MIS CHAPTER-2 FOUNDAMENTAL CONCEPTS IN MIS

CHAPTER TWO
FOUNDATIONAL CONCEPTS IN MIS
2.1 Introduction
2.2 Business and Management Functions
MIS is a concept that combines management, information and system.
2.2.1 Management
Every organization, regardless of size, type, or location needs managers. Management is the process of
getting activities done efficiently with and through other people. The process includes the functions or
primary activities performed by managers. Efficiency refers to the relationship between inputs and outputs
and refers to efforts to minimize resource costs. Effectiveness refers to goal attainment. Managers seek to
be both efficient and effective.
An organization is a systematic arrangement of people to accomplish some specific purpose. Managers are
important to an organization's success because they direct and coordinate activities so the organization can
reach its goals.
Management is important in our society today. Accordingly, there are two reasons for studying
management. We interact with organizations every day of our lives. Every product we use and every action
we take is provided or affected by organizations. These organizations require managers.
Management has been defined in a variety of ways, but for our purposes it comprises the processes or
activities that describe what managers do in the operation of their organization: plan, organize, initiate, and
control operations. They plan by setting strategies and goals, and selecting the best course of action to
achieve the plan. They organize the tasks necessary for the operational plan, set these tasks up into
homogeneous groups, and assign authority delegation. Because decision making is such a fundamental
prerequisite to each of the foregoing management processes, the job of an MIS becomes that of facilitating
decisions necessary for planning, organizing, and controlling the work and functions of the business.
2.2.2 Managers and Decision Making
Decision making is often a manager’s most challenging role. Information systems have long helped
managers communicate and distribute information; however, they have provided only limited assistance for
management decision making. Because decision making is an area that system designers have sought most
of all to affect (with mixed success), we now turn our attention to this issue.
[Link] The Process of Decision Making
Decision making can be classified by organizational level, corresponding to the strategic, management,
knowledge and operational levels of the organization.
 Strategic decision making: determines the objectives, resources, and policies of the organization.
 Management control decision making: (also known as middle or tactical level management) is
primarily concerned with how efficiently and effectively resources are used and how well
operational units are performing.
 Operational control decision making: determines how to carry out the specific tasks set forth by
strategic and middle management decision makers.
 Knowledge-level decision making: deals with new ideas for products and services, ways to
communicate new knowledge, and ways to distribute information through out the organization.
Within each of these levels of decision making, researchers classify decisions as structured, semi-structured
and unstructured.
 Unstructured decisions are those in which the decision maker must provide judgment, evaluation,
and insights into the problem definition. All of these decisions are novel, important, and non-routine,
and there is no well-understood or agreed upon procedure for making them.
 Structured decisions, by contrast, are repetitive and routine and involve a definite procedure for
handling them so that they do not have to be treated each time as if they were new.
 Some decisions are semi-structured, in such cases, only part of the problem has a clear-cut answer
provided by an accepted procedure.
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Operational control personnel face fairly-well structured problems while strategic planners tackle highly
unstructured problems. Many of the problems knowledge workers encounter are fairly unstructured as well.
Nevertheless, each level of the organization contains both structured and unstructured problems. Note that
there are information systems to support or execute each of these types of decisions.
[Link] Stages in Decision Making
Effective decision making requires an understanding of decision-making processes including behavioral
and communications aspects, the ability to identify, obtain, store, and retrieve critical information necessary
for making sound decisions and the skill to use mathematical, statistical and simulation tools in analyzing
information in order to make decisions.
Making decision consists of several different activities. Simon (1960) described four different stages in
decision making: intelligence, design, choice, and implementation.
1. Intelligence: - consists of identifying and understanding the problems occurring in the organization---
whether there is a problem, what is the real problem (not just its symptoms), why there is a problem,
where the problem is, and what the effects of the problem are. Traditional MIS systems that deliver a
wide variety of detailed information can help identify problems, especially if the systems report
exceptions.
2. Design: - here the decision maker designs possible solutions to the problems. Smaller DSS systems are
ideal in this stage of decision making because they operate on simple models, can be developed quickly,
and can be operated with limited data.
3. Choice: - this stage consists of choosing among solution alternatives. Here the decision maker might
need a larger DSS or a GDSS to develop more extensive data on a variety of alternatives and complex
models or data analysis tools to account for all of the choice’s costs, consequences, and opportunities.
