1

An information system is an organized combination of

people, hardware, software, communications Networks

and data resources that collects, transforms, and

disseminates/circulate/, information in an organization.

2

Types Of Information System

3

“The MIS is defined as a system which provides

information Support for decision making in the

organization. ”

“The MIS is defined as a system based on the database of

the evolved for the purpose of providing information to

the people in the organization.”

4

MANAGEMENT INFORMATION SYSTEM(MIS)

Management information systems are distinct from

regular information systems in that they are used to

analyze other information systems applied in operational

activities in the organization. MIS involve three primary

resources: technology, information, and people.

Management information systems are regarded to be a

subset of the overall internal controls procedures in a

business, which cover the application of people,

documents, technologies, and procedures used by

management accountants to solve business problems such

as costing a product, service or a business-wide strategy.

5

Objective of MIS

Goals of an MIS are to implement the organizational structure and

dynamics of the enterprise for the purpose of managing the

organization in a better way and capturing the potential of the

information system for competitive advantage.

Following are the basic objectives of an MIS:

Capturing Data: Capturing contextual data, or operational

information that will contribute in decision making from various

internal and external sources of organization.

Processing Data: the captured data is processed into information

needed for planning, organizing, coordinating, directing and

controlling functionalities at strategic, tactical and operational level.

Processing data means:

· making calculations with the data

· sorting data

· classifying data and

· summarizing data6

Information Storage: information or processed data need to be

stored for future use.

Information Retrieval: the system should be able to retrieve this

information from the storage as and when required by various users.

Information Propagation: information or the finished product of the

MIS should be circulated to its users periodically using the

organizational network.

7

The role of MIS in an organization can be compared to therole of heart in the body.

The information is the blood and MIS is the heart. In thebody the heart plays the role of supplying pure blood to allthe elements of the body including the brain.

The MIS plays exactly the same role in the organization.

The system ensures that an appropriate data is collectedfrom the various sources, processed, and sent further to allthe needy destinations.

8

The system is expected to fulfill the information needs ofan individual, a group of individuals, the managementfunctionaries: the managers and the top management.

The MIS satisfies the diverse needs through a variety ofsystems such as Query Systems, Analysis Systems,Modeling Systems and Decision Support Systems.

The MIS helps in Strategic Planning, ManagementControl, Operational Control and Transaction Processing.

9

Management-oriented: The basic objective of MIS is toprovide information support to the management in theorganization for decision making.

Management directed: When MIS is management-oriented,it should be directed by the management because it is themanagement who tells their needs and requirements moreeffectively than anybody else.

Integrated: It means a comprehensive or complete view of allthe subsystems in the organization of a company.

10

Common data flows: The integration of differentsubsystems will lead to a common data flow which willfurther help in avoiding duplicacy and redundancy in datacollection, storage and processing.

Heavy planning-element: The preparation of MIS is nota one or two day exercise. It usually takes 3 to 5 years andsometimes a much longer period.

Subsystem concept: When a problem is seen in 2 subparts, then the better solution to the problem is possible.

11

Common database: This is the basic feature of MIS to

achieve the objective of using MIS in business organizations.

Computerized: MIS can be used without a computer. But the

use of computers increases the effectiveness and the

efficiency of the system.

User friendly/Flexibility: An MIS should be flexible.

Information as a resource: Information is the majoringredient of any MIS.

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Timeliness

Accuracy

Consistency

Completeness

Relevance

13

1) Marketing Research System (MRS)

Marketing research can be seen as the systematic and

objective search for and analysis of data and information

relevant to the identification and solution of any problem in

the field of marketing.

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2) Marketing Intelligence System (MIS)

The process of acquiring and analyzing information in order to

understand the market (both existing and potential customers);

to determine the current and future needs and preferences,

attitudes and behavior of the market; and to assess changes in

the business environment that may affect the size and nature of

the market in the future.

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3) Internal Record System (IRS)

Marketing managers rely on internal reports on orders, sales,

prices, costs, inventory levels, receivables, payables, and so

on. By analyzing this information, they can spot important

opportunities and problems.

