Chapter 1

Why Information Systems?

The environment of business has changed from the traditional environment where
management processes are treated as a face-to-face, personal art and not a far-flung, global
coordination process. Information itself is not treated as an important asset for a firm.
But today, most of the organization recognizes the importance of information. For
individuals, information systems are needed for entertainment and as an enlightment to their
life. Meanwhile for businesses, information systems are mostly needed to help in decision
making and problem solving. Besides that, it is used to gather, store and manipulate
information.

Factors
There are three main factors that contribute to the recognition of the importance of
information to any organization.
1. The first factor is the emergence and strengthening of the global economy.
Globalization of the world’s industrial economies greatly enhances the value of
information to the firm and offers new opportunities to businesses.
Information system provides the communication and analytical power that firms need
for conducting trade and managing businesses on a global scale.
2. The second factor is due to the transformation of industrial economies and societies
into knowledge and information based service economies.
In knowledge based economies, knowledge and information are key ingredients in
creating wealth to an organization.
Knowledge and information are becoming the foundation for many new services and
products.
Intensification of knowledge utilization in the production of traditional products has
increased as well.
3. The third factor is due to the transforming of the business enterprise. Traditional
firms was and still is a hierarchical, centralized, structured arrangement of specialist
that typically relies on a fixed set of standard operating procedures to deliver a mass-
produced product or services.
But the business enterprises has changed into flattened, decentralized, flexible
arrangement of generalists who rely on nearly instant information to deliver mass-
customized products and services uniquely suited to specific markets or customers
Besides the above mentioned three main factors, there are also several trends that have made
the use of information systems very important in business:
 Computers’ power has grown tremendously, while their prices have dropped.
 Computer programs’ variety and ingenuity have increased.
  Quick and reliable communication lines and access to the Internet and World Wide
Web have become widely available and affordable.
 The fast growth of the Internet has opened opportunities, as well as competition in
global markets.
 An increasing ratio of the workforce is computer literate.
• In this environment, organizations will quickly lag behind if they do not take
advantage of this progress and use the technologies and skills to meet their goals.

What is an Information System?

Information system consists of physical and nonphysical components working together. A
computer alone is not an information system.
A computer combines with a software program may constitute an information system, but
only if the program is designed to produce information that helps an organization or person to
achieve a specific goal. Information system can be further defined as a set of interrelated
components that collect or retrieve, process, store and distribute information to support
decision making and control in an organization.
Information systems can also help managers and workers to analyze problems, visualize
complex subjects and create new subjects.
It may contain information about significant people, places and things within the organization
or in the environment surrounding it.
All information systems (IS) operate in the same basic fashion whether they include a
computer or not.
However, the computer provides a convenient means to execute the four main operations of
an information system.
The four main activities are entering data into the IS (input), changing and manipulating the
data in the IS (data processing), getting information out of the IS (output) and storing data
and information (storage).
Besides the four main operations, feedback is also needed to return the output to the
appropriate people or activities in the organization to evaluate and refine the input.
Figure 1.1 Diagram showing the four main operations

IS output
Output is the information an IS produces and displays on an output device in the format
most useful to an organization. Information is data that have been shaped into a form that
is meaningful and useful to human beings.
A good IS must be able to produce information that carries the following characteristics:
 Relevant – information must pertain to the problem at hand.
 Complete – partial information is often worst than no information.
 Accurate – erroneous information may lead to disastrous decisions.
 Current – decisions are often based upon the latest information available.
 Economical – in a business setting, the cost of obtaining information must be
considered as one cost element involved in any decision.
Chapter 2
A Business Perspective on Information System
From a business perspective, an information system is an organizational and management
solution, based on information technology, to a challenge posed by the environment.
It emphasizes the organizational and management nature of information system:
To understand information system – to be information system literate as opposed to computer
literate – a manager must understand the broader organization, management and information
technology dimensions of systems and their power to provide solutions to challenges and
problems in the business environment

The key elements of an organization are its people, structure and operating procedures,
politics and culture. An organization coordinates work through a structured hierarchy and
formal standard operating procedures (SOPs). SOPs are formal rules for accomplishing tasks
that have been developed over a long time
Management’s job is to make sense out of many situations faced by organization and
formulate action plans to solve organizational problems.
A substantial part of management is creative work driven by new knowledge and information.
Information technology can play a powerful role in redirecting and redesigning the
organization.

