Raya University

College of Business and Economics

Department of Management

Information Processing and Management

(MBA 5011)
By:
Mehari Haile (PhD, MBA, MA, BA)

June, 2024
Maichew, Tigrai
 Course Contents

1. An overview of Information system for Business

2. Foundational concepts of management
information system (MIS)
3. Information technologies
4. Common business applications of information
 Chapter one
An Overview of Information
system in Business
 What is a system?
• 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 .
• 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.
• Example: manufacturing processes,
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.
 What is Information System?
• An information system (IS) can be any organized
combination of;
People,
Hardware,
Software,
Communications networks,
Data resources, and
Policies and procedures that stores, retrieves,
transforms, and disseminates information in an
organization.
• People rely on modern information systems to
communicate with one another using a variety of;
• physical devices (hardware),
• information processing instructions and
procedures (software) ,
• communications channels (networks) , and
• stored data (data resources) .
 Information System Resources and
Products
1. People Resources
• Specialists—systems analysts, software developers,
systems operators.
• End Users—anyone else who uses information systems.
2. Hardware Resources
• Machines—computers, video monitors, magnetic disk
drives, printers, optical scanners.
• Media—floppy disks, magnetic tape, optical disks, plastic
cards, paper forms.
3. Software Resources
• Programs—operating system programs, spreadsheet
programs, word processing programs, payroll programs.
• Procedures—data entry procedures, error correction
procedures, paycheck distribution procedures.
5. Data Resources
• Product descriptions, customer records,
employee files, inventory databases.
6. Network Resources
• Communications media, communications
processors, network access, control software.
7. Information Products
• Management reports and business
documents using text and graphics displays,
audio responses, and paper forms.
 Information system activities
 Input- Optical scanning of bar-coded tags on
merchandise.
Processing- Calculating pays, taxes, and other
deductions.
Output- Producing reports and displays about sales
performance.
Storage- Maintaining records on customers,
employees, and products.
Control- Generating audible signals to indicate
proper entry of sales data.
A framework that outlines the major areas of
information systems knowledge needed by
business professionals
 Foundation Concepts
• Fundamental behavioral, technical, business, and
managerial concepts about the components and
roles of information systems.
• Examples include basic information system
concepts derived from general systems theory or
competitive strategy concepts used to develop
business applications of information technology
for competitive advantage.
 Information Technologies
• Major concepts, developments, and management
issues in information technology—that is,
hardware, software, networks, data management,
and many Internet-based technologies.
 Business Applications
• The major uses of information systems for the
operations, management, and competitive
advantage of a business.
 Development Processes
• How business professionals and information
specialists plan, develop, and implement
information systems to meet business
opportunities.
 Management Challenges
• The challenges of effectively and ethically
managing information technology at the end-user,
enterprise, and global levels of a business.
Fundamental Roles of IS for
Business
 1. Support business processes
and operations
• For example, most retail stores now use
computer-based information systems to help
their employees
• Record customer purchases,
• Keep track of inventory,
• Pay employees,
• Buy new merchandise, and
• Evaluate sales trends.
 Support of Business Decision Making
• Information systems also help store managers and
other business professionals make better decisions.
• For example, decisions about what lines of
merchandise need to be added or discontinued and
what kind of investments they require are typically
