Unit-2 Concepts of Systems

2.1 Definition of system in organization

2.2 Types of system
2.2.1 Deterministic & Probabilistic systems
2.2.2 Open & Closed Systems
2.3 Introduction to Organization
2.4 Organization Structure

2.1 Introduction to System

• System is a set of elements or components that interact to achieve goals.

• The elements themselves and the relationships among them determine how
the system works.
• Systems have inputs, processing mechanism, output and feedback.

Elements
Systems
Inputs Processing Output Goal
Mechanism

Restaurant Vegetables, Drinks, Frying, Boiling, Spicy Dishes, Customer

Wheat, Fruits, Heating, Drink Soups, Juices, Satisfaction with
Labors, dispensing, Cold Drinks tasty and
Management Cooking healthy food

College Students, Lecturers, Teaching, Educated Acquisition of

Administrators, Research, Students, Useful Knowledge
Books, Equipments service, research, service
seminars, to community,
Projects state, nation

Automatic Dirty Car, Water, Cleaning type, Clean Car Assessment

Car Wash Ingredients to wash car wash from the
System the car, time, operator customer
energy, skills regarding car
cleanness

Page 1
 Unit-2 Concepts of Systems

Performance measurement criteria

Performance of any system measured in different ways

o Efficiency
o Effectiveness
o Standards

Efficiency
• Efficiency is measured by what is produced divided by what is consumed. It
can range from 0 to 100 percent.
• I.e. efficiency of motor is the energy produced (in terms of work done) divided
by the energy consumed. (in terms of electricity or fuel used)
• It can also use comparatively. i.e. performance of Diesel Car Vs Petrol Car Vs CNG car

Effectiveness
• Effectiveness is measure of the extent to which a system achieves its goals. It
can be computed by dividing the goals achieved by the total of the stated
goals.
• I.e. a company manufacturing machine spare parts is developing 100 damaged
pats. For reducing this damage control system developed. After installation of it
the total damage part is 15. So the effectiveness of the system is measured as 85%
• Similar to the efficiency; effectiveness can use to compare system.
• Efficiency and effectiveness are performance objectives for an overall system. Meeting
these objectives may involve trade-offs in terms of cost, control and complexity.

Standards
• It is a specific objective of the system.
• I.e. a system performance standard for a particular marketing campaign might
be to have each sales representative sell 100 products a week. The performance
of the sales may be calculated on the basis of this objective.
• Once the standards are defined the system performance is measured and compared
with the standards.
• Variances from the standards are determinants of the system performance

System Variable and System Parameter

• System variable are quality of item that can be control by the decision
maker. For example: Price for any product is a system variable because

Page 2
 Unit-2 Concepts of Systems

it can be control

• System Parameter is values of quality that cannot be control For Example:

cost of raw material. Rate of chemical to produce certain types of plastic
which is control by low of chemistry not the decision maker.

System Modeling

System Models are used to test different relationships and their effects since
they are simplified then the real system.

Model
• It is an abstraction or an approximation that is used to represent the reality.
• It enables us to explore and gain an improved understanding the real world situations.
• I.e. recorded history has been used by people as models (like a battle, physical
mock-up of ancient building, symbols which represents the money, numbers
and mathematical relationships).
• Managers and decision makers used such models to make better decisions
which may help them to understand what happening in their organization.

• There are various types of models. Among them mostly used models are:
narrative, physical, schematic and mathematical model.

Narrative Model
• As the name implies the model is based on the words.
• It is logical and not a physical model.
• Both verbal and written descriptions of reality are considered narrative models.
• In any organization; reports, documents, and conversations concerning to
the system are important narratives.

Physical Model
• It is a tangible representation of reality.
• Basically these models are computer designed or constructed.
• E.g. Building Raw Models
• A Civil Engineer may develop a scale model of a new complex or shopping
centre to give potential investor information about overall appearance and
approach of the development.

Schematic Model
• It is a graphical representation of reality.

Page 3
 Unit-2 Concepts of Systems

• Graphs, Charts, figures, diagrams, illustrations and pictures are such type of models.
• They are used extensively in developing computer programs and systems.
• e.g.
• A plan for new building, a graph which shows company’s financial
projection, electric diagrams, scheduling charts for projects.

Mathematical Model
• It is an arithmetic representation of reality.
• A mathematical model is a description of a system using mathematical
concepts and language.
• E.g. Mathematical models are used in the natural sciences (such
as physics, biology, earth science, chemistry) and engineering
disciplines (such as computer science, electrical engineering)
• Retail chains have developed mathematical models to identify all the activities,
efforts and time associated with planning, building and opening a new store so
that they can decide how long it take to complete the store.

Accuracy is critical in development of any model. An inaccurate model will usually

lead to an inaccurate solution to a problem. Assumption should be always as
realistic as possible.

