Prof. Nitin C. Kamat · 2018-10-17 · 3.5 Herbert Simons Model of Decision Making 3.6 Group...

Prof. Nitin C. Kamat B.E. (Electrical)

ManagementInformation

Systems

MUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNELUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI

© AUTHORNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers.

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Typeset by : Elite Art, Delhi-110002Printed by : M/s. Aditya Offset Process (I) Pvt. Ltd., Hyderabad. On behalf on HPH.

First Edition : 2011Second Revised Edition : 2014

PREFACE TO SECOND EDITIONWith a deep sense of satisfaction I am very grateful for a remarkableresponse towards this book from various Institutions, Faculties andStudents. There have been very positive suggestions from all corners,particularly from students, who have benefited from the use of this book.

Information Technology is ever changing and new technologies areadded every day. To align with this comprehensive and coverage ofvarious topics have been modified accordingly.

Contents of book are completely revised and in line with PuneUniversity Modified Syllabus 2013-14 for MBA

Chapter 12 Supply Chain Management, and Chapter 13 CustomerRelationship Management are deleted and new chapters on Cloudcomputing and Mobile Computing are added.

For guidance of Students, hints for answering questions and casestudies appear in Pune University MBA Examination for last six yearsare included in Appendix

The layout of the book has been modified to put the subject in bettersequence, Objectives, Summary and Review questions have sincebeen added

I being Practicing ERP Consultant and instrumental in developingeducational activities for Welingkar Distance Education Institute havepaid to the practical use of MIS techniques and included variousSnapshots for various modules.

Being a faculty, I am involved in imparting training in MIS as subject forMBA Institutes in Pune and collecting feedback from students ofSymbiosis Institute of Management (UG), Pune.

I am thankful to my Guru Padmashri Dr.S.B.Muzumdar, Presidentand founder director of Symbiosis International University andalso giving blessings for second edition.

I am also thankful to my school mate and friend Pramod Jejurikar,Chairman, South Asia e-learning Committee, Rotary Club RID 3131District Governor who has first inspired me to write this book.

I am thankful to Prof Rajesh Aparnath, HOD, Distance Education Cell,Welingkar Institute of Management, who has given many newopportunities in writing books in various IT subjects such as E-Commerce, Internet Marketing and Enterprise Solutions. This experiencegained in last two years was very useful in updating this MIS book.

My heartfelt thanks to Mr.K.N Pandey, Direcor, and Mrs. Nimisha Kadamof Himalaya Publishing House Pvt. Ltd., Mumbai, instrumental in frontand back end in marketing and publishing this book in variousManagement Institute all over India and also for giving useful feedbackfor modifying contents of this book.

At last but not the least I am grateful to my family members, my wifeArpita, sons Chinmay and Tanmay, daughters in law Chaitali and Asmitawho helped me in various stages of collating information from differentsources.

Prof. Nitin Kamat

Reader’s feedback is highly appreciated. Feel free to contact me ormail to communicate your views for improvement.

[email protected],[email protected]

Section 1Chapter 1 : Overview : Management Information Systems 3-22

1.1 Introduction, Need of MIS1.2 Purpose and Objectives1.3 MIS Definitions1.4 Types of Information Systems1.5 Conceptual Design Model of MISv1.6 Role of MIS as Instrument for Organisational Change1.7 Information Systems

1.7.1 Strategic Information System1.7.2 Information Systems to Support Three Levels of Strategy used in Business1.7.3 Why Information Systems?

1.8 Key Management Issues1.9 Contemporary Approach to Information Systems1.10 Porter-Miller Postulates1.11 Summary1.12 Review Questions

Chapter 2 : Information Systems in Organisation 23-52

2.1 IS at the Organisational Level2.2 Types of IS2.3 Interrelationship2.4 IS by Function within Organisational Level2.5 System as Planned Organisational Change2.6 Establishing Organisational Information Requirement

2.6.1 Need for Information System in Organisation2.7 Enterprise Analysis2.8 Critical Success Factors2.9 System Development and Organisational Change2.10 The Spectrum of Organisational Change2.11 Information Uncertainty

DETAIL CONTENTS

2.12 Value of Information2.13 Sources of Information2.14 Information Reporting in Organisation2.15 Human as Information Process

Chapter 3 : Decision Making and Management Information System 53-100

3.1 Manager’s Role in Decision Making3.2 Types of Decision3.3 Conceptual Models of Decision Making3.4 The Process of Decision Making3.5 Herbert Simons Model of Decision Making3.6 Group Decision Making3.7 Characteristics of a DSS3.8 Capabilities of DSS3.9 Decision Making Levels3.10 Integration of TPS, MIS, and DSS3.11 Components of a DSS3.12 Group Decision Support System3.13 Decision Making Tools

3.13.1 Decision Tables3.13.2 Decision Tree3.13.3 Principle of Rationality

3.14 Role Play3.15 Models for Decision Making

Chapter 4 : Database Management Systems 101-127

4.1 Data Cycle4.2 Database Design4.3 Database Languages4.4 Types of Database Management System4.5 Networking4.6 Network Topology

Chapter 5 : Data Warehouse and Data Mining 128-150

5.1 Introduction

5.2 History of Data Warehousing

5.3 Data Warehouse

5.4 Data Warehouse Architecture

5.5 Benefits of Data Warehousing

5.6 Online Analytical Processing

5.7 Multidimensional Data

5.8 Data Mining

5.9 Data Mining Tools

5.10 Tasks Solved by Data Mining

Chapter 6 : System Analysis and Design 151-187

6.1 Introduction

6.2 Type of System

6.3 Systems Development

6.4 The Systems Development Life Cycle (SDLC)

6.5 Design Tools use in System Analysis

6.5.1 Data Flow Diagram (DFD)

6.5.2 Entity Relationship Diagram

6.6 Systems Development Methodologies

6.6.1 Waterfall Development-based Methodology

6.6.2 Parallel Development

6.6.3 Development Methodology: Rapid Application Development (RAD)

6.6.4 Prototyping

6.7 Project Team Skills and Roles

Chapter 7 : Information Security and Control 188-207

7.1 Information Security7.2 Basic Principles of Information Security7.3 Ethical Issues7.4 Threats to Information Security7.5 Protecting Information Resources7.6 What are firewalls?