made after an analysis provided by computer-based
information systems.
• This function not only supports the decision making
of store managers, buyers, and others, but also
helps them look for ways to gain an advantage over
other retailers in the competition for customers.
Support of Strategies for Competitive Advantage
• Gaining a strategic advantage over competitors
requires the innovative application of information
technologies.
• For example, store management might make a decision
to install touch-screen kiosks in all stores, with links to
the e-commerce Web site for online shopping.
• This offering might attract new customers and build
customer loyalty because of the ease of shopping and
buying merchandise provided by such information
systems.
• Thus, strategic information systems can help provide
products and services that give a business a
comparative advantage over its competitors.
 Trends in information system
• Data Processing: 1950s–1960s
• The role of IS was simple like transaction processing,
record-keeping, and traditional accounting applications
and other electronic data processing systems.
• Management Reporting: 1960s–1970s
• Management information systems
• Management reports of prespecified information to
support decision making
• Decision Support: 1970s–1980s
• Decision support systems
• Interactive ad hoc support of the managerial decision-
making process
• Strategic and End-User Support: 1980s–1990s
• End-user computing systems
• Direct computing support for end-user
productivity and workgroup collaboration
• Executive information systems
• Critical information for top management
• Expert systems
• Knowledge-based expert advice for end users
• Strategic information systems
• Strategic products and services for
competitive advantage
• Electronic Business and Commerce: 1990s–2000s
• Internet-based e-business and e-commerce systems
• Web-enabled enterprise and global e-business
operations and electronic commerce on the Internet,
intranets, extranets, and other networks.
• Enterprise Resource Planning (ERP) and Business
Intelligence: 2000s–to present
• Enterprise wide common-interface applications data
mining and data visualization, customer relationship
management, supply-chain management.
• This organization-specific form of a strategic information
system integrates all facets of a firm, including its
planning, manufacturing, sales, resource management,
customer relations, inventory control, order tracking,
financial management, human resources, and marketing
—virtually every business function.
Networks inside the
organization
 The IS Function
• A major functional area of business equally as important to
business success as the functions of accounting, finance, operations
management, marketing, and human resource management.
• An important contributor to operational efficiency, employee
productivity and morale, and customer service and satisfaction.
• A recognized source of value to the firm.
• A major source of information and support needed to promote
effective decision making by managers and business professionals.
• A vital ingredient in developing competitive products and services
that give an organization a strategic advantage in the global
marketplace.
• A dynamic, rewarding, and challenging career opportunity.
• A key component of the resources, infrastructure, and capabilities
of today’s networked business enterprises.
• A strategic resource.
 Chapter 2
Foundational concepts in IS
• The strategic role of information systems involves
using information technology to develop
products, services, and capabilities that give a
company major advantages over the competitive
forces it faces in the global marketplace.
• This role is accomplished through a strategic
information architecture:
• the collection of strategic information systems that
supports or shapes the competitive position and
strategies of a business enterprise.
• The following figure illustrates the various competitive
forces a business might encounter, as well as the
competitive strategies that can be adopted to counteract
such forces.
 Competitive strategies
• Businesses can counter the threats of
competitive forces that they face by
implementing one or more of the five basic
competitive strategies .
