BC5-B11 BUSINESS INFORMATION SYSTEM UNIT – 1 1

Module I Management Information System: Data, Information &

Knowledge – Information Technology & Communication technology -
Role of Information & Communication technology in Business –
Management Information System , Meaning , Concepts, Purpose &
Features of MIS, Basic structural concepts.

Data The word data is the plural of datum, though data commonly
represents both singular and plural forms. Data are raw facts or
observations, typically about physical phenomena or business
transactions. For example, a spacecraft launch or the sale of an
automobile would generate a lot of data describing those events. More
specifically, data are objective measurements of the attributes (the
characteristics) of entities (e.g., people, places, things, events).
Example. Business transactions, such as buying a car or an airline
ticket, can produce a lot of data. Just think of the hundreds of facts
needed to describe the characteristics of the car you want and its
financing or the intricate details for even the simplest airline
reservation. People often use the terms data and information
interchangeably. However, it is better to view data as raw material
resources that are processed into finished information products. Then
we can define information as data that have been converted into a
meaningful and useful context for specific end users. Thus, data are
usually subjected to a value-added process ( data processing or
information processing) during which
(1) their form is aggregated, manipulated, and organized;
(2) their content is analyzed and evaluated; and
(3) they are placed in a proper context for a human user. The issue of
context is really at the heart of understanding the difference between
information and data.
Data can be thought of as context independent: A list of numbers or
names, by itself, does not provide any understanding of the context in
which it was recorded. In fact, the same list could be recorded in a
variety of contexts. In contrast, for data to become information, both
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the context of the data and the perspective of the person accessing the
data become essential. The same data may be considered valuable
information to one person and completely irrelevant to the next. Just
think of data as potentially valuable to all and information as valuable
relative to its user.
Example. Names, quantities, and dollar amounts recorded on sales
forms represent data about sales transactions. However, a sales
manager may not regard these as information. Only after such facts are
properly organized and manipulated can meaningful sales information
be furnished and specify, for example, the amount of sales by product
type, sales territory, or salesperson.
Information
Data becomes information when it is applied to some purpose and adds
value for the recipient. For example a set of raw sales figures is data.
For the Sales Manager tasked with solving a problem of poor sales in
one region, or deciding the future focus of a sales drive, the raw data
needs to be processed into a sales report. It is the sales report that
provides information.

In the first column below you'll see some examples of the huge amount
of data that managers may receive. The second column then shows
how the various types of data could be processed to create useful
information.
Data Possible methods of converting data into
information
Sales figures Plot charts and identify trends
Market and competition Find average or typical values
data
Financial performance Present complex data as a chart or graph
Production output Monitor changes over time and forecast
future values
Costs of resources or other Compare figures and identify similarities or

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inputs differences
Staff absences, holidays or Assess whether a result is significant or
sick leave occurred by chance
Accident records Assess whether one thing is related to
another

Table 1.1 Converting data to information

Collecting data is expensive and to merit the effort, you need to be very
clear about why you need it and how you plan to use it. One of the
main reasons that organisations collect data is to monitor and improve
performance. Measure what matters might be a bit of a cliché but if
you are to have the information you need for control and performance
improvement, you need to:
 collect data on the indicators that really do affect performance
 collect data reliably and regularly
 be able to convert data into the information you need.
Quality of information refers to its fitness for use or its reliability. Some
of the attributes of information which influence the quality of
information are as follows:
 1) Timeliness

Timeliness means that information must reach the recipients

within the prescribed time frame. Timely information can ensure
correct executive action at an early stage. The characteristic of
timeliness, to be effective, should also include current
information.

2) Accuracy

Accuracy is another key-attribute of management information. It

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means that information is free from mistakes and errors, is clear

and accurately reflects the meaning of data on which it is based. It
conveys an accurate picture to the recipient, who may require a
presentation in graphical form rather than tabular form.

3) Relevance

Relevance is yet another key attribute of management

information. Information is said to be relevant if it answers
specifically for the recipient what, why, where, who and why? In
other words, the MIS should serve reports to managers, which are
useful, and the information helps them make decisions.

4) Adequacy

Adequacy means information must be sufficient in quantity. MIS

must provide reports containing information, which is required in
deciding processes of decision-making.

5) Completeness

The information, which is provided to a manager, must be

complete and should meet all his needs. Incomplete information
may result in wrong decisions and thus may prove costly to the
organization.

6) Explicitness

A report is said to be of good quality if it does not require further

analysis by the recipient for decision-making. Thus the reports
should be such that a manager does not waste any time on the

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processing of the report, rather he should be able to extract the

required information directly.

7) Exception based.

Top managers need only exception reports regarding the

performance of the organization. Exception reporting principle
states that only those items of information, which will be of
particular interest to a manager, are reported. This approach
results in saving precious time of the top management and
enables the managers to devote more time in pursuit of
alternatives for the growth of the organization.
 Quality of information refers to its fitness for use or its reliability.
Some of the attributes of information which influence the quality
of information are as follows:


Knowledge is a combination of information, experience and insight

that may benefit the individual or the organisation. "When crude oil
prices go up by $10 per barrel, it's likely that petrol prices will rise by 2p
per litre" is knowledge.
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The boundaries between the three terms are not always clear. What is
data to one person is information to someone else. To a commodities
trader for example, slight changes in the sea of numbers on a computer
screen convey messages which act as information that enables a trader
to take action. To almost anyone else they would look like raw data.
What matters are the concepts and your ability to use data to build
meaningful information and knowledge.

