MANAGEMENT
INFORMATION SYSTEMS
MODULE - I
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.
CONTROL
INPUT PROCESSING OUTPUT
FEEDBACK
BUSINESS ORGANIZATION AS A SYSTEM
BUSINESS ENVIRONMENT
CONTROL
MANAGEMENT
FEEDBACK
INFORMATION SYSTEMS
MONEY
PRODUCTION
MATERIAL PRODUCTS
DELIVER PRODUCTS
INFORMATION SERVICES
SUPPORT CUSTOMERS
MACHINES
LAND
INPUT PROCESSING OUTPUT
Source: MIS JOBrien et al 10e page 40
SYSTEM
• INPUT – Capturing and assembling elements that enter the system to be
processed. Eg: Raw Materials, Data.
• PROCESSING – Transformation process that convert input into output. Eg:
Manufacturing, Mathematical transformation.
• OUTPUT – Transferring elements that have been produced by a
transformation process to their ultimate destination. Eg: Finished products,
Management Information.
Eg: Manufacturing System(Raw Materials to Finished Goods),
Information System (Data to Information)
• FEEDBACK – Data about performance of a system.
Eg: Sales performance.
• CONTROL – Monitoring and evaluating feedback to determine whether a
system is moving towards achievement of its goal.
Eg: Sales manager reassigning sales persons to various territories.
Source: MIS JOBrien et al 10e page 35
SYSTEM - CONCEPTS
• ENVIRONMENT – System exists and functions in an environment containing
other systems. Eg: Society
• SUBSYSTEM – If a system is one of the components of a larger system, it is
a subsystem, and the larger system is its environment.
• OPEN SYSTEM vs CLOSED SYSTEM
• OPEN SYSTEM - A system which interacts with other systems in its environment.
• CLOSED SYSTEM - Does not interact with environment in which it exists.
• ADAPTIVE SYSTEM vs NON-ADAPTIVE
• ADAPTIVE SYSTEM – A system that has the ability to change itself or its environment
to survive. Eg: Organizations
• NON-ADAPTIVE SYSTEM – Does not react to changes in environment.
• SIMPLE vs COMPLEX SYSTEM
• Simple system – System in which there are few interrelated entities.
• Complex system – System with several components and many interrelations among
them.
Source: MIS JOBrien et al 10e page 39
DATA vs INFORMATION
DATA
• Raw facts or observations, typically about physical phenomena or business
transactions. Eg: Data describing a Spacecraft Launch, Sale of Automobile.
• Objective measurement of attributes(the characteristics) of entities(eg: People,
Place, Things, Events).
INFORMATION
Data that have been converted into a meaningful and useful context for specific
end users. Data subjected to a value added process – 1) Form is aggregated,
manipulated, organized. 2) Content is analysed and evaluated. 3) Placed in a proper
context for a human user.
Eg: Names, quantities, amounts in sales forms represent data about sales
transactions. Once this is properly organized and manipulated it becomes
meaningful sales information – Sales by product type, sales territory, salesperson.
Source: MIS JOBrien et al 10e page 44
INFORMATION SYSTEM
• Organized combination of people, hardware, software,
communications networks, data resources, policies and
procedures that stores, retrieves, transforms and disseminates
information in an organization.
• System Components - people, hardware, software, communications
networks, data resources
• System Activities –Input, Process, Output, Storage, Control
• System Feedback and Control – Error Messages, Dialog boxes
• System Boundaries – Modules, End User group
• System goal – Dissemination of information
Source – MIS JOBrien 10e page 4
ROLE OF INFORMATION SYSTEMS IN
BUSINESS
• Support of strategies for corporate advantage.
• Eg: New product lines in next 5 years.
• Support of decision making by employees and managers.
• Eg: Retail store – Merchandise to be added/discontinued
• Support of Business processes and operations.
• Eg: Retail Store - Purchases, Inventory Tracking, Inventory Replenishment
Source: MIS JOBrien 10e Page 9
TYPES OF IS
• TPS –Transaction Processing System
• MIS- Management Information System
• OAS-Office Automation System
• DSS-Decision Support System
• ESS-Executive Support System
• ES- Expert System
STRATEGY
• LONG TERM DIRECTION OF THE ORGANIZATION
• BASIS FOR ITS COMPETITIVE ADVANTAGE
• COMPETITIVE ADVANTAGE
• A firm that is leading an industry in some identifiable way such as sales,
revenues, or new products.
• When a firm sustains profits that exceed the average for its industry, the firm
is said to possess competitive advantage over its rivals.
• Hard to sustain over the long term.
Source: MIS JOBrien 10e Page 76
BASIC COMPETITIVE STRATEGIES
• COST – Use IT to substantially reduce the cost of business processes or Use IT to
lower the costs of customers or suppliers. eg: e-Procurement.