• Cost Leadership Strategy.
• Becoming a low-cost producer of products and
services in the industry or finding ways to help
suppliers or customers reduce their costs or
increase the costs of competitors.
• Differentiation Strategy
• Developing ways to differentiate a firm’s
products and services from those of its
competitors or reduce the differentiation
advantages of competitors.
• This strategy may allow a firm to focus its
products or services to give it an advantage in
particular segments or niches of a market.
• Growth Strategies
• Significantly expanding a company’s capacity to
produce goods and services, expanding into global
markets, diversifying into new products and services,
or integrating into related products and services.
• Alliance Strategies
• Establishing new business linkages and alliances with
customers, suppliers, competitors, consultants, and
other companies.
• These linkages may include mergers, acquisitions, joint
ventures, formation of virtual companies, or other
marketing, manufacturing, or distribution agreements
between a business and its trading partners.
• Innovation Strategy
• Finding new ways of doing business.
• This strategy may involve developing unique
products and services or entering unique
markets or market niches.
• It may also involve making radical changes to
the business processes for producing or
distributing products and services that are so
different from the way a business has been
conducted that they alter the fundamental
structure of an industry.
N.B. An organization may make use of one,
some, or all of the strategies in varying degrees
to manage the forces of competition.
 Using Information Technology for
Strategic Advantage
• Organizations may view and use information
technology in many ways. For example, companies may
choose to use information systems strategically, or
they may be content to use IT to support efficient
everyday operations.
• If a company emphasized strategic business uses of
information technology, its management would view IT
as a major competitive differentiator.
• They would then devise business strategies that use IT
to develop products, services, and capabilities that
give the company major advantages in the markets in
which it competes.
• One of the most important implementations of
competitive strategies is business process
reengineering (BPR), often simply called
reengineering .
• Reengineering is a fundamental rethinking and
radical redesign of business processes to achieve
dramatic improvements in cost, quality, speed,
and service.
• BPR combines a strategy of promoting business
innovation with a strategy of making major
improvements to business processes so that a
company can become a much stronger and more
successful competitor in the marketplace.
• However, making radical changes to business
processes to dramatically improve efficiency and
effectiveness is not an easy task.
• For example, many companies have used cross-
functional enterprise resource planning (ERP)
software to reengineer, automate, and integrate
their manufacturing, distribution, finance, and
human resource business processes.
Difference between Business
Improvement and BPR
 The Role of Information
Technology
• Information technology plays a major role in
reengineering most business processes.
• The speed, information-processing capabilities,
and connectivity of computers and internet
technologies can substantially increase the
efficiency of business processes, as well as
communications and collaboration among the
people responsible for their operation and
management.
• For example, the order management process
illustrated in the following figure (next slide) is
vital to the success of most companies.
• Many of them are reengineering this process with
ERP software and Web-enabled e-business and e-
commerce systems, as outlined in the second
figure.
 Creating a virtual company
• In today’s dynamic global business environment,
forming a virtual company can be one of the
most important strategic uses of information
technology.
• A virtual company (also called a virtual
corporation or virtual organization ) is an
organization that uses information technology to
link people, organizations, assets, and ideas.
 Strategies of Virtual Companies

