Introduction to Management

Information Systems
• Data are raw (unprocessed) facts about people,
objects, events in an organization
• Ex. Employee number, total hours worked in a
month, inventory part number, or sales order.
• Data can exist in a variety of forms.
Data Represented by
Alphanumeric Numbers, letters, and
data other characters
Image data Graphic images or
pictures
Audio data Sound, noise, tones
Video data Moving images or
pictures
 Information
• Information is a collection of facts organized,
processed and presented in a form suitable
for human interpretations so that they have
additional value beyond the value of the
individual facts.
• Information is anything that reduces
uncertainly.
• Information is the result of processing,
manipulating and organizing data in a way that
adds to the knowledge of the receiver.
• It is vital to decision making in many areas
 Characteristics of valuable
Information
• Accessibility: information should be easily
accessible by authorized users so they can obtain it in
the right format at the right time to meet their needs.
• Accuracy: accurate information is error free (GIGO).
• Completeness: complete information contains all
important facts.
• Economical: information should also be economical.
Decision makers must always balance the value of
information with the cost of producing it.
• Security: Information should be secure form access
by unauthorized users.
 …Cont’d
• Simplicity: Information should be simple, not overly
complex.
• Timeliness: Timely information is delivered when it
is needed.
• Verifiability: Information should be verifiable.
• Flexibility: Flexible information can be used for
variety of purposes.
• Relevance: relevant information is important to the
decision maker.
• Reliability: reliable information can be depended on.
In many cases, the reliability of information depends
on the reliability of the data collection method.
 Systems definition and
concepts
• A system is an interrelated combination of
components working together for some purpose.
• The system takes input from outside, processes it,
and sends the resulting output back to its
environment.
• Example of systemElements
System Goal
Inputs Processing Outputs

Actors, Filming, editing, Finished film Entertaining movie,

director, staff, special effects, delivered to film awards, profits
sets, distribution movie studio
Movie equipment
Characteristics of systems
 …Cont’d
• Components – is a set of elements, which is a
system itself, and a part of the whole system.
• Interrelated Components – The function of one
component is tied to the functions of the others.
Output from one is input for another, the
dependence of a part on one or more other parts
• Boundary ­– A system has boundary, within
which all of its components are contained and
which establishes the limits of a system,
separating it from other systems
• Purpose – some output that the components
work together to achieve.
 …Cont’d
• Environment – A system exist within an
environment, everything outside the system’s
boundary that influences and / or interacts the
system.
• Interfaces – The points at which the system
meets its environment and there are also
interfaces between subsystems.
• Input – System takes input from its environment
• Output - System returns output to its
environment as a result of its functioning to
achieve the purpose.
• Constraints – There are limits to what the
system can do (capacity, speed, and capability),
some of these constraints are imposed inside the
system and others are imposed by the
 Some important Systems
concepts
– Decomposition – is the process of breaking
down a system into its smaller components
• Decomposing a system also allows us to
focus on one particular part of a system.
– Modularity is a direct result of decomposition
which divides a system into modules of a
relatively uniform size. This makes it easier to
understand the system.
– Coupling means that subsystems are
dependent on each other, messages are
passed between subsystems.
 …Cont’d
 A good system will have very independent
subsystems with minimal flows of data between
them.
 This makes the system simpler and easier to
change just one part of the system without
affecting the other parts.
 Cohesion is the extent to which a subsystem
performs a single function.
 Generally coupling must be reduced and
cohesion increased, so that it performs
only one function.
 Information Systems
• Information system:
◦Set of interrelated components
◦Collect, process, store, and distribute
information
◦Support decision making, coordination, and
control
• Three activities produce information organizations
need
◦Input: Captures raw data from organization or
external environment
◦Processing: Converts raw data into
meaningful form
◦Output: Transfers processed information to
people or activities that use it
Feedback:
 …Cont’d
Activities in an Information System

Captures or collects raw

Transfers the processed
data from within the Converts this raw input into a
information to the people
organization or from its meaningful form.
who will use it or to the
external environment
activities for which it will be

INPUT PROCESS used OUTPUT

FEEDBACK
Output that is returned to

appropriate members of

the organization to help

them evaluate or correct

 …Cont’d
• A combination of technology, people, and
processes that organizations use to
produce (to convert data to useful
information) and manage information
• Information Systems are an integrated set
of components for collecting, storing,
processing, and communicating
information.