Chapter 8 : Information System and Software Quality Assurance 208-219

8.1 Quality8.2 Quality Concepts

8.3 Quality Costs8.4 Total Quality Management8.5 Software Quality Assurance8.6 Software Reviews8.7 Statistical Quality Assurance8.8 Static Validation Techniques8.9 SQA Plan

Chapter 9 : Functional Applications in Manufacturing and Service Sector 220-236

9.1 Introduction9.2 MIS Application Framework (Model)9.3 MIS Operations (Production)9.4 MIS Materials9.5 Human Resource Management9.6 Financial Management9.7 Marketing Management9.8 Hotel Management System9.9 Banking System

Section 2Chapter 10 : Enterprise Resource Planning 239-274

10.1 What is the Relation of MIS and ERP?10.2 ERP Definition10.3 ERP Vendors10.4 What is the difference between SAP and ERP?10.5 ERP Customization10.6 Why ERP?10.7 Seamless Integration Policy10.8 Implementing Strategy10.9 ERP Project Management10.10 BPR Overview10.11 Why ERP Project Fails?10.12 Selecting ERP10.13 ERP Implementation Tips for Success

10.14 ERP Concept10.15 Scope of ERP Modules10.16 ERP Document Flow and Material Flow

Chapter 11 : IT Enabled Services 275-302

11.1 Business Process Outsourcing11.2 Driving Factors of BPO Revolution11.3 Business Specialization11.4 BPO Types11.5 Identifying and Selecting BPO Opportunity11.6 Vendor Identification and Selection11.7 Fundamental Characteristics of a BPO Project11.8 BPO Relationship Success Factors11.9 Profit and BPO Relationship11.10 Developing Interpersonal Relationship11.11 Geography Information System

Chapter 12 : Cloud Computing 303-318

12.1 Introduction12.2 Definition12.3 What is Cloud Computing?12.4 Types of Cloud Computing12.5 Cloud Architecture12.6 Cloud Computing Benefits12.7 Cloud Computing Transforms Your Business12.8 Summary12.9 Review Questions

Chapter 13 : In-Memory Technology and Enterprise Mobility 319-331

13.1 Introduction13.2 What is Memory Concept?13.3 What is In-Memory Technology?13.4 Mobility and Its Need in an Enterprise13.5 What is Enterprise Mobility?

13.6 Application of Enterprise Mobility to Business13.7 Definition of Enterprise Mobility13.8 Use of Mobile Technology in Enterprise13.9 Summary13.10 Review Questions

Section 3Chapter 14 : Real Time Snapshots of MIS and ERP Software for VariousModules 335-376

14.1 Purchase Master14.2 Purchase Order14.3 Item Master14.4 Inventory Transaction14.5 Work Order Information14.6 Production Reports14.7 Production Master14.8 Process Production Entry14.9 Production Indent14.10 Sales Engineer Master14.11 CRM Enquiry Data Sub Menu and Entry Screen14.12 Proforma Invoice14.13 Commercial Invoice14.14 Material Inward Transaction14.15 GL Master14.16 Account Transaction14.17 Money Receipts14.18 Debit Note Journal Voucher14.19 Payment Voucher14.20 Credit Note14.21 Expense Voucher14.22 Credit Note14.23 Service Tax Integration

Chapter 15 : Case Studies 377-428

15.1 Hospital Management15.2 Payroll Accounting and HR Management

15.3 ERP for Corrugated Box Manufacturing Industry15.4 ERP for Furniture Manufacturing Company15.5 ERP for Chemical Company15.6 Kettle Products15.7 Toshiba Case for Data Warehousing15.8 MIS in Banking15.9 DSS Case Study15.10 Leading Edge Award Winning Mobility Solution Provides MIS with Real Time Advantage15.11 Michael K. Howard Limited15.12 Cottsway Housing Association15.13 South Staffs Housing Association15.14 Garment Company15.15 Retail Pharmacy Chain — Global Operation15.16 How MIS Should Not be Done. Anif MIS Case Study15.17 FMCG Companies Get IT Savvy15.18 Bajaj Electrical bagsed the CSI 2010 IT Ecellence Award for its ERP15.19 ERP in a Company which is Specialising in Glass Window and Glass Shuttrs in Pune15.20 Scae Out State Server. In Memory Date Grid15.21 Royal Mail Group15.22 Cloud Computing for Small Business

Appendix A: Pune University Questions and Answers (Guideline) 429-449

A to Z Index 451-453

OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 1 n

Section 1

CONTENTSChapter 1 Overview Management Information Systems

Chapter 2 Information Systems in OrganisationsChapter 3 Decision Making and Management Information Systems

Chapter 4 Database Management SystemsChapter 5 Data Warehouse and Data Mining

Chapter 6 System Analysis and DesignChapter 7 Information Security and Control

Chapter 8 Information System and Software Quality AssuranceChapter 9 Functional Applications in Manufacturing and Service Sector

n 2 n MANAGEMENT INFORMATION SYSTEMS


Objectives

Identify the Need of Management Information System in Organization

Recognise the Purpose and Benefits of Management Information System in Organization

Understand MIS Concept and Design Model

Explore Key Management Issues

Identify Types of Information System

Understand Strategic Information System

Structure

1.1 Introduction, Need of MIS

1.2 Purpose and Objectives

1.3 MIS Definitions

1.4 Types of Information Systems

OverviewManagement Information Systems

Chapter 1

3


MIS Solutions grow with Customers’ changing needs.