• Share infrastructure and risk with alliance

partners.
• Link complementary core competencies.
• Reduce concept-to-cash time through sharing.
• Increase facilities and market coverage.
• Gain access to new markets and share market or
customer loyalty.
• Migrate from selling products to selling
solutions.
 Data Processing, Information Processing, and Knowledge Processing

(I)Data Processing
•The whole objective of data processing is "getting the right
information to the right person at the right time".
•This processing involves the selection and combination of
facts from the store of data in order to convey a meaningful
message to someone.
• Three criteria of data processing:
• accuracy,
• timeliness and
• meaningfulness
• Information Processing involves information
acquisition, organization, integration, utilization,
and evaluation from the different sources for
gaining and using information.
• Knowledge Processing includes knowledge
creation, knowledge sharing and knowledge
application. This includes databases, documents,
expertise and experience of employees.
 Types of Information in Terms of Management
Hierarchy

• Operational
• Tactical
• Strategic
 Business Systems
• A system can be described simply as a set of
elements joined together for a common objective.
• A system is a collection of people, machines, and
methods organized to accomplish a set of specific
tasks.
• A system is defined as a number of components,
entities that form a whole. These entities interact
in such a way as to achieve a goal.
• It is a set of objects that are relevant and may
not be described in terms of their attributes or
component parts.
 Classification of Management Information
System
1. Transaction Processing Systems (TPS)- cards,
inventory adjustments slip, insurance
applications etc
2. Knowledge Work Systems (KWS) and Office
Automation Systems (OAS)- professionalism
3. Management Reporting Systems- reporting on
the past and present, and, they generally report
on internal operation.
4. Decision Support System (DSS)- designed to
accommodate individual and group decision-
makers. provide managers with opportunities to
evaluate alternatives related to a given problem
or task
5. Executive information systems (EIS)
• Focus on accessibility
• Senior executives need access to internal and
external information.
6. Expert Systems
• Computer programs designed to operate within a
narrow problem domain and to capture and present to
the user expert knowledge.
 Chapter 3
Information technologies
 Introduction
• What basic knowledge should you possess about
information technology?
• Computer Hardware
• Computer Software
• Data Resource Management
• Telecommunications and Networks
Computer Hardware and peripherals
• All computers are systems of input, processing,
output, storage, and control components.
• A computer is a system of hardware devices
organized according to the following system
functions:
 Input.
• The input devices of a computer system include
computer keyboards, touch screens, pens, electronic
mice, and optical scanners.
• They convert data into electronic form for direct entry
or through a telecommunications network into a
computer system.
• Processing-
• the central processing unit (CPU) is the main processing
component of a computer system.
• CPU can be subdivided into two major subunits: the
arithmetic-logic unit and the control unit. The electronic
circuits (known as registers of the arithmetic-logic unit
perform the arithmetic and logic functions required to
execute software instructions.
• Output-
• The output devices of a computer system include video
display units, printers, and audio response units.
• They convert electronic information produced by the
computer system into human-intelligible form for
presentation to end users.
• Storage-
• The storage function of a computer system takes
place in the storage circuits of the computer’s
primary storage unit, or memory, supported by
secondary storage devices such as magnetic disk
and optical disk drives.
• Control-
• The control unit of a CPU is the control
component of a computer system. Its registers
and other circuits interpret software instructions
and transmit directions that control the activities
of the other components of the computer
system.
The computer system concept. A computer is a system of
hardware components and functions.
 Input technologies
• Pointing devices
• Electronic mouse
• Touch screens
• Pen based computing
• Speech recognition system- may be the future of data
entry and certainly promises to be the easiest method
for word processing, application navigation, and
conversational computing because speech is the
easiest, most natural means of human communication.
Speech input has now become technologically and
economically feasible for a variety of applications.
• Optical scanning- devices read text or graphics and
convert them into digital input for your computer.
 Computer software
• Software- is the general term for various kinds of
programs used to operate and manipulate
computers and their peripheral devices.
• One common way of describing hardware and
software is to say that software can be thought of
as the variable part of a computer and hardware
as the invariable part.
• There are many types and categories of
software.
Types of software
 Business application software
• Thousands of function-specific application
software packages are available to support
specific applications of end users in
business and other fields.
• For example, business application software supports
the reengineering and automation of business
processes With strategic e-business applications like
customer relationship management, enterprise
resource planning, and supply chain management.
• Other examples are software packages that Web-
enable electronic commerce applications or apply to
the functional areas of business like human resource
management and accounting and finance.
• Still other software empowers managers and business