2.2 System types (classification of system):

System can be classified as follow:

1) Simple and Complex

• Simple system have few component and the Relationship or interaction between
elements is An uncomplicated and strait forward
• Complex system has many components that are highly related and inter
connected.

2) Open and Closed System (V. IMP)

• The systems that have interfaces with the environment are considered as open
systems. These systems are either open to inputs from the environment or are
open to provide output to the environment.
•It is very easy to find examples of open systems. Information systems in general
are open systems. They receive input from the environment and they generate
outputs that are given to entities outside the scope of the system that is to the

Page 4
 Unit-2 Concepts of Systems

environment in which they operate

• Almost all the business and social systems in real world are open systems.
They have multiple interfaces with the environment in which they operate.
• Open systems have to be flexible enough to adapt to the changing environment in
order to remain in existence. Management information systems are open systems.

• The systems that do not have any interaction with the outside world are called
as closed systems. Closed systems have no interaction with the environment in
which they operate.
•It is, however, difficult to find examples of closed systems. Some scientific
research systems are known to operate without any interaction with the
environment in which they operate.
• The environment is not static. The environment keeps on undergoing changes
from time to time.

3) Deterministic and Probabilistic System (V. IMP)

• There are systems whose results can be predicted and there are systems whose results
cannot be predicted. Systems can also be classified into deterministic and probabilistic
systems based on the predictability of the results.

• The systems whose results can be predicted are called as deterministic system. The
systems whose results cannot be predicted are called as probabilistic systems.

• The solar system is a simple example of deterministic system. The movement of planets
can be predicted to high degree of precision as the planets movement is taking place as per
specific predetermined rules. The solar system is based on specific rules and therefore the
outcome can be predicted.

• Similarly, computer systems contain programs. Programs contain certain set of instructions
that are followed during its execution. Programs are performing specific operations in
accordance with predetermined set of rules and conditions embedded in the program. Thus
computer systems become deterministic systems.

• On the other hand, there are systems whose results cannot be predicted with precision. The
results of these systems can be predicted with certain degree of probability. These systems
are probabilistic systems.

• Sales forecasting system is an example of probabilistic system. One cannot say with high
degree of confidence that the result of the system would match exactly with real world
situation. One can only predict with certain degree of probability. Sales Forecasting,

Page 5
 Unit-2 Concepts of Systems

Budgetary Planning, Revenue projections etc. are some of the examples of probabilistic
systems.

4) Stable and Dynamic

• Stable system undergoes very little change over Time. A stable system is one in
which relationship are define and it is disturb by environmental facts. It is
capable of returning to its desire state. Stability is measure in term of certain
elements. For example: stock control system.
• Dynamic systems repeatedly go over-time. For Example: computer parts
manufacturing company.

5) Permanent and Temporary

• Permanent system exists for a relative long period of Time. people made system
are generally permanent. System operates for long time span. Operation
performed by human may be said to by permanent.
• Temporary systems are design to last specified period of time. These systems are
important for the accomplishment of specific task in business and for research on
science.

6) Adaptive and Non-adaptive

• A system that reacts to its environment to such Way to improve with functioning
achievement or productivity of survival it’s called an adaptive System.
• It is able to change in response to changes in the environment and their
interaction with the environment to continue their existence.
• For example : A company which changes according to demand & adjust its
price of product to look for new market it is consider as adaptive system.
• Those systems that do not react or adapt changes from the Environment are
called non-adaptive system.

7) Stationary and non-stationary

• A stationary system is one whose properties and Operations either do not vary
in repetitive Cycles. For example: the automatic factory, super market store
operation, high school.
• An advertising organization, a research and Developments laboratory are
non- stationary system.

Page 6
 Unit-2 Concepts of Systems

8) Sub-system and super-system

• Each system is nested in a large system. The System in the hierarchy that was
most interested in state as controlling is usually called the sub System.
• For example: In organization any small part or single module can consider as sub
system

• Super system is a term that has at least two uses

o as a opposed to subsystem
o To denote any extremely large and complex system.

• For example: when number of sub systems grouped together it became one super
system

9) Conceptual and Empirical

• Conceptual system are concern with theoretical structured, which may or may
not have counterpart in the world. Conceptual system for organization is
composed of ideas. These systems are also appear in the form of plans, structures
and procedures
• Empirical system is made up of people, materials, machines, energy and
physical things

10) Natural and Manufactured

• Natural system is planting in nature. For Example: solar system and water
system
• Manufactured system is form after people Gathering groups to live and hunt
together. For Example: Transportation system, Natural Defense.

11) Social, People-machine and Machine

• Systems made up of people are purely social System. For example: political
parties’ most empirical system call into the category of People-machine system.
Pure machine system would have to obtain their Own inputs and maintain
themselves.
For Example: Electric power generations system.