4. Implementation: - is a stage where the decision is put into effect. Managers can use a reporting system
that delivers routine reports on the progress of a specific solution. Support systems can range from full-
blown MIS systems to much smaller systems as well as project-planning software operating on personal
computers.
General Model of Decision Making
1. Intelligence [Finding out what is going, what the significant problems are]
2. Design [Identifying the decision(s) that need to be made]
3. Choice [Making the decision]
4. Implementation
Problem Solving
 Structured Problems
o solved by known methods and models
o all relevant data available
o require little judgment, evaluation or insight
o easily automated
 Unstructured Problems ("Less structured" would be a better term)
o standard solution methods unknown
o some desirable data may not be available
o requires considerable human judgments, evaluation and creative insight
o difficult to automate
 Semi-structured Problems
o Some parts are structured, others are not
o Remember that there is a continuum from structured to unstructured.
2.3 Data, Information, Knowledge and Wisdom
(I) Data: - are collections of facts or events represented in the form of symbols, such as digits, alphabets,
pictures, graphs, etc. Capturing, processing and storage of data are the essential functions of any IT
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infrastructure. Data are the basic raw materials in the process of generation of information. Data may be
collected from internal as well as external sources.
Based on their properties, mainly in computing, data types can be categorized as:
o Text (Non-Graphic): is often represented as strings of alphabetic and numeric characters. Tools
are available can be text processing programs like MS word, etc.
o Graphic: represents the concepts in pictures, diagrams, charts, tables, etc. Graphic software and
hardware are available.
o Image: represents the reproduction of a real object. Different standard formats are available for
image representation such as Joint Photographers Encoding Group (JPEG), Graphic Interchange
Format (GIF) and Tag Image Format (TIF).
o Animation: represents simple sequences of pictures with animated effect created by flipping
through them such as animated face in visual speech.
o Audio: represents sounds and their sequences. The three types of audio data are: speech, music,
and sound effects.
o Video: represents successive capture and storage of image as they change with time, i.e., motion
images.
(II) Information consists of data that have been retrieved, processed, or otherwise used for informative or
inference purposes, argument, or as a basis for forecasting or decision making.
Information is knowledge that one derives from facts placed in the right context with the purpose of
reducing uncertainty. From the manager's point of view, information serves the purpose of reducing
uncertainty regarding the alternative course of action, in the process of decision making. Availability of
information regarding the alternatives improves the odds in favor of making a correct decision. Information
is recognized as one of the most important corporate resources.
Some interpretations that have been made from these sources are as follows:
The nature of information is;
- Something one did not know before.
- Something that affects what one already knows.
- Something useful in some way to the person receiving it.
- The meaning of words in sentences.
- Something that provides more than what is stated.
Our understanding of the basic nature of information is clouded by the fact that the word information is
used in a variety of different contexts in our daily speech. The most prevalent of these everyday uses are
discussed below.
 Information as a Commodity
 Information as Energy
 Information as Communication
 Information as Facts
 Information as Data and
 Information as Knowledge
(III) Knowledge: includes the capability of evaluating information in some meaningful or purposeful way.
Having the knowledge or ability to perform some complex task involves more than just having a list of
instructions or the information needed; that is, the ability to manipulate the information or perform the sub-
tasks is required. Knowledge, thus, is a cognitive state beyond awareness. It can also refer to the organized
record of human experience such as books, reports etc.
(IV) Wisdom: Implies the application of knowledge as contained in human judgment centered on certain
criteria or values that are generally accepted by the culture or society.
Data …....……> Database system

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Information ….> Information system/Information base = the description of all the information which is
stored by the information system.
Knowledge …> Knowledge base system
Information has been used in its broad context to represent all accumulated knowledge and facts. However,
it is good to differentiate the hierarchies as indicated. Data and facts make up the lower forms of
information. They are collected, observed, or generated by human and computer endeavors. Accumulated
data, the organization of facts to form the basis of what we know, is the next level called information.
The two higher levels, knowledge and wisdom, are individual and personal in nature. Wisdom is the further
integration of information and knowledge into theory which has been both societal and personal meaning. It
is the highest level of the information use continuum.
2.4 The Information Needs and Sources of Managers
2.4.1 Information Need
It refers to the information required by the users to accomplish their tasks. How is it possible to determine
the information needs of users? Information needs may be learnt by engaging in variety of information
gathering activities including:
- User analysis: Personal interviews, observations, survey, etc. ; and
- Through activity/task analysis, and record searches.