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4) Decision Support System(DSS)

A decision support system (DSS) is a computer-based

information system that supports business or

organizational decision-making activities. DSSs serve the

management, operations, and planning levels of an

organization and help to make decisions, which may be

rapidly changing and not easily specified in advance.

17

The main aim of MIS is to inform management and help

them make informed decisions about management and the

way the business is run.

18

Transaction processing systems: These systems process a

large volume of routine, recurring transactions.

Operations information systems: These systems gather

comprehensive data, organize it and summarize it in a form

that is useful for managers.

Decision support systems: These systems help mangers with

the necessary information to make intelligent decisions.

Expert systems: They are meant to mimic humans in making decisions in a specific field.

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1.Hardware

2.Software

3.Control

4.Databases and application programs

5.People

6.Telecommunications and Networks

20

Scheduled reports which are produced periodically, or on a Schedule (daily, weekly, monthly).

Key-indicator report which summarizes the previous day’s critical activities and also it is typically available at the beginning of each day.

21

Demand Report which gives certain information at a manager’s request.

Exception Report which is automatically produced

when a situation is unusual or requires management action.

22

It improves personal efficiency.

It expedites problem solving(speed up the progress of

problems solving in an organization).

It facilitates interpersonal communication

It promotes learning or training.

It increases organizational control. It generates new evidence in support of a decision. It creates a competitive advantage over competition. It encourages exploration and discovery on the part of the

decision maker. It reveals new approaches to thinking about the problem

space. It helps automate the Managerial processes

23

24

Nature and Scope of MIS

The following diagram shows the nature and scope of MIS:

25

MIS - Classification of Information

26

• Data may be made available from management

information systems on a company’s intranet

• Employees can use browsers and their PC to gain

access to the data

Functional Aspects:

MIS is an integrated collection of functional information

systems, each supporting particular functional areas.

27

An Organization’s

MIS

Financial

MIS

Marketing

MIS

Human

Resources

MIS

Etc.

Accounting

MIS

Drill down reports

Exception reports

Demand reports

Key-indicator reports

Scheduled reports

Databases

of

external

data

Databases

of

valid

transactions

Transaction

processing

systems

Business

transactions

Business

transactions

Extranet

Internet

Etc.

28

Financial statements

Uses and management

of funds

Operational

databases

Databases

of valid

transactions

for each

TPS

Transaction

processing

systems

Business

transactions

Business

transactions

Internet

or

Extranet

Financial

MIS

Business

transactions

Databases of

external data

Databases of

internal data

Financial

DSS

Financial

ES

Financial

applications

databases

Customers,

Suppliers

29

Inputs to the Financial Information System:

Strategic plan or corporate policiesContains major financial objectives and often projects financial needs.

Transaction processing system (TPS)Important financial information collected from almost every TPS -payroll, inventory control, order processing, accounts payable, accounts receivable, general ledger.External sourcesAnnual reports and financial statements of competitors and general news items.

Financial MIS Subsystems and Outputs:

Financial subsystems

• Profit/loss and cost systems

• Auditing

• Internal auditing

• External auditing

• Uses and management of

funds

30

Manufacturing MIS:

Quality control reports

Process control reports

JIT reportsOperational

databases

Databases

of valid

transactions

for each

TPS

Transaction

processing

systems

Business

transactions

Business

transactions

Internet

or

Extranet

Manufacturing

MIS

Business

transactions

Databases of

external data

Databases of

internal data

Manufacturing

DSS

Manufacturing

ES

Manufacturing

applications

databases

Customers,

Suppliers

MRP reports

Production schedule

31

Inputs to the Manufacturing MIS:

Strategic plan or corporate policies.The TPS:

• Order processing• Inventory data• Receiving and inspecting data• Personnel data• Production process

External sources

Manufacturing MIS Subsystems and Outputs:

• Design and engineering

• Master production scheduling

• Inventory control

• Manufacturing resource planning

• Just-in-time inventory and manufacturing

• Process control

• Computer-integrated manufacturing (CIM)