Managerial roles and decisions vary at different levels of the organization.

• Senior managers – make long-range strategic decisions about products and services to
produce.
• Middle managers – carry out the programs and plans from senior management.
• Operational managers – responsible for monitoring the firm’s daily activities.
Information technology is one of many tools available to managers for coping with change
which consists of computer hardware, computer software, storage technology and
communication technology.
Computer hardware is physical equipments used for input, processing and output activities in
an information system.
Computer software is detailed, preprogrammed instructions that control and coordinate the
work of computer hardware components in an IS.
Storage technology is physical media and software governing the storage and organization of
data for use in an IS.
Lastly, communication technology is physical devices and software that link various
computer hardware components and transfer data for use in an IS.
A network links two or more computers to share data or resources such as printer.

Contemporary Approaches to Information Systems

Multiple perspectives on IS shows that the study of information systems is a multidisciplinary
field, where no single theory or perspective dominates.
Figure 1.3 shows the major disciplines that contribute problem, issues and solutions. In
general, the field can be divided into technical, behavioral and socio-technical approaches.
Technical approach emphasizes mathematically based, normative models to study
information systems as well as the physical technology and formal capabilities of these
systems. Three disciplines that contribute to this approach are Management Science,
Computer Science, and Operation Research.
Behavioral approach is more concerned with the development and long-term maintenance of
information systems, which emphasizes on issues like strategic business integration, design,
implementation and utilization.Three disciplines that contribute to this approach are
Psychology, Economics and Sociology.
Socio-technical approach avoids a purely technological approach to information systems.
This approach stress the need to optimize the performance of the system as a whole where
both the technical and behavioral components needs attention, which means that the
technology must be changed and designed in such a way as to fit organizational and
individual needs meanwhile organization and individual must also be changed through
training, learning and planned organizational change in order to allow the technology to
operate and prosper.
The new relationship (as illustrated in Figure 1.4) between organization and IS shows that
there is a growing interdependence between organizational business strategy, rules and
procedures on the one hand and information system software, hardware, databases and
telecommunications on the other.
The changes in strategy, rules and procedures require changes in hardware, software,
databases and telecommunications.
This relationship becomes critical when making management plans for the future.