2.4.2 Sources of Data/Information
 Formal Sources
 Primary sources via different data collection methods.
 Secondary sources such as Statistical sources and Databases in different media, other documentary
sources, Web pages (on the Internet), discussion groups, online bulletin boards, etc.
 Informal Sources such as business contacts, invisible colleges, etc.
2.4.3 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.
If the information is to be valuable in the operation and control of a business, it must meet three criteria of data
processing: accuracy, timeliness and meaningfulness.
Accuracy: - The input data to the processing system must be accurate. The individual steps in the processing
of data must also be accurate.
Timeliness: - The right information delivered too late can be as useless as no information at all. (i.e. a need
for fast data processing system).
Meaningful: - The information produced by the data processing must be meaningful to the people using
the information. i. e.
 The information must be appropriate and relevant to the user's needs.
 The report presented must be comprehensible. Both the format and the content of the
reports must be easy to read and understand.
(II) Information processing
Information processing includes all those activities which turn a set of uncorrelated facts into a meaningful
correlated whole for use in the management processes of planning, decision-making and control. The
preparation of reports containing information involves subjecting the basic facts, i.e. the data, to a number
of processing operations which typically include: verification (when data has been subjected to data
conversion into a 'machine - sensible' form), validation, sorting, merging, computing, comparing, updating,
printing, etc.
Information Processing involves information acquisition, organization, integration, utilization, and
evaluation from the different sources for gaining and using information.

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The process of generation of information involves a series of activities. Broadly speaking, there are three
basic activities:
a. Data acquisition
b. Data transformation
c. Management of information
a. Data Acquisition: As stated earlier, data are facts expressed with the help of symbols such as alphabets,
digits, graphs, diagrams, pictures, etc., or in any other form. Data may describe an event or it may represent
status of an element of the environment. Whatever may be the source of data; it may be initially recorded
and later verified for accuracy and authenticity. This activity is called data capture.
Data may be captured by punching with keyboard or scanning with scanning devices, facts from documents
on which they were recorded.
b. Data Transformation: Data transformation may be done by performing any of the following operations
on data:
i. Rearranging: Rearranging data in some specified order is a very common data processing activity. For
example, data regarding stores may be rearranged in order of date of purchase or in order of value of
each unit or in the alphabetic order of names if these are items. Such a rearrangement is also known
as sorting of data. Sorting may add to the usefulness of data.
ii. Classifying: Data may be classified on the basis of the selected variables/factors. For example, sales
data may be classified on the variables like customer's code, city, and product or sales person involved
in obtaining order.
iii. Calculating: For a layman, data is processed only by calculating. A series of calculations performed
on numeric values is called computation. This is the logic behind for the computer to be called
computing machine. Calculating involves performing arithmetic operations (like addition, subtraction,
multiplication, division and logic operations).
iv. Summarizing: is a process of aggregating various data elements, reducing the bulk of data to a more
meaningful form. For example, a finance manager may be interested in knowing the total number of
shares applied for in a public issue. The data in this regard may be summarized and such summary
report may be more useful to him than the entire statement giving details of each share application
received.
c. Management of information
After the acquisition and/or transformation, the processed data may be either communicated to end user or
may be stored for future reference. If the information is to be communicated to the user, the format for the
reporting must be selected. The format for reporting may include simple columnar/tabular format or visual
formats such as charts, diagrams, graphs, etc.. Once the report format is decided, appropriate channels of
communication need to be selected and used. In case the information generated is to be used in future, it
may be stored on some mass storage medium. Such activities of communicating and/or storing information
may be termed as managing information.
(III) Knowledge Processing
It includes knowledge creation, knowledge sharing and knowledge application. This includes databases,
documents, expertise and experience of employees.
Create Capture/organize Access use
Knowledge use Knowledge sharing Knowledge application.
Knowledge management aimed at improving process and productivity towards building competitive
advantage.
2.4.4 Users of information
In any organization, information users could be managers, technical and professional specialists, or clerical
or operations personnel. External users could be clients/customers, donors, governmental and international
agencies and the public at large.
What are some of the characteristics of information users?
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 Information users have different wants, needs and cognitive styles;
 Information users have different information sources or types that best satisfy their preferences; and
 They have dynamic needs depending on the task they are performing at present, which is changing
through time.
Who are Information Users? Information as we have seen is sent to users. The information generated by an
organization can be valuable to many different people. Users of an organization's information can be
external or internal.
