number of employees reporting at a particular day whether in the day or night shift.

Other benefits of a MIS will be analysis of the airline by department so as to avoid staff imbalance.

Risks in Using MIS

While it is common knowledge that the use of MIS makes the company more efficient and accurate in its decisions, the use of such technology may not necessarily impact positively on the company in the short run. The installation costs are high and may mean making additional budgetary allocations; this could mean that other airline processes could be affected. The airline staff has to be trained on the functioning of the new system and this could further drain the airline’s financial resources.

Trial runs of the MIS will have to be carried out before full implementation which will also be costly to the firm.

The high sensitivity of the systems will require constant monitoring to ensure the effectiveness since this is a critical decision making component.

Recommendations

The following are the recommendations that I came up with after the research;

  1. The management of the Virgin Atlantic Airlines must install modern MIS technologies for use in their day to day operations. This is a cost-cutting mechanism which will go a long way in raising the company’s performance in both profit and passenger numbers. The installation will also lead to more accurate decision making processes within the company.
  2. The management must involve the workers in coming up with decisions affecting the company, they could incorporate a worker’s representative in the management board. The representative will consult fellow workers and give his/her report during the board meetings.
  3. The company should make more investments in the e-ticketing department. Research showed that more people preferred this form of booking over the manual process. The manual bookings must however not be abandoned because a significant number still used it.

Conclusion

Decision making in an organization is very useful for the continuity of an organization and these decisions must be based on earlier company performances. This can better undertaken by the use of modern MIS methods, apart from profit motivations, use of such technology can also lead to efficiency and eliminate bad business practices.

Reference List

Applied Management Science, n. d. Making Good Strategic Decisions. Web.

Virgin-Atlantic.com. n.d. Press Kit-Financial. Web.

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