Figure 1.4 From data to information to knowledge

Converting information to knowledge
Ultimately the tremendous amount of information that is generated is
only useful if it can be applied to create knowledge within the
organisation. Building and managing knowledge is one of the greatest
challenges that faces organisations in the twenty first century. We hear
a lot about the knowledge economy and for many organisations it is
their knowledge or 'know how' that defines their competitive
advantage.There is considerable blurring and confusion between the
terms 'information' and 'knowledge'.
Types of knowledge
Formal/Explicit Knowledge
This type of knowledge is formalized and codified, and is sometimes
referred to as know-what It is therefore fairly easy to identify, store,
and retrieve This is the type of knowledge most easily handled by KMS,
which are very effective at facilitating the storage, retrieval, and
modification of documents and texts.
From a managerial perspective, the greatest challenge with explicit
knowledge is similar to information. It involves ensuring that people

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have access to what they need; that important knowledge is stored;

and that the knowledge is reviewed, updated, or discarded.
It is considered simpler in nature and cannot contain the rich
experience based know-how that can generate lasting competitive
advantage.
Informal/implicit/Tacit Knowledge
It is sometimes referred to as know-how and refers to intuitive, hard to
define knowledge that is largely experience based. Because of this, tacit
knowledge is often context dependent and personal in nature. It is hard
to communicate and deeply rooted in action, commitment, and
involvement
Tacit knowledge is also regarded as being the most valuable source of
knowledge the lack of focus on tacit knowledge directly to the reduced
capability for innovation and sustained competitiveness.
KMS have a very hard time handling this type of knowledge. An IT
system relies on codification, which is something that is
difficult/impossible for the tacit knowledge holder.
It should be quite apparent that it would be near impossible to convey
our intuitive understanding gathered from years of experience and
practice. Virtually all practitioners rely on this type of knowledge.
Tacit knowledge is found in: the minds of human stakeholders. It
includes cultural beliefs, values, attitudes, mental models, etc. as well
as skills, capabilities and expertise (Botha et al 2008). On this site, I will
generally limit tacit knowledge to knowledge embodied in people, and
refer separately to embedded knowledge (as defined below), whenever
making this distinction is relevant.
Clearly, both types of knowledge are essential for the organisation.

Information on its own will not create a knowledge-based organisation

but it is a key building block. The right information fuels the

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development of intellectual capital which in turns drives innovation and

performance improvement.

A system is defined as a set of interrelated components, with a clearly

defined boundary, working together to achieve a common set of
objectives by accepting inputs and producing outputs in an organized
transformation process. Many examples of systems can be found in the
physical and biological sciences, in modern technology, and in human
society. Thus, we can talk of the physical system of the sun and its
planets, the biological system of the human body, the technological
system of an oil refinery, and the socioeconomic system of a business
organization.

A system can be of various types like the education system, transport

system, political system… and also the information system

Systems have three basic functions:

• Input involves capturing and assembling elements that enter the

system to be processed. For example, raw materials, energy, data, and
human effort must be secured and organized for processing.

• Processing involves transformation processes that convert input into

output. Examples are manufacturing processes, the human breathing
process, or mathematical calculations.

• Output involves transferring elements that have been produced by a

transformation process to their ultimate destination. For example,
finished products, human services, and management information must
be transmitted to their human users.

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Example. A manufacturing system accepts raw materials as input and

produces finished goods as output. An information system is a system
that accepts resources (data) as input and processes them into
products (information) as output. A business organization is a system in
which human and economic resources are transformed by various
business processes into goods and services.
Information System

The system concept becomes even more useful by including two

additional elements: feedback and control. A system with feedback and
control functions is sometimes called a cybernetic system, that is, a
self-monitoring, self-regulating system.

• Feedback is data about the performance of a system. For example,

data about sales performance are feedback to a sales manager. Data
about the speed, altitude, attitude, and direction of an aircraft are
feedback to the aircraft’s pilot or autopilot.

• Control involves monitoring and evaluating feedback to determine

whether a system is moving toward the achievement of its goal. The
control function then makes the necessary adjustments to a system’s
input and processing components to ensure that it produces proper
output. For example, a sales manager exercises control when
reassigning salespersons to new sales territories after evaluating
feedback about their sales performance.
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An information system is defined as the software that helps organize

and analyze data. So, the purpose of an information system is to turn
raw data into useful information that can be used for decision making
in an organization.
General Purpose vs. Specialized Information Systems
There are some general types of information systems. For example,
a database management system (DBMS) is a combination of software
and data that makes it possible to organize and analyze data. DBMS
software is typically not designed to work with a specific organization
or a specific type of analysis. Rather, it is a general-purpose information
system. Another example is anelectronic spreadsheet. This is a tool for
basic data analysis based on formulas that define relationships among
the data. For example, you can use a spreadsheet to calculate averages
for a set of values or to plot the trend of a value over time.
In contrast, there are a number of specialized information systems that
have been specifically designed to support a particular process within
an organization or to carry out very specific analysis tasks. For
example, enterprise resource planning (ERP) is an information system
used to integrate the management of all internal and external
information across an entire organization. Another example is
a geographic information system (GIS), which is used to manage and
analyze all types of geographical data. Expert systems are another
example of information systems. An experts system is designed to solve
complex problems by following the reasoning of an expert.
Typical Components of Information Systems
While information systems may differ in how they are used within an
organization, they typically contain the following components:

1. Hardware: Computer-based information systems use computer

hardware, such as processors, monitors, keyboard and printers.
2. Software: These are the programs used to organize, process and
analyze data.