• Quality control and testing

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Sales by customer

Sales by salesperson

Sales by productOperational

databases

Databases

of valid

transactions

for each

TPS

Transaction

processing

systems

Business

transactions

Marketing

MIS

Databases of

external data

Databases of

internal data

Manufacturing

DSS

Manufacturing

ES

Marketing

applications

databases

Pricing report

Marketing MIS:

Supports managerial

activities in product

development, distribution,

pricing decisions, and

promotional effectiveness

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Inputs to Marketing MIS:

• Strategic plan and corporate policies

• The TPS

• External sources:

•The competition

•The market

Marketing MIS Subsystems and Outputs:

• Marketing research

• Product development

• Promotion and advertising

• Product pricing

Human Resource MIS:

Concerned with all of the activities related to employees and potential

employees of the organization

Types of MIS

Introduction

Data

-Bare facts and figures

Information

-Data that is organized into meaningful context

- It is processed data

-Supports the decision making process

- reduces uncertainty about a situation or event

Knowledge

-Human capacity (potential & actual ability) to take effective action in varied and

uncertain situations.

-It is the awareness and understanding of facts, truths or information gained in the

form of experience or learning.

Process of Generation of Information

It involves three activities:

(a) Data Acquisition

- Data is initially recorded and later verified for accuracy and authenticity. This is

called dta capture.

- Data is captured by punching with keyboard or scanning with scanning

devices, facts from documents on which they were recorded.

- Data captured is organized in data files. Each file contains records relating to

various data elements (fields) expressed with the help of different symbols

(characters).

(b) Data Transformation

- It is done by performing any of the following operations:

(i) Rearranging: also called sorting of data

(ii) Classifying

(iii) Calculating

(iv) Summarizing

(c) Management of Information

The processed data maybe either communicated to end user or maybe stored for

future reference.

One decides the report format, appropriate channel of communication to provide

information.

System

An assembly of inter-related elements comprising a unified whole.

The components (elements) are connected together in order to facilitate the flow of

information, matter or energy.

It works towards a common goal by accepting inputs and producing outputs.

System -

Input Process Output

Control

Feedback

What is Information System?

It is an organized combination of people, hardware, software, communications

networks, and data resources that stores and retrieves, transforms, and disseminates

information in an organization.

Evolution of Information System

Enterprise & Internetworking (1990s/2000s)

e.g. internet worked IS, Intranet, Extranet,

Internet, etc.

Strategic & End User Support (1980s/1990s)

e.g. Expert System, etc.

Decision Support System (1970s/1980s)

Management Reporting (1960s/1970s)

e.g. MIS

Data Processing (1950s/1960s)

E.g. EDPS, TPS, etc.

Elements/Resources of IS

Computer Hardware

Refers to computer systems and other associated equipment including the

communication links that a modern IT installation may need.

One needs to assess the nature of IT needs, the volume of data to be processed,

sources of data, complexity of data analysis and impact of other related factors to

determine the hardware resources.

Computer Software

It is the lifeline of the IT infrastructure and it makes the computer hardware function.

It is set of interrelated computer programs.

Data

Collection of facts or events from both internal and external sources represented in

the form of symbols, such as digits, alphabets, pictures, graphs, etc.

Capturing, processing and storage of data are the essential functions.

Human Resource

They are the catalyst in process of generation of information and thus are very vital.

Procedures

It includes the operational and control procedures for the use of IT infrastructure.

It contains instructions for users regarding the use of IT infrastructure for day to day

activities and for also handling specific situations.

Roles of IS

-Focuses on competitive priorities.