professionals with decision support tools like data
mining, enterprise information portals, or knowledge
management systems.
 Data Resource Management
• In all information systems, data resources must
be organized and structured in some logical
manner so that they can be accessed easily,
processed efficiently, retrieved quickly, and
managed effectively.
 Fundamental concepts of data
• A conceptual framework of several levels of data
has been devised that differentiates among
different groupings, or elements, of data. Thus,
data may be logically organized into characters,
fields, records, files, and databases , just as
writing can be organized into letters, words,
sentences, paragraphs, and documents.
 Character
• The most basic logical data element is the
character , which consists of a single alphabetic,
numeric, or other symbol.
• From a user’s point of view (i.e., from a logical
as opposed to a physical or hardware view of
data), a character is the most basic element of
data that can be observed and manipulated.
 Field
• The next higher level of data is the field, or data item.
• A field consists of a grouping of related characters.
• For example, the grouping of alphabetic characters in a
person’s name may form a name field (or typically, last
name, first name, and middle initial fields), and the grouping
of numbers in a sales amount forms a sales amount field.
• Specifically, a data field represents an attribute (a
characteristic or quality) of some entity (object, person,
place, or event).
• For example, an employee’s salary is an attribute that is a
typical data field used to describe an entity who is an
employee of a business.
• Generally speaking, fields are organized such that they
represent some logical order, for example, first name, last
name, address, city, state, and zip code.
 Record
• All of the fields used to describe the attributes of
an entity are grouped to form a record.
• Thus, a record represents a collection of
attributes that describe a single instance of an
entity.
• An example is a person’s payroll record, which
consists of data fields describing attributes such
as the person’s name, Social Security number,
and rate of pay.
• Each record in an employee file describes one
specific employee.
• Normally, the first field in a record is used to store
some type of unique identifier for the record. This
unique identifier is called the primary key.
• The value of a primary key can be anything that will
serve to uniquely identify one instance of an entity, and
distinguish it from another.
• For example, if we wanted to uniquely identify a single
student from a group of related students, we could use
a student ID number as a primary key.
• As long as no one shared the same student ID number,
we would always be able to identify the record of that
student. If no specific data can be found to serve as a
primary key for a record, the database designer can
simply assign a record a unique sequential number so
that no two records will ever have the same primary key.
 File
• A group of related records is a data file
(sometimes referred to as a table or flat file ).
When it is independent of any other files related
to it, a single table may be referred to as a flat
file.
• Flat file refers to any database that exists in a
single file in the form of rows and columns, with
no relationships or links between records and
fields except the table structure.
• Regardless of the name used, any grouping of
related records in tabular (row-and-column form)
is called a file.
• Files are also classified by their permanence,
for example, a payroll master file versus a
payroll weekly transaction file.
• A transaction file, therefore, would contain
records of all transactions occurring during a
period and might be used periodically to update
the permanent records contained in a master
file.
• A history file is an obsolete transaction or
master file retained for backup purposes or for
long-term historical storage, called archival
storage.
 Database
• A database is an integrated collection of logically
related data elements.
• A database consolidates records previously stored
in separate files into a common pool of data
elements that provides data for many applications.
• The data stored in a database are independent of
the application programs using them and of the
type of storage devices on which they are stored.
• Thus, databases contain data elements describing
entities and relationships among entities.
• Examples of these logical data elements
 Database structure
• The relationships among the many individual
data elements stored in databases are based on
one of several logical data structures, or models.
• Database management system (DBMS) packages
are designed to use a specific data structure to
provide end users with quick, easy access to
information stored in databases.
• Five fundamental database structures are the
hierarchical, network, relational, object-oriented,
and multidimensional models.
Example
Types of Databases
Whenever you use a
search engine like Google
or Yahoo to look up
something on the
Internet, you are using an
external database.
Sub-sets of the data from
the data warehouse that
focuses on aspects of a
company, such as a
department or a business
process.
 Telecommunications and networks
• By definition, the term network means an
interconnected or interrelated chain, group, or
system.
• Using this definition, we can begin to identify all
kinds of networks: a chain of hotels, the road
system, the names in a person’s address book or
PDA, the railroad system, the members of a church,
club, or organization.
• Telecommunications- is the exchange of
information in any form (voice, data, text, images,
audio, video) over networks.
• The internet is the most widely visible form of
telecommunications in our daily lives.
Popular uses of the Internet
Examples of how a company can use the internet for
business
 CHAPTER FOUR