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3. Databases: Information systems work with data, organized into

tables and files.
4. Network: Different elements need to be connected to each other,
especially if many different people in an organization use the
same information system.
5. Procedures: These describe how specific data are processed and
analyzed in order to get the answers for which the information
system is designed.
The first four components are part of the general information
technology (IT) of an organization. Procedures, the fifth component,
are very specific to the information needed to answer a specific
question.
TYPES OF INFORMATION SYSTEMS
Management Information Systems is one out of several information
systems that are used in business. To better understand Management
Information Systems, let’s look at the different types of information
systems available in business.

 Transaction Processing Systems. These systems have been designed to

collect, process and store transactions that occur in the day to day
operations of a company. The system can also be used to cancel or
modify transactions done in the past if the need arises. One property of
this system that enables them to work effectively is the ability to
accurately record multiple transactions even if the different
transactions take place simultaneously. They are built to be able to
handle large volumes of transactions. Examples include stock control
systems, payroll systems, order processing systems etc.
 Decision Support Systems. These systems help decision makers to
make the best decisions by generating statistical projections from
analyzed data. Although it does not eliminate the need for the
manager’s judgment, it significantly improves the quality of the
decision by offering forecasts that help determine the best course of
action. These systems compile information from several sources for
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purposes of aiding in decision making. Examples of these systems

include computer supported cooperative work, group decision support
systems, logistics systems and financial planning systems.
 Executive Information Systems. Also known as Executive Support
System, this is a tool used for reporting enterprise-wide data to top
executives. These systems provide quick and easy to use reports that
are presented in graphical displays that are easy to compare. They can
be taken as specialized decision support systems because they provide
information necessary to help improve the quality of decisions. Owing
to the high expectations from such a system, these systems need to be
highly individualized hence they are usually custom made for specific
clients. They are also customizable to fit the specific needs of the
clients.
 Management Information Systems. These systems make use of
information technology to help managers ensure a smooth and
efficient running of the organization. Information collected by these
systems is structured so that the managers can easily evaluate the
company’s current performance vis-à-vis previous outputs. Some of the
common types of Management Information Systems include process
control systems, human resource management systems, sales and
marketing systems, inventory control systems, office automation
systems, enterprise resource planning systems, accounting and finance
systems and management reporting systems.

Information and communications technology (ICT)

Information and communications technology (ICT) is an extensional
term for information technology (IT) that stresses the role of unified
communications] and the integration
of telecommunications (telephone lines and wireless signals) and
computers, as well as necessary software, storage, and audiovisual
systems, that enable users to access, store, transmit, and manipulate
information.

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ICT, or information and communications technology (or technologies),

is the infrastructureand components that enable modern computing.

Although there is no single, universal definition of ICT, the term is

generally accepted to mean all devices, networking components,
applications and systems that combined allow people and organizations
(i.e., businesses, nonprofit agencies, governments and criminal
enterprises) to interact in the digital world.
Components of an ICT system

ICT encompasses both the internet-enabled as well as the mobile

devices powered by wireless networks. It also includes technologies,
such as landline telephones, radio and television broadcast

The list of ICT components is exhaustive, and it continues to grow.

Some components, such as computers and telephones, have existed for
decades. Others, such as smartphones, digital TVs and robots, are more
recent entries.ICT is sometimes used synonymously with IT (for
information technology); however, ICT is generally used to represent a
broader, more comprehensive list of all components related to
computer and digital technologies than IT.

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ICT's impact in Business

Information technology fosters innovation in business. Innovation
results in smarter apps, improved data storage, faster processing, and
wider information distribution. Innovation makes businesses run more
efficiently. And innovation increases value, enhances quality, and
boosts productivity.
Innovation through information technology has created the following
radical changes in business:
· Online shopping is more efficient than shopping in a store.
· Digital marketing is more efficient than high cost newspaper,
television, and radio advertising.
· Social networking is more efficient than going to clubs.
· VoiP communication is more efficient than legacy telephony.
· Cloud computing is more efficient than a private computer network.
Businesses that have embraced the innovation paradigm tend to have
the following characteristics:
· They have more accurate business planning
· They have more effective marketing
· They have higher global sales
· They have more systematic management
· They use real time monitoring
· They offer instant customer support
In fact, it’s hard to thing of long term business growth without the push
of information technology.
Reasons for Accelerated Business Growth
The technological revolution has improved businesses this century in
the following five primary ways:
1. Information technology has given business the tools to solve complex
problems.
Improved hardware (more memory, faster processors, sharper visual
displays, etc) combined with smarter applications (Mindmapping
software like X Mind, organizers like Google calendar, etc) have made

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it easier to research data, analyze it, and plan scalability. Many tools
available to solve complex problems.
2. Information technology allows businesses to make better decisions.
Good decisions in business are based on solid market research. This can
be done through engaging teams through video conferences, reviewing
public sentiment on social media and industry forums, and using online
surveys to get customer feedback. There are also tools like Microsoft
CRM Dynamics and Google Analytics.
3. Information technology has improved marketing.
Internet marketing using online advertising methods (SEm, PPC,
Facebook Ads) are far more accurate ways than traditional marketing of
finding target audiences, discovering their needs, and building a
marketing campaign to persuade them to buy. It’s difficult to see how
many people read a newspaper ad. It’s easy to figure out how many
people clicked on an online banner.
4. Information technology has improved customer support.
Customers can receive support from multiple channels telephone,
emails, social media platforms, webinars, and so on. Additionally,
customer relationship management systems help businesses
understand customer behavior.
5. Information technology has improved resource management.
Cloud computing allows a company’s employees to use any device
anywhere in the world to access their enterprise level software.