A second change in the relationship of IS and organizations results from the growing
complexity and scope of system projects and applications.
Over time, information systems have come to play a larger role in the life of the
organization.
Early information systems brought about largely technical changes that were relatively easy
to achieve and accomplish and affects few people.
Later systems affected managerial control and behavior (who has what information about
whom, when and how often); ultimately systems influenced “core” institutional activities
(what products and services are produced, under what conditions and by whom) concerning
products, markets, suppliers and customers.
Early information systems brought about largely technical changes that were relatively easy
to achieve and accomplish and affects few people.
The explosive growth in computing power and networks is turning organizations into
networked enterprises, allowing information to be instantly distributed within and beyond the
organization.
This capability can be used to redesign and reshape organizations, transforming their
structure, scope of operations, reporting and control mechanisms, work practices, work flows,
products and services. The following describes the new ways of conducting business
electronically.
1. Flattening organizations will results in fewer levels of management, with lower-level
employees being given greater decision-making authority. Those employees are empowered
to make more decisions than in the past are no longer work standard 8 hours and no longer
necessary work in an office and they can be scattered geographically.
2. Contemporary information technology makes more information available to line workers
so they can make decisions that previously had been made by managers.
3. Networked computers have made it possible for employees to work together as a team.
Team members can collaborate closely even from distant locations. These changes mean that
the management span of control has also been broadened, allowing high-level managers to
manage and control more workers spread over greater distances.
4. Separating work from location is possible as organizing globally while working locally is
made possible through technologies like e-mail, the Internet, video conferencing.
Communication technology eliminates distance as a factor for many types of work in many
situations. Collaborative teamwork across thousands of miles has become a reality designer’s
work on the design of a new product together even if they are located on different continents.
Companies are not limited to physical locations or their own organizational boundaries for
providing products and services.
Virtual organization becomes reality where organization using network linking people, assets
and ideas to create and distribute products and services without being limited by traditional
organizational boundaries or physical location.
5. Reorganizing work flows as IS have been progressively replacing manual work procedures
with automated work procedures, work flows and work processes. Improved work flow
management enabled many organizations not only to cut cost significantly but also to
improve customer service at the same time
6. Increases flexibility of organization as companies uses communication technology to
organize in more flexible way, increases their ability to respond to changes in the marketplace
and to take advantage of new opportunities. Large organization can use information
technology to achieve some of the agility and responsiveness of small organizations like mass
customization, the use of software and computer networks to finely control production so that
products can be easily customized with no added cost for small production runs. The result is
a dynamically responsive environment in which products can be turned out in a greater
variety.
7. Information technology is recasting the process of management, providing powerful new
capabilities to help managers plan, organize, lead and control. For example the use of
Enterprise Resource Planning (ERP) is a business management that integrates all facets of the
business, including planning, manufacturing, sales and finance so that they can become
closely coordinated by sharing information with each other.
8. Reducing organizational boundaries as networked information system enables transactions
to be exchanged electronically among different companies, hence reducing the cost of
obtaining products and services from outside the firm. An inter-organizational system is a
system that automates the flow of information across organizational boundaries and links a
company to its customers, distributors or suppliers.
CHAPTER THREE:
MAJOR TYPES OF INFORMATION SYSTEMS
Operational Level Information Systems
The information system that is involved at operational level of an organization is the
Transaction Processing System.
Transaction processing systems (TPS) are the basic business systems that serve the
operational level of the system.
A transaction processing system is a computerized system that performs and records
the daily routine transactions necessary for the conduct of the business.
Transaction Processing Systems
A TPS is any system that records transactions (a business event: a sale, a purchase, the
hiring of a new employee).
TPS is the entry point where data are entered at its source at the time of transactions
taking place.
TPSs are interfaced with applications that provide clerical workers and operational
managers with up-to-date information.
At the operational level, tasks, resources, and goals are predefined and highly
structured.
The decision to grant credit to a customer, for instance, is made by a lower-level
supervisor according to predefined criteria.
All that must be determined is whether the customer meets the criteria.
The following table shows the specific types of application information systems that
correspond to operation level:

Functional Area Systems

Sales and  Order tracking

Marketing
Order processing

Manufacturing  Machine control

Plant scheduling
Material movement control

Finance  Securities trading

Cash management

Accounting  Payroll
 Accounts payable
Accounts receivable

Human Resources  Compensation

Training and development
Employee record keeping

Strategic Information Systems

What is a Strategic Information System?
• Strategic Information Systems can be defined as computer systems at any level of the
organization that change goals, operations, products, services or environmental
relationships to help the organization gain a competitive advantage.
• The following describes the eight basic ways to gain competitive advantage.