- Supports Business Process and operations

-Provide access to information

-Enhance communications

-Provide decision assistance

-Supports strategies for competitive advantage

- Summarizing the three major roles of the business applications of IS

Support Strategies

for CA

Support Business

Decision Making

Support business Processes & Operations

Operations

Support

Systems

Management

Support

Systems

Transaction

Processing

Systems

Process

Control

Systems

Enterprise

Collaboration

Systems

Management

Information

Systems

Decision

Support

Systems

Executive

Information

Systems

Information

Systems

Types of Information Systems

Types of Information SystemsTwo categories depending upon their focus on the kind of

activities in a business enterprise

1. Operations Support Systems2. Management Support Systems

Operations Support Systems- Focus on the operations of the enterprise- Objective is to improve the operational efficiency- Use internal data primarily- For lower level of managers- Classified into the following categoriesa) Transaction Processing Systemb) Process Control Systemc) Enterprise Collaboration System

a) Transaction Processing Systems-Focus on the recording and processing of economic events (transactions)

-It processes transactions in two ways – batch and real-time (or online)

-It encompasses the entire gamut of daily routines of the enterprise including financial accounting, inventory control, payroll, sales order processing system.

-TPS s were one of the earliest computerized systems that organizations used to capture valuable decision-making data and to conduct every day business.

- Almost all organizations have manual or automated TPS. Examples of TPS Coffee shopBankDoctorNasdaq- the e-stock exchange handles up to 1000 stock transaction

/second

-TPS are considered the backbone of many organizations without it managers couldn’t make basic decisions such as how many items to produce?

- Transaction can be internal or externalInternal: occurring inside the organizationExternal: occurring outside the company, customer places an order from a

company catalog

-Few years ago a separate transaction systems existed for each department in

a company

- Now many organizations are integrating the TPS systems of each

department so that users can see how their decision affect other parts of the

organization and the customers.

-TPS are the “data lifeline” of a company for several reasons:

•If a company fails to capture a transaction it may lead not only to customer

dissatisfaction and lost profit but also to serious penalties and lawsuits.

•TPS s become the source of data for other systems in the organization. If

analyzed and integrated it will give business key information about new

company plans. A better plan how to meet customer needs and preferences.

•TPS is a link between the organization and external entities, such as

suppliers, customers & distributors.

Enter data

Step 1

Validate data

Step 2

Process the

data into

information

Step 3

Store the

processed

data

Step 4

Generate

output

Step 5

Support user

queries

Step 6

1. Data entry: enter data by using input devices such as ATM it called data

source document

2. Validation: ensure the accuracy and reliability of data.

3. Processing: once the company validate the accuracy & reliability of data

the system processes and converts data into information. There are two

types of processing.

(a) On-line Transaction Processing (OLTP)

the data input device is directly linked to the system to be

processed.

“some times linked to the system via the network or

telecommunication.”

example Bank ATM, student registration for classes, travel agent

flight reservation.

On-line processing is possible because of networks and

databases.

(b) Batch Processing

Processing that done on a daily, weekly, or monthly basis or any

period of time.

Disadvantages of batch processing

The information in the files may not up-to-date.

Some errors may be detected only after the entire batch is

processed in on-line processing errors can be detected right

away.

Which type of processing is better?

It depends on the users decision making needs.

4. Data storage: to store the processed data in proper way. Otherwise data

will be usefulness to decision makers.

The kind of processing and type of storage medium are to some extent

related.

For example: magnetic tape is often used in batch processing. And

magnetic disk used in on-line processing.

5. Output generation

◦ Convert data into useful format

◦ Different users need different formats at different times

6. Query support the last step is to query or ask system questions.

Steps in Processing a Transaction

Records internal and external transactions that take place in a company

Is used mostly by lower-level managers to make operational decisions

Handles and stores large Volume of Data

Automation of basic operations

Benefits are easily measurable Stores data that are frequently accessed by other systems, i.e. it acts as a source of input for other systems

Is ideal for routine, repetitive tasks

Records transactions in batch mode or on-line

Requires six steps to process a transaction—data entry, validation, data processing, storage, output generation, and query support

b) Process Control System

Monitors & control physical process

c) Enterprise Collaboration Systems

-Enhance team and workgroup communication and productivity, and include

applications that are sometimes called office automation system.

It facilitates the following activities:

-Producing outgoing documents (using text processors)

- storage & retrieval of documents (using document management system)

- transmission of messages (using message communication systems)

- scheduling and meeting management (using video conferencing)

Management Support System- Information System application focus on providing information and

support for effective decision making by managers.