Bear in mind that information may be relevant to people outside the organization as well as its internal
management and employees. In fact, decisions relating to an organization can be taken by outsiders. Some
of the external users may be;
 The government (e.g. Department of Trade and Industry
 The Inland Revenue Authorities require information for taxation.
 An organization's suppliers take decisions to trade with the organization.
Internal users of information by status include the following:
 The board of the company; or public sector equivalent.
 Divisional general managers, reporting to these directors.
 Department heads.
Internal users of information by function are:
 Marketing, finance, administration, production, technical, personnel, research, etc.
2.4.5 Types of Information in terms of management hierarchy
A more functional classification of information is based on the basis of types of decisions. Information, as
required at different levels of management can be classified as operational, tactical and strategic.
1. Operational Information: Operational information relates to the day-to-day operations of the
organization and thus, is useful in exercising control over the operations that are repetitive in nature. Since
such activities are controlled at lower levels of management, operational information is needed by the lower
level management. Examples are such as cash positions and daily sales.
Operational information:
 Is derived almost entirely from internal sources;
 Is highly detailed, being the processing of raw data;
 Relates to the immediate term and task specific;
 Is prepared constantly, or very frequently;
 Is largely quantitative.
2. Tactical information: Tactical information helps middle level managers allocating resources and
establishing control to implement the top-level plans of the organization. For example, information
regarding the alternative sources of funds and their uses in the short run, opportunities for deployment of
surplus funds in short term securities, etc., may be required at the middle levels of management.
Tactical information is;
 Is derived from a more restricted range of external sources, so is thus primarily generated internally;
 Summarized at a lower level - a report might be included with summaries and raw data as backup;
 Describes or analyses activities or departments and it is relevant to the short and medium terms;
 Is prepared routinely and regularly based on quantitative measures.
3. Strategic information: While the operational information is needed to find out how the given activity
can be performed better, strategic information is needed for making choices among the business options.
The strategic information helps in identifying and evaluating these options so that a manager makes
informed choices which are different from the competitors and the limitations of what the rivals are doing
or planning to do. Such choices are made by leaders only. Strategic information is used by managers to
define goals and priorities, initiate new programs and develop policies for acquisition and use of corporate
resources.
Strategic information is therefore;
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 Derived from both internal and external sources;
 Summarized at a high level and relevant to the long term;
 Deals with the whole organization (although it might go in some detail);
 Often prepared on an 'ad hoc' basis in both quantitative and qualitative;
 Incapable of providing complete certainty, given that the future cannot be predicted.
2.5.1 Strategic Information Systems
Strategic planning-level information systems are designed to provide top management with information that
assists them in making long-range planning decisions for the organization.
Strategic planning information systems often have these characteristics:
Ad Hoc Basis: The information may be produced either regularly or periodically. For example, periodic
accounting system reports are used by top management in its planning function. However, strategic
planning information is more often produced when it is needed, on an ad hoc basis.
Unexpected Information: The information produced by the system may not be the information that was
anticipated.
Predictive Nature: The Information produced is usually predictive of future events rather than descriptive
of past events. Long-range planners try to set a course for an organization through an uncharted future. The
information that the strategic planning system provides should help these planners the risks involved in
their choice of routes.
Summary Form: The information produced is usually not detailed but in summary form. Long-range
planners are not usually interested in detailed information. They are usually concerned with more global
data.(Example, buying trends, overall demographic characteristics of groups of customers).
External Data: A large part of the data used for input to the system may be acquired form sources external
to the organization. (Investment opportunities, rates of borrowed capital, demographic characteristics of a
market make group and economic conditions must be obtained from data maintained outside the
organization).
Unstructured Format: The data used for input to the system may contain data that are unstructured in
format. For instance, forecasts of future market trends may use the opinions of store buyers, salespeople, or
market analysts obtained in casual conversations.
Subjectivity: The data used for input the system may be highly subjective and their accuracy may be
suspect. For instance, forecasts of future stock market trends may be based partly on rumors reported by
brokers. Forecasts of the expected market share of your organization within the industry observers who are
basing their opinion on rumors and on conversations held with a variety of industry personnel are examples
of subjective information.
2.5 Business Systems
2.6.1 System Concepts
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.
Systems boundary: All systems have a boundary that separates them from their environment. The
activities in a class include lectures, discussion, testing, grading, and preparation of assigned course work.
When defining a system, you need to establish a boundary.
Systems and subsystems: Systems may consist of numerous subsystems, each of which has elements,
interactions, and objectives. Subsystems perform specialized tasks related to the overall objectives of the
total system.