Figure : A Payroll Transaction Processing

System
The inputs (numbers of employee hours worked and pay
rates) go through a transformation process to produce
 …Cont’d
• Business firms, other organizations, and
individuals in contemporary society rely on
information systems to
– manage their operations,
– compete in the marketplace,
– supply services, and
– augment personal lives.
 Manual and Computerized Information
Systems
• Manual Information Systems:
– It is an information systems that rely on use of pen and
paper technology.
• A computer-based information system (CBIS)
– It is a set of hardware, software, databases,
telecommunications, people, and procedures that are
configured to collect, manipulate, store, and process data
into information.
• Hybrid systems (both manual and CBIS )
– In this course the term “information system” is used to
refer to “computer- based information systems”.
Components of CBIS
 …Cont’d
• Hardware is a device such as a processor, monitor,
keyboard or printer
• Software is a program or collection of programs that
enable hardware to process data.
• Database is a collection of related files or tables
containing data.
• Network is a connecting system (wire line or wireless)
that permits different computers to share resources.
• Procedures are the set of instructions about how to
combine the above components in order to process
information and generate the desired output. IS
controls mechanisms such as who has access to what
information, who does what, when, where, and how.
• People are those individuals who use the hardware
and software, interface with it, or uses its output
Types of Information System

 Two approaches to classify an MIS are

according to:
 The organizational functions which they
support
 Function based Information System
 Cross Functional Information System
 The managerial activities for which they are
used.
 Operational information systems / Transaction
Processing Systems
 Tactical systems or (Management information
systems and Decision Support Systems)
 Strategic information systems or Executive
Types of Information Systems
based on managerial support
activities

A transaction processing system (TPS)