- Classified into following categoriesa) Management Information Systemb) Decision Support Systemc) Executive Support System

a) Management Information Systems- Aims at meeting the information needs of managers, particularly with

regard to the current and past operations of the enterprise.

- Offers summary and exception reports on the operations of the enterprise and are also called as operations support systems.

Summary Report :A report that accumulates data from several transactions and

presents the results in a condensed form.

Exception Report: A report that outlines any deviations between actual output and

expected output.

- The main input to an MIS is usually the transaction processing system and other

internal company sources

Benefits of MIS:

1. Provide middle managers with information to make

semistructured decisions.

2. Information generated by an MIS helps managers understand

the day-to-day operations of the company

3. Helps managers implement the tactical goals of the company.

• MIS is a group of general-purpose, well-integrated systems

that monitor and control the internal operations of an

organization.

Features

• Summary and exception Information

• Operational Control

• Focus on Internal Information

• Structured and semi-structured Decision

Relationship between a TPS and MIS

The main goal of TPS is to record & process company transaction. While the main goal of MIS is to produce summary & exception reports for making tactical decisions.

The output of a TPS & other company sources are the input of MIS

TPS usually helps managers with operational decisions, while MIS helps managers make tactical decisions over a longer period of time.

However both systems must work together in harmony to meet the company’s information needs.

b) Decision Support System

-Gives direct computer support to managers during the decision making process.

-- offers flexibility to manager to decide the input data, tool of analysis, depth of analysis and reliance on the outcome of analysis for decision making. The users have full control of the system.

-- offers an interactive environment for users and thus permits managers to experiment with data and model to develop the optimal decision making strategy.

-It has a User friendly interface

- report generators and graphical facilities

-Flexibility of use in various unexpected decision situation.

- DSS:- A set of interactive software programs that provide managers with data, tools, and models to make semistructured decisions.

-Some activities that a DSS can perform:Selecting the best loan package to meet your needs.Identifying an ideal location for a store

Managers should answer two types of questions

What? …Why?

What

Computers are excellent at

computations

(answering what

questions)

Why

People are excellent at

applying intuition & judgment

to solve problems

(answering why questions)

DSS uses computer computations and put them into models that systemize

decision processes

1. Database management system (DBMS): a piece of software that controls, manages, and maintains internal & external data.

2. Model management system: a system that stores and processes the models that managers use to make decisions.

3. Support tools: tools that help users to interact and interface with a decision support system.

A DSS has five main characteristics:

1. DSS integrates data & models so that it is easier for managers to make good decisions.

2. DSS helps managers see how decision interrelate and the effects of one decision on others.

3. It supports a wide variety of decision-making styles.

4. It helps managers make decisions under dynamic or changing business conditions

5. DSS allows users to query the system for a specific answers.

A DSS has three features that are extremely useful to managers :

1. What-if analysis 2. Goal seeking 3.risk analysis

1. What-if analysis: The study of the impact of a change in the input data on the proposed solution. ex. Product pricing

Complex decision because decision maker must consider many internal & external information

A DSS can help manager to answer “what if questions”

◦ What if the price of raw materials increased by 10%

◦ What if the product demand increased

◦ If the competitors reduce the price by 5%

2. Goal seeking: help managers determine what they should do to achieve a certain goal. Ex.1 The goal to increase sales of its top-selling product by 10%. A DSS can show different ways to achieve. Ex.2 What grade should student get to achieve A in the course.

3. Risk analysis: A DSS calculates the risk associated with each alternatives.

Internal Data

External Data

Decision-making

Models

•What-if Analysis

•Goal Seeking

•Problem Solving

•Generate Alternatives

•Assess Risk

Statistical Models allow user to perform a wide range of statistical functions (average, standard deviation, graphic analysis….)

Financial and Accounting Models to measure and assess the financial implications of different alternatives. (profit-or-lose analysis, cost-benefit analysis….)

Production Models help to estimate number of machines to operate, amount of material required to meet the predetermined demand

Marketing Models help marketing managers make a wide variety of decisions (product pricing, store location, advertising strategies..)