• DIFFERENTIATION – Developing ways to differentiate a firm’s products and
services from those of its competitors or reduce the differentiation advantages of
competitors. eg: Rewards programs for frequent users.
• INNOVATION – Finding new ways of doing business. Create Innovative products
using IT. 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. eg: Courier Online tracking.
• GROWTH – 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. IT to manage business
expansion. Global expansion by large retail companies, Intensification(Search
Engine Optimisation), Diversification.
• ALLIANCES – Establish new business linkages and alliances with other companies,
suppliers, customers. Linkages may include mergers, acquisitions, joint ventures,
formation of virtual companies, or distribution agreements between a business
and its trading partners. eg: Vendor managed inventory as in large retail
companies, Oil companies.
Source: MIS JOBrien 10e Page 72
OTHER STRATEGIC INITIATIVES
• LOCK IN CUSTOMERS AND SUPPLIERS – Benefits to suppliers and
customers by use of information systems. Eg: Loyalty programs
• CREATE SWITCHING COSTS – Operating system and bundled software,
Social Media data.
• RAISE BARRIERS TO ENTRY – Booking systems by Airline
companies, Technology patents.
• LEVERAGE INVESTMENT IN IT - Online tracking by courier firm.
Source: MIS JObrien 10e Page 70
PORTER’s VALUE CHAIN and IT
• PRIMARY PROCESSES - Business activities that are directly related to the
manufacture of products or the delivery of services to the customer.
• INBOUND LOGISTICS - Automated Just-in-Time Warehousing
• OPERATIONS - Computer-Aided Flexible Manufacturing
• OUTBOUND LOGISTICS - Order Processing
• MARKETING AND SALES - Targeted Marketing
• CUSTOMER SERVICE - Customer Relationship Management
• SUPPORT PROCESSES - Business activities that help support the day-to-day
operation of the business and that indirectly contribute to the products or
services of the organization.
• ADMINISTRATIVE COORDINATION AND SUPPORT SERVICES. Eg: Accounting, legal
• HUMAN RESOURCES MANAGEMENT. Eg: Employee recruiting to training
• TECHNOLOGY DEVELOPMENT. Eg: Product Development Extranet with Partners
• PROCUREMENT OF RESOURCES. Eg: E-Commerce Web Portals for Suppliers
Source: MIS JOBrien 10e Page 81
PORTER’s 5 COMPETITIVE FORCES AND INDUSTRY ATTRACTIVENESS
• Determining the attractiveness of an industry.
• A company can succeed in the long run only if it successfully develops
strategies to confront five competitive forces that shape the structure of
competition in its industry.
• No activity in a firm is independent, yet each activity is managed
separately. While implementing IT based solutions, it is important to
understand the cost parameters involved for each activity
• Gaining competitive advantage requires that an enterprise’s value chain
be managed as a system rather than as a collection of separate parts.
STRATEGIC IMPORTANCE –ATTRACTIVENESS OF AN INDUSTRY
COMPETITIVE ENVIRONMENT – 5 FORCES FRAMEWORK
• COMPETITION WITHIN THE INDUSTRY – Industry is attractive when competition is
less. Factors - Industry growth rates, high fixed costs, Number and strength of
competitors. Eg: Mobile phone industry.
• THREAT OF NEW ENTRANTS – Industry is attractive when threat of new entrants is
low. Factors - Customer Loyalty, Access to distribution channels, Economies of Scale,
Government Policy,Online selling. Eg: Softdrinks market, Mobile Service providers.
• THREAT OF SUBSTITUTES – Industry is attractive when threat of substitutes is less.
Factors - Cost and performance implications in switching to substitute. Eg: Landline
vs Mobile
• BARGAINING POWER OF SUPPLIER – Industry is attractive when bargaining power of
supplier is low. If bargaining power of supplier is high, supplier can raise the price of
inputs or the cut the supplies. Factors –Number of suppliers, Uniqueness of service.
Eg: Aircraft manufacturers.
• BARGAINING POWER OF BUYERS – Industry is attractive when bargaining power of
buyer is low. If bargaining power of customers is high, they can drive the price
to lower levels or even refuse to buy the product. Factors – Number of buyers, Buyers
ease of switching product, Buyer’s Information availability. Eg: Individual buyers vs
Large retailers.
The collective strength of the five forces varies from industry to
industry, as does the average profitability. The strength of each of
these 5 forces can either improve or erode the attractiveness of the
industry. IT can alter each of these 5 forces and hence industry
attractiveness as well.
Example: The automation of POS, customer billing and order
processing has increased rivalry in many distribution industries.
BUSINESS PROCESS REENGINEERING
Fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in cost, quality, speed
and service. High potential payback, but also high risk and level of
disruption to organization environment.
• Enterprises go back to the basics and re-examine their very roots.