Add new functionality as you need

1.5 Conceptual Design Model of MIS

1.6 Role of MIS and MIS instrument for organizational change

1.7 Information Systems

1.7.1 Strategic Information System

1.7.2 Information Systems to Support Three Levels of Strategy used in Business.

1.7.3 Why Information Systems

1.8 Key Management Issues

1.9 Contemporary Approach to Information Systems

1.10 Porter-Miller Postulates

1.11 Summary

1.12 Review Questions


1.1 Introduction, Need of MIS

Management Information Systems is based on the premise that information system knowledge isessential for creating competitive firms, managing global corporations, adding business value andproviding useful products, services to the customers. This book provides an introduction to managementInformation Systems that undergraduate and MBA students will find vital to their professional success

Today, it is widely recognized that information system knowledge is essential to managers becausemost organisations need information system to survive and prosper. Information system can helpcompanies extend their reach to far away location, offer new products, services, reshape jobs and workflows and perhaps profoundly change the way they conduct business.

We are living in a time of great change and working in an Information Age. Managers have toassimilate masses of data, convert that data into information, form conclusions about that informationand make decisions leading to the achievement of business objectives. For an organization, informationis as important resource as money, machinery and manpower. It is essential for the survival of theenterprise.

Before the widespread use of computers, many organizations found difficulties in gathering, storing,organizing and distributing large amounts of data and information. Developments in computer technologymade possible for managers to select the information they require, in the form best suited for theirneeds and in time their wants. This information must be current and in many cases is needed by manypeople at the same time. So it has to be accurate, concise, timely, complete, well presented and storable.Most firms nowadays depend on IT.

The term management information system (MIS) made its first appearance in U.S. navy report on theuse of computers to construct a single integrated system to manage all navy resources.

A management information system (MIS) is a subset of the overall internal controls of a businesscovering the application of people, documents, technologies, and procedures by management accountantsto solve business problems such as costing a product, service or a business-wide strategy. Managementinformation systems are distinct from regular information systems in that they are used to analyze otherinformation systems applied in operational activities in the organization. Academically, the term iscommonly used to refer to the group of information management methods tied to the automation orsupport of human decision making, e.g., Decision Support Systems, Expert Systems, and ExecutiveInformation Systems.

Information is necessary input for achieving our objectives to learn Information can be considered as the essence of all human intellectual activities It is a well known fact that information is fundamental input for activities Information would acquire importance like raw material, natural resources and energy as commodities. Chief Information Officer is a common designation in any enterprise today It is not only business executives and managers who need information support Without MIS, it would be impossible for information to be made available Organizations, involve several people with different background, culture, aspirations A single organisation consists of multiple business units located in different cities Materials Manager need information about inventory and capital blocked in inventory HR Managers need information about attendance for preparing payroll


Plant Manager for resource allocation Need in Manufacturing and Service sectors

1.2 Purpose and Objectives of MIS

MIS combines tech., with business to get people the information they need to do their jobs better/faster/smarter. MIS professionals work as systems analysts, project managers, systems administrators,etc., communicating directly with staff and management across the organization.

An ‘MIS’ is a planned system of the collecting, processing, storing and disseminating data in theform of information needed to carry out the functions of management. In a way, it is a documentedreport of the activities those were planned and executed.

According to Philip Kotler “A marketing information system consists of people, equipment, andprocedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information tomarketing decision makers.”

Management information systems are those systems that allow managers to make decisions for thesuccessful operation of businesses. Management information systems consist of computer resources,people, and procedures used in the modern business enterprise. MIS also refers to the organization thatdevelops and maintains most or all of the computer systems in the enterprise so that managers canmake decisions. The goal of the MIS organization is to deliver information systems to the various levelsof corporate managers. MIS professionals create and support the computer system throughout thecompany. Trained and educated to work with corporate computer systems, these professionals areresponsible in some way for nearly all of the computers, from the largest mainframe to the desktop andportable PCs.

Its purpose is to help managers to solve structured problems. But it should also fulfill a number ofother purposes:

It should provide a basis to analyze warning signals that can originate both externally andinternally; this is the main function of data base;

It should automate routine operations thus, avoiding human work in the processing tasks; It should assist management in making routine decisions; It should provide the information necessary to make non-routine decisions; It should serve as a strategic weapon to gain competitive advantageThe fundamental purpose is to provide information support to management functions within an

organisation. MIS is designed and implemented with a view to provide the required information supportto undertake managerial activities such as planning, organizing, staffing, coordination, control anddecision making

MIS in a business organisation has several objectives. They are dependent on different factorsspecific to particular business.

Some of the common objectives are :1. To provide right type of information at lowest cost and right time2. To ensure managerial activities are provided with adequate and appropriate information support3. To ensure information overloads as well as generation of redundant information is avoided.