Human Resource Models help managers to make decisions that involve in company personnel (assessing training needs estimating future personnel needs evaluating hiring & firing policies.

Benefits

- evaluation of a larger number of alternatives

- modeling and forecasting becomes easy

- useful in intra group and inter group communication

- in depth analysis of data and thus more effective use of data resource

1. Top managers do not have the time to study and analyze large

volume of data. They need an IS that will analyze the data & present

it in elegant manner so they can have quick & effective decisions.

2. The system that deliver high level information in a friendly way is

called EIS.

3. An EIS consists of tools & techniques, such as color graphics, touch

screens, voice activated commands, and distribute large volumes of

data quickly and effectively.

4. Provides critical information from both internal and external sources

to easy-to-use displays to managers

5. The managers get tailored made formats they prefer.

6. Focus more on delivery of information by top managers than

generation of information.

The main difference between DSS & EIS is that EIS is used to deliver & display information (information delivery), while DSS is used to analyze a problem(problem solving)

Today many systems are a combination of DSS & EIS, these systems are known as Executive Support System

An EIS has many features that a DSS has, such as drill-down, which allows employees to obtain summary or detailed data with a few simple keystrokes.Drill-down: the ability to provide information at the level

of detail that the decision maker demands.

Applications of EIS- Executive Briefing- Personalized Analysis- Exceptions Reporting- Model based analysis

EIS: information system that analyzes and presents

information to executive decision makers in a

useful, friendly, and customized format.

DSS and EIS provide middle and top managers with decision support.

Both DSS and EIS are intuitive, interactive, user-friendly systems.

DSS and EIS are menu-driven and often have excellent color and graphic capabilities.

Both systems use internal and external data to solve problems.

A DSS uses internal and external data and different decision-making models to provide managers with alternatives to a given problem. An EIS provides managers with expert information in the form of analysis and reports.

Both systems are equipped with decision-making tools such as “what-if” analysis and ‘goal seeking”. EIS is also equipped with drill-down capabilities.

A DSS can support both individual and group decision making. DSS that support group decision making are known as group decision support systems (GDSS).

Artificial intelligence is a field of computer science that studies the design and development of computer systems that mimic human intelligence.

Intelligence defined as a set of characteristics or attributes.

AI includes several areas of specialization such as

1. Computer vision: the computers ability to recognize & identify objects.

2. Speech recognition: the computers ability to understand a human voice.

3. Natural language:the ability to communicate with a computer the way the humans communicate with each other.

4. Robots: machines capable of human like movement.

One of the AI fields is Expert System (ES)

Expert systems are computer programs that capture the knowledge of a human expert and use it to solve complex problems.

Knowledge appears in different forms in an organization such as an innovative ideas for a products, a new way to motivate employees, a new production method…..

The main goal of ES is to capture knowledge of experts in all forms and use it to solve complex problems of an organization in a relatively narrow domain.

ES then are versatile and can help with many kinds of problems.

It attempts to represent knowledge of human experts in the form of heursitics.

• ES can capture and apply the knowledge of human expert by joining

three main components:

1. Knowledge base

2. Inference engine

3. User interface

User Poses Problem User

InterfaceInference

Engine Knowledge Base

Knowledge Acquisition

Knowledge base consists of facts, theorem, cases, forms, texts, graphics, spreadsheets, principles & rules, that experts use to solve a given problem.

The information in the knowledge base comes from many sources such as the human experts, books, journals, databases & others. Managers also can gain knowledge from observation, formal & informal interviews & questionnaires. This is known as knowledge acquisition.

Knowledge acquisition: the process of acquiring knowledge from different sources.

These processes usually hard to do and time consuming. Knowledge acquisition is viewed a bottle neck in building expert systems.

Knowledge representation

The process of representing the knowledge of experts in a language that the computer can understand.

There are different approaches to knowledge representation on of the most popular ways to represent knowledge is using IF – THEN rules.

Expert system that use IF-THEN rules are called rule based systems.