• It doesn’t believe in small improvements. Rather it aims at total
reinvention.
• BPR focuses on processes - A business process is a series of steps
designed to produce a product or a service. It includes all the
activities that deliver particular results for a given customer(external
or internal). Process maps.
Source: MIS JObrien 10e Page 86, MIS JObrien 10e Page 84.
BPR – CONSOLIDATED METHODOLOGY
• Prepare for BPR - Develop Strategic Purpose, Identify Customer driven
objective, Build Cross functional team. Ensure management acceptance and customer value.
• Map & Analyse As-Is Process - Identify disconnects(things that prevent the
process from achieving desired results) & value adding processes By using
modelling methods available(Activity Models, Process Models), Ascertain
time and cost of each activity by Simulation & Perform Activity Based Costing.
• Design To-Be Processes - Benchmark processes, Develop To-Be models
using modelling methods, ascertain time and cost of To-Be using simulation
and ABC, To-Be models arrived at are validated, Perform Trade-off Analysis and select best
possible To-be scenarios.
• Implement Reengineered processes – Stage of Resistance. Develop
transition plan from As-Is to the redesigned process, Validate transition
plans using prototyping & simulation, Initiate training programs, Implement
transition plan.
• Improve Continuously - improving the reengineered process continuously.
Initiate On-going measurement, Review performance against target, Improve process
continuously.
Source: BUSINESS PROCESS REENGINEERING: A CONSOLIDATED METHODOLOGY: Muthu, Whitman and Cheraghi.
[Link]
Business Improvement VS BPR
BUSINESS BUSINESS PROCESS
IMPROVEMENT REENGINEERING
LEVEL OF CHANGE INCREMENTAL RADICAL
PROCESS CHANGE IMPROVED NEW BRAND-NEW PROCESS
VERSION OF PROCESS
STARTING POINT EXISTING PROCESSES CLEAN SLATE
FREQUENCY OF CHANGE ONE-TIME OR PERIODIC ONE-TIME
CONTINUOUS CHANGE
TIME REQUIRED SHORT LONG
TYPICAL SCOPE NARROW, WITHIN BROAD, CROSS-
FUNCTIONS FUNCTIONAL
HORIZON PAST AND PRESENT FUTURE
PARTICIPATION BOTTOM-UP TOP-DOWN
PATH TO EXECUTION CULTURAL CULTURAL,
STRUCTURAL
PRIMARY ENABLER STATISTICAL CONTROL INFORMATION
TECHNOLOGY
RISK MODERATE HIGH
Source: MIS JObrien 10e Page 87
Information Systems and BPR
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.
• ENTERPRISE RESOURCE PLANNING – Manufacturing, Finance
• CUSTOMER RELATIONSHIP MANAGEMENT – Marketing, Selling
• INTERNET, INTRANET, EXTRANET – Order entry, Supplier managed
inventory.
Source: MIS JObrien et al 10e Page 87
BPR IN ORDER PROCESSING
REENGINEERING ORDER MANAGEMENT
Customer relationship management systems using corporate intranets and
the Internet.
Supplier-managed inventory systems using the Internet and extranets.
Cross-functional ERP software for integrating manufacturing, distribution,
finance, and human resource processes.
Customer-accessible e-commerce Web sites for order entry, status
checking, payment, and service.
Customer, product, and order status databases accessed via intranets and
extranets by employees and suppliers.
Source: MIS JObrien 10e Page 88
TYPES OF INFORMATION SYSTEMS
• OPERATION SUPPORT SYSTEMS
• TRANSACTION PROCESSING SYSTEMS
• PROCESS CONTROL SYSTEMS
• ENTERPRISE COLLABORATION SYSTEMS
• MANAGEMENT SUPPORT SYSTEMS
• MANAGEMENT INFORMATION
• DECISION SUPPORT SYSTEMS
• EXECUTIVE INFORMATION SYSTEMS
• SPECIALISED PROCESSING SYSTEMS
• EXPERT SYSTEMS
• KNOWLEDGE MANAGEMENT SYSTEMS
• STRATEGIC INFORMATION SYSTEMS
• FUNCTIONAL BUSINESS SYSTEMS
Source: MIS JObrien 10e page 20
TYPES OF INFORMATION SYSTEMS
INFORMATION
SYSTEMS
OPERATION SUPPORT SYSTEMS MANAGEMENT SUPPORT SYSTEMS
TRANSACTION PROCESSING MANAGEMENT INFORMATION
SPECIALIZED SYSTEMS SYSTEMS SPECIALIZED
PROCESSING PROCESS CONTROL SYSTEM DECISION SUPPORT SYSTEMS PROCESSING
SYSTEMS ENTERPRISE COLLABORATION EXECUTIVE INFORMATION SYSTEMS
SYSTEMS SYSTEMS
KNOWLEDGE STRATEGIC FUNCTIONAL
EXPERT SYSTEMS MANAGEMENT INFORMATION BUSINESS
SYSTEMS SYSTEMS SYSTEMS
Source: MIS JObrien et al 10e page 20
TYPES OF INFORMATION SYSTEMS
MANAGEMENT SUPPORT SYSTEMS
MANAGEMENT SUPPORT SYSTEMS – Information System
applications that focus on providing information and support for
effective decision making by managers.