A management information system (MIS)
A decision support system (DSS)
An Executive Information System (EIS)
 Transaction Processing
System
TPS are designed to handle a large volume of
routine, recurring transactions/operations and serve
as a foundation for other systems i.e. Major
producers of information for other systems
Track Basic business operations such as
customer orders, purchase orders, receipts, time
cards, invoices, and payroll checks in an
organization
Creates databases from routine operations.
Example: Banks use them to record deposits and
payments into accounts.
 Serve operational Persons/Supervisors
 Principal purpose is to answer routine questions
and to track the flow of transactions through the
 …cont’d
 The processing of transactions can be accomplished
in a
 Batch processing: A system whereby business
transactions are accumulated over a period of time
and prepared for processing as a single unit or
batch such as daily or weekly,
 On-line transaction processing (OLTP): A system
whereby each transaction is processed
immediately, without the delay of accumulating
transactions into a batch
Management Information System
Provide routine reports and summaries of data
stored in TPSs to the Middle and Operational
level managers .
Uses usually internal data stored in the TPS
database.
Uses low level analysis, such as summaries
and comparisons, as opposed to
sophisticated mathematical models or
statistical techniques.
Common Standardize Report Categories :
Periodic/scheduled – weekly, monthly, quarterly
Exception – unusual good or bad events ;
conditions occurred
 …cont’d
Allow managers to monitor, direct , predict
short and medium future performance of the
organization
Provide accurate feedback
It generally addresses structured questions
that are known in advance. i.e. they are not very
flexible systems.
 Outputs of a Management Information
System (Type of MIS Report )
 Scheduled reports
• Produced periodically, or on a schedule (daily, weekly,
monthly)
 Key-indicator report
• key indicators such as Inventory levels, production
activity, or sales volume. Often these indicators are
compared to numbers from prior reporting period or to
target set by an organization this gives managers an
opportunity to implement/take any corrective
measure/action where necessarily.
• Summarizes the previous day’s critical activities
 Demand report
• Gives certain information at a manager’s request
 Exception report
• Automatically produced when a situation is unusual or
requires management action
Decision Support System
Support managers to develop solutions for
specific non-recurring, unexpected,
unstructured problems or Unanticipated
questions for middle management.
Use models/ analysis tools to analyze large
quantities of data such as from data
warehouses and data marts.
 e.g. managers process data to identify facts
and to draw conclusions about data patterns
and trends.
DSS generally provide support for Middle
managers who face semi structured and
unstructured decision situations.
 Use information from TPS, MIS, and external
 …cont’d
• A DSS has three fundamental components:
– DSS Database or Database management system
(DBMS), which stores large amounts of data relevant to
problems the DSS has been designed to tackle;
– DSS Software System, which transforms data from the
DBMS into information that is useful in decision-making
Example: Data Mining Tools, Online Analytical
Processing tools, Mathematical and Analytical Models;
and
– User Interface or Dialog generation and management
system (DGMS), which provides a user-friendly interface
Executive Support Systems
 Support senior management
 Detect signals of problems in the organization environment
that indicate strategic threats and opportunities by
analyzing, comparing, and highlighting trends
 Address strategic issues and long-term trends
 E.g. What products should we make in 5 years?
 ESS must be flexible, easy to use, and contain both internal
and external sources of information relevant to
organizational goals..
 Address non-routine or unstructured decisions
• Requiring judgment, evaluation, and insight
 Draw summarized information from internal MIS and DSS
and Incorporate data about external events (e.g. new tax
laws or competitors)
Relationship Between Systems
 TPS: Major source of data for other systems
 ESS: Primarily a recipient of data from lower-level
systems
 Assignment 1
• Make a group of 5 members.
1. Discuss about functional and cross functional IS. What are the
limitations of functional IS and how they are solved? (Each
group)
2. Discuss In detail about the following IS according to your
group
• Functional IS
 Human Resource Systems…………………..G1

 Marketing Systems …………………………..….G2

 Manufacturing Systems ……………………...G3

 Accounting Systems………………………………G4

 Financial Management Systems…………G5

 MIS an Overview
• Management Information System has three
sub-components
• Systems: emphasizing a fair degree of
integration and a holistic view;
• Information :stressing on processed data in
the context in which it is used by end users;
• Management: focusing on the ultimate use
of such information systems for managerial
decision making.
 What is Management?
• It is the effective utilization of human and material
resources to achieve the enterprise objectives.
• It is the processes or activities that describe what managers
do in the operation of their organization
Management Level
In an organization there is a managerial hierarchy or
management levels which may be simply classified as:
• Top level management
– These individuals are at the top one or two levels in an
organization
– E.g. Chief Executive Officer (CEO), Chief Financial Officer
(CFO), Chief Information Officer (CIO), Chairperson of the
Board, President, Vice president, and corporate head
– Do not direct the day-to-day activities of the firm; rather,
they set goals for the organization and direct the
company to achieve them.
 …cont’d
• Middle level management
– Job titles include: Plant manager, Regional
manager, and Divisional manager.
– responsible for carrying out the goals set by
top management.
• Operational or lower level management
– First-level managers are also called first-line
managers or supervisors.
– Job titles such as: Office manager, Shift
supervisor, Department manager, Crew leader,
Store manager.
– responsible for the daily management of line
workers
– These are the managers that most employees
 Function of management ( the
P-O-L-C framework)
Planning: choosing appropriate organizational goals
and the correct directions/ detail action plans to
achieve those goals.
E.g.:- an organization has a goal of increasing sales
during the month of February.
– increasing advertisements in a particular region,
– placing some items on sale,
– increasing the amount of required customer-to-
sales rep contact, or
– contacting prior customers to see if they are
interested in purchasing additional products.
 Types of planning:
Strategic planning
• Responsible to develop organizational
goals, strategies, and policies
• Strategic planning has a long time frame,
often three years or more.
– the strengths and weaknesses of the
organization,
– involves analyzing opportunities and
threats
• An organization’s top management most
often conducts strategic planning.
 …cont’d
Tactical planning
• Specify the policies, procedures and business
objectives for their subunits
• Managers and business professionals in self-directed
teams develop short and medium range plans,
schedules and budgets
• Intermediate-range (one to three years) planning that
is designed to develop relatively concrete and specific
means to implement the strategic plan.
• Middle-level managers often engage in tactical
planning.
Operational planning
• Short-range (less than a year) planning that is
designed to develop specific action steps that support
the strategic and tactical plans.
• Managers or members of self directed teams have
 Organizing
Organizing: arrange resources to achieve
organizational goals
• It is the process of bringing together physical,
financial and human resources and developing
productive relationship amongst them for
achievement of organizational goals.
• The function of management that involves
developing an organizational structure and
allocating human resources to ensure the
accomplishment of objectives.
E.g. identify different roles and assigns the right
amount of employees to carry out the plan.
– delegate authority, assign work, and
 …cont’d
• Leading/Directing: managers motivate and
coordinate employees to work together to
achieve organizational goals.
– Influencing people to work towards achieving
set of objectives