Page 7
 Unit-2 Concepts of Systems

Difference between Open and Close System (V IMP)

Sr. OPEN SYSTEM CLOSED SYSTEM

No.
1 An open system is one that interacts with A closed system is one that does not interact
its environment. with its environment.
2 Open system is affected with the change in Closed system are not affected with the living
living organisms and its environment. organisms and its environment because barrier
exists between the environment and the system
from being affected.
3 The company in turn is a system within the In research for instance, we attempt to develop
larger industry system. The company models that are essentially closed models.
interacts with its environment, a larger
system, makes that individual company an
open system.
4 In reality, an open system must exist. In reality, closed system rarely exists.
5 The demand forecasting is a Example of oAll kind of accounting system, case, stock,
open system f Attendance of employee is close system.
6 EX:- EX:-
All Industry is a part of national economic The scientists who device a laboratory system
system and are an open system. to measure the elastically of a metal is assuming
a closed system.
7 Every social organization is an open system. Simple operational lower level functional
management is closed system.

Difference between Deterministic and Probabilistic System (V IMP)

Sr.No Deterministic Probabilistic

1 The systems whose results can be predicted The systems whose results cannot be
are called as Deterministic System. predicted are called as Probabilistic System.
2 Deterministic system provides guarantee Probabilistic system does not provides
of output guarantee of output
3 In deterministic system, same process is In Probabilistic system, different process is
followed to get the output followed to get the output
4 Example: computer systems become Example: Sales forecasting system is an example
deterministic systems. of probabilistic system.

Page 8
 Unit-2 Concepts of Systems

2.3 Introduction to Organization

• Organization is formal collection of people and other resources established to

accomplish a set of goals.
• The primary goal of a for-profit organization is to maximize shareholder value,
often measured by the price of the company stock.
• i.e. Diamond Company, Marketing agency, Self Finance Institutes etc.
• Non-Profit organizations include social groups, religious groups, universities
and other organizations that do not have profit as the primary goal.
• i.e. Charitable Trusts, Government Schools etc.
• An Organization is a system, which means that it has inputs, processing
mechanisms, outputs and feedback.
• An Organization constantly uses Money, people, materials, machines,
equipment, data, information and decisions.

Page 9
 Unit-2 Concepts of Systems

2.4 Organizational Structure

• An organization is a formal collection of people and other resources
established to accomplish a set of goals.
• It refers to organizational subunits and the way they relate to overall
organization. Depending on the goals of the organization and its approach to
management, a number of structures can be used.
• An organization structure can affect how information systems are viewed
and what kind are used. Although there are many possibilities
organizational structure typically falls into one of the following categories.

1. Traditional Organizational Structure:

• A traditional organizational structure, also called a hierarchical structure, is

like a managerial pyramid where the hierarchy of decision making and
authority flows from the strategic management at the top down to
operational management and no management employees.

Page 10
 Unit-2 Concepts of Systems

• Compared to lower levels, the strategic level, including the president of

the company and vice presidents, has a higher degree of decision
authority, more impact on corporate goals, and more unique problems to
solve
• In most cases, major department heads report to a president or top-level
manager. The major departments are usually divided according to function
and can include marketing, production, information systems, finance and
accounting, research and development, and so on

• The positions or departments that are directly associated with making,

packing, or shipping goods are called line positions. A production
supervisor who reports to a vice president of production is an example of a
line position.
• Other positions might not be directly involved with the formal chain of
command but instead assist a department or area. These are staff positions,
such as a legal counsel reporting to the president.
• Today, the trend is to reduce the number of management levels, or layers, in
the traditional organizational structure. This type of structure, often called
a flat organizational structure, empowers employees at lower levels to
make decisions and solve problems without needing permission from
midlevel managers.
• Empowerment gives employees and their managers more responsibility
and authority to make decisions, take action, and have more control over
their jobs.

Page 11
 Unit-2 Concepts of Systems

• For example, an empowered sales clerk could respond to certain customer

requests or problems without needing permission from a supervisor.

2. Project and team Organizational Structure:

A project organizational structure is centered on major products or services.
E.g. in a manufacturing firm that produced bady products, each type is produced by a
separate unit.
Traditional functions like marketing, finance & production are positioned
within these major units.
Many project teams are temporary when the project is complete; the members
go on to new teams formed for another project.

3. The Team Organizational Structure:

The team organizational structure is centered on work teams or groups. In
some cases, these teams are small; in other they are very large.
Typically each team has a team leader who reports to an upper level manager
in the organization. Depending on the task being performed, the team can be either
temporary or permanent.
For example a healthcare company can form small teams to organize its
administrators, physicians, and other to work with individual patients.

Page 12
 Unit-2 Concepts of Systems

4. Multidimensional Organizational Structure:

A multidimensional organizational structure, also called matrix
organizational structure, incorporate several structure at the same time. E.g. an
organization might have both traditional functional area & major project units.
One advantage of the multidimensional organizational structure is the ability
to communicate with different groups and able to discuss and solve problems.

Page 13