1.3 MIS Definition

Kelly, defines Management Information System as “A combination of human and computer-basedresources that result in collection, storage, communication and use of data for the purpose of efficientmanagement of operations and for business planning

T. Lucey, defines MIS as “A system to convert data from external and internal sources intoinformation and to communicate that information in an appropriate form to managers at all levels in allfunctions to enable them to make timely and effective decisions for planning, directing and controllingthe activities of organisation

According to Davis Gordon, “Integrated user machine system for providing information to supportoperations, management and decision making functions in an organisation. The system uses computerhardware and software, manual procedures, models for analysis, planning control and decision making,and a database

According to Barry Cushing, “MIS is a set of human and capital resources within an organisationwhich is responsible for the collection and processing of data to produce information which is useful toall levels of management in planning and controlling activities in an organisation.

Now if we put discussion together, We can say— MIS is defined as computer-based information system.— MIS is system based on the database of the organisation evolvedThough there are a number of definitions, all of them converge on one single point, i.e., the MIS is

a system to support the decision making function in the organization. The difference lies in defining theelements of the MIS. However, in today is world MIS a computerized business processing systemgenerating information for the people in the organization to meet the information needs of decisionmaking to achieve the corporate objective of the organization.

In any organization, small or big, a major portion of the time goes in data collection, processing,documenting it to the people. Hence, a major portion of the overheads goes into this kind of unproductivework in the organization. Every individual in an organization is continuously looking for some informationwhich is needed to perform his/her task. Hence, the information is people-oriented and it varies with thenature of the people in the organization.

The difficulty in handling this multiple requirement of the people is due to a couple of reasons. Theinformation is a processed product to fulfill an imprecise need of the people. It takes time to search thedata and may require a difficult processing path. It has a time value and unless processed on time andcommunicated, it has no value. The scope and the quantum of information is individual-dependent andit is difficult to conceive the information as a well-defined product for the entire. Organization. Since thepeople are instrumental in any business transaction, a human error is possible in conducting the same.Since a human error is difficult to control, the difficulty arises in ensuring a hundred per cent qualityassurance of information in terms of completeness, accuracy, validity, timeliness and meeting the decisionmaking needs.

In order to get a better grip on the activity of information processing, it is necessary to have aformal system which should take care of the following points:

Handling of a voluminous data.

Confirmation of the validity of data and transaction.


Complex processing of data and multidimensional analysis.

Quick search and retrieval.

Mass storage.

Communication of the information system to the user on time. Fulfilling the changing needs of the information.

The management information system uses computers and communication technology to deal withthese points of supreme importance.

1.4 Types of Information System

There are six major types of information systems in contemporary organisations that are designedfor different purposes and different audiences.

1. Operational-level systems are Transaction Processing Systems (TPS), such as payroll or orderprocessing, that track the flow of the daily routine transactions necessary to conduct business.Knowledge-level systems support clerical, managerial and professional workers.

2. They consist of Office Automation Systems (OAS) for increasing the productivity of dataworkers and Knowledge Work Systems (KWS) for enhancing the productivity of knowledgeworkers

3. Management-level systems (MIS and DSS) provide the management control level with reportsand access to the organisation’s current performance and historical records

4. Most MIS reports condense information from a TPS and are not highly analytical. Decisionsupport systems (DSS) support management decisions when these decisions are unique, rapidlychanging, and not specified easily in advance.

These systems have more advanced analytical models and data analysis capabilities than MISand often draw on information from external as well as internal sources.

5. Executive Support Systems (ESS) support the strategic level by providing a generalized computingand communications environment to assist senior management’s decision making.

An ESS has limited analytical capabilities but can draw on sophisticated graphics software andmany sources of internal and external information.

6. An Expert System is a Software System that attempts to reproduce the performance of one or morehumans and experts, most commonly in a specific problem domain.

1.5 Conceptual Design Model of MIS

Process Model defines entity or a set of activities that together respond to a set of inputs to producedesired output.

The process of converting input to desired output is governed by factors such as performancestandards, knowledge, procedures, material, machine, constraints and control points


MIS or management information sysems is the name given for data processing and so it is needed inan organization as it is able to process data so much faster than people could do it and because anorganization has so much data to process MIS is essential for the smooth running of the organization.

The concept of the MIS has evolved over a period of time comprising many different facets of theorganizational function. MIS is a necessity of all the organizations.

The initial concept of MIS was to process data from the organization and present it in the form ofreports at regular intervals. The system was largely capable of handling the data from collection toprocessing. It was more impersonal, requiring each individual to pick and choose the processed dataand use it for his requirements.

This concept was further modified when a distinction was made between data and information. Theinformation is a product of an analysis of data. This concept is similar to a raw material and the finishedproduct. What are needed are information and not a mass of data. However, the data can be analyzed ina number of ways, producing different shades and specifications of the information as a product. It was,therefore, demanded that the system concept be an individual-oriented, as each individual may have adifferent orientation towards the information. This concept was further modified, that the system shouldpresent information in such a form and format that it creates an impact on its user, provoking a decisionor an investigation. It was later realized then even though such an impact was a welcome modification,some sort of selective approach was necessary in the analysis and reporting. Hence, the concept ofexception reporting was imbibed in MIS. The norm for an exception was necessary to evolve in theorganization. The concept remained valid till and to the extent that the norm for an exception remainedtrue and effective. Since the environment turns competitive and is ever changing, fixation of the normfor an exception becomes futile exercise at least for the people in the higher echelons of the organization.The concept was then evolved that the system should be capable of handling a need-based exceptionreporting. This need may be either of an individual or a group of people. This called for keeping all datatogether in such a form that it can be accessed by anybody and can be processed to suit his needs. Theconcept is that the data is one but it can be viewed by different individuals in different ways. This gaverise to the concept of DATA BASE, and the MIS based on the DATABASE proved much more effective.