For businesses, advances within ICT have brought a slew of cost

savings, opportunities and conveniences. They range from highly
automated businesses processes that have cut costs, to the big
data revolution where organizations are turning the vast trove
of data generated by ICT into insights that drive new products and
services, to ICT-enabled transactions such as internet shopping
and telemedicine and social media that give customers more choices in
how they shop, communicate and interact.

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But ICT has also created problems and challenges to organizations and
individuals alike -- as well as to society as a whole. The digitization of
data, the expanding use of high-speed internet and the growing global
network together have led to new levels of crime, where so-called bad
actors can hatch electronically enabled schemes or illegally gain access
to systems to steal money, intellectual property or private information
or to disrupt systems that control critical infrastructure. ICT has also
brought automation and robots that displace workers who are unable
to transfer their skills to new positions. And ICT has allowed more and
more people to limit their interactions with others, creating what some
people fear is a population that could lose some of what makes it
human.

MANAGEMENT INFORMATION SYSTEMS

A system can be of various types like the education system, transport
system, political system… and also the information system. An
information system is basically a combination of different computer-
based tools which is used to collect data, store data and finally to
process data. Businesses and organizations rely on information systems
to carry out and manage their operations, interact with their customers
and suppliers to compete in the market. For example, government use
information systems to provide services cost-effectively to the citizens,
manage the economy and also to collect taxes.

Management information system or MIS is an information system

which is specially designed for providing information to the
management. It is a computer-based system which produces regular
reports on various operations for each and every level of management
in an organization or business. It basically helps the company managers
to make a proper planning about the business and also to control
decision.

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Management Information System (MIS) is a planned system of

collecting, storing, and disseminating data in the form of information
needed to carry out the functions of management.
A Management Information System is an information system that
evaluates, analyzes, and processes an organization's data to produce
meaningful and useful information based on which the management
can take right decisions to ensure future growth of the organization.
The MIS consists of 3 elements- Management, Information and
System.

Management:
Management is a process of planning, controlling, organizing all of the
people working in an organization to work together for achieving a
common target. Management relies on the 3 functions – Planning,
Controlling and Organizing.
In the planning phase, the objectives of the organization are discussed.
For example, when to complete it, how to complete it etc. So, it is an
important function of management.
In the organising phase, the manager assigns the objectives or task
which are discussed in the planning phase. The manager also organises
the resources to complete the objectives or tasks of the organization in
properly and efficiently.
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In the controlling phase, the measurement and correction of activities

of subordinates are done. So it is basically the controlling of all the
workers or subordinates in the organization to work correctly.
Information:
It is the next element of MIS which comes after management. Basically,
the data and information both are interrelated to each other. So, data
basically is the collection of raw facts and figures and the data is been
processed to obtain information.
For say a student roll number, which is a data. When we enter this roll
number into a computer-based information system like online result
system, then the system will process the roll number and provide us
with the details of marks carried by the student along with his/her
details like name, age, class, section, address etc. So, here we entered a
data and got all information regarding the exam of the student.
System:
We have already discussed the system above. It is basically an orderly
grouping of interrelated components that are arranged together to
achieve a desired objectives or goal. In a system the relation among the
different components matters. If elements of a system are added or
removed then the behavior of the system changes.

How a Management Information System Works

The term Management Information System sounds complicated, but

actually the concept is quite simple when you break it down. A
business collects many different types of data. For example, a clothing
retailer tracks inventory, manufacturing, personnel, online and in-
store sales and marketing, just to name a few. An MIS collects all of
this data from various sources, processes and organizes it. Next, the
MIS takes all of this processed data and generates a user-friendly
report that management can consult while making decisions. Using
the clothing retailer example, a manager might look at an MIS report
and learn that on Wednesdays, in-store business is slow and,

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therefore, the store is overstaffed. The manager can now make the
decision to cut back employee hours on Wednesdays, keeping in line
with demand. Ultimately, utilizing this data will help maximize profits
and ensure that business operations are running smoothly.