Example IF car lights were left on AND car doesn't start

THEN the battery is dead (99%)

Knowledge

Human

experts

Journals

Books

Databases

others

Experts captures & acquires this knowledge

Knowledge acquisition

Experts represents knowledge in the system

Knowledge representation

Facts, rules, theorem, & principles

Knowledge Base

The inference engine is similar to the reasoning of the human brain.two popular reasoning possesses that an expert system uses:

1. Forward chaining 2.backward chaining

In forward chaining, the inference engine begins with a set of known facts, analyze the data and looks for solutions that match the data set.

In backward chaining, the inference engine begins with a goal and search for data, facts, and other evidence that support this goal.

Inference engine:a component of expert system that perform a reasoning function that results in advice to the user.

User interface combines the knowledge base & inference engine in a way that makes it easy for the user to interact with the system.

Data start Rule 1

Rule 2

Rule 3

Rule 4Goal End

EndDataRule 1

Rule 2

Rule 3

Rule 4Goal start

forward chaining

backward chaining

An expert system is a software program that captures the knowledge and problem-solving skills of a human expert.

Expert systems are ideally suited for problems that require knowledge, intuition, and judgment.

Expert systems, unlike DSS and EIS, can replace the decision maker.

The three main components in an expert system are the knowledge base, the inference engine, and the user interface.

Benefits of an Expert System

- Coding of expertise

- Enhanced understanding of business process

- Timely availability of expertise

- Easy replication

- Strategic Application

Limitations

- Limited Focus

- Inability to learn

- Maintenance problems and developmental costs

- Limited domain of knowledge

Top

Middle

Lower

Office

Automation

Systems

Expert Systems

Types of Information Systems and Levels of Management

EIS

DSS

MIS

TPS

Knowledge Management Systems

-Used for managing knowledge in organization, supporting creation, capture, storage

and dissemination of information

-Idea is to enable employees to have ready access to the organization documented

base of facts, sources of information and solutions.

-A KM System could be any of the following:

* Document based

* Provide network maps

* AI technologies which use a customized representation scheme to represent the

problem domain.

KMS Cycle

Create

Disseminate StoreManage

Capture

RefineKnowledge

Knowledge – information that is contextual, relevant and actionable.

Knowledge is information in action and is exercised to solve a problem

Knowledge is of two types –

Explicit knowledge- deals with more objective, rational and technical knowledge

Implicit Knowledge- cumulative store of subjective or experiential learning

MIS focus on explicit knowledge

KMS refers to the use of modern technologies – the internet, intranets, extranets.

Benefits

-Sharing of valuable organizational information

- reducing redundant work

- reducing training time for new employees

IS for Strategic Advantage

IS and Business Strategy

Strategic Information Systems

• Definition: Computer systems at any level of an organization

that change the goals, processes, products, services, or

environmental relationships to help the organization gain a

competitive advantage.

• Strategic information systems profoundly alter the way a firm

conducts its business or the very business of the firm itself.

• It can be of any kind of information system (DSS, TPS, MIS,

etc.)

Strategic Levels and IT

Business Level Strategy and IT

“How can we compete effectively in this particular market?”

The most common generic strategies at this level are:◦ To become the low-cost producer◦ To differentiate your product or service

* Product differentiation: Competitive strategy for creating brand loyalty by developing new and unique products and services that are not easily duplicated by competitors.

Eg: banks provide on-line banking service, Dell sells custom-tailored PC.

* Focused differentiation: Competitive strategy for developing new market niches for specialized products or services where a business can compete in the target area better than its competitors. Information systems enable companies to finely analyze customer buying patterns, tastes, and preferences so that they efficiently pitch advertising and marketing campaigns to smaller and smaller target markets.

- To change the scope of competition by either enlarging the market or narrowing the market

At the business level the most common analytic tool is value chain analysis.

Value chain model: Model that 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.

Primary activities are most directly related to the production and distribution of the firm’s products and services that create value for the customer Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service.

Support activities make the delivery of the primary activities of a firm 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 competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price. Firms can use information systems to create unique new products and services that can be easily distinguished from those of competitors.