• Controlling: managers monitor and measure the

degree to which the organization has reached its
goals.
 Cont’d

In performing each of the function of management , at any

levels of management , information is required to take different
decisions. Information is the basis for decision making and in
fact the life blood of management.
• Since it emerged as a field of study in 1970s,
MIS has been defined by different authors in
different ways
• ‘A computer system or related group of systems
which collects and presents management
information to a business in order to facilitate
its control.‘
• Management information systems (MIS) is an
integrated, user-machine system for providing
information to support operations,
management, and decision-making functions in
• 'A system to convert data from internal and
external sources into information and to
communicate that information, in an appropriate
form, to managers at all levels in all functions to
enable them to make timely and effective
decisions for planning, directing and controlling
the activities for which they are responsible.
• The system utilizes computer hardware and
software; manual procedures; models for analysis,
planning, control and decision-making; and a
database (Davis and Olson:1985).
 Importance of MIS
• Why are information systems so
essential for running and managing
businesses?
• Overall cost of information systems is
growing overtime and should be spent
wisely. Well managed MIS can bring
about
– Improved process;
– Improved products and services;
– Improved quality;
– Reduced costs;
– Improved management, problem solving
IT Investment Compared to Total

Figure IT Investment Trend

Business firms invest heavily in information
systems to achieve six strategic business
objectives:

– Operational excellence

– New products, services, and business models

– Customer and supplier intimacy

– Improved decision making

– Competitive advantage

– Survival
• Operational excellence:
– Improvement of efficiency to attain
higher profitability
– Information systems, technology an
important tool in achieving greater
efficiency and productivity
– Wal-Mart’s Retail Link system links
suppliers to stores for superior
replenishment system
• New products, services, and
business models:
– Business model: describes how company produces,
delivers, and sells product or service to create
wealth
– Information systems and technology a major
enabling tool for new products, services, business
models
• Examples: Apple’s iPod, iTunes, and iPhone,
Netflix’s Internet-based DVD rentals
• Customer and supplier intimacy:
– Serving customers well leads to
customers returning, which raises
revenues and profits
• Example: High-end hotels that use
computers to track customer
preferences and use to monitor and
customize environment
– Intimacy with suppliers allows them to
provide vital inputs, which lowers costs
• Improved decision making
– Without accurate information: Managers use forecasts,
best guesses, luck
• Leads to: Overproduction, underproduction of goods and
services, misallocation of resources, poor response
times
• Poor outcomes raise costs, lose customers