Over a period of time, when these conceptual developments were taking place, the concept of theend-user computing using multiple databases emerged. This concept brought a fundamental charge inMIS. The change was decentralization of the system and the user of the information becomingindependent of computer professionals. When this becomes a reality, the concept of MIS changed to adecision making system. The job in a computer department is to manage the information resource andleave the task of information processing to the user. The concept of MIS in today’s world is a systemwhich handles the databases, provides computing facilities to the end-user and gives a variety ofdecision making tools to the user of the system.

ProcessingInput Output

Knowledge and Training Methods and procedures

MachinesMaterial


1.6 Role of MIS and MIS Instrument for Organizational Change

MIS acts’ as an agent or a catalyst to bring about organisational change that is needed to cope upwith the changing business environment and the effect of external forces. MIS has shifted from back officeto front office. Information system professionals are conversant with constant change and rapid rate oftechnological obsolescence, offers a “Cockpit view” to managers.

The role of the MIS in an organization can be compared to the role of heart in the body. Theinformation is the blood and MIS is the heart. In the body, the heart plays the role of supplying pureblood to all the elements of the body including the brain.

The heart works faster and supplies more blood when needed. It regulates and controls the incomingimpure blood, processes it and sends it to the destination in the quantity needed. It fulfills the needs ofblood supply to human body in normal course and also in crisis.

The MIS plays exactly the same role in the organization. The system ensures that an appropriatedata is collected from the various sources, processed, and sent further to all the needy destinations.The system is expected to fulfill the information needs of an individual, a group of individuals, themanagement functionaries: the managers and the top management.

The MIS satisfies the diverse needs through a variety of systems such as Query Systems, AnalysisSystems, Modeling Systems and Decision Support Systems. The MIS helps in Strategic Planning,Management Control, Operational Control and Transaction Processing.

The MIS helps the clerical personnel in the transaction processing and answers their queries on thedata pertaining to the transaction, the status of a particular record and references on a variety ofdocuments. The MIS helps the junior management personnel by providing the operational data forplanning, scheduling and Controlling and helps them further in decision making at the operations levelto correct an out of control situation. The MIS helps the middle management in short-term planning,target setting and controlling the business functions. It is supported by the use of the managementtools of planning and control. The MIS helps the top management in goal setting, strategic planningand evolving the business plans and their implementation.

The MIS plays the role of information generation, communication, problem identification and helpsin the process of decision making. The MIS, therefore, plays a vital role in the management, administrationand operations of an organization.

1.7 Information Systems

The various types of systems the organisation, exchange data with one another. Transactionprocessing systems are major source of data for other systems, especially MIS and DSS. Executivesupport systems are primarily receipts of data from lower level systems.

However, the different systems in an organisation are only loosely integrated. The information needsof the various functional areas and organisational levels are too specialized to be served by a singlesystem.

1.7.1 Strategic Information System

A strategic information system in changes the goals, operations, product, services, or environmentalrelationship of organisations to help them gain an edge over competitors. Today, information systemscan so dramatically boost a firm’s productivity and efficiency that business view information as a weaponagainst competition and a strategic resource. In the past, information used to be considered a bureaucraticnuisance.


1.7.2 Information systems to support three levels of strategy used in business.

Information systems can be used to support strategy at the business, firm and industry level. Information systems can be used to help firms become a low-cost producer, differentiate products,

or serve new markets. Information systems can also be used to “lock in” customers and suppliers using efficient customer

response and supply chain management applications. Value chain analysis is useful at the business level to highlight specific activities in the business

where information systems are most likely to have a strategic impact. At the firm level, information systems can be used to achieve new efficiencies or to enhance services

by tying together the operations of disparate business units, so that they can function as a wholeor promote the sharing of knowledge across business units.

At the industry level, systems can promote competitive advantage by facilitating cooperation withother firms in the industry, creating consortiums or communities for sharing information, exchangingtransactions or coordinating activities.

The competitive forces model and network economics are useful concepts for identifying strategicopportunities for systems at the industry level.

1.7.3 Why Information Systems

Four powerful worldwide changes have altered the business environments :- Emergence of the Global Economy- Transformation of Industrial Economies- Transformation of the Business Enterprise- The Emerging Digital Firm

Emergence of the Global Economy Management and control in a global marketplace Competition in world markets Global work groups Global delivery systemsTransformation of Industrial Economies Knowledge and information-based economies New products and services Knowledge a central productive and strategic asset Time-based competition Shorter product life Turbulent environment Limited employee knowledge baseTransformation of the Enterprise Flattening


Decentralization Flexibility Location Independence Low Transaction and Coordination Costs Empowerment Collaborative Work and TeamworkEmergence of the Digital Firm Digitally enabled relationships with customers, suppliers and employees Core business processes accomplished via digital networks Digital management of key corporate assets Rapid sensing and responding to environmental changes

Information as a strategic resource

Business environment is prone to changes and this factor makes business planning very complex.Some factors such as the market forces, technological changes, complex diversity of business andcompetition have a significant impact on any business prospects. MIS is designed to assess andmonitor these factors. The MIS design is supposed to provide some insight into these factors enablingthe management to evolve some strategy to deal with them.

Since these factors are a part of the environment, MIS design is required to keep a watch onenvironment factors and provide information to the management for a strategy formulation. Strategyformulation is a complex task based on the strength and the weakness of the organization and themission and goals it wishes to achieve. Strategy formulation is the responsibility of the top managementand the top management relies on the MIS for information.