Data mining: Analysis of large pools of data to find patterns and rules that can be

used to guide decision making and predict future behavior.

The cost of acquiring a new customer has been estimated to be five times that of

retaining an existing customer. By carefully examining transactions of customer

purchases and activities, firms can identify profitable customers and win more of their

business.

Supply chain management: Integration of supplier, distributor, and customer

logistics requirements into one cohesive process.

Supply chain: A collection of physical entities, such as manufacturing plants,

distribution centers, conveyances, retail outlets, people, and information, which are

linked together into processes supplying goods or services from source through

consumption.

To manage the supply chain, a company tries to eliminate delays and cut the amount

of resources tied up along the way.

Information systems make efficient supply chain management possible by integrating

demand planning, forecasting, materials requisition, order processing, inventory

allocation, order fulfillment, transportation services, receiving, invoicing, and payment.

SHIPPING INVENTORY

PLANNING &

FORECASTIN

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ORDER

PROCESSING

PRODUCTION

PROCUREMENT

ACCOUNTIN

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SUPPLIERSCUSTOMERS

LOGISTICS

SERVICESDISTRIBUTORS

INTRANETINTRANET

FIRM LEVEL STRATEGY & IT

“How can the overall performance of these business units be achieved?”

“How can information technology contribute?” Synergies: When outputs of some units can be used as

inputs to other units, or two organizations can pool markets and expertise, these relationships can lower costs and generate profits.

One use of IT is to tie together the operations of disparate business units so that they can act as a whole.

Core competency: An activity at which a firm is a world-class leader.

A core competency relies on knowledge that is gained over many years of experience (embedded knowledge) and a first-class research organization or just key people who follow the literature and stay abreast of new external knowledge (tacit knowledge).

Any system that encourages the sharing of knowledge across business units enhances competency.

INDUSTRY LEVEL STRATEGY & IT

“How and when should we compete as opposed to cooperate with others in the industry?”

Firms can cooperate to develop industry standards in a number of areas; they can cooperate by working together to build customer awareness, and to work collectively with suppliers to lower costs.

Information partnership: Cooperative alliance formed between two corporations for the purpose of sharing information to gain strategic advantage.

Such partnerships help firms gain access to new customers, creating new opportunities for cross-selling and targeting products. They can share investments in computer hardware and software.

At industry level, two analytic models are used: the competitive forces model and network economics.

Competitive forces model: Model used to describe the interaction of external influences, specifically threats and opportunities, that affect an organization’s strategy and ability to compete.

Network economics: Model based on the concept of a network where adding another participant entails zero marginal costs but can create much larger marginal gain. Used as a model for strategic systems at the industry level.

COMPETITIVE FORCES MODEL

Business can counter the threats of competitive forces by implementing five basic

strategies-

1. Cost Leadership Strategy

2. Differentiation Strategy

3. Innovation Strategy

4. Growth Strategy

5. Alliance Strategy

Other Competitive Strategies

1. Improving Business Processes

2. Promoting Business Innovation

3. Lock-in Customers and Suppliers

4. Creating Switching Costs

5. Raising Barriers to Entry

6. Leverage Investment in IT

7. Developing a strategic information base

Strategic use of IT

Building a customer focus business

Reengineering Business Processes

Improving Business Quality

Becoming an agile company

Creating a virtual company

Building a knowledge creating company

The challenge of strategic IS

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL

MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE

PRICING ANALYSIS DETERMINE PRICES MANAGEMENT

SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC

SALES & MARKETING INFORMATION SYSTEM

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERATIONAL

COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDGE

PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRODUCTS MANAGEMENT

FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILITIES STRATEGIC

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL

PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWLEDGE

BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT

PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC

FINANCE & ACCOUNTING INFORMATION

SYSTEM

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL

CAREER PATHING DESIGN EMPLOYEE CAREER PATHS KNOWLEDGE

COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BENEFITS MANAGEMENT

HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCE NEEDS STRATEGIC

HUMAN RESOURCES INFORMATION

SYSTEM