It’s important to note that Management Information Systems don’t

have to be massive networks. A sole proprietor using just one
computer could set up an MIS. One example of this would be a doctor
who uses an MIS to track scheduling, wait times, patient data, billing,
dealings with insurance companies and accounting. Or, a freelancer
might use an MIS to track their hours, invoicing, clients, marketing
efforts and sales

COMPONENTS OF MANAGEMENT INFORMATION SYSTEMS

To effectively deliver the information needed to decision makers,
Management Information Systems need to have the necessary
components to collect, process, store and retrieve the information
whenever it is needed.
To achieve this, these systems use the following four components:

1. Information System. This is a combination of software, hardware,

personnel and infrastructure. This component helps in the collection of
data that is stored in the MIS. The hardware includes computers,
scanners, printers and network devices. The software elements include
the company’s enterprise software and any other software that is used
in the running of the company’s network. This component makes it
possible for employees to interact with the system and thus
information can be collected
2. Database Management System. This component is primarily made up
of computer programs that help in the storage and retrieval of data. Of
course, it also includes the actual physical databases where the
information is stored after it has been captured. There are several
different database management systems that can be used in
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Management Information Systems. The suitability of the systems will

depend on the amount of data that will need to be processed and
stored in the system. There are small database management systems
that can comfortably work on personal computers and there are huge
ones that will need larger and more complex machines like mainframe
computers.
3. Intelligence System. This component is concerned with processing of
the data collected and presenting it in a manner that is easy to
comprehend. Everything from the processing of the data to the
displaying of the data is designed to give top executives an easy time as
they try to make decisions concerning the business. It is sometimes
referred to as business intelligence which stores human knowledge and
uses the logic to formulate quick solutions for future problems where
patterns match.
4. Research System. This component is concerned with identifying the
main management problems in the organization and coming up with
alternative decisions that could have sufficed in a particular situation.
This helps ensure that all the possible options are analyzed and the best
decision made. The best decision is not always the most obvious one.
This component of Management Information systems ensures that the
best decision is reached even in those instances.
Different MIS Functions
The broad functions of MIS are as given below:
1. To improve decision-making: MIS helps management by providing
background information on a variety of issues and helps to improve the
decision-making quality of management. The fast and accurate
information supplied by MIS is leveraged by the managers to take
quicker and better decisions thereby improving the decision-making
quality and adding to the bottom line of the company.
2. To improve efficiency: MIS helps managers to conduct their tasks with
greater ease and with better efficiency. This reflects in better
productivity for the company.

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3. To provide connectivity: MIS provides managers with better

connectivity with the rest of the organization.

MIS is set up by an organization with the prime objective to obtain

management informationto be used by its managers in decision-
making. Thus, MIS must perform the following functions in order to
meet its objectives.
1) Data Capturing:
MIS captures data from various internal and external sources of an
organization. Data capturing may be manual or
through computerterminals. End users, typically record data about
transactions on some physical medium such as paper form or enter it
directly into a computer system.
2) Processing of data:
The captured data is processed to convert it into the required
management information. Processing of data is done by such activities
as calculating, comparing, sorting, classifying and summarizing.
3) Storage of information:
MIS stores processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organizational
record. In this activity, data and information are retained in an
organized manner for later use. Stored data is commonly organized into
fields, records, files and databases.

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4) Retrieval of information:
MIS retrieves information from its stores as and when required by
various users. As per the requirements of the management users, the
retrieved information is either disseminated as such or it is processed
again to meet the exact demands.
5) Dissemination of MI:
Management information, which is a finished product of MIS, is
disseminated to the users in the organization. It could be periodic,
through reports or on-line through computer terminals.
Benefits of MIS
MIS when properly developed and used in an organization brings in a
lot of benefits for the organization. A list of the benefits of MIS for a
organization are:
MIS increases productivity
1. MIS reduces time, errors and costs associated with
processing information.
2. To increase productivity, MIS follows Online Transaction Processing (OL
TP). OLTP is the gathering of data as input, processing that input data
and updating the data to create valuable information from this
processed data.
3. Another area in which modern MIS improves productivity is by allowing
customers to process their own transactions through the use of
a Customer-Integrated System (CIS).
MIS enhances the quality of decision-making
1. MIS helps top management to do business in a better way, find
solutions to problems/opportunities, or help them in decision-making
by providing the relevant information.
2. MIS support for decision-making falls in two categories:

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a. When MIS helps you analyze a situation by providing all the relevant
information about the situation and then expecting you to make the
decision.
b. When MIS actually makes some sort of recommendation or giving some
insight into what decision to take.
MIS improves communication and helps develop team work
a. MIS helps to manage information and facilitates communication
between diverse teams.
b. A collaborative management information system is a specific system to
improve team work.
c. One aspect of EDI is Electronic Funds Transfer (EFT) which allows for
payment without physically sending money.
MIS can facilitate organizational transformation
1. MIS helps organizations to remain competitive or enter new markets
and transform the way business is done.

Limitations of MIS
Even though MIS has many benefits it has its limitations. MIS is
sometimes considered a solution for every bane within an organization.
While MIS may solve some critical problems but it is not a solution to all
problems of an organization. The limitations of MIS may be stated as,
1. The MIS is as good as its design-MIS if designed in an improper manner
does not serve the management and hence is of little relevance.
2. The MIS is as good as its users-if the users do not know how to leverage
the informationavailable from MIS then MIS is of little use.
3. The MIS is no good if the basic data is obsolete and outdated (for
example, MIS will only facilitate garbage with information and in about
garbage-out-process).

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Purpose of Management Information System

Information processing is a major social activity. A significant part of an

individual’s working and personal time is spent in recording, searching
for, and absorbing information, as much as 80% of a typical executive’s
time is spent on processing and communication information. Their
duties involve the production and use of information outputs
documents, reports, analysis, plans, etc.