There are various business strategies such as overall company growth, product, market, financingand so on. MIS should provide the relevant information that would help the management in decidingthe type of strategies the business needs. Every business may not require all the strategies all the time.

The type of strategy is directly related to the current status of business and the goals it wishes toachieve. The MIS is supposed to provide current information on the status of the business vis-a-vis thegoals. MIS is supposed to give a status with regard to whether the business is on a growth path or isstagnant or is likely to decline, and the reasons thereof. If the status of the business shows a decliningtrend, the strategy should be of growth. If business is losing in a particular market segment, then thestrategy should be a market or a product strategy.

The continuous assessment of business progress in terms of sales, market, quality, profit and itsdirection becomes the major role of MIS. It should further aid the top management in strategy formulationat each stage of business.

The business does not survive on a single strategy but it requires a mix of strategy operating atdifferent levels of the management. For example, when a business is on the growth path, it wouldrequire a mix of price, product and market strategies. If a business is showing a decline, it would needa mix of price-discount, sales promotion and advertising strategies.


The MIS is supposed to evaluate the strategies in terms of the impact they have on business andprovide an optimum mix. The MIS is supposed to provide a strategy-pay-off matrix for such an evaluation.

In business planning, MIS should provide support to top management for focusing its attention ondecision making and action. In business management, the focus shifts from one aspect to another. Inthe introductory phase, the focus would be on a product design and manufacturing. When the businessmatures and requires and requires to sustain or to consolidate, the focus would be on the post salesservices and support. The MIS should provide early warning to change the focus of the managementfrom one aspect to the other.

Evolving the strategies is not the only task the top management has to perform. It also has toprovide the necessary resources to implement the strategies. The assessment of resource need, and itsselection becomes a major decision for the top management. The MIS should provide information onresources, costs, quality and availability, for deciding the cost effective resource mix.

When the strategies are being implemented, it is necessary that the management gets a continuousfeedback on its effectiveness in relation to the objective which they are supposed to achieve. MIS issupposed to give a critical feedback on the strategy performance. According to the nature of thefeedback, the management may or may not make a change in the strategy mix, the focus and theresource allocation.

MIS has certain other characteristics for the top management. It contains forecasting models toprobe into the future—the business model for evaluation of the strategy performance by simulationbusiness conditions. It contains functional models such as the model for a new product launching,budgeting, scheduling and the models using PERT /CPM technique for planning.

MIS for the top management relies heavily on databases which are external to the organization. Themanagement also relies heavily on the internal data which is evolved out of transaction processing.Management uses the standards, the norms, the rations and the yardsticks while planning and controllingthe business activities. They are also used for designing strategies and their mix.

The MIS is supposed to provide correct, precise and unbiased standards to the top management forplanning.

We can summarise the role of the MIS in the top management function as follows.MIS supports by way of information, to1. decide the goals and objectives.2. determine the correct status of the future business and projects.3. provide the correct focus for the attention and action of the management.4. evolve, decide and determine the mix of the strategies.5. evaluate the performance and give a critical feedback on the strategic failures.6. provide cost-benefit evaluation to decide on the choice of resources, the mobilization of

resources, and the mix of resources.7. generate the standards, the norms, the ratios and the yardsticks for measurement and control.Success of a business depends on the quality of support the MIS gives to the management. The

quality is assured only through an appropriate design of the MIS integrating the business plan with theMIS plan.


Characteristics of Strategic Information

1.8 MIS and Key Management Issues

PlanningPlanning is basic to all managerial functions. It is a process of selecting one course of action from

different alternatives, for achieving the stated goals, objective and targets. It is a decision makingprocess determining in advance what to do, when to do, how to do what is to do. Planning creates aframe of activity and events which are to happen or a runway for achieving corporate goals, objectiveand targets. Planning process demands resource allocation through decision making. The organizationmay have a plan; but question is how effective the plan is. Organizing

Organizing is an important step in the managerial process and relates to the people in an enterprise.It deals with a quantitative and a qualitative aspect of manpower in terms of placement, the roles theyand the relations amongst them, with the aim that they work together effectively towards accomplishingthe goals, objectives and the targets of the organization. In essence, it deals with organizing themanpower resources for a given plan of execution. Staffing

The function of staffing deals with manning the enterprise as per the organization structure so thatthey together implement the process of the management. Staffing involves not only selection of aperson but also appraisal and development so that they perform their designated roles. The selection ofa person is a difficult task.


Coordinating and DirectingAfter organizing the resources and staffing the planned activities, the business plan is launched.

The process of implementing thepla is dynamic. It calls upon the manager to perform a number of thingsin a coordinated manner so that the plan remains valid and the development takes place as per the plan.Controlling

The last but the most important step in the process of management is controlling, the successfulexecution of management plan. Without control, the process becomes unproductive. The purpose ofcontrol is to regulate the process in such a way that the management process continuously strives forthe achievement of the goals, objectives and targets. The control is exercised through a system.

MIS: A Tool for Management Process

The process of management requires a lot of data and information for execution of the plan. Thisrequirement arises on account of that in each step of management, a variety of decisions are taken tocorrect the course of development. The decisions or actions are prompted due to the feedback given bythe control system incorporated in the management system. The control of overall performance is madepossible by way of budget summaries and reports. The summary showing sales, costs, profit and returnon investment throws light on the direction the organization is moving to. The exception reports identifythe weaknesses in the system of management.