Eight basic ways to gain competitive advantage

INITIATIVE BENEFIT
A company can gain advantage if it can sell more units at a
Reduce costs lower price while providing quality and maintaining or
increasing its profit margin.
A company can gain advantage if it deters potentials entrants
Raise barriers to
into the market, leaving less competition and more market
market entrants
potentials.
A company can gain advantage if it creates high switching
Establish high
costs; making is economically infeasible for customers to buy
switching cost
from competitors.
Create new products A company can gain advantage if it offers a unique product or
or services service.
Differentiate A company can gain advantage if it can attract customers by
products or services convincing them its product differs from the competitors.
Enhance products or A company can gain advantage if its product or service is better
services than anyone else’s.
Companies from different industries can help each other gain
Establish alliances advantage by offering combined packages of goods or services
at special prices.
A company can gain advantage if it can lock in either suppliers
Lock in suppliers or
or buyers, making it economically impractical for suppliers or
buyers
buyers to deal with competitors.

• Strategic information systems should be distinguished from strategic level systems for
senior managers that focus on long-term, decision-making systems where strategic
information systems can be used at all levels of an organization and are far-reaching
and deep-rooted than the other kinds of systems.
• Strategic information systems fundamentally change a firm’s goals, products, services
or internal and external relationships.
• In order to use strategic information systems as competitive weapons, we must
understand where strategic opportunities for businesses are likely to be found based
 on the two models of a firm and its environment: the Competitive Forces Model and
the Value Chain Model

Competitive Forces Model

In the competitive forces model (a model used to describe the interaction of external
influences, especially threats, and opportunities, that affect an organization’s strategy
and ability to compete;
Illustrated in Figure 2.2), a firm faces several external threats and opportunities:
 The threat of new entrants into its market
 The pressure from substitute products or services
 The bargaining power of customers
 The bargaining power of suppliers
 The positioning of traditional industry competitors
• Competitive advantage can be achieved by enhancing the firm’s ability to deal with
customers, suppliers, substitute products and services, and new entrants to its market,
which in turn may change the balance of power between a firm and other competitors in
the industry in the firm’s favor.
Competitive forces model

New market Substitute products

entrants and services

The firm Traditional

competitors

Suppliers Customers

Organization can use four basic competitive strategies to deal with these competitive
forces:
Product differentiation
• Firms can develop brand loyalty by product differentiation – creating unique new
products and services that can easily be distinguished from those of competitors, and
that existing competitors or potential new competitors can’t duplicate. Manufacturers
are starting to use information systems to create products and services that are
custom-tailored to fit the precision of individual customers.
Focused differentiation
• Businesses can create new market niches by focused differentiation – identifying a
specific target for a product or service that it can serve in a superior manner.
• A firm can provide a specialized product or service that serves this narrow target
market better than existing competitors and that discourages new competitors.
• An information system can give companies an advantage by producing data to
improve their sales and marketing techniques.
• Sophisticated data-mining software tools find patterns in large pools of data and infer
rules from them that can be used to guide decision-making.
• Data mining is both a powerful and profitable tool, but it poses challenges to the
protection of individual privacy.
• Data-mining technology combines information from many diverse sources to create a
detailed “data image” about individuals, such as their income, hobbies, driving habit,
and the question here is whether companies should be allowed to collect such detailed
information about individuals
Developing tight linkages to customers and suppliers
• Firms can create ties to customers and suppliers that “link” customers to the firm’s
products and that tie suppliers into a delivery timetable and price structure shaped by
the purchasing firm.
• This raises switching costs (the cost for customers to switch to competitors’ product
and services) and reduces customers’ bargaining power and the bargaining power of
suppliers.
• This is similar to the just-in-time delivery or inventory systems which reduce the cost
of inventory, the space required for warehousing, and construction time.
Becoming a low-cost producer
• To prevent new competitors from entering their markets, businesses can produce
goods and services at a lower price than competitors. Strategically oriented
information systems help firms significantly lower their internal costs, allowing them
to deliver products and services at a lower price (and sometimes with higher quality)
then what the competitors can provide.
• For example, organizations can use supply chain management to integrate supplier,
distributor and customer’s logistics requirements into one cohesive process.
 • Information systems make supply chain management more efficient by integrating
demand planning, forecasting, materials requisition, order processing, inventory
allocation, order fulfillment, transportation services, receiving, invoicing, and
payment.
• Supply chain management can not only lower inventory costs but also create efficient
customer response systems that deliver the product or service more rapidly to the
customer.