IS helps managers doing the right decision in the right

way at the right times
– Example: Verizon’s Web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.
• Competitive advantage
– Competitive advantage is defined as ‘a product or
service that an organization’s customers value more
highly than similar offerings from its competitors’ (in
other words, you have something useful (i.e.
products, services, capabilities) that your competitors
do not have).
– Enhance competitiveness of the organization or
control of a market through the application of IT to
business processes ( Strategic Information System)
• Delivering better performance

• Charging less for superior products

• Responding to customers and suppliers in real
time
i.e. An advantage over competitors in some
measure such as cost, quality, or speed.
 Michael Porter’s Five Forces Model is a useful tool
to assist in assessing the competition in an
industry and determining the relative
attractiveness of that industry. Porter states that
an organization to be competitive enough, a firm
should understand the five competitive force
model proposed by Mich..porter

Figure: Porter’s competitive forces model

• Competitive Rivalry
– This looks at the number and strength of your
competitors. How many rivals do you have? Who
are they and how does the quality of their
products and services compare with yours?
– In markets with lots of rivals your suppliers and
buyers can go elsewhere if they feel that you’re
not getting good deal from you.
– In the other hand where competitive rivalry is
minimum, no one else is doing what you do, then
you’ll likely have tremendous strength and
healthy profits.
• Substitute products and services
– Substitutes customers might use if your prices
become too high, e.g. iTunes substitutes for CDs
• New market entrants
– Your position can be affected by people’s ability
to enter your market .
– Some industries have high barriers to entry, e.g.
computer chip business
– New companies have new equipment, younger
workers, but little brand recognition
– If it takes little money and effort to enter your
market and compete effectively, or if you have
little protection for your key technologies, then
rivals can quickly enter your market and weaken
your position.
• Bargaining Power of Customers
– the ability of consumers to put the firm under
pressure which also affects customers sensitivity
to price changes and quality.
– Buyers power is high if buyers have many
alternative and low if they have few choices.
• Bargaining Power of Suppliers
– This is determined by how easy it is for your
suppliers to increase their prices. How many
potential suppliers do you have? How unique is
the product or services that they provide? And
how expensive would it be to switch from one
supplier to another?
– the fewer suppliers there are the more you need
their help, the stronger their position and their
ability to charge you more and vice versa.
• To survive and succeed, a business
must develop and implement
strategies to effectively counter the
above five competitive forces.
Organizations can follow four basic
generic strategies which is enabled
by using IT:
– Low-cost leadership
– Product differentiation/ Innovation
– Focus on market niche
– Strengthen customer and supplier
intimacy
• Low-cost leadership
– Produce/deliver products and services at a lower price than
competitors while enhancing quality and level of service
• Use information systems to fundamentally shift the cost of doing
business or reduce the costs of business processes or/and to
lower the costs of customers or suppliers, i.e., using online
business to consumer & business to business models, e-
procurement systems to reduce operating costs.
• Product differentiation/ Innovation
– Differentiation means the addition of unique/new features to an
existing product and service, Introduce new products and services, or
develop new ways to produce them that are competitive attractive in
the market.
– By offering different , or better products or services companies can
charge higher prices; greatly change customer convenience sell more
products, or both.
• Use information systems to develop differentiated features
or/and to reduce competitors’ differentiation advantages, i.e.,
using online live chatting systems and social networks to better
understand and serve customers
• Focus on market niche
– Identify and create market niches that
have not been adequately filled.
– Use information systems to enable a
focused strategy on a single market
niche; specialize
• Strengthen customer and
supplier intimacy
– Use information systems to develop
strong ties and loyalty with customers
and suppliers; increase switching costs
– Example: Netflix, Amazon
• Survival
– Information technologies as necessity
of business
– May be:
• Industry-level changes, e.g. Citibank’s
introduction of ATMs
• Governmental regulations requiring
record-keeping
– Examples: Toxic Substances Control Act,
Sarbanes-Oxley Act
 MIS and Computer
• Translating the real concept of the MIS into
reality is technically, an infeasible
proposition unless computers are used.
• The MIS relies heavily on the hardware and
software capacity of the computer
• It’s ability to process, retrieve communicate
with no serious limitations.
• The variety of the hardware having distinct
capabilities makes it possible to design the MIS
for a specific situation.
 …cont’d
• Suppose the organization has multiple
business location at long distances and if it
need to bring the data at one place,
process, and then send the information to
various location, it is possible to have a
computer system with a distributed data
processing capability.
• The ability of the hardware to store data
and process it at a very fast rate helps to
deal with the data volumes, its storage
and access effectively.
• The ability of a computer system to
provide security of data brings a
 …cont’d
• The computer system provides the facilities
such as READ ONLY where you cannot delete to
UPDATE.
• User friendly systems and the end user
computing is possible, making information
processing a personalized function.
• Complex business world is possible only when
the MIS is based on computer system support
• The software is available to handle the
procedural and nonprocedural data processing.
 MIS and Academics
Multiple perspectives on management information
systems show that the study of MIS is a
multidisciplinary field.
No singe theory or perspective dominates.