If effective management system is to be assured, it has to rest on business information. Themanagement performance improves if the business risk and uncertainties are handled effectively. If theinformation provided is adequate, one can deal with these factors squarely. The information supportimproves the lack of knowledge, enriches experience and improves analytical abilities leading to betterbusiness judgment. So, if efficient information support is to be provided, it calls for a system with thegoals of generating management information. A good MIS must furnish information to the managers toexpand their knowledge base. He must know the adverse trends in business, the shortfalls and failuresin the management process.

The MIS should provide the support to act decisively. It should support management in terms ofbasic business information at the corporate level and meet the specific needs of the managers. It shouldhighlight on the critical success factors and support key areas of management.

MIS should have, wherever possible, support systems to help the manager in decision making.Modern management systems rely on MIS. The complexity of business operations with skill and foresightto avert the crisis.

Modern business management requires shift from the traditional controls to managerial control. Theshift requires the manager to become more efficient in handling the work he is entrusted with. Themanager becomes more efficient if he is well informed, made richer in knowledge, experience and analyticalskills and is able to face the uncertainties and the risk of business. This is possible only if he issupported by MIS in his specific task of management of business.

Modern business has business has become more technology- oriented wherein the manager isrequired to be up to date on technological advancement not only in his field of operations but also inthe other technologies. The emerging new technologies are posing threats to current business and areopening new opportunities for new business ventures. The manager has to keep himself abreast on theinformation of how these technologies affect his business prospects. A good MIS designed for such asupport is absolutely essential. MIS therefore, is a tool for effective execution of the managementprocess.


1.9 Contemporary Approach to Information Systems

1. Technical Approach2. Behavioral Approach3. Socio-technical Approach

Technical Approach

Computer scienceTheories of computabilityMethods of computationMethods of efficient data storage and access

Management scienceModels for decision makingManagement practices

Operations researchMathematical techniques for optimizing selected parameters of organisations, such as transportation,inventory control, etc.

Socio-technical SystemsOptimize systems performance: Technology and organisationOrganisations mutually adjust to one another until fit is satisfactoryInformation systems are socio-technical systems. Although they are composed of machines, devices,

and “hard” physical technology, they require substantial social, organizational, and intellectualinvestments to make them work properly. Since problems with information systems — and their solutions— are rarely all technical or behavioral, a multidisciplinary approach is needed.

Operations Research

Technical Approaches

Computer Science

Management Science Sociology

EconomicsPsychology

Behavioral Approaches


The technical approach emphasizes mathematically-based, normative models to study informationsystems, as well as the physical technology and formal capabilities of these systems. The behavioralapproach, a growing part of the information systems field, does not ignore technology, but tends tofocus on non-technical solutions concentrating instead on changes in attitudes, management andorganizational policy, and behavior.

MIS combines the work of computer science, management science, and operations research with apractical orientation toward developing system solutions to real-world problems and managinginformation technology resources. It is also concerned with behavioral issues surrounding thedevelopment, use, and impact of information systems, which are typically discussed in the fields ofsociology, economics, and psychology.

In the socio-technical view of systems, optimal organizational performance is achieved by jointlyoptimizing both the social and technical systems used in production. Adopting a socio-technical systemsperspective helps to avoid a purely technological approach to information systems.

Technology must be changed and designed, sometimes even “de-optimized,” to fit organizationaland individual needs. Organizations and individuals must also be changed through training, learning,and planned organizational change to allow technology to operate and prosper. The technical approachemphasizes mathematically based, normative models to study information systems, as well as the physicaltechnology and formal capabilities of these systems. The behavioral approach, a growing part of theinformation systems field, does not ignore technology, but tends to focus on non-technical solutionsconcentrating instead on changes in attitudes, management and organizational policy, and behavior.

MIS combines the work of computer science, management science, and operations research with apractical orientation toward developing system solutions to real-world problems and managinginformation technology resources. It is also concerned with behavioral issues surrounding thedevelopment, use, and impact of information systems, which are typically discussed in the fields ofsociology, economics, and psychology.

In the socio-technical view of systems, optimal organizational performance is achieved by jointlyoptimizing both the social and technical systems used in production. Adopting a socio-technical systemsperspective helps to avoid a purely technological approach to information systems.

Technology must be changed and designed, sometimes even “de-optimized,” to fit organizationaland individual needs. Organizations and individuals must also be changed through training, learning,and planned organizational change to allow technology to operate and prosper.

The logical view presents data as they would be perceived by end-users or business specialists;whereas the physical view shows how data are actually organized and structured on physical storagemedia.

High-level versus low-level. Logical implies a higher view than the physical. Users relate to datalogically by data element name; however, the actual fields of data are physically located in sectors ona disk. For example, if you want to know which customers ordered how many of a particular product,your logical view is customer name and quantity. Its physical organization might have customer name ina customer file and quantity in an order file cross referenced by customer number. The physical sequenceof the customer file could be indexed, while the sequence of the order file could be sequential.

A message transmitted from Phoenix to Boston logically goes between two cities; however, thephysical circuit could be Phoenix to Chicago to Philadelphia to Boston.

When you command your program to change the output from the video screen to the printer that isa logical request. The program will perform the physical change of address from, say, device number 02to device number 04.


The word physical view comes from the viewing of the database. The viewing of database can becategorized into two categories: physical view and logical view. In viewing a database, there can bemany different ways users can view a database depending on their needs and purposes. Physical viewrefers to the way data are physically stored and processed in a database. On the other side, logical viewis designed to suit the need of different users by representing data in a meaningful format. Anotherword, the logical view tells the users, in their term, what is in the database. So while there can benumerous logical views of a database to suit the needs of the users, there can only be one physicalview of a database because physical view deals with the physical storage of information on a storagedevice.