COMMON BUSINESS APPLICATIONS OF

INFORMATION
 Common business applications of
information
1. Financial Information Systems
2. Marketing information system
3. Manufacturing and production information
system
4. Human resource information system
5. Managerial decision support system
 Financial Information System
• General ledger or chart of accounts- periodic account reports and
statements, such as an income statement and a balance sheet,
and provides support for budgeting
• Fixed assets- maintains records of equipment, property, and other
long-term assets an organization owns (Original price,
Depreciation rate, accumulated depreciation to date, and look
value of the asset)
• The Sales Order Processing Subsystem-
• tracks the sales made by each sales person and provides
input to the payroll subsystem so that salesperson’s
commissions can be accumulated.
• provide information to the shipping department to ensure
that the correct stock is sent to the customer;
• provide for backorders when there is not enough stock on
the shelves;
• accurately figure prices, totals, discounts, and taxes on the
order; and allow a quick and accurate response to customer
inquiries about the status of the order.
• Accounts receivable Subsystem:
• The accounts receivable subsystem allows you to
enter, update, and delete customer information, such
as charge sales, credit terms, sales invoices, cash
payments received, credit for returned or damaged
merchandise, and accounts balances.
• Used to prepare collection letters, start collection
procedures, and disallow additional credit to poor
credit risks.
• The Accounts Payable Subsystem:
• used to schedule cash payments to creditors.
• The Inventory Control Subsystem:
• used to keep track of inventory levels and inventory
costs of the organization.
• The subsystem maintains information about each
stock item, such as stock numbers and stock
• The Purchase order Processing Subsystem
• processes purchase orders and tracks which purchase
orders have been filled, which stock items ordered are
on backorder, which stock items have been damaged or
do not meet the specifications of the original order, and
when orders are expected to be received.
• The Payroll Subsystem
• processes wage and salary information, such as
payment to employees; deductions from employee
checks; and payments to government taxing agencies
for taxes owed.
 Marketing information systems
• The marketing functions includes planning,
buying, merchandising (standardization and
grading and pricing), selling (advertising, sales
promotion, packaging, publicity and personal
selling), physical distribution (transporting and
storing) and facilitating (financing, risk bearing
and obtaining information).
• Includes to marketing mix decisions (includes
product decisions, physical distribution decisions,
adverting and promotion decisions and pricing
decisions)
 Manufacturing and production Information
Systems
• Purchasing Information Systems-
• right quantity of raw materials and production
supplies.
• Quality Control Information Systems-
• provide information about the status or production of
goods as they move from the raw material state,
through goods in process, to the finished goods
inventory.
• Cost Accounting Information Systems-
• monitor the three major resources used in production:
personnel, materials, and equipment and facilities.
• Payroll information systems and materials information
systems provide information about the costs of these
resources.
• Inventory Management and Control Information
Systems-
• Maintaining inventories at their proper levels
• Ordering too much and ordering too little are
costly in terms of inventory carrying costs and
ordering costs respectively.
• Thus, the best or economical order quantity
(EOQ) strikes a balance between carrying costs
and procurement costs.
• Capacity Planning Information Systems
• Having enough materials, but make sure
certain that there is sufficient personnel,
space, machines, and other production
facilities available at the right time to meet the
organization's planned production
• Production Scheduling Information Systems
• allocate the use of specific production facilities
for the production of finished goods to meet
current or forecasted orders.
• Use Gantt chart and PERT project software
packages
 Human Resource Information Systems
• Employee Information Systems
• personnel file such as name, address, sex, marital
status, citizenship, years of service or seniority data,
education and training, previous experience,
employment history within the organization, salary
rate, salary or wage grade, and retirement plans.
• Payroll Information Systems-
• including information about employees’ pay rates,
wage classifications, and seniority
• Position Information Systems-
• identify each position in the organization, the job
category in which the position is classified, the
employee currently assigned to the position, and
identify unfilled positions.
• Employee Evaluation Information Systems
• review the work of employees on a regular
basis to make decisions regarding merit pay,
pay increases, transfer, or promotion.
• information systems related to employees’
Performance appraisal.
• Job Analysis and Design Information Systems
• Job description
• Job specification
• Compensation and Benefits Information Systems
• Fringe benefits, over-time pay to an employees
etc
 Managerial Decision Support Systems
• Executive Support Systems (ESS)-
• Senior executives need information on changing
government policies, demographics, the actions of
competitors, and changing market conditions now and in the
future.
• Executive information systems deliver news, reports
prepared by external services, and broad overviews of the
performance of the company.
• Management Information systems (MIS)
• control the operations of the company on a daily, monthly,
and quarterly basis.
• Decision support systems (DSS)-
• contain analytic models that permit the users to stimulate
the business and to understand how to react to a change in
business conditions
The End!!