• EXECUTIVE INFORMATION SYSTEMS – Provide critical information
from a wide variety of internal and external sources in easy-to-use
displays to executives and managers. Strategic information needs of
top-management. Features - Trend Analysis, Exception Reporting, Drill
Down capability.
• MANAGEMENT INFORMATION SYSTEMS – Provide information in the
form of reports and displays to managers and business professionals.
Eg: Sales analysis, Production Performance.
• DECISION SUPPORT SYSTEMS – Direct computer support to managers
in decision making process. Eg: Product pricing, Profitability forecasts
Source: MIS Jobrien et al 10e page 22
TYPES OF INFORMATION SYSTEMS
OPERATION SUPPORT SYSTEMS
OPERATION SUPPORT SYSTEMS – Process data generated by and
used in Business operations.
• TRANSACTION PROCESSING SYSTEMS – Record and process data
resulting from business transactions. Eg: Sales processing,
Accounting Systems.
• Batch – Recorded, Accumulated into batches, Processed periodically. eg: NEFT
• Online – Transaction data processed as it is generated. eg: Online Ticket
Booking
• PROCESS CONTROL SYSTEM – Monitor and control industrial
processes. Eg: Sensors in Refinery systems
• ENTERPRISE COLLABORATION SYSTEMS. Eg: Enhance communications
and Productivity. Eg: Email, Video-Conferencing.
Source: MIS Jobrien et al10e page 21
TYPES OF INFORMATION SYSTEMS -
SPECIALIZED PROCESSING SYSTEMS
• STRATEGIC INFORMATION SYSTEMS – Apply Information Technology to a
firm’s products, services, or business processes to help it gain a strategic
advantage over its competitors. Can be any kind of information system that
uses IT to help an organization
• Gain a competitive Advantage
• Reduce a Competitive Disadvantage
• Meet other strategic enterprise objectives
• FUNCTIONAL BUSINESS SYSTEMS – Information systems that focus on
operational and managerial applications in support of basic business
functions. Eg: Support applications in Accounting, Finance, Marketing,
Operations, Human Resources.
• EXPERT SYSTEMS – Expert advice for operational tasks. Eg: Equipment
Diagnostics, Credit application advisor.
• KNOWLEDGE MANAGEMENT SYSTEMS – Knowledge based information
systems that support the creation, organization and dissemination of
business knowledge to employees and managers throughout the company.
Eg: Best practises, Customer Problem Resolution.
Source: MIS JObrien et al 10e page 23, MIS JObrien et al 10e page 63
INFORMATION SYSTEM MODEL
• Fundamental conceptual framework of major COMPONENTS and
activities of an information systems.
• RESOURCES – People, Hardware, Software, Data, Networks.
• ACTIVITIES – Input, Processing, Output, Storage, Control
• BOUNDARIES – Modules, Department, End user group.
Source: MIS JOBrien et al 10e p41
INFORMATION SYSTEM RESOURCES
• PEOPLE RESOURCES – Specialists, End Users
• HARDWARE RESOURCES
• Machines – Computers and other equipment. Eg: Desktop, Laptop.
• Media – Tangible objects on which data are recorded. Eg: Magnetic Tape
• SOFTWARE RESOURCES – Programs – System/Application, Procedures
• DATA RESOURCES
• Databases – Hold processed and organized data.
• Knowledge Bases - Hold knowledge as facts, rules, case examples on
successful business practices.
• NETWORK RESOURCES
• Communication Media – Coaxial cables, Fiber optic cables
• Network Infrastructure – Hardware/Software/Data to support the operation
and use of a communication network. Eg: Modem
Source: MIS JOBrien et al10e p41
INFORMATION SYSTEM ACTIVITIES
• INPUT – Data about Business events to be captured(Data entry). Eg:
Barcode scanning of merchandise.
• PROCESSING – Data subjected to processing such as classifying,
sorting, summarizing. Eg: Calculate employee pay, taxes, deductions.
• OUTPUT – Information made available to end users. Messages,
Reports, Multimedia. Eg: Reports about Sales performance.
• STORAGE – Data retained in organized manner for later use. Eg:
Maintaining records on employees.
• CONTROL – Feedback about input, processing, output, storage
monitored and evaluated. Eg: Error Messages, Dialog Boxes, Sales
amount and Total Sales mismatch.
Source: MIS JOBrien et al 10e p45,46
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