The following show how the above-mentioned strategic can be used on the Internet
Strategy Internet Application
Virtual banking which allows customers to view account
Product differentiation statements, pay bills, check account balance and obtain 24-
hour customer service through the World Wide Web
Hotel room reservation tracking system which provides
electronic information on participating hotels. It can
Focused differentiation
analyze these usage patterns to tailor hospitality-related
products more closely to customer preferences
Links to customers and Access through websites to track or check the status of any
suppliers shipment
Uses EDI (electronic data interchange) to quote any
Low cost producer
quotation or charge any bills.

Value Chain Model

Leveraging Technology in the Value Chain (Value Chain Model)
• The value chain model highlights the primary or support activities that add a margin
of value to a firm’s products or services where information systems can best be
applied to achieve a competitive advantage.
• The value chain model can supplement the competitive forces models by identifying
specific, critical leverage points where a firm can use information technology most
effectively to enhance its competitive position.
• This model views the firm as a series or chain of basic activities that add a margin of
value to a firm’s products or services.
• These activities can be categorized as either primary activities or support activities.
• Primary activities are most directly related to the production and distribution of the
firm’s product and services that create value for customer which includes inbound
logistics, operations, outbound logistics, sales and marketing, and services.
• Support activities make the delivery of the primary activities possible and consist of
organization infrastructure (administration and management), human resources
 (employee recruiting, hiring and training), technology (improving products and the
production process) and procurement (purchasing input).
• Organizations have a competitive advantage when they can provide more value to the
customers or when they provide the same value to customers at a lower price.
• Information systems could have strategic impacts if they helped the firm provide
products or services at a lower cost than competitors or if it provides the products or
services at the same cost as competitors but with greater value.

Difficulties in building and sustaining strategic information system

 Not all strategic information systems make profit.
 They can be expensive and risky to build.
 Many strategic information systems are easily copied by other firms, so that strategic
advantage is not always sustainable.
 Implementing strategic systems often requires extensive organizational change and a
transition from one socio-technical level to another. Such changes are called strategic
transitions and are often difficult and painful to achieve.
How Information Systems Promote Quality
• What is Quality?
• Quality can be defined from both producer and customer perspectives.
• From the perspective of the producer, quality signifies conformance to specifications
or the absence of variation from those specifications.
From the perspective of the customer, quality means they are:
• Concerned with the quality of the physical product – its durability, safety, ease
of use, and installation.
• Concerned with the quality of service – the accuracy and truthfulness of
advertising, responsiveness to warranties, and ongoing product support.
• Concerned with psychological aspects – the company’s knowledge of its
product, the courtesy and sensitivity of sales and support staff, and the
reputation of the product.
• Total Quality Management (TQM) is a concept that makes quality control a
responsibility to be shared by all people in an organization. TQM holds that the
achievement of quality controls is an end in itself. Everyone is expected to contribute
to the overall improvement of quality. TQM encompasses all of the functions within
an organization.

How Information Systems Contribute to Total Quality Management

Information systems can help firms to achieve their goals by:
 Simplifying the product, the production process or both.
 Benchmark
 Use customer demands as a guide to improving products and services
 Reduce cycle time
 Improve the quality and precision of the design
 Increase the precision of production

Relationship of Systems to One Another: Integration

• The various types of systems in the organization exchange data with one another.
• TPS are a major source of data for other systems, especially for MIS and DSS.
• ESS is primarily a recipient of data from lower-level systems.
• The other types of systems may exchange data with each other as well.
• Data may also be exchanged among systems serving different functional areas.
• However, the different systems in an organization are only loosely integrated.
• The information needs of the various functional areas and organizational levels are
too specialized to be served by a single system.