Benefit of Different View

The capability of allowing different views (both logical views and physical views) in a database,gives users a lot of flexibility. With the logical views, the users can see data differently from how theyare stored and most of all, users doesn’t need to know the technically detail of the physical storage. Onthe other hand, database specialist and advance users could benefit from the use of physical view ofthe database because through physical view, they can see the physical storage of the data. This allowsspecialist to make the database more efficient.

Understanding the purpose of different views and examples

Understanding physical view and the difference between physical and logical views is very important.Imagine that if a database called “data soft “hit the market with only one physical view, would thedatabase sell and be very popular? May be not. This is because the database would get too technicalthat user has to look through the physical storage to see the database itself. How about if “data soft”now has one physical view and one logical view, would the database sell and be popular? May be not,because there’s only one way the users can view the database no matter how many users are there.

Think about the employee database in a restaurant, it would store lots of data like employee Id,social security Id, numbers of complaints, hours worked, hourly rate, vacation time, sick days taken,taxes paid and wage paid. However, managers and employees do not need to see all the information ofthat database. For employee, the data that are relevant to them are hour work and hourly rate, but theydo not need to see data like numbers of complaints.

For managers, data like numbers of complaints, hours’ work and wage paid would be necessary forthem to monitor the cost and access employee performance. However, managers do not need see thedata like social security as those are personal information of the employee. Hence, a database wouldworks best when it has many different logical views for different users and each view would have onlythe relevant information for that users.

The physical view of the database becomes useful when a database specialist design the databaseand makes the database efficient. The physical views contain the information of where the data arephysically stored. In the example of the restaurant employee database, the whereabouts of physicalstorage of the database are irrelevant to manager and employee because they do not need to know that.

However, when the database becomes substantially large and complicated, it’s important for databasespecialist to design the physical storage of the data so that data are well organize and efficient toaccess.


Logical view of MIS

Physical view of MIS

MIS

Vision, Mission,Goals

Principles and Applications ofManagement

Uses of Database and Knowledge Base

Computers and Information Technology

LayeredProducts

Functional Application Systems

Business Transaction Processing Systems

External Schema– User View –

Internal Schema– Computer View –


1.10 Porter-Miller Postulates

Acording to Porter-Miller, Information Technology is affecting competition in three vital ways.1. It changes industry structure, and in doing so, alters the rule of competitions.2. It spawns whole new business, often from within the companies’ existing operations.3. It creates competitive advantages by giving companies new ways to out perform their rivals

1. Changes in structure

According to Porter-Miller the structure of industry is emboidied in five competitive forces thatcollectivelly determine industry profitabilty

(a) The bargaining power of customers(b) The bargaining power of suppliers(c) Threat of new entrants in firm’s market(d) Pressure from substitute products or services(e) Positioning of traditional industry competitorsInformation Technolgy can alter each of competitive forces and thereby help the firm gain competitive

advantage

2. Spawning of new business

It helps new industry in 3 ways1. Makes new business technologically feasible2. By creating derived demand for new product3. It helps to create/spawn business with old ones.

3. New ways of doing the things

Information, and IT facilitate evolution/development of new ways of doing old things differentlly.This difference makes the difference and confers competitive advantage on a firm.

In order to understand the specific use of information for competitive advantage, we would considerthe consider the use under two types :

a) Functional uses

Information helps in lowering cost in all parts of value chainHelps in product deliveryAdding value to qualityImproves quality of services and operations.

b) Strategic uses

Information gives new way to out perform their rivalsA firm can use four competitive strategies to deal with competitive forces

Product differentiation.


INDUSTRY

Porter-Miller’s Competitive Forces Model

Threat ofNew Market

Entrants

Threat ofSubstitute Products

and Services

Bargaining Powerof

Customers

Bargaining Powerof

Suppliers

TheFirm

Rivalry amongExisting

Competitors

Focused differentiation.Developing right linkages to customers and suppliers.Becoming a low cost producer.

A firm may/can achieve competitive advantage by pursuing one or more above strategiessimultaniously.


1.11 Summary

Management Information Systems is based on the premise that information system knowledge isessential for creating competitive firms, managing global corporations, adding business value andproviding useful products, services to the customers.

Information system can help companies extend their reach too far away location, offer new products,services, reshape jobs and work flow and perhaps profoundly change the way they conduct business.

The fundamental purpose is to provide information support to management functions within anorganization MIS is designed to and implemented with a view to provide the required informationsupport to undertake managerial activities such as planning, organizing, staffing, coordination, controland decision making

MIS is defined as Computer-based information system.MIS is system based on the database of theorganization evolved. The system uses computer hardware and software, manual procedures, modelsfor analysis, planning control and decision making, and a database

There are six major types of information systems in contemporary organizations that are designedfor different purposes and different audiences

Four powerful worldwide changes have altered the business environment- Emergence of the Global Economy- Transformation of Industrial Economies- Transformation of the Business Enterprise- The Emerging Digital FirmContemporary approach to information systems.1. Technical approach2. Behavioral approach3. Socio-technical approach

1.12 Review Questions

1. Explain the role of IT in MIS department. (Pune University May 2007)2. Define MIS and explain contemporary approaches to MIS. (Pune University Dec 2010)3. Explain contemporary approaches to MIS. (Pune University Dec 2010)4. MIS: A Tool for Management Process. Discuss

Prof. Nitin C. Kamat · 2018-10-17 · 3.5 Herbert Simons Model of Decision Making 3.6 Group...

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Transcript of Prof. Nitin C. Kamat · 2018-10-17 · 3.5 Herbert Simons Model of Decision Making 3.6 Group...