Outputs and Inputs: The inner workings of a system or subsystem are organized to produce outputs from
inputs. In this conversion process, some value, or utility, should be added to the inputs. For example, a

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training program should produce trained employees with certain skills, knowledge, or behavior from its
inputs--- untrained employees. The outputs of one subsystem usually become inputs into the next.
An interface is a connection at system or subsystems boundaries. Two typical business systems that
interface with each other are inventory control and purchasing.
Open and closed Systems: Open systems operate in an external environment and exchange information
and material with that environment. The external environment consists of the activities external to the
system boundary with which the system can interact. In contrast, a closed system is relatively self-
contained; exchange with its environment does not occur. Closed systems do not get the feedback they need
from the external environment and tend to deteriorate.
Systems Feedback: A system needs feedback to do its job. Feedback is form of control, because it requires
continuing adjustments in the activities of the system. Employees need feedback to learn how they are
doing job goals. Students receive grades or other kinds of evaluations from instructors to see whether they
are meeting course objectives.
2.6.2 Classification of Information System
These days when we talk about MIS, we should note that it is more of a computer-based system. As it has
been indicated earlier, the system in place is supposed to provide information that satisfies various needs.
The same system is expected to provide information for planning, decision making, and for routine day to
day operations. In view of satisfying these differing needs we have the following sub systems?
Transaction Processing Systems (TPS): Transaction processing systems’ focus is data. These systems are
designed to handle routine transactions and maintenance of database. Transaction processing systems (TPS)
form the basis of many of the information processing applications in organizations of today. Transactions
may be introduced into the system on-line in the form of time cards, inventory adjustments slips, insurance
applications, and the like. The essential activity of transaction processing system includes data capture and
validation, transaction-dependent processing steps, and database maintenance.
Knowledge Work Systems (KWS) and Office Automation Systems (OAS): serves information needs at
the knowledge and other levels of the organization. Knowledge work systems aid knowledge workers,
while office automation systems primarily aid data workers (although they are also used extensively by
knowledge and other workers).
In general, knowledge is people who hold formal university degrees and who are often members of a
recognized profession, like engineers, doctors, lawyers, and scientists. Their job consists primarily of
creating new information and knowledge. Knowledge work systems, such as scientific or engineering
design applications, promote the creation of new knowledge and ensure that new knowledge and technical
expertise are properly integrated into the business. They are primarily secretaries, accountants, filling
clerks, or managers whose jobs are principally to use, manipulate or disseminate information. Office
automation systems are information technology applications designed to increase data workers’
productivity by supporting the coordinating and communicating activities of the typical office.
Management Reporting Systems: The focus of these systems is information. They are designed to supply
information for routine responsibility reporting from databases. The principal identifying attribute of
management reporting systems (MRS) are: they are built for situations where information requirements are
reasonably well known, they are oriented toward reporting on the past and present, and, they generally
report on internal operations. These characteristics clearly deal with operational and tactical types of
activities.
Decision Support System (DSS): Decision support systems’ focus is a decision; such systems are designed
to accommodate individual and group decision- makers. Decision support systems provide managers with
opportunities to evaluate alternatives related to a given problem or task. The principal identifying attributes
of decision support systems (DSS) are: direct support the decision-making process and permitting
projection. These characteristics clearly relate to managers, their information needs, and activities. Group
decision support systems (GDSS) use computer mediated-communication tools, such as networks,
anonymous input and voting, and whiteboards, to support groups as they make decisions.
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Executive information systems (EIS): The focus of these systems is accessibility. That is, senior
executives need access to internal and external information. Principal identifying attributes of executive
information system (EIS) are: they provide immediate access to information reflecting.
Key success factors and access to internal and external information and they are easily tailored to user’s
preferences. These characteristics are critical for senior executive’s types of activities and decisions.
Expert Systems: Expert systems are computer programs designed to operate within a narrow problem
domain and to capture and present to the user expert knowledge. These systems can be developed to assist
decision- makers in such diverse areas as classification, diagnosis, and monitoring, among others. Most
importantly, the knowledge base of an expert system consists of human judgment and rules of thumb, as
well as accepted facts and rules within its domain.
Expert systems consists of a knowledge base, a friendly user interface, an inference engine to control the
system operation as well as the application of the system’s knowledge, and an explanation subsystem to
permit the system to explain to the user how it arrived at conclusions.