Figure 3.6 below shows the relationship between the different systems:
CHAPTER 4
INFORMATION SYSTEMS, ORGANIZATIONS AND MANAGEMENT
After completing this chapter, you will be able to:
• Identify the salient characteristics of organizations
• Analyze the relationship between information systems and organizations
• Contrasts the classical and contemporary models of managerial activities and roles
• Describe how managers make decisions in organizations
• Assess the implications of the relationship between information systems,
organizations and management decision making for the design and implementation of
information systems

Organization and Information Systems

• Information systems and organizations have a mutual influence on each other.
• Information systems must be aligned with the organization to provide information
needed by important groups within the organization.
• Meanwhile, organizations must be aware of and open themselves to the influences of
information systems in order to benefit from new technologies.
• The interaction between information technology and organizations is very complex
and is influenced by a great many mediating factors, including the organization’s
 structure, standard operating procedures, politics, culture, surrounding environment
and management decisions.

Figure 4.1 below illustrates the two-way relationship between organization and information
technology.

What is an Organization
• Organization is a stable, formal social structure that takes resources from the
environment and processes them to produce outputs (technical definition).
• This technical definition focuses on three elements of an organization:
• Capital and labor are primarily production factors provided by the environment.
• The organization (the firm) transforms these inputs into products and services in a
production function.
• The products and services are consumed by environments in return for supply inputs.
Figure 4.2 will shows the relation between these three elements.

• In the technical microeconomic definition of the organization, capital and labor (the
primary production factor provided by the environment) are transformed by the firm
through the production process into products and services (output to the environment).
• The products and services are consumed by the environment, which supplies
additional capital and labor as inputs in the feedback loop.
 • An organization is more stable than an informal group in terms of longevity and
routine-ness.
• Organizations are formal legal entities, with internal rules and procedures, that must
abide by laws.
• Organizations are also social structures because they are a collection of rights,
privileges, obligations, and responsibilities that are delicately balanced over a period
of time through conflict and conflict resolution (behavioral definition).
Figure 4.3 below shows the behavioral view of an organization that emphasizes group
relationships, values and structures.

Why organizations are so much alike and why organizations are so different
According to Weber, all modern organizations (bureaucracies):
• Have a clear-cut division of labor and specialization;
• Arrange specialists in a hierarchy of authority;
• Limit authority and action by abstract rules or procedures (standard operating procedures,
or SOPS);
• Create a system of impartial and universalistic decision-making;
• Are devoted to the principle of efficiency: maximizing output using limited inputs.
Some supplements to Weber, identifies some additional features for an organization as
follows:
• Have Standard Operating Procedures – a set of precise rules, procedures, and practices
developed by an organization to cope with virtually all expected situations.
• Have Organizational Politics.
• Have Organizational Culture – the set fundamental assumptions about what products the
organization produces, how and where it should produce them and for whom they should
be produced
 Differences
Although all organizations do have common characteristics, no two organizations are
identical. The differences between organizations are like:
o Structures.
o Goals.
o Constituencies.
o Leadership styles.
o Tasks
o Surrounding environments.
o Power.
o Function.
o Technology.
o Business processes.
o Levels
The Changing Role of Information Systems
The development of information architecture of organizations has changed from:
• Electronic accounting machines (EAM) in the 1950s with isolated “electronic
accounting machines” with limited functions.
• Data processing departments in the 1960s with large, centralized mainframe
computers that served corporate headquarters and a few remote sites.
• Information systems in the 1970s with midsized minicomputers located in individual
departments or divisions of the organization that were networked to large, centralized
computers.
• Information systems and services in the 1980s with desktop PCs used dependently
and linked to minicomputers and large computers
• Enterprise-wide information utility from 1990 until recently with computers
coordinated information flowing among desktops, between desktops, among
minicomputers and mainframes and perhaps among hundreds of smaller local
networks. These networks can be connected into a network linking the entire
enterprise or linking to external networks, including the Internet.
The position and role of information system specialists also have evolved over time.
• The formal organizational unit or function that has emerged is called the information
systems department.
• In the early years, the information systems group was composed mostly of
programmers and highly trained technical specialists who wrote the software
instructions for the computer.
• Today a growing proportion of staff members are system analysts, who constitute the
principal liaison between the information systems group and the rest of the
organization and the main job function of a system analyst is to translate business
problems and requirements into information requirements and systems.
 • Information systems managers are leaders of teams of programmers and analysts,
projects managers, physical facility managers, telecommunication managers and
heads of office automation groups.
• They are also managers of computer operations and data entry staff. End users are
representatives of departments outside of the information systems group for whom
applications are developed.
• In most organizations, the information systems department is headed by a chief
information officer (CIO).