The system provides information on past, present, and project future

and on relevant events inside and outside the organization in the
society. it may be define as planned and integrated system for
gathering relevant data,coverting it in to right time. The main purpose
of management information system is to provide the right and correct
information to the right people at right time.

Another important purpose of management information system is that

it is needed by all business organization because of increased
complexity and rate of change of today’s business environment foe
example marketing manager needs information about sales
performance and trends financial manager needs information on
returns, production manager needs information analyzing resources
requirement and workers productivity and personnel manager needs
information analyzing resources requirements and workers productivity
and personnel manager needs information concerning employee
compensation and professional development. thus effective managers
with the specific marketing,financial,production and personnel
information, and products they require to support their decision
making responsibilities.

Management information system concept is a vital to effective

computer use in business of two or major reason:

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1- It serves as a system framework for organizing business computer

applications. business application of computer should be viewed as
interrelated and integrated computer based information system and
not as independent data processing job.

2- It emphasized the management orientation of electronics

information processing in business the primary goal of computer based
information should be the processing of data generated by business
operations.

Characteristics of Management Information System(features)

management information system is a comprehensive and coordinated
set of information subsystems which are rationally integrated and
which transform data information in a variety of a ways to enhance
productivity in conformity with the manager’s style and characteristics
on the basis of established quality.

1. Management oriented - the system is designed from top to bottom.

This does not mean that the system will be geared to providing
information directly to top management rather it means that the
system development starts from an appraisal of management needs
and overall business objectives it is possible that top management is
the focus of the system such as their needs cornerstone on which the
system is built for example- a marketing information system basic sales
order processing the shipment of goods to the customers and the
billing of the goods are fundamental operation control activities.
however if the system is designed properly this transaction information
can be traced by salesman, sales territory, size of order, geography and
product line furthermore if designed with strategic management needs
in mind external competition market and economic data can be created
to give a picture of how well the company’s product are faring in their

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marketing environment and to serve as a basic of new product or

marketplace introduction the initial application can be geared to the
operational and management control areas but in such a way as not
preclude its integration into a strategic planning subsystem for upper
management.

2. Management directed - because of the management information

system it is imperative that management actively directs the system
development efforts to determine what information is necessary to
improve its control of operation it is rare to find an management
information system where the manager himself or a high level
representative of his department is not spending a good deal of time in
system design it it not a non time involvement for continued review
and participation are necessary to ensure that the implemented system
meets the specification of the system that designed therefore
management is responsible for setting system specification and it must
play a major role in subsequent trade off decision that inevitably occur
in system development. An important element of effective system
planning is the process for determining the priority of application
development. Management must control this process if a management
information system is the objectives. A company without a formal
application approval cycle and a management steering to determine
priorities will never develop an management information system.

3. Integrated - integration is significant because of the ability to

produce more meaningful management information for example in
order to develop an effective production scheduling system we must
balance such factors as:

A.Setupcost.
B.Workforce.
C.Overtimerates.
D.Productioncapacity.
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E.Capitalrequirement
D.Customerservice.

4. Common data flows - Because of the integration concept

of management information system there is an opportunity to avoid
duplication and redundancy in data gathering storage and
dissemination for example customer orders are the basic for billing the
customer for goods ordered setting up the accounts receivable
initiating production activity sales analysis sales forecasting and so on it
is prudent to capture this data closest to the source where the event
occur and use it throughout the functional area it is also prudent to
capture it once and thus avoid the duplicate entry of sources data into
severalsystem.

5. Heavy planning elements - Management information system do not

occur overnight they take from three to five years and longer to get
established firmly within a company a heavy planning element must be
present in management information system development
the management information system designer must have the future
objectives and needs of the company firmly in mind. the designer must
avoid the possibility of system obsolescence before the system
planning is an essential ingredient to successful management
information system the management information systemprovides
meaningful direction towards which one strives.

6. Sub-system concept - In tackling a project as broad and complex in

scope as a management information system, one just avoid losing sight
both the forest and the trees. Even though the system is viewed as a
single entity, it must be broken down into digestible sub-system that
can be implemented one at a time. The breakdown of management
information system into meaningful subsystems set the stage for
prioritized implementation. The subsystem analysis is essential for
applying boundaries to the problem, thus enabling the designer to
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focus on manageable entities that can be assigned and computerized

by selected system and programming team.

7. Flexibility and ease of use - Despite a careful analysis of the future

management information needs it is impossible to predict what is
desire their to five year hence. This is true in most industries and
especially in industries with rapid change patterns, it is naïve to think
that if anyone possesses the omniscience to predict the future with this
aa a premise, the next best thing an management information
system developer can do is to built in the flexibility to incorporate as
many manufacture nuances as possible.

8. Data base - The data is the mortar that holds the functional system
together each system requires access to a master file or data covering
inventory, personnel, vendors, customers, general ledger, work in
progress and so on. If the data is stored efficiently and with common
usages in mind one master file can provide the data needed by any of
the functional system. It seems logical to gather data once, properly
validate it and place it on a central storage medium that can be
accessed by any system. However it is not unusual to find a company
with multiple data files, one serving one functional system and another
serving another system.