In general, the field can be divided into technical and

behavioral approaches.
 Information systems are socio-technical systems.
Though they comprise machines, devices and “hard”
physical technology, they still require substantial social,
organizational, and intellectual investments to make
them work properly.
Figure Contemporary views to MIS
–Computer science is concerned with
establishing theories of computability, and
methods of efficient data storage and access.
–Management science emphasizes the
development of models for decision making
and management practice.
–Operations research focuses on mathematical
techniques for optimizing selected parameters
of organization, inventory control and
transaction costs.
 Behavioral/Social
Aspect
An important part of the information systems field
is concerned with behavioral issues that arise in
the development and long-term maintenance of
information systems.
Issues such as strategic business integration,
design, implementation, utilization, and
management cannot be explored usefully with the
models used in the technical approach.
Other behavioral disciplines contribute important
– Sociologists study how groups and organizations
shape the development of systems and also how
systems affect individuals, groups, and
organizations.
– Psychologists study how human decision makers
perceive and use formal information; they also study
how people deal with the changes brought about by
new technology.
– Economists study the impact systems have on
control and cost structures within the firm and within

the markets.
 Management Information Systems and
the User
• Every person in the organization is a user
of the MIS.
• The people in the organization operate at
all levels in the hierarchy.
• A typical user is a clerk, an assistant,
an officer, an executive or a manager.
• The MIS caters to the needs of all persons.

• The main task of a clerk is : to search the

data make a statement and submit it to
the higher level.
 …cont’d
• An assistant has the task of collecting and
organizing the data and conducting a basic
analysis of integrating the data
• The MIS offers the methods and facilities to
integrate the data and report the same in a
proper format.
• An executive plays the role of a decision maker.
 The MIS provides facilities to analyze the data
and offers the decision support systems to
perform the task of execution.
• The MIS provides an action oriented information.
Management Information Systems and the
User
• The manager has a position of
responsibility and accountability for the
business results.
o The user of the MIS is expected to be a
rational person and the design of the
MIS is based on this assumption.
o The nature of the impact in a few cases
is negative.
 This negative impact can be handled
with proper training and counseling.
 …cont’d
• At the level of an officer and an
executive, the MIS does the job of
data the manipulation and
integration
• The manager holding a position in
the top or middle management
suffers from fear of challenge and
exposure.
• An intelligent user of information
can demonstrate the ability of
 …cont’d
• Through the MIS, the information can be
used as a strategic weapon to :
 counter the threats to business
 make business more competitive and
 bring about the organizational
transformation through integration.
o A good MIS also makes an organization
seamless by removing all the
communication barriers.