Why Organizations Build Information Systems

Some of the general benefits why organizations adopt information systems are as
follows:
• More efficient.
• Save money.
• Reduce workforce.
• Become vitally important simply to stay in business.
• A source of competitive advantage.
• More innovative than others.
• Satisfy the ambitions of various groups within an organization

The Role of Managers in the Organization

• Managerial roles are expectations of the activities that managers should perform in an
organization.
• Their responsibilities range from making decisions to writing reports to attending
meetings.
• Behavioral model is used to describe the management based on behavioral scientists’
observations of what managers actually do in their jobs.
According to Mintzberg, these managerial roles fell into three categories:
Interpersonal roles
• Managers act as figureheads for the organization when they represent their companies
to the outside world and perform symbolic duties.
• Managers act as leaders, attempting to motivate, counsel and support subordinates.
• Managers also act as a liaison between various levels of the organization; within each
of these levels, they serve as a liaison among the members of the management team.
• Managers provide time and favors, which they expect to be returned.

Informational roles
• Managers act as the nerve centers of their organization, receiving the most concrete,
up-to-date information and redistributing it to those who need to be aware of it.
Managers are therefore information disseminators and spokesperson for their
organization.
Decision roles
• Managers act as entrepreneurs by initiating new kinds of activities. They handle
disturbances arising in the organization. They allocate resources to staff members
who need them. They negotiate conflicts and mediate between conflicting groups in
the organization.

Managers and Decision Making

The Process of Decision Making
• Decision making remains one of the more challenging roles of a manager.
Information systems have helped managers communicate and distribute information.
• However, they have provided only limited assistance for management decision
making.
• Decision making can be classified by organization level, corresponding to the
strategic, management, knowledge and operational levels of the organization.
• Strategic decision making determines the objectives, resources and policies of the
organization.
• Management level decision making mainly controls how efficient or effective
resources are utilized and how well operational units are performing.
• Knowledge level decision making mainly evaluates new ideas for products, services,
ways to communicate new knowledge and ways to distribute information throughout
the organization.
• Operational level decision making will decide how to carry out specific tasks
specified by upper and middle management and establish criteria for completion and
allocate resources.
• Within each of these levels of decision making, decisions can be classified as
unstructured decisions and structured decisions.
 • Unstructured decisions are non-routine decisions in which the decision maker must
provide judgment, evaluation and insights into the problem definition and there is no
agreed-upon procedure for making such decisions.
• Structured decisions are decisions that are repetitive, routine and have a definite
procedure for handling them.

Stages of Decision Making

Making decisions consist several activities. Simon (1960) described four different stages in
decision making: intelligence, design, choice and implementation.
• Intelligence. The first of Simon’s four stages of decision making. Individual collect
information to identify and understand problems occurring in the organization.
• Design. Simon’s second stage of decision making. Individual conceives of possible
alternative solutions.
• Choice. Simon’s third stage of decision making. Individual selects among the
various solution alternatives.
• Implementation. Simon’s final stage of decision making. Individual puts the decision
into effect and reports on the progress of the solution.