9. Distributed data processing - The majority of the companies

implementing management information system have a geographic
network of sale office, distribution channel, manufacturing
plants,divison,subdivision and so on some of these entities are
operated in a completely independent fashion and therefore may not
be part of the integrated management information system more often
than not, the remote site to have the connection with each other and
with a host of operation in order to create a effective management
information system with geographical boundaries some from of
distributed data processing is necessary. Distributed data processing
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can be thought of as the delivery system, placing information in the

hands of those who need it when they need it.

10. Information as a resource - Providing the entire organization must

be a concept that information is a valuable resource particularly in the
management control and strategic planning areas must be properly
managed. This is a subtle but important change in thinking. It was a
common in the past to view the data processing.

Types of Management Information Systems

A management information system (MIS) is a computer-based system
that provides the information necessary to manage an organization
effectively. An MIS should be designed to enhance communication
among employees, provide an objective system for recording
information and support the organization's strategic goals and
direction. There are four types of MIS that will be introduced in
ascending order of sophistication.

TRANSACTION PROCESSING SYSTEMS

1. These systems are designed to handle a large volume of
routine, recurring transactions. They were first introduced in the
1960s with the advent of mainframe computers. Transaction
processing systems are used widely today. Banks use them to
record deposits and payments into accounts. Supermarkets use
them to record sales and track inventory. Most managers use
these systems to deal with tasks such as payroll, customer billing
and payments to suppliers.
OPERATIONS INFORMATION SYSTEMS
2. These systems were introduced after transaction
processing systems. An operations information system gathers
comprehensive data, organizes it and summarizes it in a form

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that is useful for managers. Most of these systems access data

from a transaction processing system and organize it into a form
usable by managers. Managers use operations information
systems to obtain sales, inventory, accounting and other
performance-related information.
DECISION SUPPORT SYSTEMS (DSS)
3. A DSS is an interactive computer system that can be used
by managers without help from computer specialists. A DSS
provides managers with the necessary information to make
intelligent decisions. A DSS has three fundamental components:
1. Database management system (DBMS): Stores large amounts
of data relevant to problems the DSS has been designed to
tackle.
2. Model-based management system (MBMS): Transforms data
from the DBMS into information that is useful in decision
making.
3. Dialog generation and management system (DGMS): Provides
a user-friendly interface between the system and the managers
who do not have extensive computer training.
EXPERT SYSTEMS AND ARTIFICIAL INTELLIGENCE
4. These systems use human knowledge captured in a
computer to solve problems that ordinarily need human
expertise. Mimicking human expertise and intelligence requires
that the computer (1) recognize, formulate and solve a problem;
(2) explain solutions and (3) learn from experience. These
systems explain the logic of their advice to the user; hence, in
addition to solving problems they can also serve as a teacher.
They use flexible thinking processes and can accommodate new
knowledge.

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Structure of Management Information System

The structure of MIS can be described in terms of its operating
elements, decision support, managerial activity, and organizational
function.
1. Operating elements of MIS: The operational elements of MIS are:

(a) Physical components: The physical components of an information

system include:
(i) Hardware - which refers to the physical computer instrument and
related devices performing various functions like input, output,
secondary storage, CPU and Communication.
(ii) Software - which refers to the instructions given to the hardware to
perform various operations.
(iii) Database - which is the collection of logically related and centrally
controlled records containing various stored data.
(iv) Procedures - which include the set of instructions to the users, data
preparation group, operating personnel, etc.
(v) Operating personal - they may be computer operators system
analysts, programmers, data administrators, or data preparation
personnel.
(b) Processing functions: On the basis of processing functions,
information system consists of the following: (i) Processing transactions
- transaction is an activity, which acts as the source of data. The
information system functions include the recording and measurement
of these transactions.
(ii) Maintaining master files - it involves the creation and maintenance
of master files for permanent storage of data.
(iii) Producing reports - one of the major jobs of the information system
is to generate and provide Structure of Management Information
System 131 reports to the user at various levels of management. (iv)
Processing inquiries - information systems provide responses to
inquiries from various levels.

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(v) Process interactive support applicationsinformation systems

provide interactive facilities to end-user and facilitate system planning,
analysis, and decision-making. They enable the user to ask questions
and receive immediate results.
(c) Output for users: The output provided by an information system to
the end-user may take any of the following forms:
(i) Transaction documents or screen - examples are purchase order,
payroll, sales invoice, etc.
(ii) Preplanned reports containing regular contents.
(iii) Preplanned inquiry responses.
(iv) User-machine dialog results - which refers to the way in which a
user can interact with a system to arrive at a solution.
(v) Ad hoc reports and enquiry responses - which occur at regular
intervals and receive data for analyses whose format cannot be
preplanned.
2. Decision support: One of the major roles of managers in an
organization is decision-making; and, as a tool to the managers, the
purpose of information systems is to facilitate the decision making
process. As a decision support tool,
MIS consists of two types of decisions - structured and unstructured.
(a) Structured decisions (Programmable decisions): These are well-
defined, repetitive and routine deciSions, having predetermined
deciSion models or rules. It does not mean that the decisions are
automated. In simple words, programmable decisions can be made
within a framework, specifying the steps to be adopted, in a flow chart,
decision table, or a formula. The decision model will specify the
information requirements and can be used by the lower level personnel
in the organization who do not possess specialized knowledge or skill.
Giving purchase order, preparation of pay rolls, etc., are examples. The
guidelines and rules required for taking such decisions are made
available in the form of procedure manuals, which help the users to
understand them. The important features of these decisions are:

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(1) These decisions can be delegated since they do not require any
specialized knowledge.
(2) Programmable decisions can be automated,
(3) The cost involved is very low when compared to non-programmable
decisions.
(b) Unstructured decisions (Non-programmable decisions): These
decisions are occasional in nature. They have no pre-established
decision models or procedures, necessitating a new solution for each
unique problem. The information requirements cannot be predicted in
advance, so that the retrieval may be ad hoc in nature. Moreover, due
to the absence of decision rules, these decisions are subject to human
judgment, and involve very high risk. Capital budget preparation,
introduction of a new product in the market, etc. are examples of non-
programmable decisions.
3. Management Activity (Levels of Management and Information
Requirements): On the basis of managerial activities MIS consists of
three activities, such as strategic planning, tactical planning and
operational planning, which constitute a hierarchy.

Fig. 9.2: Hierarchy of Planning

The functions of strategic planning level include the fixation of goals,
policies, general guidelines, setting up of organizational objectives, etc.,
which involve long-range considerations. Decisions made at this level
are connected with the choice of business directions, market strategy,
product mix, etc. Strategic level of management (top management)
requires aggregate, not much accurate, wide, future-oriented and
largely external information for decision making. At the tactical

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planning level, the emphasis is on managerial control, and it is

concerned with raising and utilization of resources effectively and
effiCiently. The activities at these levels include acquisition of
resources, tactics, plant location, new product development,
establishment and monitoring of budgets, etc. This level of
management requires information about the targets, budgets and the
actuals corresponding to the target performance, because at this stage
control measures are adopted, if the actual and targets vary
significantly. The causes for such variation are analyzed and a report is
submitted to managers of this level for controlling activity.
Management control and tactical planning level have a medium-term
planning horizon. It involves activities like reusing of resources,
structuring of works, acquisition and training of personnel. Tactical
planning is reflected in areas like capital expenditure, budget, and
three-year staffing plan. The responsibilities of management at the
operational, planning and control levels include effective and efficient
use of resources, and the execution of the day-to-day activities of the
organization. They relate also to short-term decisions or current
decisions like pricing, production levels, stock level, etc. The pieces of
information required at this level of management are well defined and
restricted. But detailed, historical, highly current, accurate, frequent
and largely internal information is also required at this stage for proper
functioning. Even though the three levels of management activity can
be differentiated on the, basis of the planning horizon, the activities
and information processing for these three levels are interrelated. For
instance, the inventory control at the operational level depends on
accurate processing of transactions at the management control and
tactical planning levels, which, in turn, depend on correct
summarization of results of operations at the strategic level.
4. Organizational Functions (organizational functions and information
requirements): The structure of MIS can also be explained in terms of
organizational functions. These functions do not have a standard
classification, The normal functions in a manufacturing organization
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include, purchase, production, marketing, personnel, finance and

accounting. MIS is developed to support the functional . subsystems of
the organization. With in each functional subsystem, there will be four
levels of managerial activities, such as trqnsaction processing,
operational control, managerial control, and strategic planning. The
various subsystems are:
Purchase Subsystem The transactions to be processed consist of
purchase requisition, purchase orders, manufacturing orders, receiving
reports etc. The operational control level uses information contained in
the reports, like under stock items, over stock items, vender
performance, Managerial control information consists of overall
comparisons between planned and actual inventory levels, cost for
purchased items, stock outs, inventory turnover, etc. Strategic planning
involves analysis of new distribution strategies, new polices with regard
to venders and making or buying decisions.
Production Subsystem The functions of this subsystem include planning
of production, facilities, scheduling of production activities, engineering
of product, employment and training of production personnel, and
quality control and inspection. Operational control requires detailed
reports comparing actual performance with production schedule.
Management control requires summary reports comparing overall
planned performance with actual performance. StrategiC planning
includes alternative manufacturing approach or approach to
automation.
Marketing Subsystem Transactions in marketing subsystem are sales
orders, promotion orders etc. The operational control of the marketing
subsystem performs hiring and training of sales force, dayto-day
scheduling of sales and promotion efforts, etc. The managerial level
compares overall performance against the standard marketing plan.
StrategiC planning considers the problem"s of new markets and new
marketing strategies. The information required at this level relates to
customer analysis, competitor analysis, income projection, etc.

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Personnel Subsystem This subsystem is concerned with employment

requisitions, job description, training specification, personnel data, pay
rate changes, hours worked, benefits, termination notices, etc.
Operational control level requires decision procedures for actions, such
as hiring, training, termination, etc. Management control level requires
information about cost of recruiting, composition of skills, cost of
training, salary paid, wage rates, etc. Strategic planning requires
information about alternative strategies for recruiting, salary, training,
and benefits and about retaining personnel.
Finance and Accounting subsystem Transactions involved in finance
subsystem are processing of credit applications, sales, billing, collection
payment vouchers, cheques, journal vouchers, ledgers, stock transfers
and so on. Operational control requires information about daily error
and exception reports, records of processing delays, records of
unprocessed transactions etc. Management control requires
information on budgeted and actual resources, cost of processing
accounting data, error rates, and so forth. Strategic planning requires
information to evolve alternative strategy to adequately finance the
firm, long range tax planning policy, systems for cost accounting and
budgeting, etc.

MANAGEMENT INFORMATION SYSTEM